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HomeMy WebLinkAbout20040415Volume XI.pdfORIGINAL BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO INCREASE ITS INTERIM AND BASE RATES AND CHARGES FOR ELECTRIC SERVI CE . ) CASE NO.IPC-O3 -13 Idaho PublIc Utilities CommIssIon 00100 of the Sioretary .RECEIVED APR 1 5 2004 Boise, Idaho BEFORE ,;iRt~ COMMISSIONER MARSHA SMITH (Presiding) COMMISSIONER PAUL KJELLANDER COMMISSIONER DENNIS HANSEN PLACE:Commission Hearing Room 472 West Washington Boise, Idaho DATE March 31 , 2004 . VOLUME XI - Pages 1723 -1922 fib CSB REpORTING Constance S. Bucy, CSR No. 187 17688 Allendale Road * Wilder, Idaho 83676 (208) 890-5198 * (208) 337-4807 Email csb~spro.net ARAN 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 1391Pocatello, 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: For Industrial Customers of Idaho Power: For Idaho Irrigation Pumpers Association: For The United States Department of Energy: For Uni ted Water IdahoInc: For NW Energy Coalition: For Micron Technology, Inc. : CSB REPORTING Wilder, Idaho 83676 . ... :::,",*;:,:::::~f,f::n:::::;:. :::.";::::-- .,:,-;~:~':;-;: , 0;--':7:':';-:0":;:,:" :.;::;,.::;::";;",g.:;::::,,:;;::;::..::.:: ::":;:::;":;:-:;:-::::::-:' APPEARANCES A P P EA RAN C E S (Continued) For Community Action Partnership Association of Idaho and AARP: Brad M. Purdy, Esq. Attorney at Law 2019 North 17th Street Boise , Idaho 83702 For Kroger Company: (Of Record) BOEHM , KURSZ & LOWRY by Kurt J. Boehm, Esq. 36 E. Seventh Street Suite 2110Cincinnati , Ohio 45202 eSB REPORTING Wilder , Idaho APPEARANCES83676 WITNESS David Schunke(Staff) Michael Henderson ( ICIP) Terri Carlock (Staff) Marilyn Parker(Staff) EXAMINATION BY Mr. Ward (eross) Mr. Purdy (eross) Mr. Miller (Cross)Mr. Richardson (eross) Mr. Budge (eross) Mr. Kline (Cross) eommissioner Smi Mr. Stutzman (Redirect) Mr. Richardson (Direct-Reb) Prefiled Rebuttal Testimony Mr. Kline (Cross-Reb) Ms. Nordstrom (Direct) Prefiled Direct Testimony Ms. Nordstrom (Direct-Cont I d)Mr. Gollomp (Cross) Mr. Ward (eross) Mr. Kline (eross) Commissioner Kj ellanderMs. Nordstrom (Redirect) Mr. Stutzman (Direct) Prefiled Direct Testimony Mr. Eddie (eross)Mr. Purdy (eross) Ms. Moen (eross) PAGE 1723 1725 1746 1754 1763 1776 1782 1792 1795 1800 1809 1813 1815 1829 1832 1833 1837 1849 1850 1852 1855 1902 1906 1915 ---.--.--.--.-...-- eSB REPORTING Wilder , Idaho 83676 INDEX PAGE Admi t ted 1921 Premarked Admi t ted 1921 Premarked Admi t ted 1921 Premarked Admitted 1921 Premarked Admitted 1921 Premarked Admi t ted 1921 Premarked Admi t ted 1921 Identified 1903 NUMBER DESCRIPTION EXHIBITS FOR THE STAFF: 101. - 138. 139. Comparison of Reconnection Charges for Energy Utilities 140. Copy of a residential electric bill 141. Staff Proposed Tariff - Rule L 142. Idaho Power Complaints 2000-2003 143. Energy Company eomplaint & Inquiry Comparisons, etc. 144. Price Indexes FOR NORTHWEST ENERGY COALITION: 608. Energy Consumption and Expendi tures by Low- Income Customers, Roger D. eol ton CSB REPORTING Wilder, Idaho 83676 BOISE , IDAHO , WEDNESDAY , MARCH 31 2004, 1:00 P. eOMMISSIONER SMITH:All right.Okay. We I 11 go back on the record.I believe we were ready for questions from Mr. Ward. MR. WARD:Thank you. DAVID SCHUNKE produced as a witness at the instance of the Staff having been previously duly sworn, resumed the stand and was further examined and testified as follows: CROSS - EXAMINATION BY MR. WARD: Mr. Schunke , I only have a few.I f you I d turn to page 8 of your testimony. eOMMISSIONER SMITH:That I S right.Okay. MR. WARD:I knew you wouldn I t forget him forever. BY MR. WARD: Are you there? Yes. CSB REPORTING Wilder, Idaho 1723 SCHUNKE (X) Staff83676 Could you look at lines 9 through 12.You say if the overall increase awarded the company is substantially greater than the 3.14 percent recommended by Staff I believe this cap should be re-evaluated. Now, you have two items in your testimony that you characterize as caps.I wonder which one you I re referring to.The cap of the irrigation increase and then you refer to the cap of any class revenue requirement decreases at one third the full cost of service amount. Well, I think depending on how far the ultimate -- COMMISSIONER KJELLANDER:Mr. Schunke, could you hit your microphone? THE WITNESS:I I m sorry.I I m actually referring to both caps. BY MR. WARD: Okay.So you would, presumably, if the overall increase is significantly greater than the Staff recommendation , you would up the cap on the irrigation class, and decrease it, I guess would be the way to say , on the other classes? Yes , that I s correct.I mean, obviously if the eommission ordered a 18 percent increase to the company, I wouldn I t be wanting to cap the irrigators at eSB REPORTING Wilder , Idaho 1724 SCHUNKE (X) Staff83676 15. Okay.And at the bottom of page 9 of your testimony, lines 23 and then running over into the top of the next page, you essentially say - - well , let me ask you if I'm paraphrasing you accurately by saying that no matter what cost of service study one comes up with , the irrigation class problem continues to exist , and at your proposed increase would still be under cost of service? Yes. MR. WARD:That's all I have. eOMMISSIONER SMITH:Thank you , Mr. Ward. Mr. Purdy. MR. PURDY:Thank you. CROSS - EXAMINATION BY MR. PURDY: Mr. Schunke, is it fair to say that you are Staff I s policy witness with respect to revenue requirement allocation or what's also known as rate spread? Yes. Okay.And how many years have you worked for this eommission? , almost 25. CSB REPORTING Wilder , Idaho 1725 SCHUNKE (X) Staff83676 Twenty-five years.So you have quite a bit of institutional knowledge about revenue allocation and rate making in general is that fair to say? Well, I hope that I s true.I think that I s fair to say. And now it's true that Staff notwithstanding what conversation you just had with Mr. Ward, at least in its initial proposal Staff does not propose bringing the irrigation class all the way to what cost of service would indicate. That I S correct. All right.And when you, from a policy perspecti ve , when you approach a general rate case like this , isn I t it true that the Staff has to take into account the interest of all customer classes and the company itself? Yes. And in that vein you try to , I assume , and I think I know from some degree of experience, you try to strike a fair balance in resolving every issue that comes before the Commission. Well that I s our goal yes. Okay.And would you agree with me that over the past course of the past four rate cases, including this rate case, that the irrigation class CSB REPORTING Wilder , Idaho 1726 SCHUNKE (X) Staff83676 subsidy has been an important issue? Yes. All right.And would you agree wi th that that subsidy has - - well , yesterday I don't know if you were here but I asked Mr. Gale if the relative percentages were in 185 case about 60 percent , the 265A case a little over 30 percent , and the '94-5 case 26 percent , and the current rate case now back up to 67 percent.Is that your understanding? Yes. All right.And without accounting for the time value of money, if you add the revenue deficiency for the irrigation class in each of those rate cases you come under , a little under one hundred million dollars subj ect to check.Do you accept that? Subj ect to check. All right.Now, to your recollection has the Commission Staff ever proposed, in an Idaho Power general rate proceeding, bringing the irrigation class all the way to cost of service? I don't believe so.But , you know , I'd have to - - I don I t think so, but I'd have to check on the 94 - 5, 95 - 4 case.I can I t remember what our recommendation on that was at that time.But I don' think we have. CSB REPORTING Wilder , Idaho 1727 SCHUNKE (X) Staff83676 All right.And would it be - - is it your recollection that in the event you did not propose bringing the irrigators all the way to what cost of service would indicate, that at least one of the reasons was to avoid what we've called rate shock? That'one of the considerations yes. Okay.Now you do agree,don I t you,that while cost service should not the sole factor determining revenue allocation , as a matter of policy there should also not be allowed to exist a very large revenue allocation subsidy for any given class?Would you agree that that's an equally important goal? Yes.That is also one of our goals , to eliminate subsidies. And we I ve sometimes referred to that as rate parity, have we not? Yes. Do you consider a 67 percent subsidy to be a considerable subsidy? That I S considerable , yes. Is it a problem for you? It is a problem.And it I S a something that I would strive to correct in rate design. Okay.Now , Staff is proposing, is it a 15 percent increase, in the irrigators - - I'm sorry, you' CSB REPORTING Wilder , Idaho 1728 SCHUNKE (X) Staff83676 proposing accepting the eompany' s 25 percent cap increase. No.In my proposal it's a 15 percent cap. A 15 percent cap? Yes. Okay. And just for clarification , our Staff cost of service would indicate a 47 percent increase to the irrigators and we - - and I I m recommending a 15 percent cap. Thank you for clearing that up. Now , as I was going for a short run over the lunch hour it seemed like I wasn't getting anywhere very fast.And I started thinking about the concept of movement and time , and Einstein's theory that you can move half way toward a fixed point and never get there even though you move forever.As an engineer I assume you're familiar with that theory, are you not? Well , don't ask me too much about that. Well , in essence isn I t that what has happened over the past 20 years is that we've taken half steps or partial steps toward trying to bring the irrigators to parity and not only are we not getting there, we I re actually moving backwards away from that obj ecti ve? CSB REPORTING Wilder , Idaho 1729 SCHUNKE (X) Staff83676 Well , I don I t know that you can draw any conclusions on any kind of a trend because we've only had, in the last 20 years , we've only had two rate cases plus this one.And there's lot of things that have changed over time.So I would certainly agree if your point is we're still a long ways from cost of service. agree with that.But whether or not we're moving further away, I don't know that we are.We I ve had three looks at cost of service for the irrigators over a 20 year period and they always are well below cost of service.But I' not going - - I can't draw any conclusion on any trend whether or not we I re moving further from cost of service. Well , didn't you testify that under Staff I s cost-of-service run that the irrigation class is at least more than 15 million dollars below cost of service?I I m sorry, 15 percent. Yes.Actually, I believe they're greater - - they I re greater than that below cost of service. Okay.So are you disputing that we have seen an increase in the subsidy since the 94-5 case for the irrigation class? m disputing your characterization that we are moving further and further from cost of service wi th the irrigators.And I I m not prepared to make that conclusion. CSB REPORTING Wilder , Idaho 1730 SCHUNKE (X) Staff83676 Do you feel we're getting any closer to cost of service? Well , I can't draw that conclusion either. My point is we've only had three looks at it in 20 years and I - - if we see rate cases more frequently, as the eompany has indicated that we will , then I think that we'll be in a better position to look at cost of service on a more frequent basis , and then we can draw those conclusions.I f we'd had two or three looks at cost of service over a three to five-year period , then I would be in a better position to make some statements with regard to whether we I re moving toward cost of service more closely for the irrigators or not. I 'm just saying it's over such a long period of time , we have such infrequent looks at cost of service, and there are other things that change.And so I I m just unable to draw any conclusions as to what kind of a trend we I re seeing.m not prepared to say we I re moving closer to cost of service but I don t know that we I re moving further away either. All right.Is it your understanding Mr. Schunke , that Idaho Power has suggested that we can re-examine the irrigation subsidy the next time it files a general rate case? Yes. eSB REPORTING Wilder , Idaho 1731 SCHUNKE (X) Staff83676 All right.And do you recall in the past on behalf of Staff of a raising concern, or do you recall eSB REPORTING Wilder , Idaho Staff ever raising concerns about the length of time that had transpired between Idaho Power general rate cases? That is sometimes a concern , yes. Yeah.And you generally don I t see a cost of service study performed by Idaho Power without an associated general rate case; isn I t that true? That's true. All right.And is it fair to say that over the past , well , let's say 10, 15 years Idaho Power has, Idaho Power's rates have certainly fluctuated even though they've only filed one general rate case during By virtue of the power cost adj ustment that time period. the PCA 1 s is that what you're referring to there? That's one example.Are there others? fluctuating? Of their rates fluctuating or their costs Their rates. The rates.I guess the only one that comes to mind is the PCA that affects their rates on an annual basis. Were rates adj usted for the Company' filings to include in rate base the Milner and the Swan 1732 SCHUNKE (X)Staff83676 Falls projects? Yes. They were.And was there an associated cost-of-service study performed at that time or how was that change in rate base allocated among revenue customer classes? Well , I don't believe we did a cost service at that time. Okay.So I guess my point is, isn I t Idaho Power relying on more of a piece meal approach to rate making that doesn't bring with it a cost-of-service study every time they come in to change rates? Well , I think the Milner was kind of anomaly.In the peA that certainly doesn I t have a cost of service with it.m not sure what point you' trying to make here , but certainly with general rate cases we have cost of service and we look at it then. haven t seen cost of service in general rate cases very frequently.That I S certainly true. Well, my point is , how do we know that the next time that Idaho Power comes before this eommission seeking some type of rate relief for capital investment whether it I s the Bennett project or the Hell's Canyon relicensing, that they won I t ask for some type abbreviated procedure where they don't provide a CSB REPORTING Wilder , Idaho 1733 seHUNKE (X)Staff83676 cost-of-service study? see. Isn'that a possibility? Well that a possibility. So we don'have any assurances that the irrigation rates will necessarily be examined the next time Idaho Power comes before this eommission seeking rate relief. I guess that I s true. Okay.Now , I'm sorry I don't recall, did you have a - - do you have a position with respect to the proposal that Dr. Power and a couple other witnesses have made to incrementally or systematically increase the irrigation rate? , I did not address that. All right.What's your opinion of that proposal , just in general terms? Well , that is not my position.I didn lay out a systematic approach for the irrigators to move to the full cost of service.My feeling is that I do believe the eompany will be in more frequently with general rate cases requesting rate relief.I believe we will have opportunities to look at their cost of service. And it's my belief that that I s an appropriate way to address the irrigators , the issue with the irrigators. CSB REPORTING Wilder , Idaho 1734 SCHUNKE (X)Staff83676 Well , I guess my point is that , given that over the course of 20 years , whether it I S trending up or it I S trending down , I think we all agree that the irrigation subsidy under the cost-of-service methodology that we use , has been in place , it's been substantial and given that Idaho Power has taken on a different approach to rate making whereby it doesn't provide the frequency of cost of service studies that you think is really necessary to be able to detect trends, aren I t running a danger that we're just going to continue this subsidy and it will never get resolved? Well , I think that is a risk.And if thought that the next 20 years was going to look like the previous 20 years I think that would be a big concern. Because of the plant investments that they're making I believe that we will see them in , the Company in , for rate relief and we will have opportunity to look at their cost of service more frequently.And that I s why I' comfortable with that position. And you're assuming that the filings that they would make necessary to accomplish those things would be accompanied with a cost-of-service study? That does have that assumption, yes. But in the meantime, because it seems that we've found ourselves in kind of a reactionary role here CSB REPORTING Wilder , Idaho 1735 SCHUNKE (X) Staff83676 we wait until Idaho Power decides to file a general rate case , we don 1 t know if they 'll necessarily file a cost-of-service study with that, why not just go ahead now and ramp up the irrigation rates to start to eliminate that subsidy over the next three to five years instead of sitting around waiting for an unknown to occur? Well , that's certainly another approach. That's not my proposal but that is , I think , a valid approach. All right.Conceptually do you have a problem wi th it? Well, I have - - I mean , I have a number of problems that had to wrestle with in my recommendation percent cap.And that balancing the subsidy to the lrrigators with what felt was increase that was reasonable to the irrigators.And no, not comfortable with a customer class that's that far out of line with cost of service.But I'm al so not comfortable with a customer class that would see a 50 percent increase in their rates in, you know, over a relatively support period of time. So, I mean, there is a tension there. I I ve made a proposal on how I felt best to balance that. And it is a judgment call and I think that -- I think CSB REPORTING Wilder, Idaho 1736 SCHUNKE (X)Staff83676 there are other valid opinions on how that could be handled. So the later of those two discomforts you just articulated is the goal to avoid , or limit , or diminish rate shock; is that right? Yes. Okay.Now , do you personally have a defini tion or an idea of what a low- income customer for Idaho Power is? In terms of their income or ... In terms of their income , nature of usage, type of housing they live in? What do you think of when you think of a low-income Idaho Power customer? Well , every time I think I have an idea I see numbers that suggest that it's difficult to stereotype what that person looks like.So I'm hesi tant to suggest that I know exactly what a low-income person' usage characteristics are and so forth.But I -- so I' not sure. And did you hear Ms. Fullen , I believe yesterday for Idaho Power, that Idaho Power does not have an independent internal definition of the term low-income customer? Yes. CSB REPORTING Wilder , Idaho 1737 SCHUNKE (X)Staff83676 Okay.And is it then, based on what you just testified, is it true that the eommission and eommission Staff do not have their own internal independent definition of low-income customer? Well , I don'And whether or not consumer affairs has a definition of that, I don I t know. But I'm not aware of such a definition. Have you heard of the term social engineering? I used to hear that term more often, but I have certainly heard that term. In the context of rate making, and this is just purely from a policy standpoint , in the context of rate making what does social engineering mean to you? Well , at least one commissioner that used to be here, his view of social engineering was when you try to achieve some social policy through rate design through rate design.And that's how it applied to me in the work that I do. All right.Based on that definition or that idea that you articulated, would you consider a subsidy in this case for the irrigation class of a significant proportion that I s been allowed to exist over 20 years constitutes social engineering? I suppose you could characterize it that CSB REPORTING Wilder, Idaho 1738 SCHUNKE (X)Staff83676 way. All right.Now , I'm sorry for jumping around a little bit but I wanted to get back to the idea of a low-income customer. To the extent that you have a sense for what that , what that looks like , that type of customer, would you agree that if we had to put it into one particular Idaho Power customer class it would most logically fall into the residential class? Oh. In other words, is there a separate Idaho Power low-income customer class? There I S not a separate class for low income and I guess when you mentioned low income I was thinking of residential , but I - - well, I'll just leave it at that.That's what I was thinking of. All right.Well , but it's fair to say that the residential class is pretty diverse , isn t it? Yes. So there are certainly weal thy residential customers and there are certainly very poor residential customers. Yes. All right.I I ve heard during the course of this proceeding the suggestion that we need to CSB REPORTING Wilder, Idaho 1739 SCHUNKE (X)Staff83676 consider the economic impact on irrigation customers increasing their rates substantially.And my question to you , do you recall during any of the rate cases for Idaho Power that you've participated in , that we've made the same type of economic impact analysis for the eompany's low-income customers? Well , there's certainly been concerns in the past about the effect of rate design and rate increases on low-income customers.And I believe some those concerns have been raised even in this proceeding. And I think there I s quite a bit of testimony on the effect, for example of the customer charge and the increase of the customer charge on low- income customers. , I mean , I think that there has been concern.I think there is concern about the effect of large increases on any customer class, not just the irrigators. Yet are you proposing a similar cap on the proposed residential increase in this case that you are for the irrigation class? Well , the cost of service indicated that the residential class would have gotten a 1 percent increase in the Staff's cost of service., no , I didn't think it was appropriate to be concerned about a cap for the residential customers. What type of increase is Idaho Power eSB REPORTING Wilder , Idaho 1740 seHUNKE (X)Staff83676 proposing for the residential class?Do you recall? Well , it I S in the neighborhood of 18 percent. Would you accept that it's 19 percent in order to cover the irrigation subsidy? Yes , I'd accept that. Now , I want to ask you a question about the customer charge.As I understand it you proposed leaving it at -- or increasing it from $2.50 to $3 , is that right? Yes. And your rationale for not increasing that beyond that point is it sends the wrong price signal. other words , it doesn't matter how much energy you use for this amount of charge , it's fixed and therefore it doesn't discourage inefficient use of electricity. Well, actually I had three reasons. Okay. Tha t was one of them.Another one was that we didn 't, in Staff I s revenue requirement we didn' need the additional revenue that would dictate a higher customer charge.And I also felt that the customer charge should be limited to recovery of meter reading and billing costs. And you think that it is pretty close at CSB REPORTING Wilder , Idaho 1741 SCHUNKE (X) Staff83676 its current level to those costs, the customer costs? Well , the meter reading and billing is $4.20 for the residential class. Okay.Have you heard the eompany I s testimony to the effect that they could at least conceptually argue for a fixed customer charge that's far in excess of $10? Yes. And to do that , they would include certain fixed costs into the customer charge is that right? Yes. And do you have a problem with that in terms of where the logical ending point for that would be?In other words, if we're going to throw fixed costs into the monthly customer charge, shouldn't we include everything from the concrete and the rebar in a damn , to the parking lot outside the Company building, to every fixed cost that the Company has to cover every year? Well , I suppose you could take that to that extreme.I had a problem with including fixed costs in general.So if you're looking for somebody that has a problem with those things, I guess you re talking to the right guy. I guess my point was , is there any logical point other than going all the way and trying to recover CSB REPORTINGWilder, Idaho 1742 SCHUNKE (X) Staff83676 - - if you are going to recover fixed costs in the monthly minimum , is there any logical end point other than to recover everything as fixed? Well, I think there would be logical points were you could stop.I think you could stop at distribution.And I suppose then you could go on to include other fixed costs.But the rationale in its most general sense , could be extended to if one wanted to make that case, to include all , all fixed costs.And I think that would be irrational , but I don I t know.I don' think the Company's made that point.m not. But you need a generation facility to serve the customer just as much as you need a distribution facility; isn I t that true? Yes , that I s true. All right.Now, you propose that in the event that the Commission grants a greater overall revenue requirement increase for Idaho Power than proposed by the Commission Staff, that with respect to the residential class , that be recovered through an increase in the fixed charge up to - - did you put a cap on that up to a certain point? Well , actually that isn't what I said. just said that if the Commission awards a greater increase than what the Staff I s proposal was based on, CSB REPORTING Wilder , Idaho 1743 SCHUNKE (X) Staff83676 that it would be appropriate to take another look at the $3 - - recommendation for the $3 customer charge. Well, given your concern that increasing the fixed monthly charge that has no relation to actual usage, and your concern being that that sends the wrong price signal, I guess I I m having a hard time understanding logically why, if the Commission decides to grant a greater increase than proposed by Staff , why all of a sudden that principle is tossed aside and we go ahead and increase the monthly fixed charge. Well , because as I pointed out , that wasn't my only principle.That was one of the things I was considering.The other one was meeting the revenue requirements.Another one was to not exceed the cost of meter reading and billing. Right.But we can meet the revenue requirements for any given class , well in the case of the residential class , by simply increasing the commodity charge. You could do that. And that's sends a truer price signal as to the cost of generating additional power and using addi t ional power. Well , I may regret having put that in my testimony.But the point of it was simply that my CSB REPORTING Wilder , Idaho 1744 seHUNKE (X)Staff83676 recommendation of a $3 customer charge was based on a 14 percent rate increase to the eompany.And there 1 s huge difference between the Staff proposal and the eompany , s proposal.And if the eommission ends up awarding a rate increase closer to what the Company has asked for, that it would be appropriate, in my opinion to take another look at the $3 customer charge.It may make sense to raise that to something above $3.But I do say that the cap would be $4.2 O. Why would it make sense? Well , it would make sense because you could satisfy the conditions that I was - - I believe are appropriate in setting the customer charge or the one that you're concerned about is the proper signal for conservation , I think achieving your revenue requirement not exceeding the cost to serve meter reading and billing, and you could set that amount at up to $4.20 and not violate the meter reading billing.You would then have to achieve a balance between your conservation signal and valid concerns on the Company I s part with respect to stabilizing cash flow and meeting revenue requirements. Okay.So just so that I understand you. Your proposed cap would be the $4.20.You wouldn 1 t propose any greater increase to the customer change than CSB REPORTING Wilder , Idaho 1745 SCHUNKE (X) Staff83676 that? That was the cap that I proposed , yes. MR. PURDY:Okay.That r S all.Thank you. COMMISSIONER SMITH:Thank you. Mr. Gollomp. MR. GOLLOMP:No questions. COMMISSIONER SMITH:Mr. Miller. MR. MILLER:Thank you, Madame ehairman. eROSS-EXAMINATION BY MR. MILLER: Just a couple of questions, Mr. Schunke. The first area is within the Schedule 9 rate design recommendations that you've made.Are you wi th generally? Yes. And I suppose a good way to look at it would be to look at your Exhibit 127.And there is this apparent anomaly within Schedule 9 that both the Company and the Staff I s cost-of-service study indicates a relatively large increase required for primary service, and a, ei ther no increase or small decrease for secondary service.And I think I discussed with Ms. Brilz the apparent anomaly of why that occurred and I think she eSB REPORTING Wilder , Idaho 1746 seHUNKE (X) Staff83676 explained it as best as it can be explained.But I would like to, going beyond that , just ask a couple of questions with respect to the rate design within that schedule or that class. You have recommended a 13 percent increase for 9 primary, and a .13 percent decrease for 9 secondary.Is that correct? Yes , that's correct. And just so it I s clear in our mind , how does that contrast with the eompany s recommendation for rate design within that class? Well , in the work papers I' ve got I don' have Schedule 9 broken out by primary and secondary.But the overall increase that the eompany is recommending for Schedule 9 looks like it's a 15.1 -- .04 percent increase. m not sure I have it with me either , and we can clarify this later on, but in general does the Company propose a sort of uniform increase for the class as a whole as opposed to different changes for the sub-elements of 9P and 9S? Well , I believe they - - I believe they proposed breaking out secondary and primary with different increases, different - - yes , a different increase in rates. CSB REPORTING Wilder , Idaho 1747 SCHUNKE (X) Staff83676 Do you happen to have with you I don't -- I don't have that with me. We can go back to that later, I guess, with Ms. Brilz.The Kroger Company, al though it seems to me missing in action , did send in some rebuttal testimony.Did you have a chance to read through that? Yes, I did. Mr. Higgins' testimony, there he argues that by increasing 9P by 13 percent and reducing 9S by 13 percent , the differential between the two prices virtually disappears.And he recommends a 1., 1. percent increase for Schedule 9 as a whole in order to preserve the existing relationship between 9S and 9P. I was curious to know your reaction to that proposal. Well , I agree that the two schedules , the 9S and 9P do move very close together.The differential becomes relatively small.I would not oppose maintaining a greater difference than what I have recommended in this rate design proposal. So something along the lines of Mr. Higgins ' suggestion would be something you think the Commission could consider appropriately? Yes.Or even something in between.What I believe he proposed was just to maintain the current CSB REPORTING Wilder , Idaho 1748 SCHUNKE (X) Staff83676 differential.And my proposal moves them much closer together.And maybe something in between would be appropriate.And I would not oppose something like that. It does leave the cost recovery with the Schedule 9 class and whether or not you ended up increasing the rates for the secondary in order to maintain that differential , I won't be opposed to that. Well , I'll follow up further on that.Ms. Brilz in her rebuttal testimony expresses - - I assume you've read her rebuttal testimony? Yes , I have. Expresses some reservation about the Staff recommendation to de-link Schedule 9 and Schedule 19 in the sense that currently the basic charge and the service charge, I believe , for the two schedules are the same. And your proposal makes them different. Yes. After reading her rebuttal testimony, did you have any second thoughts about your proposal? Well , I guess I read it differently. thought Ms. Brilz indicated that because Schedule 19 would be moving to a mandatory time-of -use rate they would be substantially different just in principle.And you wouldn t see the moving between 9 and 19 like you have in the past. eSB REPORTING Wilder , Idaho 1749 SCHUNKE (X)Staff83676 So the concern about having that ease of movement and the maintaining the similarity between the customer charges and demand charges , goes away a little bit.That's the way I read her testimony. That's assuming the time-of -day rates are made mandatory for Schedule 19. Yes. And if they I re not , then there is a concern, I think. Well , if they r re not then my rate design proposal doesn I t apply anyhow , so. Right. And if they I re not , if they re not time-of-use rates , and if your point is is that a valid thing to try to maintain that, I would agree. And I don't know exactly how this will factor in , but in general the eompany, after it I S written testimony has indicated that it would not oppose some form of grace period for transition to time-of -use rates. Although I don't think we yet know precisely how long or how much of a grace period. Do you see that as any - - if a grace period was adopted , would that affect your thinking on this rate design? And is it fair for me to ask you a eSB REPORTING Wilder , Idaho 1750 seHUNKE (X) Staff83676 question? What you mean by grace period? Well, I don r t think anybody knows , at least from what I've heard so far, I'm not sure anybody knows precisely yet.I think ther was a general indication that there was not an opposition to some form of grace period but that 1 s as far as I think it's gone at this point.Maybe we'll get some more detail. m not opposed to a period wherein the Schedule 19 customers would have an opportunity to see in their bills what their bill would be both under the time-of -use rate and under a flat rate. At the end of that period of time , then, they would have - - that would give them an opportunity during that period of time to make changes in their operation and I think that would be appropriate. I don I t suppose you've had any opportunity to give any thought to how long a period that process should be in place in order to give customers time to absorb that information and make any changes in their service configuration? Well , I know I believe it was Mr. Teinert that indicated that it should be a year.And I guess I can't claim that I'm intimately familiar with the operations of Schedule 19 customers to know whether that CSB REPORTING Wilder , Idaho 1751 SCHUNKE (X) Staff83676 length of time would be required.I would hope that it could be done more quickly than that. Well , again maybe we can follow-up further on that.Just one other area.I wanted to ask just a couple of questions about your preference for a case-by-case approach to the irrigation subsidy as opposed to some systematic plan for addressing it. I believe that you and I have been invol ved in one capacity or another in every Idaho Power cost-of-service rate design case since the 265A case , I believe. Yes. And to my recollection in each of those cases , Mr. Yankel, a credible witness , has offered testimony to the general affect that the Company' cost-of-service study is either incomprehensible or wrong.In each of those cases there have been various arguments having to do with various sky-is-falling scenarios. I guess my question is, do you have - - do you think there's any reason to believe that we wouldn' have to go through the same thing in another rate case if we waited for another one to address it again?Or to put it in sort of an agricultural analogy, how many times do we have to plow this ground before we actually do CSB REPORTING Wilder , Idaho 1752 seHUNKE (X) Staff83676 something? Well, my hope is that we would see rate cases more frequently.And that by plowing the ground more frequently that we would make progress towards getting the irrigators moved closer to the cost service. I think I inferred, and I don't want to put words in your mouth , from your testimony that your preference is the case-by-case approach.But in response to questions from Mr. Purdy you did acknowledge that there could be some value to a systematic approach. Yes. That would be not an irrational thing to do? Yes.That I S not my proposal , but I don' think it I S irrational either. All right. MR. MILLER:Thank you , Madame Chairman. COMMISSIONER SMITH:Thank you, Mr. Miller. Mr. Richardson. MR. RICHARDSON:Thank you, Madame ehairman. CSB REPORTING Wilder, Idaho 1753 seHUNKE (X) Staff83676 CROSS -EXAMINATION BY MR. RICHARDSON: Mr. Schunke, on page 4 of your testimony beginning on line 16 , you state that time of use and seasonal rates would be implemented in a manner consistent with the Company's proposal.Has the Commission Staff prepared a study that concludes that mandatory time-of-use rates would benefit both the eompany and Schedule 19 customers? Yes.Yes, I've studied the cost of service, the Company s operation , and I've concluded that the eompany has a summer peaking requirement. studied different billing mechanisms including automatic meter reading time-of-use billing.And I've concluded that time-of-use rates are the most effective way to send a signal to customers.I I ve observed what other utilities have observed to happen when they implemented time-of-use rates and seen that customers do respond.There is - - there is customer response when they have the proper price signals.And I believe that based on all those facts, that there's a benefit to the customers that they can - - to the extent they can shift load that their load factor would actually improve. it improves their cost of service actually goes down. CSB REPORTING Wilder , Idaho 1754 SCHUNKE (X)Staff83676 think that's a benefit to customers. As their load shifts the eompany' s capacity factor on their generation units actually goes up making the Company operate more efficiently.All these things I've concluded , are a benefit to the customers and to the Company. Now , when asked if the Staff had prepared a study you talked a lot about your experience and your understanding, but I was wondering if the Staff - - you' familiar with Exhibit No. 216 , which is the Residential Time-of -Use Viability Study.Are you familiar with that exhibi t Is that the ehristensen study? It is. m familiar with that, yes. So that was - - would you characteri ze your study of Schedule 19 time of use to be as thorough and detailed and documented as that study? I think my study included that study. And did you provide your study with your testimony or exhibits in this case? , I did not. And is that available for us to examine? I could compile the materials and make it available , if you wish. CSB REPORTING Wilder , Idaho 1755 SCHUNKE (X) Staff83676 How do you define - - when you use the word study, how do you define that?I mean , is it in a single document or is it after 20 some years of working at the eommission you have a lot of different files on different issues and that's what you I d be compiling? You know , I think a study could be any number of things.I think a study could be as formal as the Christensen study.I think a study could be less formal where one analyzes the facts of the eompany' s operation , the facts of the opportunities that are before us for various rate design options, and observe what the resul ts that other people have had , and for that matter this company has had, with various rate designs and concl ude from that studying of those facts , what' appropriate. So you're recommending that this Commission order the Schedule 19 class to go on mandatory time-of -use schedule , based upon what, I think I heard you say, describe, as an informal study you I ve conducted that you haven I t provided to the Commission , you haven' provided to the parties , and we can 1 t evaluate until you I ve got it compiled at a later date. Is that a fair characterization of the study? Well , I don I t think that's a fair CSB REPORTING Wilder, Idaho 1756 SCHUNKE (X) Staff83676 characterization at all. Mr. Schunke , assume with me for a moment that the industrial customer is not able to respond to time-of -use signals.Do you have that assumption in mind? Yes, I do. And that could be for a variety of reasons such as operational constraints or something like that. Time-of-use rates really don't accomplish much for that customer , or the utility providing those signals; would it? I disagree. So sending the signal to a customer who can't respond , how does that benefit either the customer or the Company? There's two purposes for the time-of-use rates.The first one , as you suggest , is to encourage the customer to respond and to shi ft their load.The other purpose is if they cannot shift their load is to more properly align their rate with the cost to serve them so that they I re paying the full cost to serve them energy the during peak period. It also would go to , I guess the same point , it goes to relieve the subsidy, then , that' occurring from customers or from usage that occurs that' CSB REPORTING Wilder , Idaho 1757 SCHUNKE (X) Staff83676 off peak period that's actually priced too high. Well , at the end of the day, if the customer is - - and I wasn't talking about cost of service here in terms of interclass subsidies.Let I S assume this is a single industrial customer whose rates are set, it' revenue requirement is set at cost of service.Meaning the Company I s recovering the full cost of serving this customer.Do you have that assumption? Yes. And then the Company implements time -of -use rates for this customer.I s there any benefit at the end of the day to either the utility or the industrial customer of having time-of -use rates? Well , I guess I'd have to stick to my same I think there is.answer.I think we revisit cost of service and if a customer is able to reshape their load their demand allocator actually goes down.When you look at cost of service again they I re allocated less, in the cost -of - service study their rates actually go down. I understand that, Mr. Schunke.But the assumption that I asked you to consider was that this is an industrial customer who can't shift his load around. He I S constrained by other things than the cost of electricity as to how this customer operates.And this customer's revenue requirement is set at the proper cost CSB REPORTING Wilder, Idaho 1758 SCHUNKE (X)Staff83676 of service , meaning the utility is recovering all the cost of serving this industrial customer.This industrial customer is incapable of shifting its load from 3: 00 in the afternoon to 3: 00 in the morning.Maybe they have a labor union that won't let them do that whatever.There really isn't any benefit to a time-of-use rate for either the utility or the customer in that scenario. Well , I'm sorry.I thought I answered that earlier.No.That was what - - I thought I responded to that before.And that is that that customer , the benefit there is that that customer then would be paying the appropriate amount in the peak period when they used energy.And they would be paying the appropriate amount in the off-peak period when they used energy. But it's sort of six of one , isn't it? COMMISSIONER SMITH:Mr. Stutzman. MR. STUTZMAN:I think we've been around this now three or four times and it's been asked and answered. COMMISSIONER SMITH:That is my favorite obj ection.Sustained. MR. RIeHARDSON:Thank you , Madame Chairman.I '11 move on. CSB REPORTING Wilder , Idaho 1759 SCHUNKE (X) Staff83676 BY MR. RICHARDSON: Referring back to the residential time-of -use study.Idaho Power's going to mandatory time of use for the residential class , correct? For the residential class? Yes. Well , the eompany has been ordered to implement automatic meter readers which would have the capabilities for time-of-use rates in the Emmett and Mceall area.That's been characterized as the first phase. Where this all leads, I guess , is yet to be seen.But I believe what will come out of that ini tially is time-of -use rates for those - - for those folks that do have the metering capability.And I believe eventually that the residential class will be automatic meter reading.Equipped with automatic meter reading capability.But I think there's an opportunity to reevaluate this after the eompany submits a report in December of '05. Well, the Christensen report , as you referred to it, did conclude that there would be some benefits , some significant benefits for the eompany of implementing time-of-use rates for the residential class CSB REPORTING Wilder , Idaho 1760 SCHUNKE (X) Staff83676 correct? Yes. And what's the Staff I s idea for a time table for implementing time-of-use rates for the residential class? We'd like to see that happen when the meters get installed.We I d 1 ike to see the eompany explore time-of-use rates with the customers that have the capability. And how many years are we talking about? For the Emmett-Mceall? For the whole residential class? Well , I think the Company 1 s indicated that it would take, I think it was four years to implement to install the equipment necessary for time-of -use rates to the entire residential class. And that's just to get the equipment in place.Not actually impose the time-of-use rates on the residential class? Yes , I think that's right. And I think the ehristensen study concluded that there 1 s a lot of benefits for implementing time of use for the residential class.And you have a study somewhere that indicates similar benefits for doing so with the industrial class? eSB REPORTING Wilder, Idaho 1761 SCHUNKE (X)Staff83676 I believe the benefits would be similar to the industrial class.In fact , I believe they' 11 be much greater because you wouldn I t have the capital cost of the meters. And do you have documentation for that belief? That having to buy meters is more expensive than not having to buy the meters? No.Having the belief that it' significantly beneficial to the industrial class to be mandatorily imposed to - - to take service under mandatorily imposed time-of-use rates. MR. STUTZMAN:Madame ehairman , I think that I S another question that I s been asked and answered several times. eOMMISSIONER SMITH:Mr. Richardson. MR. RI eHARDSON :I would respectfully disagree , Madame Chairman.The witness just stated that it was his belief that there are substantial benefits to time-of -use rates for the industrial class and I just asked him what that belief is based on. COMMISSIONER SMITH:Isn't this where we began? MR. RICHARDSON:I I d like to think not Madame Chairman , but I will go ahead and withdraw the eSB REPORTING Wilder, Idaho 1762 seHUNKE (X)Staff83676 question. COMMISSIONER SMITH:Thank you. MR. RIeHARDSON:That's all I have , Madame Chairman. COMMISSIONER SMITH:Thank you.Mr. Budge. I suspect this could take a while.Is this going to take a while? MR. BUDGE:I believe so. eOMMISSIONER SMITH:Then I would like to take ten minutes and come back at 2: 15. (Brief recess. eOMMISSIONER SMITH:Back on the record. Mr. Budge , would you have any questions for Mr. Schunke? MR. BUDGE:I do.Thank you. CROSS - EXAMINATION BY MR. BUDGE: At the risk of the ire of the Chair , I 'll apologize in advance for perhaps beating this dead dog further.But Mr. Schunke, in this case , as you ve well heard, we've had extensive discussion over the irrigation subsidy, who should pay for it , whether it's a growing CSB REPORTING Wilder, Idaho 1763 seHUNKE (X)Staff83676 gap or not a growing gap.And I suppose the big issue in this case you'd agree, is whether we move the irrigators to cost of service , and how fast.And as I understand the positions other than the eompany that proposed a moderation of 25 percent increase , and the staff of 15 percent, most of the other intervenors are advocating a full and rapid systematic move to full cost of service. Would you generally agree that characterizes the issue we're grappling with? Yes. And this eommission , with perhaps some minor exception , I don't believe was a part of any of the past policy decisions that led us to where we are today insofar as the so-called subsidy of the irrigation class. Would you generally agree with that?To the best of your knowledge. Well , I ... Maybe I ought to phrase it differently. This Commission is inheriting a problem that it didn' necessarily create , that arose out of policy decisions of past commissions with respect to the rates of the irrigators? Well that'true. And would you agree that a matter of rate making principle it I S proper for the Commlssion to eSB REPORTING Wilder , Idaho 1764 SCHUNKE (X)Staff83676 give consideration of past policy decisions which quite obviously did not move the irrigators to full cost of service? Are you saying that the eommission needs to consider the past policy in making their decision going forward. Yes. Well I think that would be something that needs to be considered.I don't believe they' constrained to past policy in any way.But I think it I s reasonable to consider the past pol icy. And insofar as Staff's proposal in this case to limit the raise to the irrigators to 15 percent was Staff , or you yourself , mindful of the fact that in these past three cases that have been discussed , we have not had a full and systematic move to cost of service? And if we dramatically parted from that line of thinking now , it would appear to be somewhat of an unf ai r or drastic result at least viewed from the perspective of irrigators. Well, it's true that we haven't had a systematic move in the past and that if we did that now it would be a departure from what we've done in the past, that's true. And the Staff in coming up with the eSB REPORTING Wilder , Idaho 1765 SCHUNKE (X) Staff83676 proposed limit of 15 percent , did you also give consideration to the fact that the irrigation class has shown virtually no growth in the past ten years and is not projected to show little if any growth in the next ten years? Well , that wasn't a part of what I considered.I was not looking at the growth of any of the classes in my recommendation. Okay. I looked at the loads that existed in the test year. If you look at what's fair , just , and reasonable from the perspective, selfish perspective of the irrigators which I have , would you agree that it could seem unfair or unreasonable if your rates dramatically and disproportionately increased when in fact you I ve not been a contributor to the growth that is causing or driving the increase in rates? Yes.In fact, I've taken that position in the past, but -- And was that something that was a consideration that staff gave when it chose to arrive at the limit that it did to the irrigator raise? Well , growth wasn I t an issue in our making the recommendation that we did. eSB REPORTING Wilder , Idaho 1766 SCHUNKE (X) Staff83676 Would you agree that the growing gap between the rates irrigators pay and what cost of service , is primarily a factor of the allocation methodology that the eompany has chosen? m sorry, the first part of that again. Let me rephrase that.Would you agree that the what's been characterized as a growing gap in the irrigation subsidy, the difference between the rates we pay and what the cost-of-service study shows we should pay, is in fact attributable to the Company's cost -of- service methodology and how it allocates the cost growth out to the customers? MR. STUTZMAN:Madame Chairman, I may want to obj ect I I m not sure Mr. Schunke is the cost service expert.m not sure he's able to answer this question.He didn't provide testimony on that point. COMMISSIONER SMITH:Mr. Budge. MR. BUDGE:I'll go into another area with him.That I S probably correct. BY MR. BUDGE: If we could look at your Exhibit 127, Mr. Schunke , please. Yes. And if I understand correctly that's the summary of revenue impact to the particular customer CSB REPORTING Wilder , Idaho 1767 seHUNKE (X) Staff83676 classes based upon Staff I s recommended revenue requirement and cost-of-service adjustment? Yes. If I look at line 16 under column 10 on percent change , would that number 3.14 percent overall increase be changed to 2.94 percent based upon the revised testimony that was provided earlier today by Mr. Holm?I believe he gave us a revised Exhibit 101 that gave a new percentage. Yes.Well , if I understand your question my Exhibit 127 was based upon 3.14 because that was the change that staff had arrived at early in our preparation of our testimony.It changed before we actually filed, and we didn I t have an opportunity to go back and make the change. I was just trying to clarify so when I ask you the next line of questions that I use the right percent.And I should use 2.94 percent? Okay. So with whatever impact that may have on the overall numbers, the summary here reflects for each class what percent, and line 7 shows your cap limit of 15 percent to irrigators? Yes. Is that correct? CSB REPORTING Wilder , Idaho 1768 SCHUNKE (X) Staff83676 Yes. What I'm concerned about , Mr. Schunke, is this.I think my clients in this case, the irrigators when I go back to them on the surface they may view Staff I S proposal as quite favorable , certainly as compared to the other intervenors, but might on the surface view it as more favorable than the Company because it would appear to be a more moderate increase in their rates.But what I am concerned about is , if you if the eommission were to accept the eompany ' s proposal and all customers got an increase of overall 18 percent an irrigator could look at that and say well , I got an increase of 25 percent , it was only 7 percent higher than everybody else.Do you follow my thinking? Yes. But if the Staff proposal were accepted in its entirety, and my irrigator views the Staff's overall increase of 2.9 percent , it appears that they would say we got five times or 500 percent greater increase than any other. So viewed from that perspective, it may not appear that Staff is treating irrigators fairly and reasonably, would you agree? Well , I'm not going to agree that we' not treating them fairly and reasonably.But I can see CSB REPORTING Wilder , Idaho 1769 SCHUNKE (X)Staff83676 where they might come to that conclusion. Can you just elaborate a bit , if you would, and explain how you arrived at the 15 percent cap? As I understand it, it's roughly one-third of what the Staff concluded the irrigators should be raised to bring them to full cost of service. Yes. And understanding that portion of it, how was it , and what factors were considered in deciding that 15 percent of that was the appropriate number? Well, I looked at cost of service first all.We looked - - I considered public interest concerns of minimizing the rate shock and rate impacts to the irrigators.And balanced - - those are the primary considerations.Balancing those two , I looked at any number of options and finally concluded that 15 percent, a one-third move was a reasonable balance. And so essentially you exercised what you felt was sound judgment based upon what would balance the impact of the irrigators versus the concerns that other customers would have that have to pick up the difference? Yes. And I think you said earlier you didn' give particular consideration to the decisions previous Commissions in dealing with the subsidy.And eSB REPORTING Wilder, Idaho 1770 seHUNKE (X)Staff83676 did that influence you in any way? In other words , should there be some degree consistency that the eommission apply princ1.ples other than full cost service the irr1.gators opposed to a systematic move full cost of service , which would be a rather departure from past decisions? Well , I suspect previous decisions did affect my thinking some.I mean , I I m certainly aware of what I S happened in the past and I suppose that had some influence on my decision. I reviewed with the Company witness their Exhibit 44 which provided a breakdown by irrigator how many would fall within a particular percentage of increase.And I believe we established before that about 22 or 22 and a half percent of irrigators would actually individually get a rate increase of 25 percent or less. But all the rest of them in the class, some 72 and a half or - 3 percent, would end up with a rate increase of above 25 percent.Some of them up awards of 50 percent or more. Did you make any attempt in your recommendation of 15 percent to determine what percent of the actual irrigators out there may end up with the 15 percent increase under the Staff 1 s proposal and how many CSB REPORTING Wilder, Idaho 1771 SCHUNKE (X)Staff83676 of them might end up with a greater?Would you expect that to be proportionate to what the Company's exhibit shows? I expect it would be.I had the same bill frequency analysis that believe the Company used and used that analysis ln coming up wi th my rate recommendation as well.But can't tell you right now how those percentages break down.But what I would expect is that the distribution would be the same as what the Company has shown in their Exhibit 44. You had some discussion on page 8 of your testimony, I believe in the area of lines 9 through 12 about what would happen if the overall increase awarded to the eompany was substantially greater than what staff recommended , the 2.94 percent.In those instances I believe you indicated that the cap that you proposed here , 15 percent, would have to be reevaluated. If the eommission did grant a substantially greater increase, would the Staff' proposed cap recommendation go down or up? If the Commission awards a greater increase , substantially greater increase then the cap woul d move up. Would move up?As I saw the Staff' rebuttal testimony, I don I t know that they commented on CSB REPORTING Wilder , Idaho 1772 seHUNKE (X) Staff83676 the irrigators I recommendation that a separate proceeding be convened to investigate cost-of-service issues. Do you recall whether or not Staff addressed that in their rebuttal?Did I miss it, or Well , you didn't miss it because we didn' have any rebuttal testimony. Does the Staff have a position -- let me strike that.Let me rephrase. Would the Staff be opposed to participating in a separate proceeding if the Commission so orders it? No.We wouldn't be opposed to that. Woul d you agree , Mr. Schunke, that what perhaps the real issue in this case and future cases is not so much the irrigation subsidy, but who should pay for new growth on the Idaho Power system?The existing customers or the new customers causing the growth. Well, I think they're two issues and I think they're related.And I think they're two very important issues.But I don I t think the - - I don't think the issue of growth totally explains the irrigation subsidy. Part of it is the allocation methodology? Well , yes.I think there are any number of things that affect the allocation and the resulting CSB REPORTING Wilder , Idaho 1773 SCHUNKE (X) Staff83676 revenue requirements for the irrigators. Just one other question area if I may. believe you were asked some questions by Mr. Richardson or perhaps others , about giving appropriate price signals to customers is one reason that rates should be higher in the months where we're experiencing peak growth.Do you recall that line of questioning? Yes. And I think you testified that one of the reasons for having higher rates in those months is to give an appropriate signal to irrigators -- or excuse me, signal to customers to reduce their usage during those times and shift them somewhere else. Yes. Do you recall that?Would you agree , Mr. Schunke , that that pricing obj ecti ve is one that does not apply readily to irrigators?And let me explain that. Ei ther irrigators have to be on or off , in business or out of business.They don I t have much choice to reduce their water usage and still get a crop. Well , I agree that irrigators by virtue of being in agriculture they clearly are forced to use energy during the summer period.But I don I t agree that -- well , let me put it in the positive. I believe that irrigators can participate eSB REPORTING Wilder , Idaho 1774 SCHUNKE (X) Staff83676 in programs such as what the Company has recently proposed , the peak clipping program where they can shift load between peak hours and off -peak hours.The Company also has a time of use pilot for the irrigators , Schedule 25.And I'm optimistic that that also might be a tool that irrigators can use to shape their load.Obviously not avoiding the seasonal peak, but hopefully avoiding some of the daily peak during that summer peak period. And in so doing, be able to reduce their demand allocators and thus actually achieve lower rates. You would agree at the moment , other than the two pilot programs that aren't available across the entire class , there really is no way for an existing customer that I s not in these limited pilots to shift their time of use within the day? Tha t 'true.And there would be no -- there be no incentive to do so. As I understand what you are supportive is the expansion of those types of programs so they would be available to all the irrigators , and they would have an opportunity to shift from one time of the day to another? Yes. And I suppose you would agree that as far as shifting seasonal , obviously the growing season eSB REPORTING Wilder , Idaho 1775 seHUNKE (X) Staff83676 doesn't permit that opportunity? BY MR. KLINE: That's right. Okay.Thank you very much. MR. BUDGE:I have no further questions. COMMISSIONER SMITH:Thank you, Mr. Budge. Mr. Kline, do you have questions? MR. KLINE:Thank you, Madame Chairman. eROSS - EXAMINATION Mr. Schunke , you've testified that Staff supports a rate design as Idaho Power proposed for eSB REPORTING Wilder, Idaho mandatory time-of -use rates for Schedule 19 customers Yes. correct? Several witnesses in this case have recommended voluntary time of rates, time-of-use rates be implemented for rate 19 , and actually for rate 9 customers. the potential for under recovery of class revenues? Don t voluntary time-of-use rates create will. Well , I believe they almost certainly Because someone' s not going to chose a voluntary time-of -use rate that's going to cost them more money. 1776 SCHUNKE (X)Staff83676 And if it does they'll quickly chose to get back out of it.So I think you'll have a self -selection of the folks that will benefit from the time-of -use rate and you'll have a revenue shortfall. Now , as long as you follow-up with that with a mechanism to recover the revenue shortfall and to realign the rates , then I Suppose something like that would work.But you do have that problem. There was some discussion in Mr. Richardson r S cross-examination about a grace period.And of course what we r re referring to there is a period , a delay in the implementation of the mandatory time-of -use rate to allow customers to get used to that rate design. Now, I think you indicated that if the delay was too much that would be not as attractive to you.And I guess the reason for that would be that if you delay too long you're simply postponing the benefits that mandatory time-of-use rates would bring.Is that your position? Yes, that is my position. All right.And also discussing this grace period.Now , Ms. Bril z in her testimony offered to defer implementation of time-of-use rates from July -- or from June 1 until November to allow the eompany to continue its education process , to continue to work with its CSB REPORTING Wilder , Idaho 1777 SCHUNKE (X) Staf f83676 customers to make sure that they understand what the impact of the time-of -use rates would be on the individual customers. Would a period of time as described by Ms. Brilz for a grace period June 1 to November 1 be acceptable to the Staff? Well , that would be acceptable to me.And I admitted earlier that I 'm not intimately familiar with some of the operations of these Schedule 19 customers. But I have heard them testify that their load factors are fairly constant.Their usage is constant throughout the year , and so I was a little unclear why a 12-month period would be necessary.If their usage is consistent throughout the year it would seem like six months would be adequate to evaluate all of their -- the effects on all their operations. All right.There I S also been an awful lot of questions directed to you regarding the irrigation subsidy.And a number of parties to this case have recommended that the eommission implement some kind of systematic multi-year approach to eliminate the cost of service shortfall that we have today with the irrigation rates. If the Commission were to adopt some kind of a hard wire approach where they would lock in a CSB REPORTING Wilder , Idaho 1778 SCHUNKE (X)Staff83676 mechanism to eliminate this subsidy, what assurance do you have, under that kind of a scenario, that those same resul ts three or four years from now , are going to be reasonable? In other words -- I'll let you answer that. Well , I don't think you have any assurance.In fact, my response to Mr. Budge with regard , I addressed peak clipping and time-of-use rates. is my belief that those kinds of programs will become more and more valuable to the Company and more and more important to the customers.And it I S my hope that they, in fact , will change the load characteristics of that customer class and so cost of service should change.And so I think that I s another reason why I think it is appropriate to revisit cost of service and look at the subsidy and how it', how that has changed over time. Mr. Schunke , staff is proposing to change the rate structure for irrigation service to include a demand charge during the out -of - season period.eould you elaborate on the reasons that staff is making that proposal? Yes.It's my understanding that in the past there has not been a demand charge to accommodate the irrigation customers operations that they - - their typically use of energy in the winter is to move equipment , and it r s not often for the large application CSB REPORTING Wilder , Idaho 1779 SCHUNKE (X) Staff83676 of water.And so the fixed costs, the demand-related costs in the past have been loaded up on the energy rate. In order for the - - to not hit the irrigators with a large demand charge for just going out and starting up their equipment for just a couple hours to realign center pi vots or to move equipment. However, as I look at that , what you' got is you've got an off-season energy rate that is well ve forgotten the percentage but it's significantly higher than the summer peak season energy rate.And it seemed to me that now that the Company is capacity constrained in the summer , and all of our other efforts in rate design have been to try to send the right price signal with higher energy rates in the summer than in the non- summer, it seemed inconsistent, albeit I understand how we got there,it seemed inconsistent to go forward with that and continue that higher energy rate in the non-summer period. So my effort was to try to move those costs into a demand charge.The demand charge that I' proposing is 80 cents per kilowatt which is much smaller than the summer demand charge.And that is - - it was designed to just recover the revenue that would normally be recovered in the non-summer energy rate. You also engage in a number of questions CSB REPORTING Wilder , Idaho 1780 SCHUNKE (X)Staff83676 and answers regarding seasonal rates for - - time-of -use rates for residential customers.And the Company in this case is proposing seasonal rates for residential customers isn't that correct? That I S right. Have you considered those to be time-of-use rates? Well , in the broadest sense I think the term that I used in my testimony was consideration of time in setting the rates.And certainly seasonal rates do that. They consider that there is a - - the cost to serve in the summer period is higher than in the non-summer period.And to that extent I support the notion of seasonal rates. And I think there's probably a continuum in terms of accuracy but also in terms of complexity and cost , for that matter.I mean, time-of -use rates I think, in the sense that we speak of in terms of the special metering that is required I think they're more accurate.But the cost, it's expensive to get them implemented , would take time.So - - I I ve forgotten the question. Seasonal.I think you've answered the question. eBB REPORTING Wilder , Idaho 1781 SCHUNKE (X) Staff83676 MR. KLINE:That's all the questions I have. EXAMINATION BY eOMMISSIONER SMITH: I guess , Mr. Schunke, I was going to take advantage of this time to have you help me out with my thought process for some of these rate design issues. First of all , for your customer charge recommendation in the residential class, it's my understanding you chose the $4.20 just from looking at the costs. Yes. Did you - - is your recommendation for other classes, was that done similarly? Yes , it was.On Schedule 7 I also used meter reading and billing as a cap.I believe Schedule 9 was already greater than the cost of meter reading and billings and I believe I didn I t recommend any increase on Schedule 9. Okay.Let's talk about Schedule 7 for a few minutes.I note on page 23 of your testimony, could you give my some idea of who I s in the Schedule 9 or 7 excuse me? CSB REPORTING Wilder, Idaho 1782 SCHUNKE (Com) Staff83676 Seven is small commercial.And I believe these are the smallest of little coffee shop commercial operations. Is there anybody in the hearing room in all these parties that's kind of looking out for the interests of Schedule 7? Specifically I don't think they' represented here. Is that generally the case in our hearings? I think that I s generally the case. Would that account for the fact why their rates are so high comparatively? Well , I I m hoping that I considered their interest in making my recommendation.I set the - - recommendation for setting the rates for Schedule 7 , I used the same principles that I did for Schedule Okay. And used the cost service as my starting point.And then took the subsidy that would go to the irrigators , we spread that back on all of the customer classes based on the cost of service revenue requirement.And then I capped the decrease to the customers that are going to get decreases , and that became a credi t .And I spread that back on the remaining eSB REPORTING Wilder , Idaho 1783 SCHUNKE (Com) Staff83676 customers.And Schedule 7 got it's share of both the subsidy and the credit. Okay.When we look at your proposed rate design for the residential class, you propose that there be a first block of 800 kilowatt hours. Yes. And the rate for that remains constant throughout the year. Yes. And then there's a summer adder for amounts over 800. Yes. think that was on page 18.Could you just refresh my memory about - - you chose 800 because represented some cost was generating cost? Well , I chose 800.I looked at the bill frequency throughout the year for the residential class, and in April , I believe it's April, the lowest usage for the whole year it r s just slightly above 800.And what I reasoned was that during that shoulder month, that's a measure of when the customers are only using their base load usages which I characterize as refrigerators and lighting and small appliances.When we look at the shoulder months all of the energy needs of the Company are met with their base load facilities.There is no eBB REPORTING Wilder , Idaho 1784 SCHUNKE (Com) Staff83676 peaking generation required.These are their lower- cost facilities.And I reasoned that, then, that same 800 kilowatt hours per month could be met throughout the year with those same generation facilities , those same lower-cost generation facilities.And it I S only during the peak period when customer usage peaks, that the eompany then has to fire up their higher cost facilities, and thus the logic for a higher rate for the next block of usage. I guess because I recently put together a West wide chart of residential rates and the ealifornia people had some corrections pointing out to me that they would consider 800 kilowatt hours residential usage to be over-the-top.And that their average is like 300 or 400. So what are we doing wrong that in a shoulder month the average is 800?That's our base usage? Well , we're not charging our residential customers 15 cents a kilowatt hour , so. A price signal.Because if they aren' using heating, usually we say we have higher usage because people heat with electricity.And we have irrigation load but this is not including any of that in April probably? Tha ti s true.And , as you know , the Northwest's average energy use has always been much CSB REPORTING Wilder , Idaho 1785 seHUNKE (Com)Staff83676 higher than the rest of the country and I guess I can I explain it in terms of anything like refrigeration. don I t know how you use more refrigeration but . . . We have three freezers. Well , maybe that's it. How wedded are you to 800?Could that be lower number , say 500? Well , I like 800.I think there's a lot of logic for 800. Okay. But a case could be made for a lower number.I used 600 for Schedule 7 because as I did the analysis for Schedule 7 their usage during the shoulder months , what I determined to be the base load was 600 kilowatt hours.So that was my logic for coming up with those numbers.And I don I t have a logic for coming up with 500.But certainly any number could be Inventive commissioners might think of one? Certainly. Looking at your Exhibit 131 , I guess I had a question.I understand the kilowatt hours in the block, and the bills in the block, but that middle one, the kilowatt hours billed in the block , is that per bill? Well, I can understand why you have a CSB REPORTING Wilder , Idaho 1786 SCHUNKE (Com) Staff83676 problem with this because every time I look at this I have a problem with it.Usually I have to call Maggie up and ask how this all works. I guess it makes sense if kilowatt hours billed in the block is per bill.I don I t get it. Okay.I think this is how this works. Kilowatt hours in the block , that is every - - every customer that uses more than , say, 500 kilowatt hours has kilowatt hours that were billed in the zero to 100 block. Right. But only the customer that used less than 100 kilowatt hours has kilowatt hours - - has kilowatt hours in the block. Right. , billed in the block.I 'ill sorry. confus ing you.Only the customer that his bill ended in the block has kilowatt hours billed in the block. Keep going. Okay.And so any customer that's usage exceeds the block , has kilowatt hours in the block , but they're not billed in the block.m getting a nod from Maggie but Well , absolutely nothing is going on in my head so I'll study this one further.It's clear that I shouldn't take up other people's time for me to get this. CSB REPORTING Wilder , Idaho 1787 SCHUNKE (Com) Staff83676 Okay.Moving along.I explored with someone , seems like a week ago, but it may have just been yesterday, about customer charges versus minimum charges.Do you have any thoughts on minimum charges being better or worse than customer charges? Well, there are advantages and disadvantages to both.Of course, as you know , we used to have a minimum charge , and the Staff fought the customer charge for quite a while.The minimum charge has some real appeal to customer service folks.Their sense is that customers are more receptive to a minimum because they feel like they re getting something with their bill.I understand that the Company's concern about the advantage and disadvantages.A customer charge has the advantage of being specifically designed for cost recovery of fixed costs.And I can understand why they prefer the customer charge over the minimum but . . . So if we wanted to help the customer service complaint people , do you think it would be bet ter to stick with your customer charge recommendation as it is; or maybe bump it up to $5 and include some kind of minimum kilowatt hours in it? Well , that's a hard question.Having switched from minimums to customer charges, if you would have asked me this in the 95-4 case I would have said CSB REPORTINGWilder, Idaho 1788 seHUNKE (Com)Staff83676 that let's stick with the minimums and then , you know let's adjust that but let's stick with minimums. I think it gets a little confusing when you go to customer charges and then go back to minimums. Now , I don't want to be arguing against minimums because I actually prefer minimums over customer charges but I think there's something to be said for consistency.And having gone to customer charges, I think that would be a consideration that we'd have to throw in there.But I do know that it's pretty much universally accepted that customers like minimums better than .. . Then there's one other - - well , actually three other topics. ve always worried about the irrigation class.It's my understanding that the irrigation class includes everybody from the guy who owns five acres throws a little pump in a ditch for three months out of the year; and the guy who farms thousands of acres and has deep wells and pivots and the whole schmear.Is that true? That is true. I see that as a problem.Do you think that I S a problem? Well, it certainly is a very diverse customer class. CSB REPORTING Wilder , Idaho 1789 SCHUNKE (Com) Staff83676 You didn't recommend a change to subdivide it, assuming there were rationale lines you could draw to subdivide it into two or three segments. Well, Commissioner , I didn I t recommend that because I didn't think of that. Oh. I didn r t even consider that. I see.m sure I I ve complained of this before.Well , think about that.All right. I will certainly think of it next time. Finally - - well , not finally.Hook up charges.It seems like there I s some allegations that the growth doesn't pay for itself.We know it doesn 't, but the Supreme Court has certain laws that despite Commission Staff efforts to let growth pay its own freight , we I re not allowed to.But did you think about our hook up charges in this case?Are they where they ought to be or are they something we need to look at again?It seems to me we looked at them but may have been a few years ago? Well , Staff is actually looking at customer charges right now.We did not make any recommendation in this case with regard to changes in customer charges.But -- Right. CSB REPORTING Wilder, Idaho 1790 SCHUNKE (Com) Staff83676 - - but it's something that Well , how often should we look at those and when was the last time we did? Well, actually, Mr. Sterling and I were just discussing this and felt that it I S probably appropriate to look at line extension and nonrecurring charges , the hook up charges , when you have a general rate case because things change and you now have a fresh test year to look at your costs and you probably ought to look at line extension and So you meant not as a part of this case, but immediately after when you know the right answers for all the other issues? Yes.Well, yes.Because it is difficult in the case because you don I t know what - - you don't know how the numbers are going to fall out.It's difficult to make recommendations. You make recommendation on the Staff' proposal but if it turns out to be something else -- and so it would be best if you looked at line extension and contributions after the eommission determined what the And finally, this is finally, Mr. Budge asked you a question that I think caused you to answer that you think there's a great potential in the irrigation class to do load shaping through kind of CSB REPORTING Wilder , Idaho 1791 SCHUNKE (Com) Staff83676 clipping programs , and peak shifts, and that sort of thing. Yes. Do you recognize that some water delivery systems won't accommodate an irrigator for doing that? They order their water in 24 hour blocks and they don' get to chose not to take it in the afternoon? Yes , I realize that.And I realize that all irrigators won I t be able to.But these programs work with small percentages. Okay.So you don I t really need to shave the peak much to save a whole bunch? Exactly. Okay.Okay. COMMISSIONER SMITH:That's all the quest ions I have. Do you have redirect? MR. STUTZMAN:Yes.Madame Chairman thank you.Just briefly. REDIRECT EXAMINATION BY MR. STUTZMAN: Mr. Schunke , you were asked about addressing winter peak, and summer peak , and rate design. CSB REPORTING Wilder , Idaho 1792 SCHUNKE (Di)Staff83676 And you indicated that your proposal primarily addressed the summer peak.Is there a reason that you focused primarily in the summer peak? Well , yes.The Company has identified the summer peak as their critical need.And my proposal was directed at the most critical need of the Company at this time. And I think Mr. Budge asked you about past practices of not moving the irrigation class to full cost of service.Do you believe that those past practices make it more difficult in this case to move the irrigation class to full cost of service? Past Commission practices might make it more difficult to move to full cost of service? Do you have an opinion on that? If what you I re thinking is that past practices contributed to the - - to their being way below cost of service and therefore is more difficult to brink them now to full cost of service? Right. Well , it certainly would be - - I would agree with that. Okay.Is the Commission required to set rates it deems to be in the public interest? Yes. eSB REPORTING Wilder , Idaho 1793 seHUNKE (Di) Staff83676 Could - - is it possible that what the Commission determines are rates for a particular class say, in the public interest , could it be possible that those could be regarded by others as social engineering? Yes , I suppose so. And when the Staff and eommission establishes rates in the public interest, is it your view or do you believe that the Schedule 7 class is somehow slighted in that process? No, I don't think they are. MR. STUTZMAN:Thank you.That I S all I have. COMMISSIONER SMITH:Thank you, Mr. Stutzman , and thank you very much, Mr. Schunke. (The witness left the stand. COMMISSIONER SMITH:We will now, by our previous agrement, go to Mr. Richardson's witness, Mr. Henderson.And while we're making that shift , we I 11 take about a seven-minute break. (Brief recess. eOMMISSIONER SMITH:Back on the record. Mr. Richardson. MR. RICHARDSON:Thank you, Madame Chairman.The Industrial Customers will call Mike CSB REPORTINGWilder, Idaho 1794 SCHUNKE (Di) Staff83676 Henderson to the stand to offer his rebuttal testimony. MICHAEL E. HENDERSON, produced as a rebuttal 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. RICHARDSON: Mr. Henderson, would you please state your name and business address for the record? Michael E. Henderson.m wi th ConAgra Foods , our office is in Kennewick , Washington. And are you the same Michael Henderson who has caused prefiled rebuttal testimony to be filed in this matter? I am.And now I have a mi rophone on. apologize. Mr. Henderson , is this your first time as a witness before a Public Utilities Commission? Yes , it is. Do you have any corrections or additions to make to your prefiled testimony? No, I do not. CSB REPORTING Wilder , Idaho 1795 HENDERSON (Di-Reb) ICIP83676 Can you briefly describe for the Commission eonAgra' s Idaho operations? We have two potato processing plants in the specialty potatoes products group in Idaho.One is in American Falls , Idaho; one is in Twin Falls, Idaho. They both make a variety of processed potato product. buy raw potatoes and convert them.And we sell into global and international markets as well as U.S. markets out of these plants.These potatoes are primarily sourced in Idaho. In aggregate, including a corporate office staff that we have in Boise , we have over 1200 employees in the State of Idaho. ean you briefly describe for us the electrical load at your two Idaho plants? Each of the plants we use electric power for a lot of things.We use primarily for freezing and cool ing .Also for wheel turning load and lighting. buy natural gas and that provides the bulk of our heating loads.Just a minute here I have a - - we use about, in aggregate , 170 million kilowatt hours a year. Thank you.Were you here this afternoon when we were discussing the so-called grace period for time-of-use rates? Yes, I was. CSB REPORTING Wilder , Idaho 1796 HENDERSON (Di-Reb) IeIP83676 And do you have any thoughts on that as an actual industrial customer who would have to live under those , about a grace period and time-of-use rates? Well, the time-of -use rates proposed we've looked at that and we I re trying to find ways to respond to that to reduce our costs back from the increase that these rates would impose on us.I was very surprised that the result of our analysis is that with the high load factor that we have , our rates our costs are actually going to increase.I would have expected that a time-of-use rate would have had incentives through it's design to , typically with our high load factor, would bring our rates down. ve been in the business with this company for 27 years and the first 17 years I was in operating process plants.We have always had demand charges and looked for ways to reducing power costs in general.And particularly have looked for ways of shifting loads from time of day or from season to season, and we just don't find very many good ways of doing that to any large degree. In terms of the length of a grace period for purposes of studying the impact of time-of -use rates, do you have any thoughts on that? Well, any deferral of a mandatory change CSB REPORTING Wilder , Idaho 1797 HENDERSON (Di-Reb) ICIP83676 like this is welcome.In terms of seeing how the billing will work and how it actually pencils, certainly that' good to then understand from a completely factual basis, not a forward-casted prediction , what the numbers are actually going to look like.But in terms of a six-month period, frankly, is still pretty short because we think in terms of a pack year.Our capital planning cycle is one to three years forward.And so if we I re to try to respond to these changes , which I think is the goal because if we can't respond then not only have we been penalized but the Company hasn I t achieved its goals of reducing these peak rates , if we're unable to respond we're just stuck with it.And it takes one to three years , typically, of capital planning.The capital that would be put in to meeting these rates would cannibalize capi tal that would otherwise flow into process improvements, making the plants otherwise more competi ti ve. So clearly if this is an artificial constraint it I S a consumption of very precious capital that really impedes our ability to improve the efficiency of these plants in Idaho. And if that capital's diverted from improving the efficiency of the plants in Idaho, what 1 s the worst case scenario that comes out of that? CSB REPORTING Wilder , Idaho 1798 HENDERSON (Di-Reb) ICIP83676 Well , I can tell you that I live in Hermi s t on, Oregon.The J.R. Simplot Company had two potato processing plants, ours and one that they built while I lived there.They've just announced that they closing it.One of the reasons was that the plant was not competitive in the world-wide marketplace. Thank you Mr. Henderson. MR. RIeHARDSON:Madame ehairman, I would move that the prefiled testimony of Mr. Henderson be spread upon the record as if it were read in full. COMMISSIONER SMITH:Without obj ection it I S so ordered. (The following prefiled rebuttal testimony of Mr. Michael Henderson is spread upon the record. CSB REPORTING Wilder , Idaho 1799 HENDERSON (Di-Reb) IeIP83676 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3- Would you please state your full name and job title? Yes. My name is Michael E. Henderson , and I am the Energy and Environmental Engineering Manager for eonAgra Foods , Inc., Specialty Potato Products.I have been a part of this company for over 27 years. My current role is to support plant operations in the areas of Energy and Environmental affairs. Could you please tell the eommission a little about ConAgra Foods and the plants you have in Idaho Power I s service territory? ConAgra Foods , Specialty Potato Products is a maj or manufacturer of processed , frozen potato products. We purchase potatoes and have operating facilities in Idaho, Oregon , Washington , Minnesota, and international locations. We compete and sell into maj or foodservice and retail markets in this country and globally. We have two maj or potato processing plants in Idaho: they are located in Twin Falls and American Falls, both are in Idaho Power I S service territory. We also have a corporate office in Boise. Our total employment in Idaho is over 1200 persons. What is the purpose of your Rebuttal Testimony? I disagree with the statements made by Dr. Dennis 1800 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-O3- Goins in his pre-filed Direct Testimony presented on behalf of US DOE as they relate to the mandatory Time-of-Use (TOU) rates for Schedule 19 customers that are proposed by Idaho Power in this Docket. Could you be specific about where you disagree with the US DOE witness? On page 20 of his Direct Testimony Dr. Goins states while discussing Idaho Power I s proposed Schedule 19 rates 1801 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3-13 While I do not object to the manner in which IPC designed the rate, I am concerned about the law of unintended consequences. IPC claims that the new rate design is revenue neutral. However, if IPC I S large commercial and industrial customers are not prepared to operate cost-effectively under the new rate, they may incur unexpected and unacceptably high bills for their energy use. (Direct Testimony of Dennis Goins, IPC-03 -13, p. 20. I disagree with his acceptance of Idaho Power's mandatory Time-of - Use rates for Schedule 19 customers.However I fully agree with his analysis that forcing TOU rates on large customers can lead to "unintended consequences" In addition , he seems to imply that if large commercial and industrial customers are "not prepared to operate cost-effectively" they may receive unacceptably high power bills.Because we are in a highly competitive global market , COnAgra Foods is continually adjusting its production process to be cost effective.The problem with Idaho Power I s proposed mandatory Tau rates is that in attempting to lower energy costs by shifting production we may well cause other costs to increase. is not as simple as just being "prepared" to minimize electric costs. What other costs do you mean could increase by changing your production process in an attempt to adjust to the proposed electric charges 1802 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3- They could include a whole range of other production costs. We attempt to optimize our costs, but we have several constraints. We already operate around the clock on many days , including many weekends. However , we are down for cleanup and maintenance on some days and most of those include weekend days. Our workforce requires a higher rate of pay to work outside normal day-shift weekday times. Many would be personally impacted with movement of work activities into off shift and weekends, so we would expect to see increases in absenteeism and other problems. Our costs would increase. Another response to TOU rates could be to attempt to limit the rate of production. This is a very expensive alternative, as the product produced at the highest production rate is 1803 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3- typically the least costly to produce, because the same fixed costs are distributed over more production. The imposition of additional external constraints, such as TOU rates , would then make the option of simply limiting production very expensive. We have sought load shedding opportuni ties to reduce demand charges and found very few are cost effective or offer significant hope. At the least, they typically require capital outlay, artificially constrain a factory, increase costs of labor , reduce efficiency and generally increase costs. These cost increases could offset any savings in electric rates and could lead to overall increased production costs.The end result could mean remaining on our current production schedule with no significant change in electric use but higher costs. This would defeat a major reason for the recommendation for the imposition of the mandatory TOU by Idaho Power. Since our plants compete not only with each other I but in global economy, increased costs at a given site can reduce operations at that site as production is moved to our lower cost facilities or lost to lower cost competitors in other areas.The net result could be net lost jobs in Idaho. What do you mean when you say it would defeat a major reason for a TOU rate design? 1804 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E- 03 -13 One reason Idaho Power has proposed mandatory TOU rates is because the cost of peak power is more expensive than power at other times.The intent of charging higher rates for power during those periods would be to cause lower use by customers and a savings to Idaho Power in power expenses.If customers can't economically change their pattern of power use there would be no savings in Idaho Power I s power supply costs.Another reason for TOU rates should be to reflect the costs imposed on the system by a customer class. Does your power consumption vary significantly over different seasons of the year? When we are competitive enough to operate , which we diligently work to accomplish , we do not have large seasonal load shifts. We primarily use natural gas for heat and electric power for freezing, wheel turning and lighting. Weather impacts electric heating and air 1805 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3- conditioning loads much more than it impacts our loads. This is typical of many Schedule 19 customers.As shown in Exhibits 205 and 206 of IeIP witness Teinert' s Direct Testimony, the residential class demonstrates much more variation over the course of the year than does the industrial class.Therefore, the cause of the peaking expense faced by Idaho Power is more attributable to the residential class than industrial customers.However Idaho Power has singled out the industrial rate class to force a TOU rate experiment. Do you know why Schedule 19 was singled out for mandatory TOU rates by Idaho Power? It appears we are the only class with sufficient metering capability to implement TOU rates.A more rational approach by Idaho Power for offering TOU rates would be on the classes that are the source of the problem and have a greater ability to adjust their consumption patterns. This approach is more rational than to do it just because you can without incurring metering costs. Do you agree with his conclusions of US DOE witness Goins that the mandatory TOU rates be allowed to go into effect subject to monitoring by the Commission? 1806 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3-13 No.Dr. Goins recommends Specifically, the Commission should require IPC to prepare And file semiannual reports for the first year in which the rate is in effect Concerning the implementation of the new Tau rate. At a minimum, these Reports should include not only analyses of how well customers understand and Respond to the new rate, but also detailed customer billing analyses that would Enable the Commission to evaluate whether the rate is creating unanticipated and Unacceptable hardship on some customers. (Direct Testimony of Dennis Goins, IPC-E-O3 -13 , p. 21. 1807 Rebuttal Testimony of Michael Henderson On Behalf of ICIP , Case No. IPC-E-O3- This is putting the cart before the horse.Rates should not be imposed that cause "unanticipated and unacceptable hardships" on customers only to change them after the harm has been done.We are not opposed to the concept of Time-of - Use rates.We, however , strongly believe that large commercial and industrial users should not be the only class forced to use them.We would be willing to support optional, not mandatory, TOU rates for Schedule 19 customers.This would allow those firms that could adj ust their production process to take advantage of the TOU rates and thus saving Idaho Power higher power expenses.ehanges in consumption pattern with in large commercial and industrial class could then be monitored to measure the impacts with causing the "unacceptable hardships" pointed out by Dr. Goins. Does this conclude your testimony? Yes it does. 1808 hearing. (The following proceedings were had in open MR. RICHARDSON:Mr. Henderson has no exhibi ts .He is now available for cross-examination. COMMISSIONER SMITH:Thank you very much. Mr. Henderson. Mr. Eddie, do you have questions? MR. EDDIE:No, questions. BY MR. KLINE: COMMISSIONER SMITH:Mr. Purdy. MR. PURDY:I have none. COMMISSIONER SMITH:Mr. Gollomp. MR. GOLLOMP:No questions, Your Honor. COMMISSIONER SMITH:Mr. Ward. MR. WARD:No questions. COMMISSIONER SMITH:Mr. Budge. MR. BUDGE:No questions. COMMISSIONER SMITH:Mr. Kline. MR. KLINE:I have a couple of questions, CROSS -EXAMINATION The rate increase that you talked about was , it due exclusively to the time-of-use aspect of the rate design? CSB REPORTING Wilder , Idaho 1809 HENDERSON (X-Reb) ICIP83676 It I S a combination of the increase of the class , as well as the rate design.In other words Time of use rate design? Yes.The time of use results in an increase to us. And is that increase less than the average in the class , do you recall? I don I t understand the question. That I S all right.You ve testified that ConAgra has potato processing plants in other states. Which states are those? Washington , Oregon, Minnesota, and we have some overseas operations. How do the rates that you pay Idaho Power compare to the rates you pay at your other plant sites? For example , Minnesota. It's higher than Minnesota.In some cases the rates are lower, in some cases the rates are higher. You know , I'd like to confirm that exactly. I 'm hesitant to be on the record and throw that out.But they I re - - I don't have it with me to compare all of them.But there are - - I can tell you that there are plants that are higher and there are plants that are lower.Is that satisfactory for your needs? CSB REPORTING Wilder , Idaho 1810 HENDERSON (X - Reb) ICIP83676 That's fair enough.Do any of those jurisdictions have time-of-use rates in which you have plants? We don't have - - none of the potato plants have time-of-use rates in the United States. MR. KLINE:That's all.Thank you. eOMMISSIONER SMITH:Any questions from Staff? MR. STUTZMAN:No questions. eOMMISSIONER SMITH:Questions from the eommission? Redirect? MR. RICHARDSON:I have no redirect, Madame ehairman.Thank you for accommodating Mr. Henderson's schedule. eOMMISSIONER SMITH:We thank Mr. Henderson for sitting through the afternoon. MR. RICHARDSON:May Mr. Henderson be excused? eOMMISSIONER SMITH:If there I s no objection, Mr. Henderson is excused. MR. RICHARDSON:Thank you. (The witness left the stand. eOMMISSIONER SMITH:All right.We are now at the point of a dilemma.Ms. Moen is in another CSB REPORTING Wilder , Idaho 1811 HENDERSON (X-Reb) IeIP83676 room of the Commission doing another case.And I understand she is the attorney that was going to cross Staff witness Parker. MR. KLINE:That's correct. COMMISSIONER SMITH:Can the Staff proceed to earlock?Is that your witness, Mr. Kline? MR. KLINE:, that would work for me. COMMISSIONER SMITH:Will that work for the Staff?Just a minor variation. MS. NORDSTROM:Would you allow me to confer with my client , for one moment? COMMISSIONER SMITH:Let I S be at ease for a moment. (Brief pause. COMMISSIONER SMITH:Back on the record.We're ready now for the Staff I s next wi tness . MS. NORDSTROM:Staff would call Terri Carlock as its next witness. CSB REPORTING Wilder , Idaho 1812 eOLLOQUY 83676 TERRI eARLoeK produced as a witness at the instance of the Staff, having been first duly sworn, was examined and testified as follows: DIRECT EXAMINATION Good afternoon. Good afternoon. Please state your name and spell your last Terri earlock , C-l-o-c- By whom are you employed and in what Idaho Public Utilities eommission as the audi t section supervisor. eSB REPORTING Wilder , Idaho Are you the same Terri Carlock that filed testimony on February 20, 2004, and prepared Exhibit I am. Do you have any corrections or changes to BY MS. NORDSTROM: your testimony or exhibit? I do not. If I were to ask you the questions that 1813 CARLoeK (Di)Staff83676 for the record. capaci ty? No. 144? are set out in your prefiled testimony would your answers be the same today? Yes , they would. MS. NORDSTROM:I would move that the prefiled direct testimony of Terri earlock be spread upon the record as if read.And Exhibit 144 be marked for identification. COMMISSIONER SMITH:Without objection , we will spread the prefiled testimony of Ms. Carlock upon the record as if read.And Exhibit 144 is identified. (The following prefiled direct testimony Ms. Carlock is spread upon the record. eSB REPORTING Wilder , Idaho 1814 eARLOCK (Di)Staff83676 Please state your name and address for the record. My name is Terri Carlock.My business address is 472 West Washington Street, Boise, Idaho. By whom are you employed and in what capacity? I am employed by the Idaho Public Utilities eommission as the Accounting Section Supervisor. Please outline your educational background and experience. I graduated from Boise State University in May 1980 , with a B.A. Degree in Accounting and in Finance.I have attended various regulatory, accounting, rate of return, economics, finance and ratings programs. I chaired the National Association of Regulatory Utilities eommissioners (NARUC) Staff Subcommittee on Economics and Finance for over 3 years.Under this subcommittee, I also chaired the Ad Hoc Committee on Diversification.I am currently a member of the NARue Staff Subcommittee on Accounting and Finance.I have been a presenter for the Institute of Public Utilities at Michigan State University and for many other conferences. Since joining the eommission Staff in May 1980, I have participated in audits, performed financial analysis on various companies and have presented testimony before IPC-E- 03 - 02/20/04 1815 CARLOCK , T (Di) STAFF this Commission on numerous occasions. What is the purpose of your testimony in this proceeding? The purpose of my testimony is to present the Staff 1 S recommendation related to the overall cost of capital for Idaho Power Company (Idaho Power) to be used in the revenue requirement in this case, IPe-E- 03 -13. will address the appropriate capital structure, cost rates and the overall rate of return. Please summarize your recommendations. I am recommending a return on common equity in the range of 9.5% - 10.5% with a point estimate of 10.0%. The recommended overall weighted cost of capital is in the range of 7.42% - 7.88% with a point estimate of 7.65% to be applied to the rate base for the test year. Are you sponsoring any exhibits to accompany your testimony? Yes , I am sponsoring Staff Exhibit No. 144 consisting of 5 schedules. Have you reviewed the testimony and exhibits of Idaho Power witnesses Avera and Gribble? Yes.Much of the theoretical approach used by witnesses Avera and Gribble in their testimonies and exhibi ts is generally the same as I have used. judgment in some areas of application results in I PC - E - 03 - 02/20/04 1816 CARLOCK, T (Di) STAFF different outcomes. What legal standards have been established for determining a fair and reasonable rate of return? The legal test of a fair rate of return for a utility company was established in the Bluefield Water Works decision of the United States Supreme Court and is repeated specifically in Hope Natural Gas. In Bluefield Water Works and Improvement Co. v. West Virginia Public Service Commission 262 U. S. 679, 692, 43 Ct. 675 , 67 L.Ed. 1176 (1923), the Supreme Court stated: A public utility is entitled to such rates as will permit it to earn a return on the value of the property which it employs for the convenience of the public equal to that generally being made at the same time and in the same general part of the country on investments in other business undertakings which are attended by corresponding risks and uncertainties; but it has no constitutional right to profits such as are realized or anticipated in highly profitable enterprises or speculative ventures. The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties. A rate of return may be reasonable at one time and become too high or too low by changes affecting opportunities for investment, the money market and I PC - E - 03 - 02/20/04 1817 eARLoeK, T (Di) STAFF business conditions generally. The Court stated in FPC v. Hope Natural Gas Company, 320 S. 591 , 603 , 64 S.Ct. 281 , 88 L.Ed. 333 (1944): From the investor or company point of view it is important that there be enough revenue not only for operating expenses but also for the capital costsof the business. These include service on the debt and dividends on the stock . .. By that standard the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risksThat return , moreover I should be sufficient to assure confidence in, the financial integrity of the enterprise, so as to maintain its credit and toattract capital. (Citations omitted. The Supreme Court decisions in Bluefield Water Works and Hope Natural Gas have been affirmed in In re Permian Basin Area Rate Case 390 U.S. 747 , 88 s.et 1344 20 L.Ed 2d 312 (1968), and Duquesne Light Co. v. Barasch, 488 U. S. 299, 109 S.Ct. 609, 102 L.Ed.2d. 646 (1989). The Idaho Supreme eourt has also adopted the principles established in Bluefield Water Works and Hope Natural Gas.See In re Mountain States Tel. Tel. Co. 76 Idaho 474 , 284 P.2d 681 (1955) i General Telephone Co. v. IPUC, 109 Idaho 942 , 712 P. 2d 643 1986) i Hayden pines Water Company v. IPUC 122 ID 356 , 834 P.2d 873 (1992). As a result of these United States and Idaho Supreme Court decisions, three standards have evolved for determining a fair and reasonable rate of return: IPe-E- 03 - 02/20/04 1818 CARLOCK, T (Di) STAFF (1) the Financial Integrity or eredit Maintenance Standard (2) the eapital Attraction Standard; and (3) the Comparable Earnings Standard.If the eomparable Earnings Standard is met, the Financial Integrity or eredit Maintenance Standard and the Capital Attraction Standard will also be met , as they are an integral part of the eomparable Earnings Standard. Have you considered these standards in your recommendation? Yes.These criteria have been seriously considered in the analysis upon which my recommendations are based.It is also important to recognize that the fair rate of return that allows the utility company to maintain its financial integrity and to attract capital is established assuming efficient and economic management , as specified by the Supreme Court in Bluefield Water Works. Please summarize the parent/subsidiary relationships for Idaho Power Company. Idaho Power's common stock is not traded. is wholly owned by IDAeORP , INe. Due to this parent/subsidiary relationship there is no direct market data available for utility operations at Idaho Power Company.The only direct stock market information available to utilize in determining the cost of equity I PC - E - 03 - 02/20/04 1819 CARLoeK, T (Di) STAFF capital is for IDAeORP , Inc. What approach have you used to determine the cost of equity for Idaho Power eompany specifically? I have primarily evaluated two methods:the Discounted Cash Flow (DeF) method and the Comparable Earnings method. Please explain the eomparable Earnings method and how the cost of equity is determined using this approach. The eomparable Earnings method for determining the cost of equity is based upon the premise that a given investment should earn its opportunity costs. competitive markets , if the return earned by a firm is not equal to the return being earned on other investments of similar risk , the flow of funds will be toward those investments earning the higher returns.Therefore , for a utility to be competitive in the financial markets, it should be allowed to earn a return on equity equal to the average return earned by other firms of similar risk. The Comparable Earnings approach is supported by the Bluefield Water Works and Hope Natural Gas decisions as a basis for determining those average returns. Industrial returns tend to fluctuate with business cycles, increasing as the economy improves and IPC-E- 03 -02/20/04 1820 CARLoeK , T (Di) STAFF decreasing as the economy declines.Utility returns are not as sensitive to fluctuations in the business cycle because the demand for utility services generally tends to be more stable and predictable.However , returns have fluctuated since 2000 when prices in the electricity markets dramatically increased.Electricity prices have not seen the dramatic spikes lately so earnings are beginning to stabilize again. Please evaluate the recent price index trends. The trends for price indexes are shown on Staff Exhibit No. 144, Schedule 1.The consumer price index percent change has averaged 9% for 2001-2003 and was 1.9% for 2003.This is less than historical averages. Please evaluate interest rate trends. The prime interest rate ranges by year are shown on Staff Exhibit No. 144 , Schedule Interest rates are at historical lows and no dramatic increase is expected. Please provide the current index levels for the Dow Jones Industrial Average and the Dow Jones Utility Average. The Dow Jones Industrial Average closed at 10,495 on February 5, 2004.This close was a 12 -month IPe-E- 03 - 02/20/04 1821 CARLoeK , T (Di) STAFF increase of 31%.The Dow Jones Utility Average closed at 267 on February 5, 2004. Please explain the risk differentials between industrials and utilities. Risk is a degree of uncertainty relative to a The lower risk level associated with utilitiescompany. is attributable to many factors even though the difference is not as great as it used to be.Utilities continue to have limited competition for distribution of utility services within the certificated area.with limi ted competition for regulated services, there is less chance of losses related to pricing practices , marketing strategy and advertising policies.The competitive risks for electric utilities have changed with increasing non-utility generation, deregulation in some states , open transmission access , and changes in electricity markets. However , competitive risks are limited for Idaho Power. The demand for utility services is relatively stable and certain or increasing compared to that of unregulated firms and even other utility industries. Competitive risks are less for Idaho Power than for most other electric companies primarily because of the low-cost source of power and the low retail rates. The investment risk for Idaho Power is less due to recovery levels for power supply costs reflected in the IPe-E- 03 - 02/20/04 1822 CARLOCK , T (Di) STAFF Power Cost Adjustment mechanism (peA).The risk differential between Idaho Power and other electric utilities is based on the resource mix and the cost of those resources.All resource mixes have risks specific to resources chosen.The demand for electric utility services of Idaho Power is relatively stable.This low demand risk is partially due to the low-cost power and the customer mix of the power users. Under regulation, utilities are generally allowed to recover through rates, reasonable , prudent and justifiable cost expenditures related to regulated services.Unregulated firms have no such assurance. Utilities in general are sheltered by regulation for reasonable cost recovery risks, making the average utility less risky than the average unregulated industrial firm. The main risks experienced by IDAeORP have been and continue to be primarily due to non-regulated operations.This was particularly true during the operation and closure of IDACORP Energy, the energy trading affiliate. You indicated that the Discounted Cash Flow method is utilized in your analysis.Please explain this method. The Discounted eash Flow (DCF) method is IPe-03- 02/20/04 1823 CARLoeK, T (Di) STAFF based upon the theory that (1) stocks are bought for the income they provide (i. e ., both dividends and/or gains from the sale of the stock), and (2) the market price of stocks equals the discounted value of all future incomes. The discount rate, or cost of equity, equates the present value of the stream of income to the current market price of the stock.The formula to accomplish this goal is: o = --------------+...------------- (l+k (1+k (l+k ) N ( 1 + ks ) N o = Current Price DividendD = s = Capitalization Rate, Discount Rate, or Required Rate of Return Latest Year ConsideredN = The pattern of the future income stream is the key factor that must be estimated in this approach.Some simplifying assumptions for ratemaking purposes can be made without sacrificing the validity of the results. Two such assumptions are:(1) dividends per share grow at a constant rate in perpetuity and (2) prices track earnings.These assumptions lead to the simplified DeF formula, where the required return is the dividend yield plus the growth rate (g): IPe-E- 03 - 02/20/04 1824 CARLoeK, T (Di) STAFF s = - - + g What is your estimate of the current cost of capital for Idaho Power using the Discounted Cash Flow method? The current cost of equity capital for IDAeORP and thus Idaho Power, using the Discounted Cash Flow method is between 7.4% - 8.8% during various time intervals.Due to changes in the markets and the dividend cut for IDACORP , I believe the proj ected price range of $25 to $35 with a growth rate of 4% is the most representati ve. The dividend yield for Moody ! s Public Utility Common Stock average is 4.18% as of February 17, 2004. This compares to the midpoint dividend yield for IDACORP of 4% at a price of $30. How is the growth rate (g) determined? The growth rate is the factor that requires the most extensive analysis in the DeF method.It is important that the growth rate used in the model be consistent with the dividend yield so that investor expectations are accurately reflected and the growth rate is not too large or too small. I have used an expected growth rate of 3% - 5%.This expected growth rate was derived from an IPe-03 - 02/20/04 1825 CARLOCK, T (Di) STAFF analysis of various historical and proj ected growth indicators , including growth in earnings per share, growth in cash dividends per share, growth in book value per share and the sustainable growth for Idaho Power and IDACORP. What is the capital structure you have used for Idaho Power to determine the overall cost of capital? I have utilized the capital structure consisting of 51.38% debt , 2.99% preferred stock and 45.63% common equity as shown on Schedule 5 of Staff Exhibit No. 144.This represents the updated capital structure for Idaho Power on 11/30/03 plus the equity infusion of $40 000 000 from IDAeORP on December 31 I have accepted the equity infusion to reflect the2003. updated capital structure as it reduces the risk levels for Idaho Power and should help maintain the Idaho Power bond ratings.This capital structure is shown on Staff Exhibit No. 144, Schedule 5, Columns 2 and What are the costs related to the capital structure for debt? The cost of debt is 5.63%.I have verified these rates as used in Staff Exhibit No. 144, Schedule I have adjusted the debt rate used by Idaho Power witness Gribble to reflect the maturity of the 8% First Mortgage Bond in 2004 (Staff Exhibit No. 144 , Schedule 3, line 1) . IPC-E- 03 - 02/20/04 CARLOCK, T (Di) STAFF 1826 I have replaced the 8% rate with a current rate of 6%. have also reflected the Pollution eontrol Revenue Bond variable rates at the current rates as shown on Staff Exhibit No. 144, Schedule 3, lines 12 - 15.Staff witness English proposed this adjustment in his testimony.I support this recommendation as the most reasonable. What are the costs related to the capital structure for preferred stock? The cost of preferred stock is 6.53% as shown in Staff Exhibit No. 144, Schedule 4.I have verified these rates as used by Idaho Power witness Gribble. You indicated the cost of common equity range for Idaho Power is 10.0% - 11.0% under the Comparable Earnings method and 7.4% - 8.8% under the Discounted Cash Flow method.What is the cost of common equity capital you are recommending? The fair and reasonable cost of common equity capital I am recommending for Idaho Power is in the range of 9.5% - 10.5%.Although any point within this range is reasonable, the return on equity granted would not normally be at either extreme of the fair and reasonable I utilized a point estimate of 10.0% inrange. calculating the overall rate of return for the revenue IPC-E- 03 - 02/20/04 1827 CARLOCK, T (Di) STAFF requirement. What is the basis for your point estimate being 10.0% when your range is 9.5% - 10.5%7 The 10.0% return on equity point estimate utilized is based on a review of the market data and comparables, average risk characteristics for Idaho Power, and the updated capital structure. What is the overall weighted cost of capital you are recommending for Idaho Power? I am recommending an overall weighted cost of capital in the range of 7.42% - 7.88%.For use in calculating the revenue requirement, a point estimate consisting of a return on equity of 10.0% and a resulting overall rate of return of 7.65% was utilized as shown on Schedule . 5, Staff Exhibit No. 144. Does this conclude your direct testimony in this proceeding? Yes, it does. IPe-03- 02/20/04 1828 CARLoeK , T (Di) STAFF open hearing. (The following proceedings were had in MS. NORDSTROM:with the eommission ' indulgence , I I d like to ask Ms. earlock a few questions regarding her role in preparing the Staff's case. Please proceed. BY MS. NORDSTROM: COMMISSIONER SMITH: DIREeT EXAMINATION Ms. earlock, how long have you worked for the Commission Staff? eSB REPORTING Wilder , Idaho Twenty- four years. And although you have gained significant regulatory experience over these 24 years, have you had occasion to develop expertise with regulatory taxation? I have. And could you please give us an idea of what that experience might be? I'll try to remember quite a few of the items.I could say that there have been numerous regulatory venues that I've participated in that would include conferences, round table discussions on tax and I have taught regulatory classes that have included tax items.ve had tax discussions with other other issues. 1829 CARLOCK (Di) Staf f83676 staff members in various states, at various companies over the years, related to the way they've calculated taxes, tax problems that they've encountered trying to figure out how we can work with some of those problems. External auditors , FASB staff , the State Tax Commission. ve provided input on regulation and tax issues in IRS comments that the staff has filed , and NARue has filed.We I ve looked at tax rate changes over the time period.Of course, all rate cases have had tax issues associated with what the tax inclusion is, what the deterred tax would be, what the effective tax rate should be both for corporations, S-Corps. We I ve had cases that have talked about the acceleration of deferred investment tax credits and whether that was legal or not legal, and how that might impact normalization.That would be for Idaho Power Company and Washington Water Power.There have been flow through versus normalization discussions on what is flow through, what is normalization, who makes that choice, how it relates to regulatory impacts.And then have reviewed several IRS rule making decisions associated wi th flow through and normalization. Thank you.Have you supervised the three Staff auditors, Alden Holm, Donn English, and Joe Leckie that testified in this case? CSB REPORTING Wilder , Idaho 1830 CARLoeK (Di)Staff83676 Yes, I do. Did you participate in the formulation of all of their respective recommendations? CSB REPORTINGWilder, Idaho Yes, I did. Did you specifically consult with Mr. Holm regarding the tax adj ustment proposed in his testimony? Yes, I did. Al though Mr. Holm has worked for the eommission Staff for a relatively short time in comparison to you, does that in any way diminish his recommendations made in his testimony? I don't believe it does , no. Does that opinion apply to Mr. English and Mr. Leckie I s testimony as well? Yes. Thank you. MS. NORDSTROM:That I S all the additional direct that I had.And with that, I would tender this witness for cross-examination. Nordstrom. COMMISSIONER SMITH:Thank you , Ms. Mr. Budge, do you have questions. MR. BUDGE:No questions. COMMISSIONER SMITH:Mr. Eddie. MR. EDDIE:No questions. 1831 CARLOCK (Di)Staff83676 Mr. Purdy.eOMMISSIONER SMITH: MR. PURDY:None. Mr. Gollomp.COMMISSIONER SMITH: Just three short questionsMR. GOLLOMP: ma'am. CROSS - EXAMINATION BY MR. GOLLOMP: Ms. Carlock, I presume you've read Dr. Everett I S testimony? I have. In his testimony he's recommended an adjustment allowance for flotation course? That correct. I have a two-part question.One, do you believe it's appropriate in this case to allow for a flotation course; and two, if you do how would you go about making that adjustment for your presentation? I seriously question whether it was appropriate or not.But I did go ahead and include that calculation in my dividend yield piece.And what I did was I looked at the dividend yield and then applied, it' - - you just basically add one plus whatever that flotation cost is and multiply it to the dividend yield. eSB REPORTING Wilder , Idaho 1832 CARLOCK (X)Staff83676 And used that in coming up with my overall recommendations. The typical rate for flotation costs that the eommission has used and Staff has recommended in the eSB REPORTING Wilder, Idaho past cases has been 4 percent.That I S lower than what Dr. Avera had for some of the other utilities that he was talking about. circumstances. But I think there was some different And then I took into consideration the Idaho Power and IDAeORP subsidiary relationship in doing Thank you. MR . GOLLOMP:That completes my that. COMMISSIONER SMITH:Thank you. Mr. Ward. eROSS - EXAMINATION Ms. Carlock , I want to also ask you a couple of questions that have to do with Dr. Avera ' In his rebuttal testimony he criticizes you for applying the DeF method to Idaho Power Company as a Do you recall reading that testimony? Yes, I recall that. cross-examination. BY MR. WARD: 1833 CARLOCK (X)Staff83676 testimony. single entity. And the basis for that is that, in large part , is that first he objects to the use of just a single company.And secondly, he says that I s not appropriate when a company has had a dividend cut. Looking to the later item , isn't it true that the DeF methodology, in fact all return on equity estimates, are attempts to describe what - - or to ferret out what investors expect on a going-forward basis? Tha tI s true.I took that into consideration.The dividend yield , the dividend cut was behind us.I looked at what the stock price had done since that time.And used only projections for figures that I was using in my calculations. I did look at historical growth rates just to determine whether they were reasonable or not.And then to the first part of your question, I looked at all utility operations and did a Value Line survey analysis for western companies , eastern companies, central companies, the Dow Jones Utility Average in total. also looked at Dow Jones Industrial Average companies in making my recommendations, to make sure that the figures that I was using for the Idaho Power IDACORP numbers were consistent with all of those. Okay.And in calculating your , both your dividend for the DCF purposes - - well , let me just start eSB REPORTING Wilder , Idaho 1834 CARLOCK (X)Staff83676 with that. You used the Moody's public utility common stock average of 4.18 percent for your dividend calculation, correct? I used that as a comparison.The dividend yield for Idaho Power eompany, the average is 4 percent. If you look at the projections, the projected stock price , it was at that particular time.The 4.18 was the comparison to other utilities.It is also the number that is calculated after flotation costs. Okay.You anticipated my question by pairing that up with IDAeORP.How did you arrive at your growth rate determination of 3 to 5 percent? I looked at various growth rates that were projected by different entities and what Value Line had for instance.I looked at Dr. Avera's exhibits and his growth proj ections.Took that into consideration as to what he had done, and concerns that I had with his analysis in applying those growth rates.And then came up wi th a range of 3 to 5 percent.And for the ease of calculation I used the midpoint of 4 percent for my calculations. Okay.In performing either a DeF analysis or a comparability analysis, is it important to pick a significant enough number of companies to be sure that eBB REPORTING Wilder Idaho 1835 CARLOCK (X)Staff83676 you can - - that you don't have statistical anomalies from a very small group? It is.That's why I looked at the whole utili ty industry as a comparable to see if Idaho Power, IDACORP was a reasonable calculation. Now, in your comparability analysis did you look at both industrial firms as well as utilities? I did.I looked to see what the trend was for industrial companies and what was happening more recent for them.And what some of the proj ections were. And finally let me ask you this.Do you think it's important to use the most current numbers when you are conducting an analysis such as this? It's important to evaluate the current numbers.And it depends on which current number you ' looking at.Whether that's the most appropriate or whether it's more appropriate to use a proj ection, or a combination of historical, current, and proj ection. it just really depends on what number you re talking abou t . In an overall sense it is important to update your analysis whenever possible and to use current calculations for proj ected growth rates. Did you review Dr. Peseau ' s testimony this case? CSB REPORTING Wilder , Idaho 1836 CARLOCK (X)Staff83676 I did. Dr. Avera suggests that the updates Dr. Peseau employed in his testimony are some how misleading CSB REPORTING Wilder , Idaho Did you find anything about the updates thator wrong. Dr. Peseau used that was erroneous? I thought that he made some very valid points.I did not recalculate any of the analysis that he did to verify it myself.I believe that he updated numbers that had changes with it.And that I s as far as I But I think that type of analysis is MR. WARD:That's all I have.Thank you. COMMISSIONER SMITH:Thank you. Mr. Kline. MR. KLINE:Thank you, Madame went with it. CROSS -EXAMINATION Could up look at page 8 of your testimony, And starting on line 21 you talk about risks being less for Idaho Power than for most other electric companies primarily because of the low cost source of power and the low retail rates. appropriate. Chairman. 1837 CARLOCK (X)Staff83676 BY MR. KLINE: Ms. earlock? That would be for the competitive risk. And wouldn't really have - - so having low costs and low rates really doesn I t have anything to do with whether a regulated utility will be able to recover its prudently incurred costs or earn a fair rate of return; does it?They I re not linked? That part of it is not linked, no.The part of the risk that's important for competitive risks is that that's an essential piece of the total risk of the Company to determine what the return requirement is. And the competitive risk being essentially that they 'll be able to stay in business?In other words wouldn't be municipalized or something like that? The competitive risk looks to the operations of the utility. m sorry, I didn 't understand that. The competitive risk looks to the operations of the utility and how it interacts with other -- or how it I s placed with other utilities, for instance and other industrial customers. If you ve got a good competitive risk compared to another utility, if you had adj oining utilities and deregulated environment, the one that had the lower cost would have less competitive risk.In an industrial company if you ve got lower competitive risks, CSB REPORTING Wilder , Idaho 1838 eARLOCK (X)Staff83676 you're likely to have the lower prices and therefore be able to get more customers and remain in business longer. Power's Customer Advisory Group, are you not? Thank you.You re a member of Idaho Yes. Advisory Group you look at the Company I s purchases and Okay.And as a part of that eustomer sales transactions; do you not? Yes , I do. And you also periodically review the Company's minutes of it's Risk Management Commi t tee eSB REPORTING Wilder, Idaho Yes, I do. And that also tracks the amount of power dec i s ions? purchases and sales the Company makes on a monthly basis for balancing loads and resources? That's correct. Would you agree that based on your review and your participation in that Customer Advisory Group, that the Company is now engaging in a significantly larger number of monthly power transactions than it has historically? I would agree that there are additional transactions that would meet the tier requirements under the risk management policy.There were previously 1839 CARLoeK (X)Staff83676 transactions that were made for balancing the system. those types of transactions I don't believe have necessarily changed.In fact , they may be less because you re firming up your requirements earlier on under the RMC proposal s All right.Are your also aware the Company currently has approximately 70 contracts with cogenerators and small power producers? I don I t know the number but they have quite a few contracts. Would you accept, subject to verification, that it's right about 70? I can accept that. Would you also - - are you aware that the Company also has three or four others currently waiting Commission approval? I have seen applications for pieces and have read certain pieces that would indicate that, yes. And would you accept, subj ect verification , that the Company in its test-year data filed in this case shows an annual cost for eSBP purchases of 46 million dollars, approximately? I have not looked at that number.But that seems consistent with what I've seen on peA reports. Thank you.And the other power purchases CSB REPORTING Wilder, Idaho 1840 CARLoeK (X)Staff83676 that we talked about just recently with the tier balancing and with the load and resource balancing, would you agree , subject to verification , that that would be approximately 12 and a half million dollars per year? That' s going to depend on the circumstances that you re looking at.you ve looked at a certain peA year that is entirely possible. And that's the dollar amount that's in this case , the test year? I believe so. Okay.And when I add those two up, you' looking at approximately 59 million dollars in purchase power expenses in this test year.Would you accept that subj ect to checking my math? Yes. Okay.And would you also accept that that would represent on a megawatt hour basis, 8 percent of the Company's total load requirements? I haven t done the calculations but that seems to be a reasonable ball park. And where I'm going with all of this, it' true is it not, that Idaho Power doesn 't earn a return the expenses associated with purchased power. No.But they re included in the PCA at 100 percent for the cogen amounts that you indicated that eSB REPORTING Wilder, Idaho 1841 eARLOCK (X)Staff83676 were the maj ori ty of that. I understand.But they don I t earn any return on those purchased power expenses, do they? And I don 't believe they should.No. Okay.But, in setting Idaho Power return on equi ty, don I t we need to take into account the substantial amount of purchased power expense the eompany is now incurring? I think that that is all relative.An 8 percent purchase power expenditure, meeting your load at 8 percent I don't believe is a significant percentage of your total requirement.There will be some years that it is higher and other years that it is lower.There are other risks that offset that.I f you want a more direct answer you can rephrase it if you like. Well, I guess the question I have is, where you I ve got significant amount of purchase power expense and all you I re really doing is trading dollars. I mean , you I re putting a dollar out and getting a dollar back with no return on that, don't you think that that has to have some consideration in setting the Company return on equity? I f any of those expenditures had been disallowed for those cogen contracts, which is the largest piece that you re talking about, then I believe eSB REPORTING Wilder , Idaho CARLOCK (X)Staff1842 83676 that you would have to consider that as a risk factor. Those are passed through 100 percent in the PCA.And none of that has ever been disallowed.So there I s no reason for any investor or rating agency to consider that as a risky item other than it I s just a delay in collection.And where the mechanism is set up, and that procedure is automatic basically for that one item, then that I S very low risk. Ms. earlock , in the questions that Ms. Nordstrom asked you right at the start of your presentation of your direct testimony, you described your involvement with the preparation of this case.And so I think it I s obvious that you recognize that the principle issues that the Staff, one of the principle issues in this case is Staff's proposal to substantially reduce or remove a number of items from Idaho Power Company s rate base. Would you agree that's a significant issue in this case? That is one of the main issues, yes. And I I m specifically referring to the Woodhead Park , the annualizing adjustments, the known and measurable investments that this Company has made.When you I re looking at establishing the return on equity for an electric util i ty, you don I t do that in a vacuum, do eSB REPORTING Wilder, Idaho eARLOCK (X)Staff1843 83676 I mean , you have to look at the totality of what'you? happening in that particular rate case. Tha t 's true.You I d have to look at everything that's going on.For instance, there are some items that would reduce the eompany ' s risk , other items that would increase the Company I s risk.The rate base items that you're talking about would increase the eompany s investment risk.When you I re talking about that percent as a percent - - or those numbers as a percentage of the total rate base, it's not that large of But it would increase the risk slightly foran amount. that investment risk component of the total risk. believe there are other items that reduce the risk to the Company as far as what's been going on wi thin the system and operations lately. Make sure I understand your last answer so I I 11 try to just paraphrase it, I guess.Are you saying that - - strike that. As Ms. Nordstrom discussed with you, I guess one of the better ways to describe your position on the eommission Staff as being one of the old hands, is that a fair characterization? I hate to admit it, but yes. We're all there, Terri.And you've seen cases, electric rate cases for Idaho Power ' come and go eSB REPORTING Wilder, Idaho 1844 eARLOCK (X)Staff83676 and other utilities as well.Wouldn I t you agree with me that there is some value in the eommission having a consistent approach from rate case to rate case, from year to year, in setting rates for electric utilities? I do believe that.But I also recognize that there are a lot of times that you need to be more specific on what that policy is.That prior orders may not address items in enough detail to avoid some changes occurring. Yeah.In hearing the testimony today of Mr. Leckie and Mr. English and Mr. Holm , it was almost as if they were saying we I re going to look at each individual rate case, each time, and we're really not going to be all that concerned about what the eommission has done in the past. Is that something that you agree with or do you think I 'm mischaracterizing their testimony? I think you're mischaracterizing to a certain degree.They have looked at this case individually.And I believe that if it I s the question and answer that you I re thinking of is the same as what m remembering, it was applying to how you might do something going forward.And the answer at least that Mr. Holm gave, was associated with that you'd look at it on a case by case basis to see if there were any unique CSB REPORTING Wilder, Idaho 1845 CARLOCK (X)Staff83676 circumstances. I don 't believe that that I s any different than the pol icy the has had in every single case.Now different issues take on different weight, of course, because of the circumstances that are behind them. Okay.I guess as kind of a final question m going to ask you to apply your intuition here, if you would please, Terri. Intuitively, looking at all of the things that have occurred since the last time that Idaho Power did a general rate case about ten years ago, you've had a substantial growth in the number of customers approximately a hundred thousand new meters , been through the entire California energy crisis, the Company's made some substantial investment in facilities, there's been a di vidend cut.Intuitively, is a rate increase of less than 3 percent even logical? I don I t think that those are linked. was surprised at the number of adjustments that the Staff had.I was not expecting the adjustments to be as large just because of what I've known has gone on in the past. I knew that the tax item was going to be a large one. There was discussions of that when the eompany flowed it through.That the eompany really needed to be able to book those for earnings because of CSB REPORTING Wilder, Idaho eARLOCK (X)Staff1846 83676 its earning situation.And that that wasn't fair to customers , and that we I d have to address it in the rate So I knew that that was going to be a big issue incase. this case. I knew that some of the rate base items would also be an issue.But I think that that goes more to the annualizing and normalizing methodology and not just the fact that there was new investments, or the fact that someone might try to characterize Staff's position as being totally different than it has been in the past. So I was surprised to see the dollar amount and the percentage increase that we were talking about. But are there none of those adjustments that I believe are totally wrong?There may be some of them where there were some minor errors that needed to be corrected.One of the items that I can think of after hearing cross might be some of the deferred tax calculations.Just to make sure that that is properly calculated.We used the eompany ' s methodology and flowed it through in the same fashion.But because there was a change there may be something that needs to be adj usted there and it was possible that the eompany methodology did not work under this instance. I would be open to looking at that. believe Mr. Holm indicated that that might also be an eSB REPORTING Wilder, Idaho eARLoeK (X)Staff1847 83676 area that could be looked at.So each item would have to be taken individually and as a whole.And so as a whole I think it would be a shock that the increase is so small.But it's not unheard of either. You indicated that you were surprised when you saw the ultimate result of the Staff I s recommendations.As the senior Staff person on this case , and as a manager of the eASE I guess is the way I would describe it , do you believe that all of the adjustments that are being recommended are fair and reasonable? I believe they re all fair and reasonable. I also believe that there are some other options that the eommission could consider.But I believe the Staff case is fair and reasonable.And that there might be, like the deferred tax piece, something that would need to be followed up with the Company to make sure it's correct. Our intent is not to cause problems with normalization.And I don I t believe we have because we' talking about an item that the Company flowed through, not something they normalized to begin with.But that' the only area that I think that there might be a concern on. That's all I've got.MR. KLINE: Thank you, Mr. Kl ine .COMMISSIONER SMITH: CSB REPORTING Wilder , Idaho eARLOCK (X)Staff1848 83676 Let I S be at ease for a minute. (Brief pause. ) . COMMISSIONER SMITH:Back on the record.Are there questions form the Commission? Commissioner Kj ellander. EXAMINATION BY COMMISSIONER KJELLANDER: Ms. Carlock, Mr. Kline asked a question related to consistency and as it relates from one rate case to the next.And I guess it I S a concept that I do have some sympathy for. So Ms. Carlock , I guess I'd like to ask could you offer me your thoughts on the concept of consistency between rate cases when there s such a distance of time, in this case ten years from one rate case to the next? There I S a lot that has occurred between now and the last rate case.The electric industry is totally different than it was back then.The types of investment that the eompany is making and the way that they re meeting their loads are different.They have the risk management policy that focuses on that.It provides benefits to the Company and customers and reduces risk CSB REPORTING Wilder , Idaho eARLOCK ( eom)Staff1849 83676 overall.The changes that have occurred make it to where some consistency may not be where you I re following everything to the let ter .But the overall concept and policy that you would be addressing needs to be consistent. COMMISSIONER SMITH:Redirect? MS. NORDSTROM:Yes, thank you. REDIRECT EXAMINATION. BY MS. NORDSTROM: Mr. Ward discussed with you Dr. Avera' testimony and you indicated that you had some concern wi th Dr. Avera s analysis.Could you explain what those were? In looking at his DCF analysis I did not believe that some the data that he used was precise. think that he was on the high side for some of the numbers that he put into the DeF.So that would be my concern with that. He criticized you for not considering the risk premium approach , Dr. Avera did.Wha t is your response to that? There are many approaches that cost of capital witnesses use.I had some concerns wi th the CSB REPORTINGWilder, Idaho CARLoeK (Di)Staff1850 83676 development of the premium.And rather than address all of those concerns I chose not to use it.The risk premium approach is not an approach that the Company or the eommission has relied on significantly in the past so I did not see the need to go through all of those concerns and try to change them in order to use that approach. There was also discussion regarding what was included in your DeF calculation.What types of data did you consider when coming to your conclusion? Like I mentioned in responding to Mr. Ward's questions, I looked at the utility industry across the board.And that's broken down into the western region, the central region, and the eastern region. looked at the bond ratings to see that they were comparable.Made sure that those company statistics if put into a DCF on an overall basis would support the numbers that were used for Idaho Power IDAeORP specifically.I also looked at the Dow Jones Utility Average doing the same thing.Compared the returns for all of these groups as well as the Dow Jones Industrial Average group, what that return had been to make sure that it was not totally out of line and was a reasonable recommendation for using Idaho Power and IDACORP. Thank you.Staff has noMS. NORDSTROM: eSB REPORTING Wilder , Idaho eARLOCK (Di)Staff1851 83676 further redirect. COMMISSIONER SMITH:Thank you, Ms. Nordstrom , and thank you, Ms. Carlock. on the record. Let's be at ease for a minute. (Brief recess. COMMISSIONER SMITH:We III go back Staff may call its next witness. MR. STUTZMAN:Thank you , Madame Chairman. Staff calls Marilyn Parker please, to the stand. CSB REPORTING Wilder , Idaho MARILYN PARKER produced as a witness at the instance of the Staff, having been first duly sworn, was examined and testified DIREeT EXAMINATION Good afternoon. Good afternoon. Place state your name for the record. Marilyn Parker. And how are you employed? I 'm employed at the Idaho Public Utilities eommission as a utility compliance investigator. as follows: BY MR. STUTZMAN: 1852 PARKER (Di)Staff83676 And in that capacity did you prepare and prefile direct testimony in this case dated February 20, CSB REPORTING Wilder, Idaho I did. Does that consist of approximately 41 That's correct. Did you also prepare and prefile Exhibit Nos. 139 through 143? Yes. Do you have any corrections or changes to I have one. Okay.Tell us what that is. 2004? On page 41, line 2 , we need to delete the number 401 , comma , 402 , comma, and the word and.So that it just reads , although required by UCRR 403 comma. Okay.Thank you.Any other changes? No. If I were to ask you the questions set forth in your prefiled direct testimony, would your answers be the same today? Yes. Okay. MR. STUTZMAN:With that, Madame Chairman pages? 1853 PARKER (Di)Staff83676 your testimony? I would ask that the prefiled direct testimony of Ms. Parker be spread upon the record as if read.And Exhibit Nos. 139 through 143 be identified on the record. eOMMISSIONER SMITH:If there I s no objection, it is so ordered. (The following prefiled direct testimony of Ms. Marilyn Parker is spread upon the record. CSB REPORTING Wilder, Idaho 1854 PARKER (Di) Staff83676 Please state your name and address for the record. My name is Marilyn Parker.My business address is 472 West Washington Street , Boise , Idaho. By whom are you employed and in what capacity? I am employed by the Idaho Public Utilities eommission as a Utilities Compliance Investigator. accepted that position with the Consumer Assistance Staff in November 2002. What is your educational and professional background? Prior to my employment with the Idaho Public Utilities Commission , I had twenty years experience working in private industry for three different utility companies.In 1973 and 1974 , I was employed by Central Alaska Utilities , a water company in Anchorage, Alaska as the Executive Secretary to the President of the company.From 1982 until 1987 , I was employed as a Customer Service Representative for Idaho Power eompany in Salmon , Idaho.From February 1989 until November 2002, I was employed by Intermountain Gas Company in Customer Services.During my last six years at Intermountain Gas, I supervised representatives at the eustomer Service eenter I s Emergency Answering Service. I received a Bachelor of Arts Degree in I PC - E - 03 - 13 02/20/04 1855 PARKER , M.(Di) STAFF Management and Organizational Leadership from George Fox University in Boise, Idaho in June of 2002. In June 2003 , I attended the National Low Income Energy Consortium Annual eonference in Sacramento, ealifornia. What is the purpose of your testimony in this proceeding? I will address issues related to: 1) customer comments received by the Commission regarding this case; 2) proposed charges and rates; 3) proposed tariff revisions; 4) low-income issues , payment options, and special need customers; 5) eompany operations with regard to the Customer Service Center and Outage Management Operations Center; 6) customer relations; and, out-of-cycle meter readings Please summarize Staff's recommendations to the Commission as discussed in your testimony. Staff recommends that Idaho Power Company (eompany) be commended for improving customer service through the use of technology-based tools such as its customer- friendly Websi te and eustomer Service eenter and Outage Management Operations Center Interactive Voice Response System. Staff also recommends the Company be required to do the following: IPC-E- 03 - 02/20/04 1856 PARKER , M.(Di) STAFF On the initial bills for customers whose service needs a physical connection at the time service is initiated that the charge be entitled , "Service eonnection Charge" and not "Reconnect ion Charge" as proposed by the eompany. Make Staff's suggested changes to Rules D and Change its methods or billing system to avoid the need to prorate bills for Schedules 1, 7, and 9. 4 )Add a sentence in Spanish to its bills and disconnection notices advising Spanish speakers what to do if the customer is unable to determine what the statement or notice says. Add a message in Spanish for those waiting on hold advising Spanish-speaking customers that a Spanish speaker is available upon request and that many of the Company important brochures and information are available in Spanish. Consult with organizations such as the Idaho Migrant Council to gather information about the customer service needs of Hispanic people IPe-E- 03-13 02/20/04 1857 PARKER (Di) STAFF in its service terri tory. Evaluate the need to print bills and delinquent notices in Spanish. ehange its billing practices so that the billing period dates given on bills correspond to the dates that beginning and ending meter readings were taken. 9 )Establish a protocol that specifies when a new meter reading should be taken in situations where service has not been disconnected between occupants. 10)eontinue to work with Staff to revise the eompany's bills, forms, and other documents to achieve compliance with the Utility Customer Relations Rules. CUSTOMER COMMENTS Have you reviewed the written customer comments that have been received by the Commission regarding this IPC-E- 03 -02/20/04 As of February 11, 2004, the Commission case? Yes. received 291 comments from both residential and commercial customers, with the majority coming from residential customers. What are the concerns mentioned by customers? The concern mentioned most often was the 1858 (Di) STAFF PARKER , M. increase in the residential monthly customer charge from $2.51 to $10., which was mentioned by more than one-third of those commenting.Customers are opposed to the increase and the most often repeated reason for opposing the increased customer charge is its perceived unfairness. Customers feel it would decrease their ability to affect the size of the bill by adjusting For example , a Pocatello customer wrote, "I amusage. opposed to the customer charge increase, which is exorbitant as it will negate my economic incentive to conserve energy.What I am opposed to is the base flat increase over which my conservation efforts have no effect. The second most frequently mentioned issue was the impact of the overall rate increase on low-income, fixed-income and senior citizen customers.As one retired customer from Caldwell said,"My pension does not come close to keeping up with all the various increases in services the last few years. Another common comment made by customers results from an apparent misunderstanding of the eompany' s proposal.Some customers expressed outrage because they thought there would be a 400% increase in the customer charge as well as an additional increase for the kilowatt-hour usage of approximately 19%.An example IPC-E- 03 - 02/20/04 (Di) STAFF 1859 PARKER, M. of one of those comments came from a McCall customer who said "The proposed 20% increase and 400% monthly service charge increase are outrageous and not affordable. Staff addressed these misconceptions in press releases as well as the workshops held across Idaho Power's service territory in January of this year. Some customers commented that the current economic conditions in Idaho should be considered before allowing Idaho Power to increase its rates.Many indicated that the eommission should just tell the Company, "NO!"At the public workshops , the Commission Staff explained the duties of the eommission and the role the eommission Staff has in rate cases. PROPOSED CHARGES AND RATES What concerns have customers expressed regarding the Company I s proposal to increase the monthly residential customer charge to $10. OO? Many customers that commented about the customer charge stated that they would prefer to have a lower customer charge and higher kilowatt-hour charge. Electric space heating and air-conditioning customers want to have greater control over the size of the bill by turning the thermostat down in the winter and up in the summer. Q. How does the proposed residential customer charge compare with existing customer charges currently IPe-E- 03 - 02/20/04 1860 PARKER , M.(Di) STAFF being billed in Idaho? Avista I S basic residential customer charge is $4.00 per month for its electric customers and $3.28 for its natural gas customers.Intermountain Gas Company has a customer charge of $2.50 per month for bills April through November and $6.50 for bills December through March.Intermountain's average customer charge is $5. per month.Utah Power and Light does not have a customer charge but has a $9.57 monthly minimum bill.Currently, Idaho Power's customer charge is $2.51 per month.Idaho Power's proposed $10.00 charge is well outside the range of fixed customer charges previously approved by the Commission. What comments do you have regarding Idaho Power I S proposal to change its account initiation and reconnection charges? Idaho Power is doing more than just proposing to change what it charges for setting up new customer accounts and reconnecting service.It has carried the cost of service approach into the realm of non-recurring charges, and in doing so, has redefined the services it provides.Under the Company's proposal, when a customer signs up for new service and the Company does not have to physically connect service, a flat $20.00 fee applies. If the customer signs up for service at a premise that IPC-E- 03 - 02/20/04 1861 PARKER, M.(Di) STAFF was previously disconnected by the eompany, the customer will pay a charge that varies by type of customer and time of day the service is rendered.A customer who is disconnected for non-payment would also pay this variable charge. Although Idaho Power's approach is unique, Staff generally agrees with the underlying concept of aligning charges with costs.Staff notes that where there is no significant difference in cost between set ting up an account and reconnecting service, the proposed charges are identical.For example , whether a eompany service technician goes out during regular working hours to simply read a meter or to read the meter and physically connect service , a customer served under Schedule 1 , 7 , or 9 will pay $20.00. Are there factors other than cost to take into consideration when determining the amount to charge for reconnect ion? Yes.The Commission should be sensitive to the fact that customers who are disconnected for non-payment may be experiencing financial difficulties.The charge should not be set so high as to create a barrier to getting reconnected.On the other hand , the charge should be sufficient to encourage customers to pay make payment arrangements and so avoid disconnection. I PC - E - 03 - 13 02/20/04 1862 PARKER , M.(Di) STAFF Under the eompany ' s proposal , residential (Schedule and commercial customers served under Schedules 7 and 9 will see a $5.00 increase for reconnection requested during the hours of 8:00 a.m. and 6:00 p.m., Monday through Friday.eharges for reconnection requested outside of those hours or on holidays and weekends remain unchanged. The Company is also proposing to increase its Field Collection eharge from $15.00 to $20.00.Do the same concerns apply to that charge? Yes.This charge is assessed when a customer pays the past due bill to avoid disconnection of service to the Company representative who has been dispatched to disconnect service for non-payment. How do the proposed charges compare wi existing charges for other energy utilities? Exhibit No. 139 compares the existing charges for all regulated energy utilities.Idaho Power I proposed Service Establishment eharge will be higher than for any utility except Atlanta Power.Utah Power and Avista do not charge customers for setting up new service during regular business hours.The proposed charge for physically connecting service for customers served under Schedules 1, 7, and 9 from 8:00 a.m. to 6:00 p.m. will be the same as or lower than those of other energy IPC-E- 03- 02/20/04 1863 PARKER, M.(Di) STAFF utilities.The proposed Field eollection Charge will be higher than 1864 PARKER , M. (Di) STAFF IPe-E- 03 - 02/20/04 all other energy utilities. Does Staff support the proposal to change the name of these charges? Staff supports the change from Account Initiation Fee to Service Establishment eharge in reference to the fee for setting up new service. However, given the change in circumstances under which the charge for turning on service (Reconnect ion Fee) will apply, Staff does not support renaming it Service Reconnection eharge.As proposed, the charge will also apply to customers who are just establishing service but require a physical connection as well as customers who recently were disconnected , usually due to non-payment. The term I'reconnection" has credit connotations to which a new customer might obj ect.It might also be confusing, since a new customer typically thinks they are connecting rather than reconnecting.For those reasons, Staff recommends that the charge be called a Service Connection eharge . Other than the suggested name change, does Staff support Idaho Power I s proposal with respect to these non-recurring charges? Yes.Al though the proposed charges wi 11 in many cases be higher than the current charges assessed by other energy utilities , they are cost-based and not IPC-E- 03 - 02/20/04 PARKER, (Di) STAFF 1865 excessive. Do you have concerns regarding Idaho Power I proposal for implementing seasonal rates? Yes.From the customer service perspective, Staff believes this will generate many phone calls to the Company throughout the summer months from customers complaining about high bills and prorated bill statements. The Company had a difficult time dealing with additional incoming telephone calls when rates were high and the peA tiered rate structure was in effect from May 2001 to May 2002.In 2001 and 2002 , actual eompany service levels were rarely above its own service level standard of answering 80% of incoming calls within 30 seconds.(Many companies, including Idaho Power, measure call-answering performance using call center industry standards called service levels.The term service level" represents the percentage of incoming calls answered within a defined number of seconds.A seasonal rate structure will have an impact on customers similar to that of tiered rates.If seasonal rates or tiered rates are adopted , the Company will need to be prepared to handle an increase in the number of incoming calls. According to the eompany, because of past experience, the Company I S eustomer Service eenter staff is better prepared to answer customer questions regarding IPC-E- 03 - 02/20/04 1866 PARKER , M.(Di) STAFF how bills are calculated, particularly those related to prorating and tiered rates.Addi t ionall y, the eustomer Service eenter now has more part-time employees who can be scheduled to provide adequate telephone coverage. Overall , the Company says it is better positioned to handle the increased volume of calls. What kinds of problems do you foresee with regard to prorating of bills? If past events are any indication, the Company can expect increased calls from confused customers wanting an explanation of the itemization of charges that will appear on the bills at the beginning and end of the summer rate timeframe.That is because the Company' proposal is to make the summer rates effective specifically from June 1 to August 31 each year irrespective of billing periods. To illustrate the prorating problem, if the proposed summer rates become effective on June 1st, a customer in a billing cycle where the meter is read on or about the 15th of each month would receive a bill in June that was calculated based on meter readings dated May 15th to June 15th However , the bi 11 woul d have one 1 ine item calculating the kWh charge at the non-summer rate from May 15th to June 1st and then another line item calculating the summer rate from June 1st to June 15th IPC-E- 03- 02/20/04 1867 PARKER , M.(Di) STAFF Due to billing system limitations the Company prorates not only the kWh charges,but all other charges or credits on the bill when I PC - E - 03 -1868 PARKER (Di)12a02/20/04 STAFF there is more than one kWh rate being used in a billing period.The Federal eolumbia River Benefit supplied by BPA, the customer charge , the franchise fee , and demand charges are prorated between the two billing periods. The split entries of prorated charges leads to unwieldy bills and confused customers , many of whom think they are being double billed. Are there any billing al ternati ves that would eliminate the need for prorating Schedule 1, 7, and 9 bills? Yes.Intermountain Gas Company has seasonal rates that begin and end based on the customer 1 s billing period rather than specific calendar dates.If Idaho Power adopted this methodology for billing, the eompany would state in its tariff that for billing periods ending July through September , the summer rate would be in effect; for billing periods ending October through June the non-summer rate schedule would be in effect. This methodology eliminates opportunities for error associated with billing outside of established billing periods. will also avoid confusing customers with unnecessarily complicated billing formats. Another option to reduce the need to prorate bills would be to use a format similar to Idaho Power ' own rate design used for its Schedule 24 customers. IPC-E- 03 - 02/20/04 PARKER , M.(Di) STAFF 1869 the Schedule 24 tariffs, irrigators are billed beginning with meter readings taken for the first billing period in May and end with the meter readings taken for the September billing.Using billing periods that are not date specific will reduce the need for prorations. Exhibit No. 140 is an example of a customer I s prorated bill from May of 2002.An Idaho Power customer with a PhD in Economics provided this bill to the Commission Staff to show how complicated the billing was and how difficul t it was to decipher how it was calculated. Given the difficulty this person had in understanding a prorated bill , it is not surprising to find that others have trouble interpreting their bills.It should be noted that having a PCA rate go into effect on a specific date in the billing period when summer rates go into effect will cause bills to be prorated, but that would happen only once in the summer and not twice.Another option would be to alter the billing system with respect to regular cycle billings so that any fixed charges or credits are not prorated due to seasonal rates or PCA adjustments. Does Staff have a preferred solution to the problem? Yes.Staff recommends that seasonal rates go into effect based on billing periods rather than specific IPC-E- 03 - 02/20/04 1870 PARKER , M.(Di) STAFF calendar dates.Another acceptable al ternati ve would be to alter the billing system so that fixed charges such as franchise fees , customer charges, and BPA credits are not prorated. PROPOSED TARIFF REVISIONS What comments do you have concerning the Company's proposal to revise Rule D , Section 6 , of its tariff? Rule D addresses the general topic of metering. Section 6 specifically addresses meter reading. The Company is proposing to add the following sentence:"The Company reserves the right to modify meter reading schedules as required by changing conditions.This proposed change is shown in context on page 14 of Company witness Brilz's Direct Testimony, Exhibit No. 48.It is unclear what the Company means by its reference to changing conditions.Staff agrees that the Company should have flexibility in establishing meter-reading schedules.However, in Staff I s opinion , this language is overly broad, granting the eompany total discretion with no defined parameters.Staff recommends that the Commission not approve the addition of this sentence to the Company's tariff as written. The Company is proposing to change its tariff to include its Rule L , Deposits, as shown on page 51 of IPe-E- 03- 02/20/04 1871 PARKER , M.(Di) STAFF Company witness Bril z 's Direct Testimony, Exhibit No.4 8. Do you agree with the Company's proposal regarding the deposit calculation methodology for Large Commercial and Special Contract eustomers? In Staff I s opinion , this is a good idea.New businesses inherently have a higher level of risk.It is reasonable for the eompany to request an amount sufficient to cover anticipated usage over a designated period of time.However, Staff suggests some al ternati ve wording to that proposed by the Company in order to clarify intent.Specifically, the Company indicates it may collect a deposit from an applicant or customer in a situation where "the current status of the Customer I s business does not pass an obj ective credit screen.The reference to "current status of the Customer I s business" is somewha t vague.Exhibit No. 141 shows Staff' recommended changes to the eompany I s proposed text. LOW-INCOME ISSUES, PAYMENT OPTIONS, AND SPECIAL NEED CUSTOMERS What impact will the overall rate design have on low-income residential customers? Under the Company r s rate proposal, all customers, including low- income customers , will be impacted based upon usage.With the proposed rate design , the more power a customer uses, the less he or IPe-E- 03 - 02/20/04 1872 PARKER , M.(Di) STAFF she will be impacted.For example, in a chart prepared by the eompany 1873 PARKER , M. (Di) 16a STAFF I PC - E - 03 - 13 02/20/04 (see Company witness Brilz Direct Testimony, Exhibit No. , page 1), a customer who uses an average of 800 kWh per month will see a 23.34% increase under the proposed design.By comparison , a customer who uses an average of 200 kWh per month will see a 17.72% increase , and a customer who averages 2,000 kWh per month will see a 13.07% overall increase. Do Idaho Power I s low-income customers have any options if they have difficulty paying their bills? Yes.Customers who meet the eligibility guidelines can receive help through the federally funded Low Income Home Energy Assistance Program (LIHEAP). Customers can apply for financial assistance by contacting their local Community Action Agency.Other fuel funds are also available.For example , customers seeking proj ect Share funds can contact the Salvation Army anywhere in the Idaho Power service territory. Additionally, some low-income customers may qualify to have their homes weatherized at no charge through the Weatherization Assistance Program (WAP). This program is also administered by local community action agencies.Customers can call the eompany or the Commission to get information about where to go or who to call about LIHEAP , proj ect Share, weatherization or energy conservation.Idaho Power provides detailed IPC-03- 02/20/04 1874 PARKER , M.(Di) STAFF information about LIHEAP to its customers in bill inserts.The January 2004 edition of lIeonsumer eonnection,1I the eompany's monthly customer newsletter also listed the contact information for community action agencies throughout the service territory. Does Idaho Power make contributions to low-income programs? Idaho Power shareholders give $25,000 annually to the proj ect Share fund.Idaho Power also gives $252,000 annually to WAP this amount is included in Idaho Power s rate base as an energy conservation expendi t ure .Idaho Power also collects and forwards to the Salvation Army proj ect Share contributions made by customers who voluntarily include extra amounts when paying their power bills.Company shareholders, in turn, pay the Salvation Army an administration fee equal to 10% of whatever is collected each year from its customers who gi ve to proj ect Share.For example, in 2002 , a total of $179 817.83 was collected in donations from customers for proj ect Share. Idaho Power shareholders gave the Salvation Army $17 981.78 for an administration fee in that year. Does Idaho Power promote the Winter Pay Program when customers call to declare the need for winter moratorium protection? IPe-E- 03 - 02/20/04 1875 PARKER, M.(Di) STAFF The Winter Pay Program is required by Rule 306 of the Utility Customer Relations Rules (UCRR) to be offered to any residential customer who calls a regulated gas or electric company to declare protection from disconnection during the winter months because he or she is unable to pay a bill in full and whose home includes children, elderly, or infirm.The Winter Pay Program allows a customer to pay each month an amount equal to one-half of what a Level Pay amount would be for that residence.The other significant benefit to the participating customer is that, provided payments are made as required each month, he or she is afforded two extra months of protection from disconnection, i. e. , November and March.Ordinarily, the protection from disconnection is for the three winter months of December January, and February. In a survey of the four maj or Idaho electric and gas utilities, Idaho Power had 178 customers on the Winter Pay program for the heating season of 2002 -03. This exceeded the participation rate of the other surveyed companies.Two of the companies had no one signed up for Winter Pay and the other company had 7 customers signed up. Do you believe Idaho Power does an adequate job of accommodating customers who cannot pay a bill in full? I PC - E - 03 - 13 02/20/04 1876 PARKER , M.(Di) STAFF The Company centralized its customer service functions several years ago.One of the goals and benefits of centralization is to ensure that all customers are treated equitably.Since the last rate case (Case No. IPC-94-5), the eompany implemented an Interactive Voice Response (IVR) system that allows customers to call and make payment arrangements over the phone without having to wai t "on hold" to talk to a customer service representative.eustomers who feel uncomfortable with this type of technology still have the option to wait for the next available representative. The Company is willing to enter into payment arrangements wi th customers. What payment options are available to customers? One of the options for a payment arrangement is levelized billing.Simply stated, levelized billing establishes 12 equal monthly installments by combining the amount past due divided by 12 with the customer ' proj ected 12 -month average bill.The customer would be required to pay that amount every month on time.When the customer is given a levelized billing payment plan and misses a payment , the eompany is not as lenient when second payment arrangements are requested. Customers who have a history of broken payment IPC-E- 03- 02/20/04 PARKER , M.(Di) STAFF 1877 arrangements are held to a stricter standard because they pose a greater credit risk to the Company.Staff believes the majority of customers calling the eompany to ask for payment arrangements are treated fairly. those instances where the customer does not believe they have received fair treatment, he or she has the option of contacting the Commission to file a complaint.Idaho Power Customer Service Representatives are required by Commission Rule 305 to advise aggrieved customers of their right to file a complaint. What is the difference between Budget Pay and Level i zed Pay? Budget Pay is promoted on residential and small commercial bills three times a year.However , a customer in good standing with no past due amounts can call in at any time to sign up for Budget Pay.Budget Pay is equal to the 12-month average of a customer's kilowatt-hour usage times the current rate.On the one -year anniversary date the amount is reviewed and, if necessary, adj usted.Because customers on Budget Pay are considered by the Company to have a good credit rating, they have more leeway on when payments can be made. customer on Budget Pay would not be sent a Reminder Notice until a bill was two months past due.Levelized Pay, on the other hand, is similar to Budget Pay in its IPe-E- 03 - 02/20/04 PARKER , M.(Di) STAFF 1878 calculation but requires strict adherence to monthly payments being made I PC - E - 03 - 02/20/04 1879 PARKER (Di) 21a STAFF on time because it is considered a payment arrangement. How does the eompany address the needs of customers who have severe disabilities, diminished mental capacity or are otherwise in need of additional assistance? In a situation where a front line customer service representative determined more personal attention should be given to a special needs customer , the customer would normally be transferred to one of five Idaho Power eustomer Service eoaches or two Coach Assistants. eoaches and Coach Assistants are experienced Idaho Power customer service representatives in lead or supervisory roles. CUSTOMER SERVICE CENTER AND OUTAGE MANAGEMENT OPERATIONS CENTER Quick , easy access to information and assistance and responsiveness to customers' concerns are essential elements of good customer service.How has Idaho Power performed in these two areas? Idaho Power has taken steps to remedy problems it has identified.Improvements in accessibility and responsiveness have been achieved primarily through technological enhancements in the eustomer Service Center and Outage Management Operations Center. Q. How does Idaho Power compare to other energy companies regarding its ability to answer incoming IPC-E- 03 - 02/20/04 1880 PARKER , M.(Di) STAFF customer service calls in a timely manner? According to the Edison Electric Institute/American Gas Association (EEI/AGA) in its 2002 annual data source survey, the average service level (the percentage of calls answered within a defined number of seconds) among the 62 reporting utility companies was 73.8% of calls answered in 32.3 seconds.Idaho Power set its internal service level goal at answering 80% of incoming customer calls within 30 seconds , slightly better than the average service level among the companies included in the EEI/AGA survey. Is Idaho Power s goal reasonable? Yes.In Staff's opinion , service levels of 80% of calls answered within the range of 20-30 seconds are reasonable. In the past three years , has the Company met its goal? No.There were three spans of time in the past three years where the Company fell short of its internal service level goal.Those times were January through June of 2001, September through December of 2001 , and January through July of 2002.During the block of time from January through June 2001 , the Company pointed to a 16% reduction in staffing due to attrition.In the September through December 2001 time period , the eompany IPe-E- 03 - 02/20/04 1881 PARKER, M.(Di) STAFF was still recovering from staffing reductions , the tiered rate questions , as well as a learning curve associated with implementation of a new customer information computer system installed in November 2001.The eompany stated that in January of 2002 through July 2002, the volume of inbound calls increased by 6% and call-handling time was longer.According to the Company, many customers were confused as to how the bills were calculated under the tiered rate design.I t took more time for customer service representatives to help customers understand their bills. Has the eompany improved its performance recently? Yes.It has been meeting or exceeding its service level goal since July of 2002. To what does the Company attribute its success regarding its ability to answer 80% of incoming calls within 30 seconds? In April 2002 , the Company hired temporary agents to assist during periods of increased call volumes and call handling times.Additionally, the tiered residential rate design was discontinued in May 2002 eliminating one cause of customer confusion and discontent.The eompany also implemented a customer service oriented training program that helped customer IPe-E- 03 - 02/20/04 1882 PARKER , M.(Di) STAFF service representatives better manage incoming calls. According to the Company, this program emphasizes multi-tasking and first call resolution and is still a part of its customer service-training regimen. How does the Company handle calls from customers who are reporting outages or emergencies? The Company has a separate Outage Management Operations Center.eustomers calling the outage telephone number reach an IVR with prompts to direct the call to the proper customer service representative.Most customers who call the outage telephone number are calling to verify that the eompany knows there is a power outage in their area.The power outage customer information messaging system is updated within minutes of conf irmed outages.The recorded message continues to be updated at least every twenty minutes or as more information is obtained.The message also tells the customer what the Company is doing with regard to the outage and , when possible, gives an estimated time of repair.If the customer determines that his or her area is not identified as having an outage , he or she is then advised how to report the outage to a customer service representative.If the customer is experiencing a life-threatening emergency related to the outage, he or she is directed to immediately call 9-The message IPe-E- 03 - 02/20/04 1883 PARKER, M.(Di) STAFF to call 9-1 comes immediately following the customer saying IPC-E- 03 - 02/20/04 1884 PARKER M. (Di) 25a STAFF Outage. " Service levels are also measured for the Outage Management System.From January through October of 2003, performance has been extremely good with an overall service level of 96.7% of its calls answered within 30 seconds. In what other ways has the Company improved its responsiveness to outages? In the years prior to the establishment of the Outage Management Operation Center in the summer of 2002 Idaho Power realized it had communication issues between the Company and its customers during outages.This was especially true as it related to relaying accurate information about outages from customers to the proper personnel so that repairs could be handled quickly and efficiently.The Outage Management Operations eenter has centralized dispatching and integrated operations with the Customer Service Center.Because they are trained in customer service skills, staff from the eustomer Service eenter is now assigned to the Outage Management Operations Center.Dispatchers and other technical staff are now able to focus on restoring service while the Customer Service Representatives interact with the customers. Q. How has the Outage Management Operations Center benefited the eompany and its customers? IPC-E- 03 - 02/20/04 1885 PARKER , M.(Di) STAFF Most customers that call regarding an outage merely want to know if the eompany is aware of an outage and to find out if any information is available regarding the estimated time of repair.The maj ori ty of customers are now finding answers to their questions within moments of placing the call.For the Company, this system has allowed it to provide good customer service by keeping customers informed and updated, particularly during those times when large numbers of customers are affected by an outage.The IVR has also reduced the need to hire additional customer service representatives to answer calls that are handled efficiently and effectively by the IVR system. CUSTOMER RELATIONS Please describe how many and what type of complaints and inquiries the Commission has received regarding Idaho Power? Exhibit No. 142 shows the number of informal complaints and inquiries received over the past four years.The Commission received significantly more complaints and inquiries in 2001 and 2002 than in 2000 and 2003.During 2001 and 2002, complaints fell into three main categories: credit and collections, billing, and rates and policies.This is not surprising because during that timeframe customers paid more per IPC-E- 03-02/20/04 1886 PARKER , M.(Di) STAFF kilowatt-hour than they had ever paid, tiered rates were introduced , and a new billing system installed. Exhibi t No. 142 shows, the number of complaints and inquiries dropped off considerably in 2003 , returning to similar levels recorded four years ago. What did your analysis of complaints received by the Commission in 2003 reveal? The maj ori ty of complaints still fall wi thin the three categories mentioned above.Of the 612 complaints received, the majority (58%) concerned credit and collection issues.Most of these credit and collections issues involved actual or threatened disconnection of service , a clear indication that some customers continue to have difficulty paying their Idaho Power bills. Was the eommission able to help these customers? In 52% of the 329 complaints involving disconnection , the eompany's original course of action was modified during the Staff I s investigation.In most instances, Staff was able to assist the customer in negotiating acceptable payment arrangements. How does Idaho Power compare wi th other maj Idaho energy companies with regard to the number of complaints and inquiries to the Commission? I pe - E - 03 - 13 02/20/04 1887 PARKER , M.(Di) STAFF Except for the year 2000, the number of complaints and inquiries per 1 000 customers was higher for Idaho Power than other regulated energy utilities. The numbers reflected in Exhibit No. 143 are not indicative of a particular problem with Idaho Power' customer relations other than the obvious impact that increasing rates and higher bills have on customers. Is Idaho Power responsive to the eommission ' Utility Compliance Investigators during complaint investigations? Yes.The average length of time in which Staff was able to resolve Idaho Power's customer complaints during 2003 was 3.31 days. The average time among all Idaho regulated electric companies was 3. days. What observations do you have about the Company's Website? The eompany's Website is easy to navigate. There are many customer service features available that save the Company and the customer time and money.For example, a customer can pay a bill using a credit card or check-by-phone using the Company's Website.A customer can use the Websi te to locate the nearest pay station. If a customer wants to receive monthly billing statements online, the customer can set up on the Website and IPC-E- 03 - 02/20/04 PARKER, M.(Di) STAFF 1888 eliminate the need for the Company to print and mail a paper bill.Many customers are signing up to receive bills over the Internet.eurrently about 6 000 customers have signed up for this service, which is handled by a third-party vendor. Two significant functions that are not available online are customer requests to connect or disconnect service.A customer that wishes to signup for service or disconnect service must still call the Customer Service Center. Has the Company added any other significant technology-based customer service features recently? Yes.A few years ago, Idaho Power added the previously mentioned IVR system that allows customers to call the Company at any time of day or night. following the prompts , customers can get a recording that informs the customer of what amount is due on the customer I S account, when the customer made the last payment , and the amount of the last payment.The customer is al so able to make payment arrangements on past due bills using the IVR. In 2004 , the eompany enhanced the system with speech recognition capabilities. After being greeted with oThank you for calling Idaho Power , 0 the customer is told to say one of the following: Outage, Residential Services , Irrigation or eommercial IPC-E- 03 - 02/20/04 1889 PARKER , M.(Di) STAFF or New Construction or Electricians.This new friendlier approach to IVR use should help put some elderly, technology-challenged , or physically limited customers at ease when calling the Company. The other significant benefit of this system is that there is only one number to call.For example, a customer no longer needs to search through the telephone book to find a separate number to report a power outage. Do you believe Idaho Power provides adequate customer assistance for non-English speaking customers? The Company has indicated to Staff that it always has at least one Spanish-speaking person available on any given shift.If the customer calling indicates he or she would like to speak to a eompany representative that speaks something other than English or Spanish , the eompany utilizes a third-party interpretation service that provides three-way telephone calling capabilities. Because the interpretation service has the ability to translate 108 languages, Staff believes this is an except ional service provided for anyone who speaks languages other than English and Spanish.Idaho Power also uses this service if the eompany I S on- shift Spanish- speaking representative is already assisting another customer. Does Idaho Power provide adequate bill-related IPC-O3-02/20/04 1890 PARKER , M.(Di) STAFF and/or other information for Spanish-speaking customers? The Company does not print any of its bills or disconnect notices in Spanish.However , the Company has seven brochures and pamphlets that are available in Spanish , including a brochure on conservation as well as a Summary of the Utility eustomer Relations Rules.Staff recommends that the Company add a sentence in Spanish in a prominent location on bills and disconnect notices to inform Spanish speakers that if help is needed understanding what the customer's statement or notice says , that he or she may call the eompany for further information. Are the eompany' s available Spanish resources frequently used by customers? Unfortunately, the information and services available are underutilized, perhaps because customers are not aware of what is offered.The Company should better promote the information and services available to Spanish-speaking customers.One way this could be accomplished is by adding a prompt in Spanish for those wai ting on hold that a Spanish-speaking representative is available upon request.Spanish- speaking customer service representatives should always inform Spanish-speaking customers of the written information available in Spanish. IPC-E- 03 - 02/20/04 1891 PARKER , M.(Di) STAFF The Company indicated that its Spanish language brochures are available to those who request them.This is a Catch-22 for Spanish-speaking customers , in that they are expected to ask for something that they do not know exists.The eompany informed Staff that it was currently working on improving its Spanish-language communications.In February of this year , a sentence in Spanish was added to all the English versions of the Summary of the Utility Customer Relations Rules indicating that a Spanish version was available upon request. What is the Hispanic population in the counties served by Idaho Power? According to the 2000 Census , 101 690 Hispanics resided in Idaho.In the 28 counties served by Idaho Power, there were 81 758 Hispanics.The overall percentage of Hispanics in Idaho in 2000 was 7.9 percent. In counties served by Idaho Power, the average percentage was 11.5 percent.Some counties served by Idaho Power had substantially higher Hispanic populations than others.For example, Canyon , Cassia , Gooding, Jerome, Minidoka , and Power counties all had Hispanic populations greater than 17 percent , with Minidoka having the highest percentage at 25.5%.Given the significant number of Hispanic people in Idaho Power I s service territory, it is IPe-E- 03 - 02/20/04 1892 PARKER , M.(Di) STAFF certainly necessary that the eompany determine how to effectively communicate with its Spanish-speaking IPC-E- 03 - 02/20/04 1893 PARKER, M.(Di) 33a STAFF customers. Do you think the number of Hispanic people in Idaho Power's service territory indicates the Company should be doing more for its Spanish-speaking customers? In its review of Spanish communications, the Company should evaluate the need for bills and delinquent notices to be printed in Spanish.The Company should consult with organizations such as the Idaho Migrant Council to gather information about the customer service-related needs of Hispanic people in the eompany service territory. Do you think the Company should provide better customer service for customers who speak languages other than English or Spanish, such as Bosnian or Russian? The fact that a person who speaks Bosnian or Russian can request a third-party translator is adequate at this time.The Consumer Staff has never received a complaint on behalf of a person who speaks a language other than English or Spanish saying they thought the Company ought to provide them with more options in their nati ve language.The small population of people that speak languages other than English and Spanish in Idaho at this time does not justify requiring the eompany to develop brochures and pamphlets in additional languages. IPe-E- 03 - 02/20/04 1894 PARKER, M.(Di) STAFF OUT-OF-CYCLE METER READINGS In your review of eompany procedures wi regard to out-of-cycle meter reading and billing, did you find anything of concern? Yes.Out-of-cycle meter readings are necessary when customers move, change billing responsibility, or request physical disconnection of service.An Idaho Power bill resulting from an out-of-cycle meter reading reflects the customer s requested date of action - not the date the meter was actually read.Staff believes this practice should be changed.Customers expect bills to be based on beginning and ending meter readings that correspond to the billing period.Using meter-reading dates that do not correspond to the billing period misleads customers and undermines the integrity of the billing process. What is the Company r s process when a customer informs the Company he or she is moving and to stop billing? The Company indicated that with respect to residential and small commercial customers, it does not routinely disconnect service between occupants because typically there is little time delay in new customers signing up for service after the former customer requests disconnection. IPe-E- 03 - 02/20/04 1895 PARKER, M.(Di) STAFF In situations where an out -of -cycle meter reading is taken to close an account and the meter is not physically disconnected, the eompany indicated that approximately 93% of the readings for residential and small commercial customers are taken within 3 calendar days, approximately 5% of the readings are taken within 5 calendar days, and the remaining 2% are not read for more than 5 calendar days.In 2003, Idaho Power performed more than 100 000 out-of-cycle meter readings for residential and small commercial accounts where power was not disconnected. Are there circumstances where the Company physically disconnects service? The Company indicated that when a service technician arrives at a premises and it is obvious that no one is occupying the home or business and no new customer has signed up for service , the meter is always disconnected.According to Idaho Power , for those accounts where service was physically disconnected in 2003 , 95% of residential and small commercial meters were read and disconnected wi thin 3 calendar days of the customer I S requested date.Approximately 2% of requests were processed within 4-5 calendar days after the customer I S requested date and the remaining 3 % took more than 5 calendar days to complete.Idaho Power conducted IPe-E- 03 - 02/20/04 1896 PARKER, M.(Di) STAFF more than 20 000 actual residential and small commercial disconnects last year. Should the Company be required to always read meters and/or disconnect service on the date customers request? No.The eompany needs a reasonable amount of time to respond to a customer I s request.A work completion interval of up to 3 calendar days in the maj ori ty of circumstances is reasonable.An interval of up to 5 calendar days is reasonable for those situations where weather , the customer's remote location, or other issues delay work.One example where the eompany might justifiably not be able to take an out-of-cycle meter read within 3 days is in a remote service area such as Garden Valley.The eompany routinely goes to Garden Valley twice a week , but depending upon some factors such as weather may only go once a week. If a customer requests disconnection of service for a specific date and the Company does not read the meter and disconnect service for 5 days beyond the requested date, who pays for the additional 5 days worth of service? The customer who was disconnecting service would be responsible for payment up until the time of disconnection.However, as stated earlier , the IPe-E- 03 - 02/20/04 1897 PARKER, M.(Di) STAFF customer I s final bill would not reflect the actual date service was disconnected. You stated earlier that Idaho Power does not routinely disconnect service for residential and small commercial customers.If service is not physically disconnected between occupants, can other billing issues arise? Yes.Unless the date Idaho Power reads the meter exactly coincides with both the date the departing customer moves out and the date the new customer moves , the billing period will not match.The wider the gap of time between requested dates and actual meter reading and/or disconnection dates, the more problematic billings become.The eompany needs to minimize the gaps that exceed 3 calendar days. Are there any other scenarios where the procedure of not actually turning off meters between occupants can lead to billing issues? Yes.Many landlords have verbal agreements with the eompany to not disconnect their rentals between tenants.The agreement is that when a tenant moves out and places a request to close his or her account , the Company is allowed to simply transfer the billing responsibility of the account into the landlord's name at the time the tenant says he or she is moving out. I PC - E - 03 - 13 02/20/04 1898 PARKER , M.(Di) STAFF Service is not disconnected between tenants and the landlord is responsible for paying for usage while the residence is vacant.This introduces another level of complexity to the billings and meter reading process because three customers (the departing tenant , the landlord, and the new tenant) are involved. Does Staff have other concerns with regard to Idaho Power's handling of out-of-cycle meter readings and disconnections? Yes.It is not clear to Staff how the Company determines what to use as a beginning reading for a new customer moving into a location where the power was not actually disconnected between occupants.It appears that in some cases, the meter reading is used from when the last occupant moved out in other cases , it appears that a new reading is obtained.It is Staff's opinion that the Company should establish a protocol that specifies when a new reading should be taken. What do you consider a reasonable approach to solving billing issues related to the Company s handling of out-of-cycle meter readings? Staff I s position is that the billing period ending date entered into the computer system and printed on the customer s final bill should match the actual date the meter was read and/or disconnected.Customers are I PC - E - 03 - 13 02/20/04 1899 PARKER, M.(Di) STAFF entitled to accurate billing information.By providing the correct date , the customer would have the option to negotiate with the Company if he or she had an issue with the length of time it took to read and/or disconnect the meter.Likewise , the starting date on bills should correspond with the actual reading date on which the bill is based.In situations where the meter was physically disconnected , the meter reading should always be verified at the time of reconnect ion for the new customer to make certain the reading matches that taken on disconnection date of the prior occupant. Have you discussed this matter with the Company? Yes.The eompany understood Staff's concerns and is examining its processes now.Staff anticipates discussing proposed solutions with the eompany by April of this year. Did you review the Company's bills, notices, forms , and other documents to ascertain compliance with the Utility Customer Relations Rules (UeRR)? Yes.Staff found that the eompany was generally in compliance with the UCRR.For those areas where changes were necessary, Staff and the Company agreed on solutions for bringing the Company into compliance.Q. What were the significant non-compliant areas I PC - E - 03 - 13 02/20/04 1900 PARKER, M.Wi) STAFF in need of change? Al though required by ueRR 403, the Company was not keeping a written record of complaints and requests for conferences it received directly from customers.The eompany indicated it would begin tracking complaints in accordance with the UCRR.The eompany had been keeping a detailed record of the complaints referred to them by the eommission.However , the purpose of this rule requirement is to encourage the eompany to analyze its own policies and processes using the valuable feedback gi ven by customers. The second area of non-compliance was that the eompany had not developed a Summary of Utility Customer Relations Rules for customers billed under Schedules , and 24 as required in Rule 701.In response to Staff I s findings , the Company prepared and began sending the Summary with bills to these customers in February. Staff also found that the Summary of Utility eustomer Relations Rules was not being provided to each new customer upon commencement of service as required by Rule 701.The eompany committed to having the Summary inserted into the initial bills of each new customer wi thin two months. Does this conclude your testimony? Yes it does. IPC-E- 03 - 02/20/04 1901 PARKER (Di) STAFF open hearing. (The following proceedings were had in MR. STUTZMAN:And Ms. Parker is available for cross-examination. BY MR. EDD IE: COMMISSIONER SMITH:Thank you. Mr. Budge, do you have questions? MR. BUDGE:No questions. eOMMISSIONER SMITH:Mr. Eddi e . MR. EDDIE:I do, thank you. CROSS -EXAMINATION Ms. Parker , if you could turn to page 16 of your testimony. Okay. And in reference to a question about the impact of the eompany' s proposal on low-income customers eSB REPORTING Wilder, Idaho you state that the rate design proposal will have a lesser impact on those customers that consume high amounts of energy or a higher amount than on customers that consume less energy. That I S correct. MR. EDD IE:Madame Chair, if I could approach and hand an exhibit out. 1902 PARKER (X)Staff83676 Exhibit 608. COMMISSIONER SMITH:Yes, you may. MR. EDDIE:For the record this will be This document was filed by the Northwest Energy eoal i tion in response to a discovery request by Idaho Power.It's an article by Mr. Roger Colton entitled Energy Consumption and Expenditures by eSB REPORTING Wilder, Idaho Low- Income Customers. (Northwest Energy Coal tion Exhibit No. 608 was marked for the record. Have you reviewed this document? , I have not. Were you aware that it was filed in this Evidently not. I will just ask you questions in reference BY MR. EDDIE: to the document and not ask you to interpret it in any way just to get some of the information into the record. If you I d turn to page - - the pagination starts with page 70 on the first page. In the third column So turn to page 71, the second page of the f i 1 ing . to the right - - actually starting with the middle column on the page where it says according to , could you read that first sentence of that paragraph? According to the LIHEAP report low- income 1903 PARKER (X)Staff83676 case? households use considerably less energy for home heating than do their non-low- income counterparts. And the LIHEAP report that that' referencing is back in the first paragraph on the page, the LIHEAP Home Energy Notebook of the year 1999 July 2001.That's correct; right? Right. Looking down at table 1 on that page which is entitled Home Heating Consumption and Expenditures Per Household, the very bottom of that table all the way to the right , under the column for electricity, you know and you agree that low- income customers on average in the west spend $203, I believe that's annually, versus non-low-income customers which would spend $271? Yes , I see that. Okay.Then turning to page 73.Looking at table 4 which is drawn from Consumer Expenditures Survey by the U. S. Departments of Labor.I f you would look at the very right-hand column of that table , and if you could compare the average annual expenditures by folks with income in the $10,000 to $14,999 range versus annual expenditures by those in higher incomes. Yes. MR. STUTZMAN:Madame ehairman, I'm going to obj ect eSB REPORTING Wilder , Idaho 1904 PARKER (X) Staf f83676 COMMISSIONER SMITH:Mr. Stutzman. MR. STUTZMAN:This witness has already testified she's not aware of this, she hasn't seen it before , it's unfair to ask her questions of an exhibit that apparently Mr. Eddie would like to have admitted but it 1 S not our exhibit, it's not our witness. COMMISSIONER SMITH:Mr. Eddie. MR. EDDIE:This document has been filed in the case.I think it's relevant to Ms. Parker 1 s testimony that she's filed before the Commission.And I I m not asking her to interpret or make a judgment about the correctness of this.I m simply asking that she review it. COMMISSIONER SMITH:m thinking actually it is kind of unfair to Ms. Parker to do this.And since your witnesses are coming up, it seems to me you have an opportunity maybe to introduce this through someone who has actual knowledge of the document. MR. EDDIE:Very good.I won I t ask her to do the research. No further questions. COMMISSIONER SMITH:Thank you. Mr. Purdy, do you have questions? MR. PURDY:I do , Madame Chairman. CSB REPORTING Wilder , Idaho 1905 PARKER (X)Staff83676 eROSS-EXAMINATION BY MR. PURDY: Ms. Parker , are you the primary, if not perhaps the only, Staff witness to offer testimony regarding issues unique to Idaho Power's low-income customers in this proceeding? Yes. Okay.I would ask you to also look at your direct testimony, page 16.You were just there a moment ago , line 19.And tell me when you re there. Okay. Okay.Now , what I want to do is go through four questions and answers just briefly so I can ask a general question and then we I 11 come back and get into it in slightly greater detail on each one of these. Would you just read the question beginning on line 19, on page 16? What impact will the overall rate design have on low-income residential customers. Okay.Now , wi th respect to the term overall rate design,that the rate design proposed by the eompany this case? Yes. Okay.And fair just for the time eSB REPORTING Wilder , Idaho 1906 PARKER (X) Staff83676 being, to say that as Mr. Eddie just pointed out, the more a residential customer uses , the less they actually end up paying per kilowatt hour? , line That's correct. line Okay.And if you could then turn to page Okay. And read the question only beginning on Do Idaho Power s low-income customers have any options if they have difficulty paying their bills. eSB REPORTING Wilder , Idaho And then is it fair to say your answer is yes, and you go into a discussion of the LIHEAP program? Yes. Okay.And again , we'll come back to that. If you could turn now to page 18 , line 6, and read that question. Does Idaho Power make contributions to low-income programs? Okay.And again , is it fair to say that your answer suggests that they do to two programs. particular WAP and proj ect Share? Right. Okay.And finally, if you I d turn to page , line 23, and read that question. 1907 PARKER (X)Staff83676 Do you believe Idaho Power does an adequate job of accommodating customers who cannot pay a bill in full? Now , your answer begins on the next page page 20 , 1 ine You don't answer it yes or no though. Am I to infer from that that you attribute a somewhat positive spin on the fact that the Company centralized its customer service functions? Right. That that somehow is advantageous to low- income customers? Well , I'm saying that they I re adequate. didn 1 t say they were excellent , they were adequate. So now I'll get back to the general questions that I promised.And based on these four questions and answers , are we to infer that it is your opinion on behalf of Staff that all of the unique low- income Idaho Power customer needs have been addressed by the Company? No.don'think they have. Okay.eould you expand on why you be 1 i eve they have not? Well , I don't think that LIHEAP is enough. And if it were up to me, I think there needs to be some ther programs.I did talk to Ken Robinette about an idea CSB REPORTING Wilder , Idaho 1908 PARKER (X) Staff83676 that I had and he did say that they were actually looking into that.I think there needs to be someone go before the legislature and have some kind of a matching fund because many states throughout the U. S. do have that kind of a program.And I'd like to see that. Thank you.So the point I was trying to make is that one could arguably infer that you I re suggesting that all low-income needs have been met in fact,that 'not your position it? No. Okay.Now have you reviewed the prefiled direct testimony of eommunity Action Partnership Association witnesses Terri Ottens and Ken Robinette? Yes. All right.And Staff did not file any rebut tal to those testimonies , did it? No. All right.Do you agree with eommunity Action's proposal to increase LIWA funding and to eliminate the non-Idaho Power 50 percent matching requirement? I think that - - I agree that there needs to be more low-income weatherization , absolutely.What m concerned about is that they're asking for about a million more, which is not in this rate case, it hasn' eSB REPORTING Wilder, Idaho 1909 PARKER (X)Staff83676 been asked for by Idaho Power , so where is that money going to come from?I I m worried about what that might do to the low-income people because essentially that will probably end up getting passed on to the residential customers so the low-income people that will benefit from that program will actually be paying for it.And I' concerned because the initial amount that was agreed to by this Commission was about 32,0000 and then that was going to be looked at again in a couple of years after that.And there was money that was not getting spent. And so I don't know what happened there.I don I t know why Health and Welfare couldn I t communicate or Idaho Power couldn't communicate and they couldn I t spend all the money that I s there.So the amount was reduced by this Commission.And so, you know , I hope that they got their act together.And all for it if Health and Welfare feels like they can administer it. All right.And so it's true then , that the actual amount that Idaho Power I s funding into LIWA is annually no longer in the $300,000s , it's gone down to I think we've heard roughly $250 000. Right.That I S correct. Now , you're not a specialist in the area of rate making or revenue allocation, are you? No. CSB REPORTING Wilder, Idaho 1910 PARKER (X)Staff83676 So when you express the concern that if the LIWA program funding is increased , that the very customers who need low-income assistance will end up paying for it.Are you perhaps overlooking the fact that presumably the amount of funding would be spread among all customer classes? Yeah.I was assuming that. All right.Now , I want to ask a couple of specific questions.And again I I m referring to page 16, line 19.And I'll try to avoid repeating what Mr. - - the point Mr. Eddie made, but your suggestion there is basically under the Company's rate design proposal the more a customer uses , the less they pay for kilowatt hour , essentially? Right.If the customer charge is $10. Okay.But yet your question seems to suggest that this is an advantage to low- income residential customers , if you look at your actual question; right? I didn't mean to imply that. Well , in fact isn't it true that this advantage, as you characterize it , applies to all residential customers whether they're low- income or not? Right. There s no distinction between low-income CSB REPORTING Wilder , Idaho 1911 PARKER (X)Staff83676 and weal thy residential customers. Right. The more you use the less you pay proportionately? Right.It depends on what you use for heatj electric, or natural gas , or wood , or whatever. Okay.Now on page 17 , line 8 , that pertains to the LIHEAP program? Right. And was your testimony a few moments ago that you think that that program could be enhanced somehow financially? Yes. Okay.But that's not wi thin the control of this Commission , is it? I don I t think so. All right.How familiar are you with the LIHEAP program? I would not consider myself to be an expert on the program. Okay.And I want to establish a couple of points just based on , or pertaining to, the general needs that low- income customers have. And along those lines , are you - - do you recall that Ms. Otten testified that only about 32 CSB REPORTING Wilder, Idaho 1912 PARKER (X)Staff83676 percent of those eligible statewide for LIHEAP actually received benefits in the year 2002? Right.Yes.I remember reading that. Okay.LIHEAP is a first-come first-served programj isn't it? Yeah.They do run out funds,yes. They run out funds? Yes. Okay.Let I s move on to page line And I want to ask you a question about proj ect Share. Okay. Would you agree with me that Idaho Power their own data indicates that only about 1465 of their customers receive proj ect Share benefits. I don't have that number. In 2002? Yeah.I don I t have that number.I don' know. You don I t dispute that, though? No. Okay.And subj ect to check would you agree that I s less than 3 percent of Idaho Power Company ' customers who are considered low- income? Okay. All right.Again, proj ect Share is a eSB REPORTING Wilder , Idaho 1913 PARKER (X)Staff83676 first-come , first-served kind of program as well? That's right. When the funds run out that I s it for the year. That's right. All right.Finally on page 19 -- this should wrap it up -- line 23.You were asked , do you believe Idaho Power does an adequate job of accommodating customers who cannot pay a bill in full.And you point out that the customer or that the eompany rather , has several payment options to assist customers who are having a hard time paying their bill. Right. But would you agree with me that if a residential customer is operating on a bare minimum , you know , they're perhaps on the verge of bankruptcy and frankly just don I t have the money to pay their power bill.That a level plan payment, or some of these various payment options that you list might not make any difference to them? That I S right.Some people just can't come up with the money to pay their bills. All right. MR. PURDY:That's all I have. COMMISSIONER SMITH:Thank you , Mr. Purdy. CSB REPORTING Wilder , Idaho 1914 PARKER (X)Staff83676 questions? Mr. Gollomp, do you have MR. GOLLOMP:No questions. Moen. eOMMISSIONER SMITH:Mr. Ward. Chair. MR. WARD:No questions. BY MS. MOEN: COMMISSIONER SMITH:Mr. Ri chardson. for you. MR. RI CHARDSON :No questions. COMMISSIONER SMITH:Mr. Budge. MR. BUDGE:No questions. COMMISSIONER SMITH:And finally, Ms. MS. MOEN:Thank you very much , Madame eROSS -EXAMINATION Ms. Parker , I just have a few questions Okay. In your testimony, particularly on pages and 4, you conveniently itemize certain recommendations CSB REPORTING Wilder , Idaho that you suggest that the eompany make with respect to various customer activities or relationships with the Company is that right? 1915 PARKER (X) Staff83676 That's right. Okay.Have you had the opportunity to review the rebuttal testimony of Maggie Brilz? Yes. And have you had the opportuni ty to review the rebuttal testimony of Susan Fullen? Yes , I have. And generally, would you agree with me that in the testimony they've addressed these or looked to these ten item and made certain recommendations or suggestions as to resolving the concerns that you raised? Yes , they have. Okay.In particular , on numbers one and two on page 3 , I think you made some suggestions as to title changes as well as to some textual changes in certain tariffs.And based on the testimony of, rebuttal testimony of Ms. Brilz , you would agree , wouldn't you that the Company has agreed to implement those changes in conformance with your request? Yes. I believe there were also suggestions that you had made with regard to accommodating the Spanish-speaking population within the service territory of Idaho Power.And would you agree with me that based CSB REPORTING Wilder , Idaho 1916 PARKER (X)Staff83676 on responses in the rebuttal testimony, that Idaho Power is responsive to the concerns that you I ve raised on pages 3 and 4? Yes, they are. Okay.I have some particular questions wi th regard to your prorating recommendations.You I 11 see that on page 3, item number 3 , you encourage the Company to change its method or billing system to avoid the need to prorate bills for schedules 1 , 7 , and Regarding that particular issue, the Staff I believe has recommended that seasonal rates become effecti ve on a rolling basis coincident with the customer I S meter reading; is that correct? Yes.That was one option , our preferred one at the time. Okay.And then you subsequently, I think on page 14 of your testimony, beginning on line 17 , you identified another option. Which -- Do you see on line 17 it says another option would be to alter the billing system with respect to regular cycle billings. What page were you on? I 'm on page line 17. Okay.Yes.Okay. eSB REPORTING Wilder , Idaho 1917 PARKER (X) Staff83676 And just to make sure that I' interpreting what you I re suggesting there correctly, is it true that as this -- in this alternative you suggesting that as an alternative to the rolling basis, that it would be an acceptable option for the eompany to modify the manner in which bills are presented to its customers , such that only the component affected by the seasonal rates are actually prorated; is that correct? Yes.That I S correct. Okay.Now , if Idaho Power - - what I wanted to see whether you I d agreed with this.If Idaho Power would change its - - or modify the bill presentation in accordance with this alternative that you've raised on page 14 , would it be acceptable or would the Staff recommend that the Company implement the seasonal rates on a date-certain basis , such as June 1st , and September 1st rather than on a rolling basis?Would you be agreeable to that? Yes.The most important thing is that we avoid the kind of bill that is , I think Exhibit 140 in my testimony.We just want to avoid that.So if you can get away from that and just do - - make your bills just easier to read for the customer , then that's fine. So I understand , you believe that those changes would make the bill less confusing and more CSB REPORTING Wilder , Idaho 1918 PARKER (X) Staff83676 readable and understandable to the consumer? Right. Okay.You I ve al ready answered my questions regarding Idaho Power's efforts to make its bills more easily understood by the Spanish-speaking population within its service territory.And I just want to speak in particular about your recommendation again on page 3 concerning the on-hold system. Uh-huh. And I believe that you are aware that Idaho Power has implemented a newer system with regard to its telephone system and customer's opportunities to get directed to the appropriate individuals or departments in order to be responsive to their questions? Uh-huh. And the question that I have is, that if Idaho Power were to implement a Spanish-speaking option to this front line system that I referred to, would the Commission Staff find that to be a desirable or satisfactory manner in which to address your on-hold concerns? Yeah , yes.We like it even better than our suggestion. All right.Just a couple of other questions.I believe with the corrections to your eSB REPORTING Wilder , Idaho 1919 PARKER (X)Staff83676 testimony on page 41 by the deletion of Utility customer rules 401 and 402, that basically you are agreeing with the Company that the Company has not been in non-compliance with those particular customer rules; is that correct? That correct. Okay.And then with the rebuttal testimony of Ms. Fullen I think, would you agree with the eompany's efforts to come into compliance with Rule 403? Yes. Okay.And then lastly you make a reference to customer rule 701 with regard to providing summaries of the actual rules to our customers.And you would agree with me , wouldn't you , that for some classes of customers we've come into compliance with that particular requirement.And that there are plans to resolve any other issues concerning that particular rule? Yes , you have. Okay. MS. MOEN:I have no further questions. Thank you. COMMISSIONER SMITH:Thank you. Do we have questions from the eommission?Nor do I. Do you have redirect, Mr. eSB REPORTING Wilder , Idaho 1920 PARKER (X) Staff83676 Stutzman? MR. STUTZMAN:I have no redirect. COMMISSIONER SMITH:Thank you very much for your help, Ms. Parker. MR. STUTZMAN:I believe, Madame Chairman that concludes the Staff's case.I would move that all of the Staff's exhibits, 101 through 143 be admitted into evidence at this point. COMMISSIONER SMITH:You mean 144. MR. STUTZMAN:Excuse me , 144. COMMISSIONER SMITH:If there's no objection , we will admit Exhibits 101 through 144.And I have crossed the Staff off of my chart. (Staff Exhibit Nos. 101-144 were admitted into evidence. COMMISSIONER SMITH:So we will now adj ourn for the evening.We have a public hearing in this room tonight at 6:30.I would ask that you assemble your loose papers and put them in binders or folders, or somewhere where they I re not at risk of being scattered and lost.I think your binders will be fine.Nobody will bother them. It I S my intention to begin at 9: 00 in the morning unless someone has obj ection? With that , we' 11 see those of you who want CSB REPORTING Wilder , Idaho 1921 COLLOQUY83676 to engage the evening's acti vi ties 6: 30,and we I 11 see the rest of you 9: 00 (The Hearing recessed 4:30 p. CSB REPORTING 1922 COLLOQUYWilderIdaho83676