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
. ...
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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
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1746
1754
1763
1776
1782
1792
1795
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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,
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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.
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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.
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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.
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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
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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'
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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
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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.
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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
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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?
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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
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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
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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
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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
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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.
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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?
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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
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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
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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
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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
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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.
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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
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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.
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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.
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- - 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
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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.
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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.
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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
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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
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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):
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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
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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) .
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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
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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.
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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?
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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?
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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.
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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
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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
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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
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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?
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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,
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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
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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
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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
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CARLOCK (X)Staff1842
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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
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eARLOCK (X)Staff1843
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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
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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
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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
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eARLOCK (X)Staff1846
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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
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eARLoeK (X)Staff1847
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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-
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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 -
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STAFF
1878
calculation but requires strict adherence to monthly
payments being made
I PC - E - 03 -
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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 -
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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 -
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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 -
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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 -
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STAFF
to call 9-1 comes immediately following the customer
saying
IPC-E- 03 -
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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 -
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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 -
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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 -
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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 -
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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 -
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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.
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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
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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.
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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
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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'
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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.
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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
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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
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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
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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.
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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
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that you suggest that the eompany make with respect to
various customer activities or relationships with the
Company is that right?
1915 PARKER (X)
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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
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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.
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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
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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
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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.
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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
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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.
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