20040416Volume XVI Part II.pdf

position.
COMMISSIONER SMITH:Gi ven the
Commission I S ruling at the beginning of the hearing, that
makes perfect sense to me.Is there any obj ection?
not, then we won I t take Mr. Said 1 s rebuttal in this case.
with Ms. Fullen.
MR. KLINE:We I 11 go ahead and proceed
COMMISSIONER SMITH:Sure.
MR. KLINE:All right, and Ms. Moen will
conduct the spread of that rebuttal testimony.
SUSAN J. FULLEN
produced as a rebuttal witness at the instance of the
Idaho Power Company, having been previously duly sworn,
resumed the stand and was further examined and testified
as follows:
DIRECT EXAMINATION
Ms. Fullen , please state your name for the
Susan J. Fullen.
Are you the same Susan Fullen that
prefiled direct testimony in this matter?
CSB REPORTING
Wilder , Idaho
BY MS.MOEN:
record.
3086 FULLEN (Di-Reb)
Idaho Power Company83676
I am.
And have you also filed rebuttal testimony
in this matter?
Yes , I ha ve .
And that rebuttal testimony consists of
pages and Exhibit 78; is that correct?
That is correct.
Do you wish to make any corrections or
additions to your rebuttal testimony?
No.
And if I asked you the same questions
today that are contained in your prefiled rebuttal
testimony, would your responses to those questions be the
same?
Yes, they would.
MS. MOEN:Madam Chair , I move that the
prefiled rebuttal testimony of Susan Fullen be spread on
the record as if read in its entirety and that Exhibit
be marked for identification.
COMMISSIONER SMITH:Without objection,
it is so ordered.
(The following prefiled rebuttal
testimony of Ms. Susan Fullen is spread upon the record.
CSB REPORTING
Wilder , Idaho
3087 FULLEN (Di-Reb)
Idaho Power Company83676
Please state your name and business address.
My name is Susan J. Fullen and my business
address is 1221 West Idaho Street, Boise, Idaho 83704.
Are you the same Susan J. Fullen who has
previously presented direct testimony in this case?
Yes, I am.
What is the scope of your rebuttal testimony?
My testimony will focus on issues raised by
Commission Staff relating to customer service and by the
Community Action Partnership Association of Idaho
relating to the Company I s Low Income Weatherization
Assistance Program.
Are you sponsoring any exhibits with your
direct rebuttal testimony?
Yes.I am sponsoring Exhibit No.7 8.
Staffing
In her direct testimony, Staff Witness Ms.
Parker discussed her concern regarding the ability of the
Company I s customer service staff to handle the expected
increase in customer phone calls with the adoption of
seasonal rates.While she commented that the Company has
modified its staffing since tiered rates were in effect
can you describe how the Company is prepared to handle
additional , sporadic call volume fluctuations?
The Company has made staffing modifications
3088 FULLEN , D i - Reb
Idaho Power Company
to the Customer Service Center since the 2001
tiered-rates time frame Ms. Parker discussed.As noted
by Staff, the Company now has more part-time employees.
In addition, the Customer Service Center has developed a
contingency plan to handle increased call volumes.The
contingency plan includes the ability to make staffing
adjustments by shortening lunch hours and extending work
hours for both shift and part-time employees.These
adjustments are outlined In a detailed deployment plan
based on critical call volume criteria.I am confident
this plan will allow the Company to manage any increase
in calls resulting from the implementation of seasonal
rates.
Prorated Bills
Is the Company taking any steps to address the
issue of bill presentation for prorated bills to help
alleviate customer confusion?
The Company acknowledges that prorated bills
have caused customer confusion.In an attempt to make
the bill presentation less confusing to customers, the
Company is investigating a number of options.Because of
the time needed to fully investigate and test these
options, the Company cannot detail a specific
modification at this time.However , the Company is
committed to finding a solution to make prorated bills
less confusing for customers.
3089 FULLEN , Di -Reb
Idaho Power Company
Customer Relations
Staff points out that two significant
functions that are not available through the Company
web site are customer requests to connect and disconnect
service.Does the Company have plans to incorporate
these types of customer requests in the capability of its
web site?
Yes.The Company is currently developing
addi tional customer services through our web site.
Staff recommends the Company add a sentence in
Spanish on bills and disconnect notices to inform Spanish
speakers that if help is needed in understanding what the
notice or statement says, he or she may call the Company
for assistance.Does the Company agree with Staff'
recommendation and if so , what steps have been taken to
accommodate this recommendation?
The Company agrees with Staff I s recommendation.
After consulting with the Company s local multilingual
translator , the Company has initiated the addition of
Spanish text near our telephone numbers in the heading of
our bills and notices.The Company anticipates
completing this change before April 1 , 2004.Exhibi t No.
78 is a sample bill showing the additional text.
Staff recommends adding an "on-hold" message in
Spanish informing customers that a Spanish-speaking
3090 FULLEN , Di -Reb
Idaho Power Company
representative is available.Does the Company agree wi
this recommendation?
The Company agrees that providing Spanish-
speaking assistance to Spanish-speaking customers is
important.As Staff points out , the Company always has
at least one Spanish-speaking representative available on
any given shift.If this representative is assisting
another customer at the time Spanish assistance is
needed , the Company utilizes its third-party
interpretation service to assist the customer.The
Company recently installed an upgraded voice activated
response unit to enhance customer interactions.We are
currently working with the Power Assistance Line (PAL)
vendor to implement the Spanish assist option that is
available through this system.This option will allow
customers to select Spanish-speaking assistance through
the initial menu offering.Because this option will
provide front-line service to customers, I do not believe
that an "on-hold" message is necessary.
Does the Company agree with Staff I s
recommendation to evaluate the need for bills and
delinquent notices to be printed in Spanish?
Yes, the Company will continue to monitor
customer requests for Spanish and other language
assistance.Presently, the Company has not had such
3091 FULLEN, Di-Reb
Idaho Power Company
requests from customers or agencies.The Company will
explore the
3092 FULLEN, Di-Reb
Idaho Power Company
opportunity to work with other groups to enhance our
services.
Out -of -Cycle Meter Readings
Staff expressed concern regarding the Company '
presentment of out-of-cycle meter reading dates on
customer bills.Specifically, Staff recommended that the
meter reading date for an out-of -cycle meter reading
should reflect the date the meter was actually read not
the date the customer requested the service.What steps
are being taken to address this issue.
The Company has thoroughly assessed the process
invol ved in the reported meter read date represented on
the customer I s bill.As a result of this assessment, the
Company will modify its process so that the actual date
the final meter reading was taken or service was
disconnected, not the date the customer requested the
service, will be recorded in the Company s Customer
Information System and will be printed on the customer'
bill.This process change will also result in the
service starting date printed on the customer I s bill
corresponding to the actual date the service connection
or meter reading took place.Changes to the Company '
out -of - cycle meter reading process are targeted for
completion by June 1 , 2004.
Non-complianceQ. In her direct testimony Ms. Parker stated the
3093 FULLEN, Di-Reb
Idaho Power Company
Company is out of compliance with UCRR 401 , 402, and 403.
Do you agree with this assertion and if so, what action
is being taken to comply?
The Company concurs it is not in compl iance
wi th UCRR 403. However , the Company respectfully suggests
that it meets the requirements of UCRR 401 and 402.UCRR
401 provides customers the right to complain or request a
conference , that the Company will promptly investigate
the complaint , and that the applicant or customer I
service will not be terminated during an investigation.
The Company adheres to this rule as can be demonstrated
through the customer contact notes wi thin the Customer
Information System and through correspondence with the
consumer staff at the Commission.
UCRR 402 provides customers and applicants the
definition of Commission authority over complaints.The
Company s partial non-compliance with UCRR 403 does not
impact UCRR 402 as this rule establishes the Commission
authori ty and procedures.
wi th regard to UCRR 403, Record of Complaints, the
Company agrees it is not in full compliance.While the
Company does maintain records of all complaints submitted
through the Commission , it has not been fully tracking
complaints received by the Company which do not involve
Commission Staff.The Company has taken steps to improve
3094 FULLEN , Di-Reb
Idaho Power Company
monthly reporting and categorization of customer contacts
entered as a "complaint" type.Addi tional training will
be conducted to improve awareness of the complaint
procedure and the review, recordkeeping and reporting
aspects of the process.
A Company-wide study is underway to determine the
best method for collecting complaints that reach the
Company through various departments outside the Customer
Service area.The Company expects to have a plan to
address the collection of these complaints by May 1
2004.
Staff also found the Company to be out of
compliance with UCRR 701.Please detail steps taken to
provide customers with a Summary of Utility Customer
Relations Rules (UCRR 701) .
A Summary of Utility Customer Relation Rules
has been distributed to residential customers annually
for several years.The Company has developed two new
consumer information brochures for irrigation
commercial, and industrial customers that provide a
summary of the Utility Customer Relation Rules.
brochure was mailed to all existing irrigation,
commercial , and industrial customers with their February
billing.The brochures contain a Spanish sentence
indicating the brochure information is available in
3095 FULLEN, Di -Reb
Idaho Power Company
Spani sh .
In addition, a process was implemented in March 2004
3096 FULLEN , Di-Reb
Idaho Power Company
that provides brochures to all new customers in
accordance with UCRR 701.
Low Income Weatherization Assistance Program
In his direct testimony on behalf of the
Community Action Partnership Association of Idaho
(CAPAI) , Mr. Robinette proposes design changes to the
Company s Low Income Weatheri zation Assistance (LIWA)
program.Specifically, Mr. Robinette proposes changes to
the current 50 percent funding, the administrative fee
paid through LIWA to the participating agencies, and the
total funding for the LIWA program.In addition , Mr.
Robinette comments on the negative consequences of the
required 1.1 savings to investment ratio (SIR).Please
comment on Mr. Robinette's proposal regarding the
Company's funding match for each weatherization job.
The Company currently funds 50 percent of the
cost of qualifying weatherization measures.Mr.
Robinette recommends that the Company fund up to the full
cost for the work performed.The Company opposes funding
the full costs of weatherization jobs.While the Company
does fully fund a limited number of special
weatheri zation jobs for tax-exempt organi zations, an
essential requirement of the current LIWA program is that
regular weatherization jobs qualify for and receive
governmental funding.This requirement allows the
3097 FULLEN, Di-Reb
Idaho Power Company
Company to hold the administrative costs of the program
to a
3098 FULLEN, Di-Reb
Idaho Power Company
reasonable level while assuring that our retail
customers I funds are used effectively.The Company
believes that a continuation of matching funding from
LIWA for quali;fying measures is appropriate.
Please comment on Mr. Robinette I s proposal
regarding the administrative fee paid through LIWA to the
participating agencies and his comments on the SIR.
Mr. Robinette proposes the administrative fee
paid through LIWA to the participating agencies be
increased to $150 per unit.The Company is willing to
consider an increase in the administrative fee and is
willing to reduce the required SIR from 1.1 to 1.The
Company proposes that both these matters be addressed
with the weatherization agencies during the preparation
of next year I s contracts and , if necessary, be brought to
the Commission for appropriate action under a separate
proceeding.
Mr. Robinette also proposes an increase in LIWA
funding to $1.2 million.Please comment on this
recommendation.
The Community Action Partnership Association of
Idaho recommends a 426% increase in LIWA funding above
the 2003 level of non-BPA expenditures.However , the
Company has not included increased funding for the Low
Income Weatherization Assistance program in its current
3099 FULLEN, Di -Reb
Idaho Power Company
application before the Commission.Accordingly, it may
3100 FULLEN , Di-Reb
Idaho Power Company
more appropriate to investigate funding levels and
funding mechanisms outside of this proceeding.
The Company proposes reviewing these topics as well
as other program design issues with the Energy Efficiency
Advisory Group (EEAG).The EEAG is a forum that allows
Idaho Power customers , regulatory staff and other
interested stakeholders to offer advice to the Company in
formulating, implementing, and evaluating energy
efficiency and demand reduction programs and I believe
that the group could contribute significantly to the
discussion.I f the Company, with support from the EEAG
determines that changes to the LIWA program design,
funding levels , or funding mechanism are appropriate, the
changes would be brought to the Commission , if necessary,
for appropriate action under a separate proceeding.
Does this conclude your direct rebuttal
testimony?
Yes.
3101 FULLEN , Di-Reb
Idaho Power Company
(The following proceedings were had in
open hearing.
MS. MOEN:Madam Chair , I also have a few
additional rebuttal questions for Ms. Fullen.
COMMISSIONER SMITH:Okay.
DIRECT EXAMINATION
BY MS. MOEN:Continued)
Ms. Fullen , in response to questions that
were posed to you during cross-examination of your direct
testimony, you referred to a BPA program that Idaho Power
has in place to serve low income customers.Do you
recall that?
Yes , I do.
And could you expand on that program as
well as other programs in which the Company participates
that target low and moderate income customers in
particular?
Yes.In 2001 , Idaho Power entered into an
agreement with the Bonneville Power Administration to
participate in the conservation and renewable discount
program.There was $2.5 million allocated for the
program from 2001 through 2006.Early on Idaho Power
made the decision to target the majority of the funds
CSB REPORTING
Wilder , Idaho
3102 FULLEN (Di-Reb)
Idaho Power Company83676
towards lower income programs.As such, one program
underway is the Energy Housecalls Program which we have
dedicated $850,000 to that program and with the
possibility of allocating up to an additional $550 000
more.
That program itself , what it does is it
provides free duct leakage testing and sealing, installs
free compact fluorescent light bulbs , supplies free
furnace air filter replacement and an extra filter
performs free water heater temperature checks and offers
free energy efficiency materials.That has been very
popular which is why we I re considering the additional
funding for that.
Other programs that have been available
are the energy efficiency manufactured home incentives,
the energy efficiency packets and we also dedicated
$50 000 to LIWA in 2003 from that funding.
And then in your rebuttal testimony
there I S reference to the LIWA program and the Company I
interest in investigating an increase in allocations of
funds to that program and we also discuss or I think in
your rebuttal testimony also discuss the option of
discussing that outside of this particular proceeding.
Are both the proposal to consider increased funding for
LIWA and the proposal to consider this funding allocation
CSB REPORTING
Wilder , Idaho
3103 FULLEN (Di-Reb)
Idaho Power Company83676
outside of this proceeding still your position?
Yes, most definitely.Idaho Power is
sensi ti ve to the special needs of low income customers.
What we do believe would be the most efficient and
effective process to follow would be to use the IRP as
the process to identify the resource requirements and
then look at LIWA as well as the IRP resource
requirements, some other programs that may come from
that , and also the funding for NEEA participation as sort
of a portfolio , if you will , that is balanced and we
would like to work through the EEAG to create that
balanced portfolio and then bring that back to the
Commission to consider the funding mechanism for that.
And would certain amounts of funds be
dedicated to LIWA or would LIWA have to compete with
other DSM programs?
The funds that are already in the rate
base, which is the $212 000, would be dedicated to LIWA
and would not have to compete for , wi thin the other pool.
They would not be added into the pool, so those would be
kept separate.
And then additional funding could also be
considered to augment the 212, OOO?
Yes.
Following your direct testimony, do you
CSB REPORTING
Wilder, Idaho
3104 FULLEN (Di-Reb)
Idaho Power Company83676
recall that Commissioner Hansen made inquiries concerning
the Northwest Energy Efficiency Alliance or NEEA?
Yes , I do.
And do you recall in particular that
Commissioner Hansen inquired about any studies that had
been done to , I guess , evaluate the manner in which NEEA
funds had been utilized?
Yes.
And to your knowledge, has an independent
study been conducted to evaluate the market impact or
accomplishments of NEEA?
Yes.Upon investigation , I did find a
study that had been conducted by a third party for NEEA
and on which we have an Idaho Power representative on
that board.
MS. MOEN:Madam Chair , I request that
Exhibi t 83 be marked for identification.This is the
Executive Summary of the report that Ms. Fullen just
alluded to.
COMMISSIONER SMITH:Exhibit 83 will be
marked.
(Idaho Power Company Exhibit No. 83 was
marked for identification.
BY MS. MOEN:Do you have a copy of that
particular exhibit before you?I think it's identified
CSB REPORTING
Wilder, Idaho
3105 FULLEN (D i - Reb )
Idaho Power Company83676
Findings and Report.
Thank you, I do now.
Would you agree that this is the Executive
Summary of the study that was done by Summit Blue
CSB REPORTING
Wilder , Idaho
Yes, it is.
MS. MOEN:I have no further questions.
The witness is available for cross-examination.
COMMISSIONER SMITH:Thank you , Ms.
Consul ting?
Mr. Budge, do you have any questions?
MR. BUDGE:No questions.
COMMISSIONER SMITH:Mr. Richardson.
Moen.
MR. RI CHARD SON :No questions,
Madam Chair.
COMMISSIONER SMITH:Mr. Ward.
MR. WARD:No questions.Thank you.
COMMISSIONER SMITH:Mr. Cooke.
MR. COOKE:No questions.
COMMISSIONER SMITH:Mr. Purdy.
MR. PURDY:Yes, please.
3106 FULLEN (Di-Reb)
Idaho Power Company83676
BY MR. PURDY:
CROSS -EXAMINATION
I guess first I'll start with the
additional direct , Ms. Fullen , regarding the BPA program.
Did you call that the Energy Households Program?
Energy Housecalls.
House what?
Housecalls.
What is that, please?
It is a program that we hire third-party
personnel to go into manufactured homes and to do the
CSB REPORTING
Wilder , Idaho
work that I indicated that we do, but these people which
are energy experts essentially go into mobile home parks
or other areas that we are aware that there are
manufactured homes and knock on doors and offer the
service that I indicated.
other than manufactured homes; is that correct?
So this program does not apply to anything
That is correct.
All right , you said , I thought I heard you
describe it as a low income targeted program , how do you
support that?
Well , because we do believe that lower
income customers are more likely to live in manufactured
3107 FULLEN (X-Reb)
Idaho Power Company83676
homes and so even though we do not know that they are low
income, per se , there is some assumption that we would be
able to reach that market by having that type of
program.
You would agree with me , would you not,
that low income people live in numerous types of housing
other than manufactured homes?
Yes , I would.
All right, did I understand you to say
that you I re considering additional funding for that
program?
Yes.
How does Idaho Power fund that program?
Well , it's through the monies that we
receive from BPA and that I s $2.5 million through the
course of five years.We have 850 000 dedicated to the
Energy Housecalls Program for manufactured homes.
have an additional $550 000 that potentially could be
allocated towards that same program.
So Idaho Power doesn I t kick into this,
this is strictly BPA money?
Yes, that is.
Okay.Now , when you discussed how you
would propose maybe a different handling of LIWA , I
understood you to say something about it would be
CSB REPORTING
Wilder , Idaho
3108 FULLEN (X - Reb)
Idaho Power Company83676
incl uded in the IRP process; is that right?
, I I m sorry.The IRP process, we would
hope , would be there to identify resource requirements,
so that I s one piece, and then those requirements along
wi th LIWA and along with the monies for the NEEA funding
would come back to the EEAG group to, in essence, create
that balanced portfolio of energy efficiency programs
that then would be submitted to the Commission for the
funding.
By starting with the IRP process, would
LIWA somehow suddenly be subj ect to least cost standards
that it I S not currently subj ect to in terms of a resource
acquisi tion standpoint?
What I believe that we would need to do is
to separate out the LIWA as an independent.It's a piece
of a three-legged stool , if you will.You have the
resource requirements which should be somewhat of a
stand-alone , you should have the LIWA requirements as a
stand-alone and then you should have the NEEA funding as
a stand-alone.
I like the word "stand-alone" frankly,
because - - well , I need a question here.Would you agree
with me that LIWA is unique as DSM programs go in that
it's the Company's only low income exclusive , non-pilot
DSM program?
CSB REPORTING
Wilder , Idaho
3109 FULLEN (X - Reb )
Idaho Power Company83676
I would say yes.I would agree with
that.
And it's been around since 1989;
correct?
I don't have the date on that.
You don I t know?
You know , I know that I have records back
to 1989.I don I t know the inception of LIWA.
Okay.You said that if it were then put
before the EEAG at some point, there would be a
consideration for additional funding.Perhaps you can
explain just briefly how the EEAG works , because it I S my
understanding that Idaho Power brings proposals to the
group, asks for input and perhaps will modify a proposal,
but ultimately, Idaho Power does what it thinks is best;
is that a fair description of the EEAG?
I would agree with part of that in that
Idaho Power does do the preliminary design on programs.
We use whatever expertise is necessary to create that
design and I believe that I s appropriate.I believe that
would be very cumbersome on the EEAG group to totally
start from scratch , if you will, to build the programs
but what we hope to see happen is again, going back to
the IRP because we need to identify what the resource
requirements are and then move those into programs which
CSB REPORTING
Wilder, Idaho
3110 FULLEN (X - Reb )
Idaho Power Company83676
are then primarily designed by Idaho Power , but then goes
to the EEAG group for assistance in that design
modification to the design , input into that design and
many times we actually go through an iterative process
there to redesign based on information that we receive
from the EEAG group.
m sorry for being a little dense here
but I I m trying to track from the IRP to the EEAG with
respect to LIWA.Currently under LIWA, the Company
simply funds up to , outside of administrative expenses
roughly 212 000 a year; is that right?
That's correct, yes.
Nobody has to comment on that; true?
Tha t 's true.
And that program is administered by the
Communi ty Action agencies; right?
Yes.
And they are compensated, I think , $75.
a proj ect; correct?
Yes, at this time.
Okay.Well , when you talk about IRP , in
my mind, that's the Company I s approach for looking at all
of its possible resources, existing and future , and
determining how best to meet its needs in the cheapest
manner possible.You testified earlier that LIWA
CSB REPORTING
Wilder, Idaho
3111 FULLEN (X - Reb )
Idaho Power Company83676
wouldn I t necessarily have to meet any type of a least
cost standard, so what connection does the IRP process
have with LIWA and with hopefully, seeing some increase
in funding of LIWA?
Okay.Well , what I believe is at issue
right now is the fact that within this proceeding, we
have $212 000 .that is dedicated to the LIWA funds.If we
go through the process that we have identified as what we
think is desirable , we will be able to identify whatever
needs there may be with energy efficiency programs, LIWA
being one of those, and be able to come back in a
different proceeding to identify the funding for those
programs.
LIWA being, as you put it, the only low
income exclusive DSM program , how do you think that'
going to fare when it's put through the IRP process , the
needs , as you put it, are identified and then come out
with a proposal on the other end, what I s the likelihood
that we I re ever going to see any increase in the funding
of LIWA under that process?
Well, I think that the EEAG group is very
fair-minded and I think that they would see the need to
identify and to allocate dollars towards the low income
needs.
But again, Idaho Power brings the
CSB REPORTING
Wilder, Idaho
3112 FULLEN (X - Reb )
Idaho Power Company83676
proposals to the table, not the group; correct?
Well , not exclusively.You know, there is
no rule against a member of the EEAG group bringing a
proposal into the group.
There might not be any rule , but isn
that typically what happens , the Company brings the
proposal and the others comment on it?
I would say it has up to this point been
more that it has occurred in that fashion , but I believe
that has been due to -- you know , there's limited funds
available right now and the priority programs have been
placed as they have.
So the EEAG has to operate wi thin the
confines of the current $.30, whatever it is, DSM tariff
rider; correct?
That would be correct.
So if we roll LIWA into that process , we
would need more money --
Tha t 's correct.
- - under that tariff rider through some
other means to increase LIWA funding; true?
True.
Does the Company have any proposals or is
it willing to consider an increase in funding under the
DSM tariff rider?
CSB REPORTING
Wilder , Idaho
3113 FULLEN (X-Reb)
Idaho Power Company83676
It is very will ing to consider additional
funding for that.
Would you agree with me that absent some
lncrease in LIWA funding that Idaho Power's low income
ratepayers outside of any funding they might receive
through LIHEAP , for them to meaningfully substantially
reduce their energy usage , they have to have some type of
weatherization; in other words, they don't have a lot of
discretionary usage of electricity, do they?
I guess I'm not sure that I I m the right
one to answer that.You know , I know what I intui ti vely
would believe on that.
What is that?
I would intuitively believe that that
would be the case; however , I don I t have the data that
supports that myself.
Would it be helpful to have that kind of
data to track low income usage?
I think that depends on many things and
On what?m sorry.
I think that depends.To have that type
of data , you know , as you are aware, Idaho Power does not
capture that data.We believe that there's sensi ti vi ty
to customers of providing that type of data to us and so
our preference has been to work with the agencies to
CSB REPORTING
Wilder , Idaho
3114 FULLEN (X - Reb)
Idaho Power Company83676
identify and provide funding for those lower income
customers rather than having that class identify itself.
We feel it's more effective for us to work with the
agencies to identify those needs.
Would the Company be adverse to an order
from this Commission that strongly encouraged Idaho Power
to work with the Community Action agencies to determine
what low income needs are and to take the necessary steps
to increase funding for LIWA?
We will willingly work with the agencies
to do that.
MR. PURDY:That's a 11 I have.Thank you.
COMMISSIONER SMITH:Mr. Eddie.
MR. EDDIE:Thank you , just a few
questions.
CROSS - EXAMINATION
BY MR. EDDIE:
Ms. Fullen , were you here Thursday when
Nancy Hirsh was testifying?
Yes, I was.
In response to a question from
Commissioner Kj ellander , Ms. Hirsh stated that from her
knowledge as a member of the Energy Efficiency Advisory
CSB REPORTING
Wilder , Idaho
3115 FULLEN (X - Reb)
Idaho Power Company83676
Group that the DSM tariff rider funds are essentially
spoken for , fully spent.That's your understanding as
well?
Primarily.There s still some flexibility
wi thin the funds , but yes, we have programs dedicated
through the next few years.
Through the next few years , okay.Just to
clarify a question from Mr. Purdy, do you see future LIWA
funding, possible increases , coming from , being collected
through that DSM tariff rider or coming from some other
pot of money?
Well not sure that that's up to me to
determine that.I think that is probably more
appropriate to be determined by the Commission.
The last question is would you agree there
are some social judgment calls being made in designing a
low income program , eligibility, for example, level of
income eligibility?
By whom?
By whoever designed the program.They
have to make some judgment call about need and
eligibility to design the program itself?
m sorry, are you speaking of when the
programs are designed, the LIWA program?
Yes.
CSB REPORTING
Wilder , Idaho
3116 FULLEN (X - Reb )
Idaho Power Company83676
Okay, and see, that judgment would come
from the agencies.
Okay, but the Company's proposal to put
the LIWA program to some extent into the advisory group,
in my mind , that means there is some element of judgment
call about the program being put to the advisory group;
otherwise, there's no reason to move the program into
that arena; is that correct?
Well , I don't think that I would classify
that as a judgment.I think that the point that we'
trying to make is that we need a balanced portfolio of
energy efficiency programs and the mechanism that we
prefer to use to create that balance and the funding for
those programs is through the EEAG group.
MR. EDDIE:m going to stop there.
may ask further questions of Mr. Gale.Thanks.
COMMISSIONER SMITH:Ms. Nordstrom.
CROSS -EXAMINATION
BY MS. NORDSTROM:
Yes , good afternoon.
Good afternoon.
On page 2 , starting on line 17 , you
acknowledge that prorated bills have caused some customer
CSB REPORTING
Wilder , Idaho
3117 FULLEN (X-Reb)
Idaho Power Company83676
confusion.On line 23 , you state that the Company is
committed to finding a solution to make prorated bills
less confusing to customers.Has the Company made any
progress in finding a solution?
Yes , we have.We have identified some
potential options that we have.
And what are those?
Well, they I re a little detailed and it
actually goes into how the information would be displayed
on the bill itself and it would be
Could you just briefly describe how the
Company s proposes to resolve this issue?
Well , we do have options available to us
and what we re trying to determine is how it is best
displayed on the bill itself.What we would like to do
is after this proceeding actually come back to the Staff
and take a look at what the options may be.
On page 4 of your rebut tal testimony, you
indicate that the Company recently installed an upgraded
voice activated response unit and is currently working
with the vendor to implement the Spanish-speaking option
that is available for the system.When do you expect
that feature to be implemented?
Wi thin two to three months, and the reason
for that length of time is just simply it is a sensitive
CSB REPORTING
Wilder, Idaho
3118 FULLEN (X-Reb)
Idaho Power Company83676
piece of equipment and we'll need to do some testing and
everything, but that has the highest priority.
On page 5 , you indicate that the Company
accepts Staff I s recommendation that bills reflect the
actual dates that the meter readings are taken and that
the Company intends to change its out-of-cycle billing by
June 1st , 2004; is that correct?
Yes.
At this time do you see any problems in
getting that change implemented by June 1st?
No.
MS. NORDSTROM:Thank you.No further
questions.
COMMISSIONER SMITH:Are there questions
from the Commissioners?Commissioner Hansen.
EXAMINATION
BY COMMISSIONER HANSEN:
I believe it was two days ago that we had
our discussion about NEEA and the benefits they claimed
that they provided Idaho customers, were you aware of
this report you just submitted as Exhibit 83 , were you
aware of that two days ago?
, I was not.When I went back to my
CSB REPORTING
Wilder , Idaho
3119 FULLEN ( Com - Reb )
Idaho Power Company83676
office , I was discussing this with Darlene Nemnich and
she said oh , we have this report available.
Does this report show the benefits that
NEEA has provided to Idaho Power customers?
Not specifically to Idaho Power customers.
I don't believe
- -
I don't believe that I s in there, but
it has a general overview of how NEEA is managed and how
the results have been calculated and verification of
that.
Am I correct in that the other day when we
were discussing this that you actually had some
kilowatt-hours saved in Idaho , an estimate that NEEA had
saved so many kilowatt-hours at a rate of , I believe
about one cent; do you recall that?
Yes , I do.
And so that wouldn I t be in this report?
Not specific to Idaho, but there is
reference to that as a general statement of what NEEA has
done and there is reference in that report
- -
I take that
back , it's just a general statement and that $0.99 was
there.
So again , my question is does Idaho Power
verify the data on this report as being correct and have
you actually checked out the benefits that NEEA claims
that have come to Idaho as a result of the money that
CSB REPORTING
Wilder , Idaho
3120 FULLEN ( Com - Reb )
Idaho Power Company83676
Idaho Power has put into this program?
We are in the process of verifying some of
those results.As I indicated before , we are currently
going through an analysis of NEEA and the continuation of
that funding, and also , as I said, it is looking very
positive.We are looking at all of the information now
even beyond the kilowatt-hour savings into , as an
example , the program design.I mean , what NEEA is able
to do for us is to give us somewhat of an
off-the-shelf-type program to implement without having to
go through the process of designing totally that program
ourself , so we're able to partner with them , if you will
to minimize our administrative cost.We feel there'
some benefit to that , also, so we are evaluating all of
those pieces before we make a decision to continue the
funding.
Has Idaho Power submitted any proposals to
NEEA in areas where they felt that NEEA could do a study
or look at benefiting certain customers in Idaho, like
the irrigation customers, the Industrial Customers or
these groups where they would look at trying to identify
cost , power savings for those groups of people, have you
as a Company gone to NEEA with requests that they look
into certain areas?
I can't give you a specific example of
CSB REPORTING
Wilder , Idaho
3121 FULLEN ( Com - Reb)
Idaho Power Company83676
that.What I can tell you is that we have a
representative on the NEEA board and I believe that she
represents the Company and the Idaho customers in that
respect.I cannot name a specific request that we
had.
And you re not aware of any request the
Company may have given her to take to NEEA?
I I m sorry, I'm not aware of one.
COMMISSIONER HANSEN:Thank you.That'
all I have.
EXAMINATION
BY COMMISSIONER SMITH:
Ms. Fullen , in Idaho the LIHEAP program
funding is totally from the federal government;
correct?
As I understand it , yes.
Does the Company
- -
in some states
though, the federal money is matched by the state with
state funds , are you aware of that?
No, I was not.
Would you accept for a hypothetical that
in some states the federal money is matched with state
funds?
CSB REPORTING
Wilder , Idaho
3122 FULLEN ( Com - Reb )
Idaho Power Company83676
Yes, I would accept that.
Would Idaho Power support state matching
funds for LIHEAP from Idaho?
CSB REPORTING
Wilder , Idaho
I would think so.
COMMISSIONER SMITH:Redirect?
MS. MOEN:No other questions.Thank you.
a few minutes.
(The witness left the stand.
COMMISSIONER SMITH:Let I S go at ease for
in order.Mr. Kline.
(Off the record discussion.
COMMISSIONER SMITH:The hearing will be
MR. KLINE:I call Rick Gale.
JOHN R. GALE
produced as a rebuttal witness at the instance of the
Idaho Power Company, having been previously duly sworn,
resumed the stand and was further examined and testified
as follows:
DIRECT EXAMINATION
Mr. Gale, would you please state your name
BY MR. KLINE:
for the record?
3123 GALE (Di-Reb)
Idaho Power Company83676
John R. Gale , still known as Ric Gale.
And you are the same Mr. Gale that
presented direct testimony in this proceeding, are you
CSB REPORTING
Wilder , Idaho
Yes, I am.
not?
And you have prefiled rebuttal testimony
consisting of 39 pages and Exhibits 79 through 80; is
that correct?
Tha t 's correct.
Do you have any additions or corrections
that you need to make to either your testimony or your
I would like to update Exhibit 80 to
reflect the new cap structure that Dennis Gribble
described this morning.
Would you proceed to do that?
exhibits?
Okay.In the column with the heading IPC
Rebuttal , the long term debt piece now would change to
83 as stated by witness Gribble and the overall rate of
return will drop to 8.32, and with that drop in the
overall rate of return , there is a change to the return
on rate base, so in the far right column on change to
return on rate base , we now have a negative 216,642.
COMMISSIONER SMITH:m sorry, which line
are you on?
3124 GALE (Di-Reb)
Idaho Power Company83676
THE WITNESS:It would have been very nice
if I had numbered the lines, so if you look at the titles
on the left-hand side and you see change to return on
rate base , go all away across to where you see the zero,
it is no longer a zero , it is now a reduction
COMMISSIONER SMITH:Thank you.
THE WITNESS:-- of 216 642.Staying in
that far right column , ultimately that will impact the
number in the box that starts with negative 5 820 and
that will be a negative 5 959 655 , and continuing to take
the scalpel to the boulder , the next line will be a minus
025 965 , which leaves us with a punch line which is
70,319 303 which would be the requested Idaho
jurisdictional increase on rebuttal.
BY MR. KLINE:And that is your only
change here , Mr. Gale?
As cumbersome as it was , yes.
Mr. Gale , with that change, if I were to
ask you the same questions contained in your prefiled
rebuttal testimony today, would your answers be the
same?
Yes , they would.
MR. KLINE:And with that, Madam Chairman
I would request that Mr. Gale's rebuttal testimony be
spread on the record and that Exhibits 79 and 80 be
CSB REPORTING
Wilder , Idaho
3125 GALE (Di -Reb)
Idaho Power Company83676
marked for identification.
COMMISSIONER SMITH:If there is no
objection , it is so ordered.
(The following prefiled rebuttal
testimony of Mr. John Gale is spread upon the record.
CSB REPORTING
Wilder , Idaho
3126 GALE (Di-Reb)
Idaho Power Company83676
Please state your name and the party you are
representing.
John R. Gale.I am testifying on behalf of
Idaho Power Company.
Are you the same Mr. Gale that presented direct
testimony in this proceeding?
Yes.
What issues will you be responding to in your
rebuttal testimony?
My testimony will (1) provide an overview of
the Staff's collective recommendations and approach to
this rate case,(2) respond to a variety of specific
revenue requirement adj ustments proposed by the Staff,
(3) discuss the proposals for systematic ratemaking
treatment of the irrigation subsidy,(4) respond to a
number of witnesses who are opposed to the proposed
increase to the monthly service charge for small customer
classes (5) speak to the decoupling issue , and (6) end
by summarizing revenue requirement impact of the
Company's collective rebuttal positions.
Overview
Please summari ze your understanding of the
collective revenue requirement recommendations of the
Commission Staff.
The Staff attacks the Company's revenue
3127 GALE , DI-Reb
Idaho Power Company
requirement in a number of ways through a number of
wi tnesses.
Ms. Carlock recommends lower returns on both the
debt and equity portion of the Company's proposed capital
structure.Her repricing of bonds expiring in 2004
reduces the debt component.The return on equity
selected by Ms. Carlock is 10.0 percent compared to the
11.2 percent proposed by Idaho Power.
Mr. English eliminates ongoing pension expense from
the test year , removes prepaid pension from rate base
and makes other expense reductions related to membership
dues , legal fees, and other business expenses.
Mr. Leckie changes the Company I s proposed
annualizing and known and measurable adjustments in a
manner that effectively disallows important plant
facilities that are providing customer service as we
speak.Mr. Leckie reclassifies some past investments
related to the Company's hydro production in order to
remove these investments from the test year.He al so
removes a portion of a document management system and
some thermal production assets at IERCO.
Mr. Holm accepts six Company proposed adjustments
(all of which appropriately reduce the Company's revenue
requirement), adj usts certain payroll-related expenses to
account for year-end labor costs , and adj usts accumulated
3128 GALE , DI-Reb
Idaho Power Company
depreciation and depreciation expense to reflect the
settlement and final order of Case No. IPC-03-Mr.
Holm removes the incentive or pay-at-risk portion of the
Company s compensation package.Mr. Holm also sets the
Company's income tax rate to an effective rate that is
based on an arbitrary five-year average, which
effectively reaches back to grab a 2002 tax deduction and
incl udes it in the test year.These adj ustments result
in further decreases to the revenue requirement.
Mr. Sterling offers support of the Company
normalized power supply expenses and the inclusion of the
Danskin Station plant.Mr. Hessing addresses class
allocations , but did raise the costs of the Company I
cloud seeding program as an issue for consideration by
the Commission.
Other Staff witnesses presented testimony on issues
related to rate spread, rate design , and customer service
issues without weighing in on revenue requirement.
Did any Staff witness propose an adj ustment
that would have been a net increase to the Company'
initial proposals?
None that I can determine.
Does the Staff have a designated individual
leading the Staff's case?
Although none of the witnesses identify
3129 GALE , DI-Reb
Idaho Power Company
themsel ves as the case manager or coordinator, Mr. Holm
identifies himself as the overseer of the Staff audit and
test year.The collection of disallowances manifests
itself in Mr. Holm's testimony.Witnesses appear to have
developed their issues independently.As such , it is my
opinion that no Staff person weighed the collective
impact or reasonableness of all of the proposals.
Who is Idaho Power Company I s case manager in
this proceeding?
I am with assistance from Mr. Said on revenue
requirement lssues, Ms. Brilz on rate design issues, and
Mr. Kline as lead counsel.
Please summarize the Company 1 s rebuttal
testimony.
Mr. Avera rebuts the rate of return on equity
proposals of the Staff and Micron.Mr. Gribble rebuts
the Staff's bond repricing proposal and Staff's American
Falls Bond treatment.
Mr. Obenchain rebuts the Staff's treatment of
annualizing and known and measurable adjustments.Mr.
Minor rebuts Staff's compensation representations
including the exclusion of the Company s pay-at-risk or
incentive portion of its employees ' compensation.Mr.
Fowler rebuts Staff's treatment of pension expense and
prepaid pension in rate base.
3130 GALE , DI -Reb
Idaho Power Company
Mr. Prescott addresses Danskin Station Power Plant,
the Woodhead Park improvements, the cost of the
Biological Opinion litigation , and Idaho Power's cloud
seeding program.Mr. MacMahon and Mr. Ripley rebut
Staff's tax proposals.
Mr. Said rebuts Staff's proposal for the Expense
Adj ustment Rate for Growth.Ms. Brilz rebuts the
assorted class allocation issues and pricing proposals.
Ms. Fullen responds to Ms. Parker s recommendations
regarding customer service issues and addresses Mr.
Robinette's proposals regarding Low-Income Weatherization
Assistance.
Revenue Requirement Reductions
Mr. English excludes a number of Idaho Power
expenses listed on Staff Exhibit 110.Please give your
general response to these exclusions.
Mr. English states that a Company expense must
be directly or indirectly related to providing
electricity in order for it to be a legitimate expense
recoverable through rates.By applying this definition
business expenses are excluded from the Company s revenue
requirement based on Mr. English's opinion that they
benef i t only the shareholder and not the customer.Many
of these exclusions deserve a closer look.
Line 1 of Exhibit No. 110 excludes 75 percent
3131 GALE, DI-Reb
Idaho Power Company
of the Company I s expenses associated with its involvement
with Edison Electric Institute ("EEI"Please respond
3132 GALE , DI-Reb
Idaho Power Company
this exclusion.
EEI is the trade association of the electric
utility industry.As such it provides a variety of
services to meet its clients I needs with regard to
electric policy formulation at the local, state
congressional , and federal regulatory levels.EEI serves
as an educational guide through the complex issues facing
our industry today:energy infrastructure, environmental
issues , emerging accounting issues, legal and business
practices, and reliability issues.EEI actively
encourages debate among members as to how best to address
and respond to these issues through its sponsorship of
special i zed committees, informational webcasts and
conferences and the creation of Internet workrooms that
foster collaboration with member utilities.In fact , EEI
serves a similar function to investor-owned utilities as
the National Association of Regulatory Utility Commission
does to state public utility commissions.Both entities
exist to provide critical industry data to its members
and support the advancement and promotion of equitable
regulations.
Staff's testimony recommends the elimination of
approximately 75 percent of the Company I S EEI dues from
the test year.Staff's reasoning is two-fold; first
they believe it is inappropriate to pass on dues expense
to customers if those dues go to associations that do not
3133 GALE , DI -Reb
Idaho Power Company
provide products that allow Idaho Power to provide
electricity to its customers.Second , Staff states that
customers should not be forced to support an organization
whose ideology they may not agree with.Staff also
questions the need for EEI lobbying efforts when the
Company has an employee whose sole responsibility is
representing the Company on maj or political efforts.
I would like to take a moment to address each of
Staff's concerns.
First , EEI provides products and services to Idaho
Power that directly affect the Company's ability to
provide low cost , reliable power to its customers.For
example Idaho Power participates in the Transmission
Subj ect Area Committee (" TSAC") and the Distribution
Subj ect Area Committee ("DSAC"Both of these
commi t tees are sponsored by EEI.
Participating on the TSAC and DSAC provides Idaho
Power and its customers the following benefits:
Best Practices - Idaho Power shares with, and
learns from , other utilities in the areas of design,
engineering, construction , operation , and maintenance of
substations , transmission lines, and distribution lines.
As a direct result of this participation , the Company has
chosen design and drafting applications and tools.
Equipment Failures - The Company receives
3134 GALE , DI -Reb
Idaho Power Company
reports of specific failures of equipment.By using this
information , Idaho Power is able to prevent, or mitigate
for , potential failures.This information has been used
to avoid costly outages and catastrophic failures of
transformers, circuit breakers , protective relays, and
capaci tors.
New Products - The Company receives reports of
new equipment with which other utilities have had success
or failure.This allows the Company to keep up with
technology that its small size would otherwise prevent.
Based on this , new technology products have been used to
increase reliability for Idaho Power customers.Idaho
Power has also avoided other products that showed
promise , but were not successful.
Roundtable Surveys - The Company is able to
participate in roundtable questionnaires that quiz
utilities about their design , construction , and operating
practices.This allows the Company to compare itself to
the best in class , and improve efficiency.
EEI Network Survey - Idaho Power has the
ability to canvas other utilities on a particular issue
at any time during the year , providing up to the minute
information on equipment and issues.
Idaho Power also participates in EEI on the Metering
Subj ect Area Commi t tee (" MSAC"
) .
Participating on MSAC
3135 GALE , DI -Reb
Idaho Power Company
provides Idaho Power and its customers the following
benefits:
Best Practices - Through a partnership between
EEI and the American Gas Association , Idaho Power'
Metering Department participates and obtains the results
of a benchmarking service called Data Source.This
membership enables the Company to compare standard
performance measurements against other electric and gas
utilities and helps identify best practices and areas for
improvement.
Equipment Failures - The EEI Transmission,
Distribution, and Metering Conference occurs
semi-annually.During these meetings specific sessions,
excl uding manufacturers , are held for the sole purpose of
discussing equipment problems utilities have been
experiencing with their metering equipment.The Company
considers the experience of other utilities as part of
its evaluation of products for servicing our customers.
Industry Networking - Idaho Power is part of
and utilizes a nation-wide network of individuals
involved in the utility industry.The Company frequently
contacts these people to discuss issues and ideas
specific to metering.
Surveys - The Company is able to participate in
EEI enabled questionnaires that allow us to quiz other
utilities about their design, construction , and operating
3136 GALE , DI-Reb
Idaho Power Company
practices.This allows for acquisition of more specific
information than is provided in the Data Source
benchmarking service.
These examples of membership benefits have been
cited specifically because they are less high profile
than the victories that the Company and its customers
have had with the help of EEI in the legislative and
federal regulatory arena.These victories include but
are not limited to the Federal Energy Regulatory
Commission s ("FERC") recognition of the need for
regional flexibility in its revised Wholesale Market
Platform paper , and maj or progress on the comprehensive
energy legislation specifically with regard to the
creation of a mandatory reliability organization
streamlining of hydropower relicensing, and new funding
for Low Income Home Energy Assistance Program.
Staff's characterization of EEI as solely a
legislative lobbying and regulatory advocacy organization
for investor-owned electrical utilities providing no
benefit to Idaho Powers customers is incomplete and
incorrectly assumes that the interests of Idaho Power and
its customers are unaligned.
Second, Staff characterizes EEI as an ideological
organization that customers should not be forced to
support. In fact, EEI is a trade organization that
represents the
3137 GALE , DI -Reb
Idaho Power Company
interests of its members through the education of
decision makers about the complex issues facing the
industry.The organization promotes no doctrine or
political ideology for mass acceptance or belief in
ei ther the modern pej orati ve sense or in the classic
definition of the word.
Third , Staff takes issue with EEI lobbying efforts
when the Company has a Company officer whose sole
responsibility is representing the Company on major
political efforts.To begin with , EEI spends less than
25 percent of its membership dues on legislative
advocacy.Applying this logic to Staff I s adj ustment
would equate to the removal of 25 percent of EEI dues
from the test year , not 75 percent.However , I do not
accept Staff's hypothesis that lobbying is per se "bad"
Lobbying is targeted education and when such education
serves to preserve or improve Idaho Power's ability to
deliver reliable low-cost power to its customers , all
interests benefit.Furthermore, the efforts of EEI and
the position of the Vice President of Public Affairs are
not duplicative as alleged by Mr. English.The Vice
President of Public Affairs is completely immersed in the
maj or hydro relicensing efforts of the Company.This
means that the Company must marshal additional resources
in order to cover the active proceedings at the FERC
3138 GALE , DI-Reb
Idaho Power Company
(Standard Market Design , Generation Interconnection
Standards of Conduct , Regional Transmission
3139 GALE , DI-Reb lla
Idaho Power Company
Organization Formation, Supply Margin Assessment,
Reliabili ty, and Infrastructure Protection), and on
Capitol Hill (Comprehensive Energy Bill)
Finally, Staff concludes their comments with regard
to EEI membership dues by stating that the Company can
access EEI research without contributing to the cause.
Clearly, Staff is conceding that EEI in fact serves more
purposes than just advocacy, but regardless , I do not
believe that the Commission would view this type of
freeloading as sound public policy.
Line 2, 3 , and 4 of Exhibit No. 110 excludes
Company dues and contributions to Rotary, Kiwanis, and
Lions service clubs.Please respond to this exclusion.
I am not sure which service clubs Mr. English
has attended , but as a long time Rotarian and a past
Kiwanian, it is incorrect to characterize any of these
service clubs as "spiritual II .Service clubs serve an
important community and customer function.They serve as
a great extension of our community relations I efforts and
complement the work of our Community Relations
Representatives.The opportunities to network with
customers in our communities are particularly important
since the centralization of the Company I s customer
service operations.Reaching out to the community is
especially important during this critical time in the
3140 GALE , DI -Reb
Idaho Power Company
Company s rel icensing process.Idaho Power submits that
there is a bona fide business purpose to being involved
in the community it serves.My experience has been that,
besides the business establishments, many state agencies
have employees as members in service clubs as well.
Line 5 of Exhibit 110 excludes Company expenses
related to various Chambers of Commerce.Please respond
to this exclusion.
Mr. English incorrectly states that Chambers of
Commerce actions have no impact on Idaho Power Company.
Chamber meetings and activities become great
opportunities for Idaho Power to work for and with the
customers on issues of mutual concern.Many of the
Chambers to which Company employees belong are also
responsible for their cities' economic development
function.To the extent that the Chambers are successful
in business attraction and creating a healthy business
environment , their actions have a direct impact on our
Company.
Chambers serve an important community and customer
function.As with the service clubs, Chambers are an
extension of Company Community Relations Representatives
and particularly important since the centralization of
the Company's operations and our current relicensing
efforts.Idaho Power submits that there is a bona fide
3141 GALE , DI -Reb
Idaho Power Company
business purpose to being involved with our customers.
believe
3142 GALE, DI-Reb 13a
Idaho Power Company
that many state agencies have employees as members of
Chambers of Commerce as well.
Line 6 of Exhibit No. 110 excludes Company
expenses related to $2 000 of political contributions
made during the test year.Please respond to this
exclusion.
The Company agrees with this exclusion.The
transactions were incorrectly coded and inadvertently
included in the Company's initial filing.It is not the
Company's intent to have our customers pay for political
contributions.
Line 7 of Exhibit No. 110 excludes Company
expenses related to Company memberships in the Arid Club.
Please respond to this exclusion.
Memberships in the Arid Club serve a business
purpose for Idaho Power - specifically, business
meetings , business contacts , and board dinners.The Arid
Club also provides some non-business social benefits that
are not business expenses.
The Company excluded non-business Arid Club expenses
in its filing by including the individual members'
personal reimbursement to Idaho Power for the
non-business use of the club.Accordingly, the Company
believes that the partial inclusion of Arid Club expenses
for business purposes is appropriate and standard for the
3143 GALE , DI-Reb
Idaho Power Company
industry.
The Staff did not recognize the reimbursements in
3144 GALE , DI -Reb 14a
Idaho Power Company
its position.The Staff has also double-counted Arid
Cl ub expenses in several instances.
Staff goes on to state that there may be other
Company employees whose club memberships are provided by
the Company.On the contrary, the Company does not
provide any additional Arid Club memberships other than
the four officers noted by Staff.Additionally, the
Company provides no other memberships for any employee to
a country club or similar type exclusive social
organi za t ion.
Line 8 of Exhibit No. 110 excludes Company
expenses related to $36,066 of chari table contributions
made during the test year.Please respond to this
exclusion.
The Company generally agrees with the items
excluded on line The transactions were incorrectly
coded and inadvertently included in the Company s initial
filing.It is not the Company I s intent to have our
customers pay for chari table contributions, only benefit
from them.In reviewing Page 2 of Exhibit No. 110, it
appears that Staff excluded several legitimate items;
however , the dollar impact is inconsequential.
Accordingly, we would accept the full exclusion.
On Page 28 of his direct testimony, Mr. English
excludes business expenses for Company management
3145 GALE , DI -Reb
Idaho Power Company
(Exhibit No. 111).Please respond to this exclusion.
While admittedly, the audit uncovered some
3146 GALE , DI -Reb 15a
Idaho Power Company
items that were inappropriately brought above the line,
the bulk of these expenses are legitimate.Previously, I
have discussed the inclusion of EEI membership as a bona
fide business expense of the Company.EEI meetings are
as well.The Company must be able to communicate with
individuals (including legislators and lobbyists)
concerning important matters impacting both the Company
and its customers.Foremost among these is the
relicensing of the Hells Canyon Complex which will affect
customers.
Mr. English also excludes legal expenses
related to the California and Pacific Northwest Refund
Cases.Please respond to this exclusion.
Mr. English has proposed to remove $352 544 in
legal expenses from the test year.He does so on the
erroneous premise that these legal fees were incurred to
defend IDACORP Energy'(" IE I ) actions in two
proceedings before the FERC.These proceedings are
commonly known as the California Refund Case and the
Pacific Northwest Refund Case (collectively the "Refund
Cases "
) .
While Idaho Power and IE did incur some legal
expenses defending various allegations against IE in the
two Refund Cases, none of those legal expenses are
included in the test year.The $352 544 in legal
expenses included in the test year were incurred solely
3147 GALE , DI -Reb
Idaho Power Company
to ensure that Idaho Power would not be precluded from
receiving refunds that might ultimately be
3148 GALE , DI -Reb 16a
Idaho Power Company
ordered by the FERC.
Please elaborate.
Mr. English is correct when he states that
because IE operated under Idaho Power I S FERC market rate
authority for a time, Idaho Power was included as a
respondent in the Refund Cases.At the time the Refund
Cases were filed , Idaho Power recognized it needed to
separate itself from IE to avoid the appearance of a
conflict and preserve Idaho Power 's abil i ty to obtain
refunds if refunds were ultimately determined to be
owing.To avoid potential claims of conflict of
interest , Idaho Power hired the law firm of Sidley,
Austin , Brown & Wood , LLP (II Sidley, Austin") to
independently represent Idaho Power in the Refund Cases.
IDACORP Energy retained the law firm of LeBoeuf, Lamb
Green & MacRae , LLP (IILeBoeuf , Lamb") to defend its
interests in the two Refund Cases.The $352 544 in legal
expense identified by Mr. English is attributable to the
legal services provided to Idaho Power by Sidley, Austin.
In short , the legal expenses Mr. English seeks to exclude
were incurred by Idaho Power with the intent to benefit
customers if refunds were ordered.
Mr. English testifies that by seeking to
include the above-referenced $352 544 in test year legal
expenses , Idaho Power is acting in a way that is
3149 GALE , DI -Reb
Idaho Power Company
inconsistent with the commitment the Company made to
exclude
3150 GALE , DI -Reb 17a
Idaho Power Company
from its rates expenses from non-utility businesses.
he correct?
No.Idaho Power I s actions in this instance are
consistent with its representations to the Commission
that it would separate Idaho Power and IE expenses.
Contrary to Mr. English's assertions, Idaho Power is not
seeking reimbursement of any legal expenses incurred to
defend IE.The legal expenses in question were incurred
to preserve potential benefits for utility customers.
Will the Company continue to incur expenses
associated with the California Refund Case and the
Pacific Northwest Refund Case?
It is likely that it will.Al though FERC has
determined in the Pacific Northwest Refund Case that no
refunds are justified , that case is currently on appeal.
The California Refund Case is still an ongoing
proceeding.While it currently appears unlikely that
refunds will be ordered , it is always difficult to
predict the outcome of litigation.Of course , if the
Company knows it will be unable to recover its legal
expenses incurred to pursue these refunds , it would be
logical for the Company to cease actively participating
in the cases and thereby reduce its exposure to
unrecoverable legal expenses.
Were you also asked to review the Staff
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Idaho Power Company
proposal presented by Mr. Leckie to remove $19.8 million
3152 GALE , DI -Reb 18a
Idaho Power Company
investment related to the Bridger rewind proj ect and the
Brownlee-Oxbow transmission line?
Yes.
Did you also review the Staff proposal
presented by Mr. Leckie to remove $7.5 million of the
investment in the Brownlee Woodhead Park?
Yes.
Do you agree with Staff I s proposals that these
investments should be removed?
No.Mr. Leckie I s removal of investment for the
Bridger rewind and the Brownlee-Oxbow transmission line
is founded on an erroneous interpretation of prior
Commission and Supreme Court rulings concerning the
addition of investment in rate base that comes on line
during the test year.His position on Woodhead Park is
based on the erroneous position that a return on the park
can be deferred.
Please explain.
Both the Commission and the Supreme Court have
observed that the test year to be utilized in a revenue
requirement proceeding and the investment (rate base)
that make up that test year are, to a certain extent,
subj ect to the Commission's discretion so long as the
resul t that is obtained is reasonable.In that regard,
there has been considerable discussion over the years in
3153 GALE , DI-Reb
Idaho Power Company
revenue requirement proceedings as to whether an average
rate base should be used or a year-end rate base should
be used.The material part of the discussions has
focused on the type of investment or rate base that is
added.The question is whether the investment in plant
under consideration produces revenues.In short , the
Commission and the courts are both concerned with the
mismatch of revenues with investment/expenses.I f the
plant that is added does not add additional revenue or if
that additional revenue is de minimis, then there is no
mismatch of revenues and expenses when the full or
year-end investment of the plant item is included in rate
base.In my opinion , if the full or year-end investment
of the plant is not recognized in the test year when
there is no additional revenue , a Commission
determination to not include the investment would be
unreasonable.
What type of additional plant does not add
additional revenue?
There are two classic examples of this issue in
the current proceeding.The rewind of the Bridger
generator and other acti vi ties at Bridger No.3 do not
increase the Company s revenues.The rewind did not add
additional revenues that were not already included in the
test year.The rewind of the generator is required to
3154 GALE , DI -Reb
Idaho Power Company
avoid the potential failure of the generator and was
undertaken
3155 GALE , DI-Reb 20a
Idaho Power Company
for reliability purposes, not to increase plant
production.Since reliability has been increased , the
investment is prudent and it must be fully recognized or
the Company's investors will not be compensated for their
investment.Delaying a return on the full investment
until a later test year is unfair when the full
investment is for a proj ect that will be used and useful
throughout the period of time new rates will be in
effect.This is doubly unfair when only the depreciated
plant will be included in the next test year.
The Brownlee-Oxbow transmission line falls in the
same category.That line was constructed for reliability
purposes to add an additional power source to the greater
Boise area and does not add additional revenue to the
test year that is not already included.The full benefit
of that line is realized once the transmission line is
placed in serVlce and the Company's customers are
receiving the full benefit of that line.To delay a
return on a portion of the investment based upon an
argument that the investment has not been on line for the
full year ignores the basic fundamentals of rate making.
Mr. Leckie implies that his position requires
an interpretation of Idaho Code , ~ 61-502A.Do you
agree?
, I do not.I am advised by Company legal
3156 GALE , DI-Reb
Idaho Power Company
counsel that Idaho Code, ~ 61-502A does not apply to the
investments in Bridger or Brownlee-Oxbow.Rather, as set
forth in the legislative intent section of that
legislation , Idaho Code, ~ 61-502A was passed
specifically for the purpose of overturning the Supreme
Court decision,Utah Power Light Company v. Idaho
Public Utili ties Commission, 105 Idaho 822 , 673 P. 2d 422
(December 14 , 1983), which decision had required the
inclusion of construction work in progress in rate base.
That section has nothing to do with the inclusion of
short-term work in progress in rate base.
Is short-term work in progress referred to in
the section?
Yes , but only to make it clear that short-term
work in progress is not excluded , and would contlnue to
be included in rate base as it had always been.
Why does Idaho Code, ~ 61-502A not apply to the
Bridger rewind proj ect and the Brownlee-Oxbow
transmission line?
Nei ther the Bridger rewind proj ect nor the
Brownlee-Oxbow transmission line are proj ects that began
and were completed in twelve months.The two investments
are not construction work in progress, since they are now
on-line, and for the same reason , they are not plant held
for future use.As a result , Idaho Code, ~ 61-502A is
3157 GALE , DI-Reb
Idaho Power Company
not applicable.
Can you also comment on Staff's proposal to
3158 GALE , DI -Reb 22a
Idaho Power Company
disallow a return on the Brownlee Woodhead Park?
I am not aware of any precedent for the Staff'
recommendation.The plant is currently used and useful,
the park is a part of a hydroelectric facility.The
license for Hells Canyon is subj ect to the jurisdiction
of the Federal Energy Regulatory Commission , and FERC has
approved the improvements to the park.The only basis
advanced by Staff for removing the investment is that it
will also be used for relicensing purposes at a later
date.Staff has not contended that the improvements to
the Woodhead Park are imprudent.The Company investors
are entitled return on the investment the
Brownl ee Woodhead Park that investment meets the
criteria of all rate-making principles.It is used and
useful , it lS a prudent investment, and it is currently
authorized under the Federal Energy Regulatory Commission
license for the Hells Canyon proj ect.That the park will
be a factor in the relicensing process should not
disqualify the facility from being currently included in
rate base.
Does Staff's recommendation that the
depreciation expense of the Woodhead Park investment be
allowed further demonstrate the unreasonableness of
Staff's position?
Yes.To contend that the Company can only
3159 GALE, DI -Reb
Idaho Power Company
recover its depreciation expenses (i.e. recover its
investment, which will cause a reduction in investment)
is, in essence, to allow for the recovery of the
investment without any return on that investment.I am
legally advised that this position is one of obvious
confiscation.The utility has made an investment for
which Staff recommends it receive no return , even though
the investment is being reduced through depreciation.
On Page 33 of his testimony, Mr. Holm discusses
three items related to outside consulting assistance used
by Idaho Power in three different proceedings during
2003.He proposes to amortize these amounts over five
years.What is your response to his proposal?
Idaho Power retains expert outside services
every year.These three instances are indicative of the
usual level of expense, not a one-time phenomena and
should be recovered fully in the test year.
Mr. Holm also addresses two intervenor funding
amounts and proposes a similar one-fifth recovery per
year.In the al ternati ve , Mr. Holm also lists the PCA as
a means for their recovery.What is your response?
Because the PCA is an annual adj ustment , it is
the perfect tool to recover intervenor funding amounts.
Irrigation Subsidy
wi tnesses Mr. Higgins (Kroger), Dr. Peseau
3160 GALE, DI -Reb
Idaho Power Company
(Micron), and Dr. Power (AARP) both suggest systematic
approaches to eliminate the irrigation subsidy
demonstrated by the Company's Class Cost of Service
Study, Exhibit No. 39.Please respond to their
recommendations.
These witnesses seek to pursue a systematic
approach to removing the irrigation subsidy.Mr. Higgins
and Dr. Power recommend periodic rate adjustments to all
customer groups such that the irrigation revenues are
increased over time with corresponding decreases to the
other customer groups.Dr. Peseau sets all customer
groups ' revenue requirements , except for irrigation
service, to cost of service now and then periodically
increases the irrigation rates until they have reached
cost of service.The revenue shortfall experienced by
Idaho Power is deferred and collected in the future from
the irrigation class.
In my mind , if the Commission were to accept any of
these recommendations, three conditions would have to be
present -(1) cost of service would be the sole basis for
determining the revenue requirement of each customer
class (2) the results from the current-cost-of service
analysis would be expected to continue into the future,
and (3) the time period between general rate filings
would be expected to be significant.I do not believe
3161 GALE , DI-Reb
Idaho Power Company
that any of these conditions exist at this time.
Regarding the first condition , the Idaho Commission
3162 GALE , DI-Reb 25a
Idaho Power Company
has historically taken more than just the pure cost of
service result into account when establishing class
revenue allocations, with rate shock being one of those
considerations.Addressing the second condition , the
costs of service results do change over time for a number
of economic and technological reasons.Changes in load
and usage patterns within customer classes as well as
changes to the Company s marginal costs all affect the
cost-of-service results.In addition , pricing impacts,
consumer information, new peak clipping programs, and the
selection of new resources will continue to change the
Company's costs going forward.Finally, with regard to
the third condition , it is my expectation that the
Company will be filing successive general rate
adjustments in the coming years that will provide
opportunities to timely reevaluate the irrigation
subsidy.I make this statement knowing that the Bennett
Mountain Plant is under construction , the Company'
capital budgets are dramatically increasing in the next
several years in all areas, and that the Hells Canyon
Relicensing is scheduled for completion in 2008.
Should the Commission decide to institute a
systematic approach at this time , does the Company have a
preference between the recommendations?
The Company views the recommendations of Mr.
3163 GALE , DI -Reb
Idaho Power Company
Higgins and Dr. Power as the only workable approach.
Idaho Power has no appetite to establish a deferral for
uncollected irrigation revenue.Postponing a rate
increase to match a deferral of costs is inappropriate
when rates can easily be approved to match current cost
levels.Deferral accounting will only add another level
of complexity to an already complicated issue.
addition , aggressively ramping up irrigation rates
without an evaluation at each step could have a severe
impact to the irrigation customer class.The Company, or
those irrigation customers remaining in business at the
end of Dr. Peseau' s process could easily be left holding
the bag.Given the importance of electricity to the
quality of life for all people , the Company believes that
great care must be taken with any systematic approach to
the elimination of the irrigation subsidy.
Monthly Service Charge
Witnesses Mr. Hirsh , Ms. Ottens, Mr. Schunke
and Dr. Power have addressed the Company I s proposed
monthly service charge.What is your understanding of
the positions that these witnesses have taken with
respect to the Company's recommendation?
My understanding of the positions taken by
these witnesses are as follows:
Ms. Hirsh states in her testimony that the only
costs that can appropriately be included in the fixed
3164 GALE , DI -Reb
Idaho Power Company
monthly service charge for the residential class are
those that are customer-specific and that do not vary
wi th the number of customers served or with demand or
energy usage.Ms. Hirsh states these costs are meters,
line drops , meter reading and billing; but in order to
incent customers to increase energy efficiency and
conserve energy, the monthly service charge should be
considerably lower even than the sum of these costs.
That is , that some portion of these customer-related
costs , as defined by Ms. Hirsh , should be transferred
into other rate elements within the residential class to
increase the portion of the bill over which customers
have control.
Ms. Ottens states that the Company s proposed
monthly service charge does not take into account the
situation of low-income customers and the impact of their
monthly electric bills on limited financial resources.
She states that the Company's proposal results in
low-income households paying for fixed costs beyond their
control and that low-income customers will be unable to
compensate or utilize energy conservation methods in
order to keep their bills low.Ms. Ottens recommends
that Idaho Power's residential monthly service charge
remain at its current level.
Mr. Shunke' s position regarding the monthly service
3165 GALE , DI -Reb
Idaho Power Company
charge varies from class to class.In general , Mr.
Shunke ' s
3166 GALE, DI-Reb 28a
Idaho Power Company
position is that, at least with respect to the
residential class,(Schedule 1), the small general
service class (Schedule 7), and the large general service
class - secondary (Schedule 9 - secondary) the monthly
service charge should include only the direct costs of
meter reading and billing and should not include any
fixed plant cost.In addition , he states that the
Company s proposed monthly service charge for the
residential class will have a disproportionate effect on
low- income customers and sends the incorrect signal that
largest users should receive a small rate increase while
customers with the lowest usage should receive the
highest increase.He recommends an increase in the
customer charge for the residential and small general
service classes but not to the level justified by cost of
service because of the low overall staff-recommended rate
increase for these customers.
Dr. Power asserts that the appropriate definition of
customer costs are those meter reading and billing costs
that vary with the number of customers and that this
variable portion represents about 70 percent of total
billing and meter reading costs for the residential
class.Dr. Power obj ects to the Company s method of
designating distribution costs as customer or demand
related and to the principle of aligning fixed and
3167 GALE , DI-Reb
Idaho Power Company
variable costs with fixed and variable prices,
respectively.He proposes a small
3168 GALE , DI-Reb 29a
Idaho Power Company
increase in the existing monthly service charge, only, to
account for some of the effects of inflation.
Please respond to the collective criticisms.
Idaho Power seeks to better align costs and
prices.As is expressed in my direct testimony on the
irrigation subsidy, sometimes this alignment has
constraining circumstances that calls for a less than
cost of service result to be implemented.The Company
realizes that within a customer group there can be
billing impacts of a rate design change that are too
dramatic for the moment.Idaho Power believes that
ul timately the Monthly Service Charge should actually be
much higher than the current proposal, potentially in the
$25 to $30 range.Because of the intra-class billing
impacts , the Company proposed a partial yet material step
to $10.However , similar to our position on the
irrigation subsidy, the Company believes some progress
needs to be made in reducing the disparity.
In an ideal situation , tbe capacity costs for
Residential and Small General Service customers would be
recovered through some type of demand charge.The
metering for these two customer classes do not presently
provide that option, leaving only two charges from which
to collect the capacity costs - the monthly service
charge and the energy charge.Since energy costs to
3169 GALE , DI-Reb
Idaho Power Company
serve small customers are not dramatically more than
serving large customers, Idaho Power
3170 GALE , DI-Reb 30a
Idaho Power Company
seeks to remove or at least partially remove the capacity
costs from the energy charge and move these costs onto
the monthly service charge.The monthly service charge
would eventually become an access charge.
Deregulation would ultimately separate the energy
component from the access component.The access
component is the collection of facilities and expenses
(unrelated to energy) required to serve a customer from
the grid.Although Idaho Power does not believe
deregulation to be on the immediate horizon in Idaho , we
do know how quickly the issue emerged before.We also
have a reasonable idea of how much unbundling and
rebundling needs to be done to our pricing structure
before deregulation could take place.
Finally, an access and usage approach is working in
many service industries and has a logical application for
electric service as well.
Please respond to the suggestion that the
energy rate needs to be nigh in order to provide a
conservation signal.
I would ask what is the economic basis for
setting the high energy rate and why should it only apply
to the small customer?It makes no sense to me to apply
an arbitrary conservation price signal to only the
smallest customers.Fixed cost recovery through variable
3171 GALE , DI -Reb
Idaho Power Company
rates can itself be a barrier to the introduction of
demand-side
3172 GALE , DI-Reb 31a
Idaho Power Company
acti vi ties because the util i ty is resistant to reducing
sales and not covering all of its fixed costs.
Ul timately, customers can lower their bills by using
less , no matter what the energy rate , since every
kilowatt-hour is billed.
Ms. Ottens , in her testimony (page 10 line 12),
expresses concern that the Company I s proposed increase to
the minimum monthly service charge will hit the low
income customers hardest because the charge is not
directly correlated to the level of actual energy usage
and because low income customers cannot compensate by
turning the lights off and the heat down.Please address
these concerns.
The Company disagrees with Ms. Ottens
assertion.It is Idaho Power's position that because
residential service includes two rate components , the
monthly service charge and the energy charge , every
customer whether low income or not can affect the amount
of their energy bill by improving control over household
energy use.Customers can compensate not just by turning
the lights off and the heat down but by changing filters
regularly, moving furniture away from registers , cleaning
light fixtures regularly, and caulking doors and windows.
It is also significant to note that because
Residential Service includes only two rate components an
3173 GALE , DI -Reb
Idaho Power Company
increase in the amount of revenue recovered through the
service charge results in a decrease in the necessary
amount
3174 GALE , DI-Reb 32a
Idaho Power Company
of revenue to be recovered through the energy charge.
With a higher service charge , the energy charge can be
set lower than it otherwise would be.
Mr. Robinette states in his testimony (page 8 , line
3) that II due to the very nature , low income households
reside in older housing stock that are the most energy
inefficient II .He suggests that these inefficiencies lead
to high usage and utility bills that "start building up
and become unmanageable. The Company's data for
low-income customers confirms that the maj ority of
low-income customers have usage greater than 700 kWh in
both the summer and non- summer months.(Please see
Exhibit No. 79 , Idaho Power's Response to 3rd Production
Request of Staff No.4 0) .The Company analysis also
confirms that for both the summer and non-summer months,
but particularly during the heating season, the lower
energy charge resulting from the increase in the service
charge to $10.00 is actually beneficial to a majority of
our low-income customers.
Fixed Cost True-Up Mechanism
In Mr. Cavanagh's direct testimony, he states
that there are significant financial disincentives to
sustained investments in cost -effective energy efficiency
and small-scale "distributed" generating resources by
I daho Power Company.Mr. Cavanagh proposes a solution to
3175 GALE , DI-Reb
Idaho Power Company
this problem , and starts off by stating that one of the
Company's most important responsibilities involves the
process of integrated resource planning.Do you agree?
Yes, I do agree that one of the Company'
important responsibilities is integrated resource
planning.In fact, the Company is currently preparing
its 2004 Integrated Resource Plan.As part of this
biennial process , the Company has solicited public input
throughout the planning process, and has implemented an
Integrated Resource Planning Advisory Council which meets
regularly with the Company.This Advisory Council
reviews material prepared by the Company as well as makes
suggestions and presentations to the group for
al ternati ve resources to meet the Company I s resource
needs.Mr. Cavanagh is a member of this advisory council
and has participated throughout the process.
Mr. Cavanagh proposes a possible solution for
these perceived financial disincentives by recommending
that the Commission adopt a simple system of periodic
true-ups in electric rates , designed to correct for
disparities between the Company's actual fixed cost
recoverles and the revenue requirement approved by the
Commission in this proceeding.Mr. Cavanagh states that
these true-ups would either restore
3176 GALE , DI -Reb
Idaho Power Company
to the Company or give back to the customers the dollars
that were under- or over-recovered as a result of annual
throughput fluctuations.Does the Company agree with
this solution?
Mr. Cavanagh recognizes the dilemma that the
Company faces when fixed costs are not recovered fully
through retail sales because sales volumes are lower than
proj ected.The Company has begun an extensive review of
this problem and is looking obj ecti vely at several
possible solutions.However , such a system of periodic
true-ups may not ultimately be as II simple II as Mr.
Cavanagh suggests.The Company has retained an
independent consultant, Mr. Eric Hirst, to assist it in
performing a survey and analysis of various true-
mechanisms, sometimes referred to as decoupling.Mr.
Hirst is well known in the industry and has much
experience with al ternati ve methodologies for recovering
utility fixed costs.A system of periodic true-ups may
be something the Company and its customers may desire in
the future, but the Company is not prepared to recommend
one at this time.
At this point , the Company remains fully obj ecti ve
on the decoupling issue , but is keenly interested in how
the
3177 GALE , DI -Reb
Idaho Power Company
revenues are eventually recoupled as well.As Idaho
Power has discovered in its Power Cost Adj ustment,
sometimes there are unanticipated and unintended
consequences.
The Company s preference would be to complete an
issue analysis paper with the help of Mr. Hirst, and
distribute a draft for comment to interested parties
before coming to a decision point on how best to proceed.
This issue lends i tsel f to the workshop and settlement
process.
Rebut tal Summary
Have you prepared an exhibit that summarizes
Idaho Power I s positions on rebuttal?
Yes.Exhibit No. 80 provides that summary in a
format that shows Idaho Power's initially filed
positions , the Staff's initial position , and our rebuttal
position.Each element of the revenue requirement
equation is segmented in Exhibit No. 80.Under the
overall Rate of Return section , Idaho Power - - through
wi tnesses Mr. Avera and Mr. Gribble - - continues to
support 11.2 percent as the appropriate rate.The
Company can accept Staff witness Ms. Carlock's 2004 bond
pricing adjustment to the debt component with the caveat
that Idaho Power s 2004 adj ustments remain in place.Mr.
Gribble s Exhibit No. 63 provides the updated capital
3178 GALE , DI -Reb
Idaho Power Company
structure without accepting the bond repricing.When Ms.
Carlock's recommendation is considered , the debt
component rate changes to 5.859 percent and the new
overall
3179 GALE , DI-Reb 36a
Idaho Power Company
Rate of Return remaining at 8.334 percent.
As outlined in the rebuttal testimony of Messrs.
Obenchain , Prescott , and Fowler , the Company does not
believe any of the Staff rate base reductions are
appropriate.The same overall rate of return applied to
the Company's originally requested rate base amount
resul ts in no change to the return on rate base.
Idaho Power has accepted several of the expense
adjustments as proposed by Staff as reasonable in the
light of changed circumstances.Obviously, the Company
agrees with the reduction of depreciation expense of
411 292.This amount is reflective of the settlement
depreciation case , IPC-03-07. The Commission approved
the settlement in its Order No. 29363 issued on October
, 2003 , a date that came after the filing of the
general rate case on October 16, 2003.
The Company also agrees that certain adj ustments
related to the year-end payroll expenses should be
reduced to take into consideration that the Company did
not reach the employment level in December that was
expected when the case was filed.This impacts three
items:the year-end annualizing payroll adj ustment, the
Structural Salary Adj ustment (II SSA "), and the incentive
on pay-at-risk adjustment.We agree with Mr. Holm'
reduction to the year-end payroll annualizing adjustment
3180 GALE , DI-Reb
Idaho Power Company
of $2,052 264 and Mr. Holml s reduction to the SSA of
$116,675.
The Company does not agree with the Staff's complete
removal of the pay-at-risk incentive portion of the
employee total compensation as discussed by Mr. Minor in
his rebuttal testimony.We do believe its appropriate to
reduce this amount to reflect year-end employment levels
also.Accordingly, the pay-at-risk/incentive adjustment
has been decreased by $277 463.
After considering the direct testimony of Staff
wi tness Mr. Engl ish on pension expense and conferring
wi th the Company's actuary, Mr. Brad Fowler , we have
decided to not ask for Service Cost treatment for pension
expense and have accepted the more traditional FAS 87
approach.As a result, we no longer request an
adj ustment to expense of $2 170 160 and our requested
expenses drop by that same amount.Mr. Fowler I s rebuttal
testimony supports this decision.
Finally, there are some expenses uncovered by Staff
in their review that should not have been included in the
Company s expenses.These include political and
chari table contributions and other expenses that were
recorded incorrectly.We do continue to argue for the
legi timacy of other business expense related to EEI,
service club , and Chamber memberships, and legal expenses
3181 GALE , DI-Reb
Idaho Power Company
related to Idaho Power's interest in the western refund
proceedings.
3182 GALE , DI-Reb 38a
Idaho Power Company
In conclusion, the Company's rebuttal testimony has
been directed at our position on the issues, not fixing
the Staff's position.We cannot do both in the time
frame allowed.Ul timately, if Staff prevails on some of
their disallowances, there will be secondary effects that
must be addressed at that time.
In total , Idaho Power Company acknowledges a
$9,066,310 decrease to our originally proposed expense
adj ustments.The corresponding tax gross up impact is
$5,820,571.The Company I s requested revenue increase
drops to $70 675,029 from the original $85,561 910.
Does this conclude your direct rebuttal
testimony?
Yes, it does.
3183 GALE , DI-Reb
Idaho Power Company
(The following proceedings were had in
open hearing.
MR. KLINE:And Mr. Gale is available for
cross-examination.
COMMISSIONER SMITH:Thank you.
Mr. Budge.
MR. BUDGE:Thank you, just a few , if I
may.
CROSS - EXAMINATION
BY MR. BUDGE:
Mr. Gale, beginning on Page 24 and
continuing on for several pages, you address the proposal
of Mr. Higgins and Dr. Peseau and Dr. Power which is, if
I can just sum that up, would be to systematically move
the irrigators over a course of a few years quickly to
full cost of service, and if I could just sum up your
testimony without going into it, you appear to raise
basically three arguments over the next several pages of
your rebuttal and I think the first one is just a
recogni tion that there's more than cost of service
involved in setting rates.
That's correct.
And I believe you re referring in part to
CSB REPORTING
Wilder , Idaho
3184 GALE (X-Reb)
Idaho Power Company83676
prior testimony about rate shock being a factor.
I think I mention rate shock again.
And then the second point you bring up is
the Company is likely to have more frequent rate cases in
the future and that will provide an opportunity to
periodically review cost of service again.
That's true.
And then your last point that I did want
to ask some questions about is you make a statement on
page 27, beginning on line 6, that in addition
aggressively ramping up irrigation rates without an
evaluation at each step could have a severe impact to the
irrigation customer class.
Correct.
So if I understand your testimony, you do
feel that it I S appropriate that if there s going to be
periodic raises moving the irrigation class towards cost
of service that it should be examined on a case-by-case
basis as you move forward with these future cases?
I think we 'll have the opportunity and
think it's appropriate that the Commission actively take
each step instead of passively have it adjust.
And would the fact that the irrigation
class in particular has di versi ty with the wide spread
between the actual rate impact on different customers , is
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Wilder , Idaho
3185 GALE (X-Reb)
Idaho Power Company83676
that also a factor that would cause you to conclude that
we shouldn I t systematically just move forward on a flat
percentage basis over so many years to get to full cost
of service?
Well , I think there are dynamics at work
impacting our costs that we may see different results in
a couple of years.
And that would be as a result of changes
in the system?
Changes in the system , changes in load,
pricing impacts.We have a lot of things on the
- -
among
our proposals for rate design and I think in one or two
years we could come back , see what has happened as a
resul t of all of those.
When you state that an aggressive move
without an evaluation at each step may have a severe
impact there on page 27 , would you also agree that if in
fact the impacts to a particular customer are severe that
they're also likely to be permanent in nature?
Some of them very well could be permanent
in nature.
I had one other question.The Company had
proposed a disproportionate increase to the irrigation
class, the 25 percent cap, which would roughly be
one-and-half times the average jurisdictional increase
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Wilder , Idaho
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Idaho Power Company83676
proposed by the Company; is that correct?
I'll accept your math, yeah.
If the Commission were to ultimately grant
an increase of something less, do you continue to believe
it would be appropriate to have a larger increase to the
irrigation class in that same percentage range or about
one-and-half times what the overall customer class or
would you adjust it in some different way?
The 25 was set in the context of our
overall rate lncrease and we do want or the Company'
position is to materially move the irrigation class at
this time.If the ultimate decision or when the ultimate
decision is less than the 17.7 percent, I think the
Commission can consider that in setting the irrigation
piece.I still would argue for a material step for the
irrigation customer class.
And you felt one-and-half times what
other customers receive would meet that test you have in
mind of being a material change or material move towards
cost of service?
Percentages are always tricky.If the
Staff revenue requirement were accepted, that would mean
irrigation would get a four-and-half percent , so I'
not sure that it would apply at the low end.
MR. BUDGE:Thank you.I have no further
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Wilder , Idaho
3187 GALE (X-Reb)
Idaho Power Company83676
questions.
COMMISSIONER SMITH:Thank you, Mr. Budge.
Mr. Richardson.
MR. RI CHARD SON :No questions,
Madam Chairman.
COMMISSIONER SMITH:Mr. Ward.
MR. WARD:No questions.
MR. COOKE:No questions.
COMMISSIONER SMITH:Mr. Purdy.
MR. PURDY:I I ve managed to pare this
down , I hope , quite a bit.
CROSS -EXAMINATION
BY MR. PURDY:
Mr. Gale, you suggested that every
customer , including low income customers , have the
ability to reduce the amount of their monthly bill and
you gave some examples, like moving furniture and
cleaning light fixtures and that sort of thing.Do you
recall that testimony?
Yes.
Okay.Now , while these are certainly, I'
sure, good ideas and something we all should do, would
you agree that far more meaningful to low income
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Wilder , Idaho
3188 GALE (X-Reb)
Idaho Power Company83676
customers would be an increase in LIWA funding,
weatherization of their homes?
I think that an increase in LIWA funding
that would make sense after we worked through the
increase would be a - - I could see that as a good impact
for the low income customers , yes.
Would you agree that absent some increase
in funding for LIWA, low income customers generally have
less financial ability to weatherize their homes on their
own than non-low income customers?
I think I would accept that.We are open
to discussing increased funding for LIWA.
Okay, there was some discussion at some
point during the hearing about the reason for the
elimination or reduction of DSM for Idaho Power in the
mid '90s and that was the fear of stranded investment,
deregulation.Given that that fear at least has in the
minds of most people been somewhat diminished and given
that current LIWA funding levels are only, I think we'
established, 0.0003 of the Company I s gross revenues and
that the Company does recover all of its LIWA funding, do
you have any significant heartburn about increasing LIWA
funding up to the levels proposed by Community Action in
this case?
I just don I t want to blanketly accept that
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Wilder , Idaho
3189 GALE (X-Reb)
Idaho Power Company83676
in the context of a hearing, but we are open to
discussing with the Community Action agencies appropriate
lncreases to LIWA funding.
So you'll make the promise that you will
engage in that dialogue?
As Ms. Fullen said , willingly.
Thank you.Would you agree that LIWA has
systemwide benefits Idaho Power the same respect
that eve ry DSM program does,and when say systemwide
benefits,should condition that and say for other
ratepayers?
Well , to the extent that LIWA does help on
the demand side , I could see system benefits, yes.
Might there be other systemwide benefits,
including the reduction of a bad debt and arrearages and
addi tional uncollected
There could be secondary effects as well,
yes.
With respect to the irrigation subsidy,
and it's on page 25 of your rebuttal if you need to look
at that , you don t seem to absolutely dismiss the idea of
a systematic, as we ve called it , phase-in or increase
for irrigation rates, but you imposed in your mind anyway
two or three conditions and I think those included that
the Company's current cost of service study results will
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Wilder , Idaho
3190 GALE (X-Reb)
Idaho Power Company83676
continue into the future and that there would be no rate
case again for a significant period of time.Do you
recall that?
Yes.
Okay.Isn't it true that the Company is
in fact using essentially the same cost of service
methodology it has used -- that it used 10 years ago In
the 1995 case , the 94-5 case?
It's very similar.I think some of the
weightings that have actually been applied are slightly
different.
Okay, and has the cost of service study
utilized by the Company consistently shown an irrigation
subsidy?
Since I've been with the Company it has.
Okay, and isn 't it also true that in the
past 20 years , Idaho Power has only made three general
rate case filings , roughly 20 years?
In roughly 20 years , yes.
Okay; so given that the cost of service
resul ts for the irrigation class have revealed a subsidy
over 20 years , more or less, and Idaho Power has only
filed three rate cases in that time , aren't your
condi tions that you have imposed for a systematic
increase satisfied?
CSB REPORTING
Wilder , Idaho
3191 GALE (X-Reb)
Idaho Power Company83676
Well , let me take a little bit with that
answer.It does, but whenever I do a rate case
presentation , it looks like we file general rate cases
every decade, but really the thing that drives most cases
are lumpy chunks of assets coming on line , and in the
94-5 case, we had some hydro facilities, Milner , with
Twin Falls right behind, and in the 265 case, we had
Valmy I I , but right before Valmy I I , we had Valmy I , so
in that time period we had rate cases two years apart and
all I'm saying is my representation today is I think
we'll see that time period.
We have other things on the time line that
ve noted which makes me say it's not going to be 10
years , it's probably going to be two years and then maybe
three years.
But yet , we've also seen instances such as
Swan Falls and Milner where the Company came in and
obtained rate relief for its investment in those
facilities without filing a general rate case , so my
question is what assurance are you offering this
Commission , especially given that cost of service studies
and general rate filings are expensive and time-consuming
and not very popular , what assurance are you giving the
Commission that you will in fact come in for a general
rate case with a cost of service study in the near
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Wilder , Idaho
3192 GALE (X-Reb)I daho Power Company83676
future?
Well , I'd certainly agree that they re not
very fun.I would give my best representation that given
the capital budgets that we have publicly noted in our
financial disclosures and the fact that Bennett Mountain
is coming on that you could expect a general rate case In
two to three years with all the extra goodies,
including - - I'm sorry for being flip
- -
including a full
class cost of service study.
And finally, Mr. Budge asked you some
questions about - - he prefaced it with the fact that the
irrigation class is diverse and given the magnitude of
the proposed increase for that class, you I re going to see
a disproportionate impact on customers within that class
and I hope that's a correct paraphrasing of his point.
My question to you is , isn't the same true with respect
to the residential class?
Actually, I believe it is and I think
that's partly where we differ from your clients.
What's that?
On how those impacts affect some of the
residential class.
Yeah , we might have a disagreement
regarding intraclass subsidies, but my point is that the
same concerns are that there might be disproportionate
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Wilder , Idaho
3193 GALE (X-Reb)
Idaho Power Company83676
impacts wi thin the residential class and along those
lines , have you in making your proposed revenue
allocation to the irrigation class conducted any studies
or taken into account the impact that the rate increase
might have on low income customers?
m not aware of a study of our rate
impact on low income customers other than what's already
been presented.
MR. PURDY:That's all I have.Thanks.
COMMISSIONER SMITH:Mr. Eddie.
MR. EDD IE:Thank you , very briefly.
CROSS - EXAMINATION
BY MR. EDDIE:
Mr. Gale , I'm not asking you to prej udge
the outcome of. the 2004 integrated resource plan, but is
it your expectations that the plan will likely call for
an increased investment in certain demand side management
programs perhaps over and above the amount of funding
that's available from the DSM tariff rider?
I think certainly at least from my end
that that's my expectation , that you could see an action
item or a block of DSM or energy efficiency resources as
a result of the 2004 IRP.
CSB REPORTING
Wilder , Idaho
3194 GALE (X-Reb)
Idaho Power Company83676
Getting back to the issue I had asked
Ms. Fullen , would it be your proposal that LIWA funds
also be collected through the rider mechanism as opposed
to coming from some other account or pot of money?
Let me take a moment with that because
there were three legs to the stool, as Ms. Fullen stated,
and they all have some common ties.Sticking with IRP
for a second , my expectation is should there be an energy
efficient C block coming out of the IRP that that would
be then the job of the EEAG to sort through that block of
demand side resources and fine~tune it and put it into
action , so I see an expanded role for the EEAG that has
been alluded to during the last week of hearings, so the
IRP would generally define and the EEAG would
specifically define and then reconcile energy efficiency
spending with the rider.
Likewise, for LIWA and separately from the
IRP , which was a little bit of the miscommunication
should there be additional LIWA funds coming out of
discussions with the CAP agencies, I could see easily of
marrying that issue up with the IRP energy efficiency
dollars and activities, and potentially the NEEA being
the third leg of the stool coming together in what could
be a future application back to this Commission
addressing funding for those three.
CSB REPORTING
Wilder , Idaho
3195 GALE (X-Reb)
Idaho Power Company83676
Just to follow up, is there a time line
that you're willing to commit to concerning that type of
application that would perhaps clarify the three legs of
the stool and propose a change, hopefully an increase, in
the DSM funding rider?
If I speak out of turn , I III look for a
head nod from the back of the room , but I think the IRP
lS probably the longest activity of the three.I think
we could immediately start talking with the CAP agencies
about getting the LIWA set and the NEEA evaluation , I
think, is already ongoing, so the IRP finishes in June,
then that task in my mind is handed over to the EEAG to
reconcile and implement.I think as soon as that has
enough quality to take to the Commission , then probably
we could take something back to the Commission.
Before the end of this year likely?
I think that I s doable.
MR. EDDIE:That's all I have.Thank you.
COMMISSIONER SMITH:Thank you.
Ms. Nordstrom.
MS. NORDSTROM:Thank you.
CSB REPORTING
Wilder , Idaho
3196 GALE (X-Reb)
Idaho Power Company83676
CROSS -EXAMINATION
BY MS. NORDSTROM:
Mr. Gale, good afternoon.
Good afternoon.
On page 13 , lines 4 and 5 of your rebuttal
testimony, you state that many state agencies have
employees as members in service clubs.To your
knowledge, does the state pay the service club membership
dues for state employees?
I do not know.
Directing your attention to page 24 , you
discuss expert outside services.
m sorry, one more time, please?
Page 24 , you discuss expert outside
services.Isn I t it true that Staff did not adjust or
amortize most of the service expenses that the Company
included in the test year?
The ones I'm talking to , I think , are
consul ting that were done for regulatory purposes and
frequently come out of my department I s budget and what I
intend to say is we have consulting services every year
in our budget of one form or another related to the
different regulatory issues.
Would you agree , though, that of the 5.
CSB REPORTING
Wilder , Idaho
3197 GALE (X-Reb)
Idaho Power Company83676
million that the Company requested that this adjustment
removes only about 5 percent of that?
The 5.5 is the budget or the test year
outside services amount?
Correct.
I would accept your math.
On page 3 , lines 4 through 8 , you describe
Staff's proposed effective tax rate adjustment.From a
policy point of view , could you please explain what would
be the impact on the Company if the Commission instead
required the Company to normalize the tax adjustment
booked in 2002 for regulatory purposes like Avista and
PacifiCorp have done?
I think that if from a policy point of
view the Commission had been under a normalization method
for years and years, I I m not sure that I I d have any
problem with it whatsoever.
Are you saying that that's not the case?
Well , what I think is we have a selective
application.
Has the Company received benefits from
flow-through for other items since the last rate case?
Are you talking about tax flow-through?
Yes.
m sorry, I don't know.
CSB REPORTING
Wilder , Idaho
3198 GALE (X-Reb)
Idaho Power Company83676
MS. NORDSTROM:Thank you.No further
questions.
COMMISSIONER SMITH:Are there questions
from the Commissioners?Nor I.
Redirect.
MR. KLINE:No redirect.
COMMISSIONER SMITH:Thank you
Mr. Ga 1 e .
THE WITNESS:Thank you.
(The witness left the stand.
COMMISSIONER SMITH:Let I S go at ease for
a few minutes.
(Off the record discussion.
COMMISSIONER SMITH:Let's go back on the
record.Having concluded our hearing a few days earlier
than we originally anticipated, we will accelerate the
deadline for posthearing briefs to April 26th.
addition , we would request that the parties just limit
their briefing to what they consider to be necessary
legal or factual issues and you don't have to recap the
entire case for us, unless you want to in 25 words or
less, which would be helpful.
In addition, we would like all
applications for intervenor funding to be filed also on
April 26th.We'll deem that the date under our rule by
CSB REPORTING
Wilder, Idaho
3199 COLLOQUY83676
which they should be filed.
Are there any other matters that need to
come before the Commission before we adjourn?If not, I
would just like to thank everyone for your courteous
behavior and your camaraderie during our last few days of
going through the hearing.It I S sometimes difficult, but
it's a necessary part of our process and it does help us
in our decision making, so we thank you all for that and
the hearing will be adj ourned.
, Mr. Ward, by rule , all exhibits which
have not previously been admitted are now admitted.
(All exhibits previously marked for
identification were admitted into evidence.
(The Hearing concluded at 5:20 p.
CSB REPORTING
Wilder , Idaho
3200 COLLOQUY
83676
This is to certify that the foregoing
proceedings held in the matter of the application of
Idaho Power Company for authority to increase its rates
and charges for electric service to electric customers in
the State of Idaho , commencing at 9:30 a.m. on Monday,
March 29, and continuing through Monday, April 5, 2004
at the Commission Hearing Room, 472 West Washington
Boise,Idaho , is a true and correct transcript of said
proceedings and the original thereof for the file of the
Commission.
Accuracy of all prefiled testimony as
originally submitted to the Reporter and incorporated
herein at the direction of the Comission is the sole
responsibility of the submitting parties.
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Patricia M. Blaska
Certified Shorthand Reporter
3201 AUTHENTICATION