20081118Staff to IPC 22-40.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 3283
R. E. C r. ì \! t: f'. ... it 1;,, 1~";
ZOOS NOV \ 8 AM il: 05
10
unLIT i
NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
ISB NO. 6864
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR AUTHORITY )
TO INCREASE ITS RATES AND CHARGES )
FOR ELECTRIC SERVICE TO ITS )
CUSTOMERS IN THE STATE OF IDAHO. )
)
)
)
CASE NO. IPC-E-08-10
STAFF RESPONSE TO THE
SECOND PRODUCTION
REQUEST OF IDAHO POWER
COMPANY
The Staff of the Idaho Public Utilities Commission, by and through its attorney of record,
Weldon B. Stutzman, Deputy Attorney General, provides the following documents and
information in response to Idaho Power Company's Second Production Request to Commission
Staff.
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 1 NOVEMBER 18, 2008
REQUEST NO. 22 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
7, lines 21-25. Did Ms. Carlock evaluate trends in public utilty bond yields from Idaho Power's
last case until the present? If the answer is "yes," please explain these trends and her conclusions.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 22: Yes.
Bonds issued by Idaho Power in the recent past include the following as shown on Audit Request
Responses to No. 12.
6.30% Series $140 milion issued 6/22/07
6.25% Series $100 milion issued 10/18/07
6.025% Series $120 milion issued 7/10/08
Public Utilty bond yields floated within a closer range (versus prime rate), decreasing at times and
increasing at others. With the market uncertnty this fall, they increased.
REQUEST NO. 23 TO STAFF WITNESS CARLOCK: Does Ms. Carlock agree that the
risk differential between Idaho Power and other electric utilties is reflected in corporate credit
ratings, such as those published by Stadard & Poor's Corporation? If the answer is "no," please
provide a complete explanation for Ms. Carlock's opinion, as well as copies of all supporting
documents.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 23: Yes for
the most par. Specific regulatory risks may not be fully analyzed. Regulatory mechanisms for
example may not be completely understood and may not be adequately reflected.
REQUEST NO. 24 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
11, lines 8-14. Please provide complete copies of the source documents for the authorized retus
cited in Ms. Carlock's testimony.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 24: The
authorized retus were cItedfrom an Edison Electric Institute document presented to the NARUC
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 2 NOVEMBER 18,2008
Accounting and Finance Subcommittee on October 13,2008. This was the most recent
information. See Attchment to Response No. 24; also available bye-maiL. The Fortnightly
authorized retus for 2007 were also evaluated. Not specifically cited but par of the knowledge
base are Commission Orders and industr aricles.
REQUEST NO. 25 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
11, lines 15-17. Please provide copies of all the specific data points for the returs on book equity
and identify the utilty, company, or industry to which those returs apply that served as supports
for Ms. Carlock's conclusion that application of the comparable earings method implies a retu
on equity in the 9.5% to 10.5% range. If Ms. Carlock did not conduct an independent analysis of
historical or projected earned rates of return on equity to support her opinion, please so state.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 25: The
returs are for utilty companies shown in Company witness A vera exhibits and workpapers and
the associated Value Line data with updates. Copies are readily available to Company witness
Avera so are not copied for this response.
REQUEST NO. 26 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
11, lines 15-17. Please provide copies of any source documents or other analyses, materials, or
evidence not specifically discussed in Ms. Carlock's testimony that supports her conclusion that
application of the comparable earings method implies a retur on equity in the 9.5% to 10.5%
range.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 26: See
Response No. 25.
REQUEST NO. 27 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
13, lines 15-17. Please confirm that Ms. Carlock's DCF range of 8.9% to 9.8% was based solely
on the results of applying the DCF model to IDACORP. If Ms. Carlock applied the DCF model to
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 3 NOVEMBER 18, 2008
estimate the cost of equity for other utilties, please explain and provide copies of the analyses and
all underlying data.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 27: The
primar DCF analysis is based on IDACORP for Idaho Power. Other utilty analysis of Company
witness Avera exhibits and workpapers with associated Value Line data with updates, was
examined using the DCF model to test reasonableness of this range versus that of Company
witness Avera. As in Response No. 25, this data has not been copied as it is readily available to
Company witness Avera.
REQUEST NO. 28 TO STAFF WITNESS CARLOCK: Reference Carlock Direct at page
14, lines 11-15. Please provide copies of the analysis of growth indicators cited by Ms. Carlock as
support for her growth rate range of 4% to 6%, including copies of all underling source documents.
STAFF WITNESS CARLOCK'S RESPONSE TO IPC REQUEST NO. 28: The
growth range of 4% to 6% is based on IDACORP and other utility companies shown in Company
witness A vera exhibits and workpapers and the associated Value Line data with updates. Copies
are readily available to Company witness Avera so are not copied for this response.
REQUEST NO. 29 TO STAFF WITNESS VAUGHN: Ms Vaughn states in her testimony
page 10, lines 16-20, "The two cost elements that showed consistent growth were Power
Generation Other Expense and Distribution Other Expense. In each case, I believe a modest 5%
growth escalation is reasonable because the Company has some discretion over Other Expense
spending."
a. How was the escalation factor of 5% determined?
b. Please explain what is meant by "the Company has some discretion over
'Other Expense Spending.'"
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 4 NOVEMBER 18,2008
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 29:
a. Using Company methodology, the 5-year Compound Anual Growth Rate
(CAGR) for Power Generation Other Expense was determined to be 6.99%, the 5-year CAGR for
Distribution Other Expense was determined to be 4.70%, and the average of the two CAGRs was
calculated to be 6%. This average calculated CAGR is in line with testimony by Company witness
Smith at pages 25, lines 9-25, in which she stated that a 5.82% growth rate was considered to be
reasonable.
The calculated CAGRs for these two cost elements are based on unadjusted Other
Expense data and include expenditures Staff believes should not be included in rates. These
include (l) parties, celebrations, and awards and (2) excessive expenditures for restaurant meals
and cell phone expense. Therefore Staff believes it is reasonable to reduce the Other Expense
escalation from 6% to 5% so that expenses Staff recommends be moved below the line for
ratem.aking puroses and expenses that are prime areas for cost containment are not
inappropriately escalated in development of the 2008 test year.
b. The Company has discretion over Other Expense cost elements that include
expenditues for items that are not essential in the production and delivery of reliable electrical
power to its customers. Non-essential expenditues include gifts, paries, and awards, excessive
cell phone and restaurant expenditues, and coffee and bottled water for the Company offces.
Many of these expenses are also in areas where expenditures may be reduced for cost containment
efforts in the curent economic environment.
REQUEST NO. 30 TO STAFF WITNESS VAUGHN: On page 8, lines 3-9, Staff witness
C. Vaughn concludes that the increase in 2007 G&A expense is related to the divestitue of
IDACORP subsidiares. Please explain witness Vaughn's rationale and provide any supporting
documentation that supports her testimony that divestiture was the sole cause of the increase and
resulting recommended disallowance.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 30: In a
presentation to the Idaho Power Board of Directors held November 16, 2006, a handout was
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 5 NOVEMBER 18,2008
provided that stated that O&M expense for 2007 would grow significantly. This increase in
expenses would be due to four (4) factors:
a. Human Resources. However the increase in this component would be
largely offset by a decrease in benefit loading and vacancies.
b. Thermal Plants. Aging infrastructue would lead to increased maintenance
costs.
c. Work Allocation from the holding company (IDACORP) to Idaho Power
Company.
d. Amortization of the American Falls bond.
It is reasonable to believe that Factor (c), Work allocation to Idaho Power due to divestiture of
non-regulated subsidiaries, is the primar factor that would have significant impact on General
and Administrative (A&G) activities. (See Audit Question and Response No. 106, Case No.
IPC-E-07-8.)
The growth predicted in 2006 was supported by analysis of G&A O&M expenses provided
to Staff in response to Audit Request No. 53. Data provided by the Company showed that G&A
expense remained essentially flat from 2004 through 2006 at approximately $73.5M. G&A
expense in 2007 was approximately $91M, an increase of$16.5M. Based on information
presented to the Board of Directors in 2006, Staff reasoned that this increase was driven primarily
by IDACORP's divestiture of its non-regulated subsidiaries, a non-recurring event. Staff believes
it is uneasonable to fuher escalate G&A expense for the 2008 future test year when it appears
that the growth is driven primarily by the one-time series of divestitures by the IDACORP, the
parent holding company.
REQUEST NO. 31 TO STAFF WITNESS VAUGHN: Staff witness C. Vaughn's
workpapers contain an Excel spreadsheet entitled: "HC AFUDC Adjustment Workpapers" with a
tab for "AFUDC Summary." Please describe the purose of this worksheet and its results.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 31: The
worksheet tab entitled "AFUDC Summar" was included with the workpapers in error. No
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 6 NOVEMBER 18,2008
information shown on this tab was used to develop or support Staff witness Vaughn's testimony;
the worksheet shows preliminar analysis.
REQUEST NO. 32 TO STAFF WITNESS VAUGHN: In her testimony and workpapers
("IPC Pcard Exclusion Workpaper), Staff witness C. Vaughn refers to a Pcard classification
within tabs labeled SB IPC, column B , and Coffee Water, colum C as "ok" but then recommends
disallowance of the amounts contained in that classification. Please explain the purose and
definition of the "ok" classification as Staff witness Vaughn has used it.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 32: All P-card
transactions were reviewed by Staff two to three different times prior to final classification for
ratemaking puroses. Because of the large number and variety of transactions (in excess of
150,000), there was some variation in the colums used for final classification. In many cases,
transactions were initially classified in one column for one purose and the final classification was
entered in a different column for ratemaking purposes. Staff admits that there is some
inconsistency among the different expense categories in the column used for final classification
used for ratemaking purposes.
Items classified by Staff as SB IPC (column D) were all "Restaurant-type" expenditues,
based on examination of vendor name. Final classification of these items for ratemaking puroses
is shown in Column D. Final classification of items identified by Staff as "Coffee" for ratemaking
purposes is shown in column B. No definitive meaning can be attached to the term "ok" as used in
any colum other than the colum used for final classification. Note that the Company excluded
similar expenditues based solely on the name of the vendor. Using a keyword search, most
expenditures from vendors whose names included the keywords "bar and grill", "sports bar",
"brew pub", "hooters", "wine bar", etc., were moved below the line for ratemaking puroses by
the Company. (See Smith testimony at pages 14-15.) A similar search was performed by Staff
and additional expenditues meeting Company keyword criteria were moved below the line by
Staff for ratemaking purposes.
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 7 NOVEMBER 18, 2008
REQUEST NO. 33 TO STAFF WITNESS VAUGHN: In her testimony on page 16, lines
23-24, Staff witness C. Vaughn states that the FERC license may be issued as soon as January of
2009. Please provide copies of documents or other evidence that support this statement.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 33: The
information was provided in verbal communication by Company employees at a meeting between
Staff and Company on August 28, 2008. This meeting was scheduled at Staff request so that
Company witness Miler could explain the proposed accounting treatment of AFUDC related to
the Hells Canyon relicensing project if it were to be recovered in rates prior to project completion.
REQUEST NO. 34 TO STAFF WITNESS VAUGHN: In her testimony on page 17, lines
15-16, Staff witness C. Vaughn states that with the inclusion of AFUDC in base rates, the
Company has less of an incentive to push for completion of the relicensing. Please explain witness
C. Vaughn's rationale for that conclusion and provide any analysis performed to support this
conclusion.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 34: There are
two primar reasons the Company may have less of an incentive to push for completion of the
Hells Canyon relicensing. (1) Inclusion of AFUDC in base rates provides for significant cash
flow to the Company since the AFUDC included in rates will be grossed up for taxes. Although
the Company wil account for these taes as income tax expense, these taxes wil be deferred; as a
result, the Company will see cash flow in excess of the AFUDC related to the project itself.
(2) Once the Hells Canyon relicensing project is included in rate base, the Company will receive a
retur on that asset. However, the project will be amortized, and, as a result, the return on the asset
will begin to decline. Although the return on the asset in rate base wil be greater than the AFUDC
alone, this retur will continue to decline over time, whereas the retur on AFUDC alone if it is
included in rates will remain flat.
As a result of these two factors, the Company will receive both an enhanced cash flow in
the present as well as a the promise of a future retur on the Hells Canyon relicensing project once
it is placed in rate base. Therefore, the Company may have less of an incentive to push for project
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 8 NOVEMBER 18, 2008
completion since it is recovering the anual retur on the project without having to wait until the
relicensing project is complete.
REQUEST NO. 35 TO STAFF WITNESS VAUGHN: In her testimony on pages 24-25,
lines 24-25 and 1 respectively, Staff witness C. Vaughn states that certain employees expenditues
are traditional business expenses but do not benefit the customers. Please provide witness
Vaughn's underlying and rationale and any analyses supporting the decision to remove specific
expenditures because they do not benefit customers.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 35: Any
expense that is included in rates by a public utilty should be directly related to provision of service
to the customer. In addition, these expenditures must be considered necessar, reasonable and
prudent in provision of this service. Expenditures that do not meet these criteria should be
recorded below the line to be the responsibilty of the shareholder rather than the customer.
Staff believes the P-card expenditures moved below the line by Staff for ratemaking
puroses are neither necessar expenditures nor do they provide any direct benefit to the customer.
Specific examples of these expenditures include:
a. $1,218 for a retirement dinner for two employees
b. $1,215 in retirement gifts for three employees
c. $1,731 for attendees to the Governor's Cup
d. $193 for an employee breakfast meeting at Eimers
REQUEST NO. 36 TO STAFF WITNESS VAUGHN: In her testimony on page 26, lines
24-25, Staff witness C. Vaughn stated "I removed 50% of all expenditures classified as
"Restaurant" below the line to eliminate expenditues that are believed to be excessive." Please
provide witness Vaughn's underlying rationale and any analyses for the use of 50% as a measure
of "excessive" restaurant expenditures.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 36: The 50%
adjustment factor is based on a sharing of costs to reflect a reasonable amount. The 50% was not
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 9 NOVEMBER 18,2008
based on a specific calculation given the voluminous amount of transaction data. However, I
believe this factor to be reasonable given the magnitude of expenditures for restaurant-type meals.
As stated in the Corporate Purchasing Card Policy Manual dated Januar 24, 2003 that was
supplied in response to Audit Request 118(b), IPC-E-07-08,
Budgets are established to accomplish prudent business objectives
at a minimum cost consistent with company puroses. Use of the
Corporate Purchasing Card should reflect that same cost consciousness.
(Emphasis included in text of manuaL.)
Staff believes that employee meetings held in restaurants rather than at Company facilities;
food, snacks, and treats purchased for Company staff meetings; and meals purchased after
"working late" are excessive. Staff does not believe it is reasonable, necessar or most cost-
effective for the customer to be responsible for these meals when the meetings could have been
held during business hours without providing food or when the Company employee could
reasonably be expected to provide his!her own meaL.
REQUEST NO. 37 TO STAFF WITNESS VAUGHN: In her testimony on page 27, lines
5-6, Staff witness C. Vaughn states that the Company is "overly permissive" regarding
expenditures for restaurant meals and other food provided for its employees. Please provide
witness Vaughn's rationale that supports this conclusion and any analyses showing the standards
she applied to support her conclusion that the Company is "overly permissive" regarding its meals
policy.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 37: There are
several factors that lead to my conclusion. (l) The Company allows reimbursement for "working
meals" if it is the most cost-efficient use of an employee's time. Although some of these meals are
certainly in the best interest of the Company and of the customer, it appears that many employees
preferentially schedule meetings at meal-time so the Company will reimburse them for a meal that
could reasonably be expected to be the responsibilty of the employee. (2) The Company
encourages a single P-card charge for multiple employee meals. For example, if a supervisor
travels from Boise to Pocatello for an employee meeting, that supervisor could pay for all
employee meals at a "restaurant meeting." Although it is reasonable for the supervisor to be
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 10 NOVEMBER 18, 2008
reimbursed for his meals while traveling, Staff believes it is uneasonable for the Company to pay
for the meals of all Pocatello employees because the meeting could have been held at Company
facilities rather than at a restaurant. However, because all meals are charged to a single P-card, it
is impossible to accurately determine how many meals were purchased. (3) The Company
routinely accepts incomplete documentation in support of P-card charges, including duplicate
charge slips that do not list items/meals purchased and incomplete identification of the individuals
present and business purpose of the meeting.
REQUEST NO. 38 TO STAFF WITNESS VAUGHN: In her testimony on page 28, lines
5-23, Staff witness C. Vaughn has estimated that the Company has 1,300 cells phones by taking
the total expenditure of$793,855 and dividing it by $50.00. Please provide the analyses and
documentation she relied on to support the $50.00 used in this calculation.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 38: The $50.00
was an estimated monthly cost; this estimate included monthly cell phone fees (usually $35.00-
$40.00), "extra minute" charges, and accessories (headsets, replacement phones, holsters, etc.).
The $50.00 was used only to estimate the total number ofIPC employees who had cell phones
provided by the Company. A precise number was not readily available or required for this relative
comparson.
REQUEST NO. 39 TO STAFF WITNESS VAUGHN: In her testimony on page 28, lines
15-16, Staff witness C. Vaughn states that she believes that it is excessive for the Company to
provide cell phones to what she has estimated to be 66% of employees. Please provide witness
Vaughn's rationale supporting this conclusion and any analyses showing the standards she applied
to support her claim of excessive cell phone use.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 39: Staff
believes it is reasonable for certain key employees (e.g. senior officers and managers, field
supervisors) to car a Company-provided cell phone so they can be in constat contact with the
Company. Staff also believes it reasonable for many field personnel to have a cell phone available
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 11 NOVEMBER 18, 2008
in order to communicate with the Company, paricularly when they are in a remote work location.
However, Staff believes that the total number of employees who are apparently assigned a cell
phone is uneasonable. Staff does not believe that it is essential for the Company to have round-
the-clock contact with this many employees.
Staff believes that Company should look at the cell phone expense as an opportunity for
cost containment.
REQUEST NO. 40 TO STAFF WITNESS VAUGHN: In her testimony on page 28, lines
22-23, Staff witness C. Vaughn states that she removed 75% of the cell phone expense charge to
A&G and 50% of all remaining cell phone expense. Please provide witness Vaughn's rationale for
her decision to use 75% and 50% as an adjustment for excessive cell phone expense and any
analyses that support the use of 75% and 50% as an adjustment.
STAFF WITNESS VAUGHN'S RESPONSE TO IPC REQUEST NO. 40: The
percentage of total cost used to adjust cell phone expense was believed to be a reasonable
adjustment given the magnitude of total cell phone expense. The percentage was not calculated,
nor was it intended to be. There was a greater adjustment for A&G cell phone expense because
employees who work in this area could reasonably be expected to have greater access to landline
phones and other types of communication. Furher, it is reasonable to expect A&G employees to
be able to "check out" a cell phone for temporary use when they are required to visit the field.
DATED at Boise, Idaho, this \ß~day of November 2008.,~~
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Terri Carlock
Cecily Vaughn
i:umisc:prodreq/ipce08.10wsnp prod req staf response2.doc
STAFF RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
IDAHO POWER COMPANY 12 NOVEMBER 18, 2008
N
l .. ,.'
a i aizin n
uncerns
.
ri
Attachment to Response No. 24
T. Carlock, Staff
Case No. IPC-E-08-10
11118/08 Page 2 of 6
,
i
;:42 Pu.uc Ih FoIl NOVMl 2007
Reguators use rate cases
to craf incentives for
capital spendig.
new trend has evolved in utiity rate caes. In
the pa ye, stte utity retors ha be
taoring retu-on-equity (ROE) rate
alowce to encoure utiities to buid in-
smcn.
Trationa ROE anysis fo on the uti-
ity's abilty to at sucient capita to ma the inveentS
nece for provdig adequate servce. Generay speng,
rate retors lea the tig and choice of such inveent
to utiity managers. But some current ca show an increa-
ing wiingnes to gi maag an eags incetive to pur-
sue preer invesents.
Federal reguators have made some high-profile moves in
thi directon in tecnt yea. FERC recntly rued an inves-
ment by an decc utiity in a trision exanion projec
for Western Pennsylvaia is eligible for significat levels of
ROE incentives. \ In that cae, the commission found
Duquesne Light Co. wa under no absolute mandate to ma
the upgrdes and ha voluntay chosen to inve in an impor-
tant relabilty projec tht would beneft cons.
The ru alow Duquese to ea re as high as 13.8
percent on the invesent. A look at the company's rerns
rened th ye indicate wht a go dea th is for inveors.
ww.forhtl.com
The idea the ROE alowce might be
adjUSed to ma sur utilities ca att
adequate caita is not new to st re-
tors. Th ye, howe, sc stte hae
looked beyond the trditional base-rate
prog to exoit the ROE component
of reguated rates as a tool to improve
ener sym rebilty and efcicy. A
recnt resource-planing cae involving
Nevda deac utties prode an c:-
ple. i (Te progw3srlt a rate ca (and
therere does not appe in th acmpa-
nying char), but rather an integted
reur plang (lRP) prog.)
Acording to the Nevda Public Ser-
vice Commision (PSC), the state fa a
numbe of chen in meetig itS long-
term electricity needs. The PSC says the
ste's major utities ha foreed a ne
for significat new power supply, with a
rea possibility of short in the nea
term. Additionaly, the utiities rely on purchased power to
mee a lare par of their load reuiementS. Afer reewg
the utiities' preferred reoutce plan, the commission con-
cluded the public would ga maum beneft if the utities
buid and own a new la po plat.
The Nevda PSC al identied a clea-cal option as the
be choice for the stte's conser, rather th relying on a
gafi poer plat tht would be cheaper to buid. but often
more expensive to run. The commision sad the utiities
should be encoutaged to inves in more renewble energy to
add neeed diverty to the generon mi
To ma th happen, the PSC grted Nev Pow Co.
and Sierra Pacific Power Co. several "equity adder" raging
from 0.125 percent to 0.25 pernt for hittg or exg
solar and non-sola reewble taetS, as wel as for complet-
ing the reuesd clea-cal plat by 2012.
'I
fl
~i
Fortightly's annual return-an-equit (ROE) surv is a
sample of major retatelec-
tric and natural-gas rate cases conduced by state regulators across the United
State. The surv is focused on the sttistca results of traditional rate proceed-
Ings, in which regulators set a revnue requirement ba an cost-of-$ervce proecons.
Incud an ROE-rate allownce. ..'
This year's surv covers cost of equity caitl determinations by stte pues during
th peri sept. 1,2006 through Aug. 31, 2007. Survey methodog remans similar to
Foilghtfy ROE surveys from past years-requests for information on the results of
rect rate procngs were sent to both regulato and utlit financial ofcis. In addi-
tion, direct examination of the commission rate orders, when available, provides addi-
tinal inforation.
Traditional cost-of-service rate cases remain the primary source of Information an
how utlity reulator view the issue of shreholder earnings reuirements. Nevrteles,
pertormance-based rate plans and cases reviewing periodic earnings alo contain firid-
Ings abut the appropriate ROE for utilties, and therefore are included in the survey.
Exlanatory notes accompany most entries, and citations are proided for orders pub.IIsh In Puic Utlit Repo, Fourt Se (P4t1).-PC. ..
Decoupling Dance
Estig an appropriate rate of re on equity for uti-
ity invesors is a fudaenta component of the cost-of-setv-
ice rate ca conduct acoss the naton by st ener utity
regators. The followi.ng surey (Sl( chart) demonstrtes the
reultS of those prodings ovr the pas ye As us, cut-
rent inte rate trds and a diion ofbusine5 rik dom-
inte the debate make restr efrt either wid down
or mature; and dicusion of the efct of such progrs on
ROE in trtiona rae pro se to be on the wae.
In addition to the idea the ROE rate component is an appro-
ww.tolghll.co
'f
¡
I
priate tool to sig invesent preence as disc ab
retors at the stte levd al ar be to fo on the
efec their ow more trditiona rery metod and pro-
ceur might have on a utity's ri profie.
One e:ple of th is se in an dec rae ca decded
by the Idao PUc.' In tht ca the PUC authoriz Idao
Power Co. to implement a thee-yea fi-cst deupling
pilot progr. The mecm adjus rate upw or dow-
wad to rever the compay's fi co of sece inded-
ent frm the volume of the utitys energy saes. With su a
pla, a utity collec a stble reue strea wheter or not
itS cumers rend to constion incetives in a positie
way. (For c:ple, if saes go dow du to efåency improe-
ments or conservtions, rates will go up within a 3 percent
cap unde the approve pla.)
Af setng a reenue reuit and a new ROE for the
coming rate period, the commision put the utity on notice ~
that it would addres in a futu rate cae whether it should ó
reduce the company's authori ROE to reec reuc risk Z
of cost re unde th new adjusent mec ti ~ 0o .. 1.0. i c..vi 00 0
Philip Cros is legal ediJor of Publi Uttut Forightly. Co ~ ~ ~ Mhim at pcCèpur.com. B i5 ù ~~ ~~~ i:Q)u '00Endnotes .Ë .. Z S2
1. Rt ~ Li Co, me Do No ElI05 tt.i. Fe 6, 2007. g 8 Q) 00
2. RtN-"PoCø., 25,PUR4ih2$2(Nev p.s.c. 20. ~ . ~ s I
3. Rt Ii Po Co. 256 PUR4ih 32 (I PUC 20. Eo U ..
NOVBE 2007 Puuc UTES FoIl 43
;\
Co Na , .,
Ty of ..\=~'.Apon 0n1l 'Tes-ye ,~r IL ¿~fil~ß~~t~:~"., ,¡::'.'S~Da - ' ...~.., - .:~~...Ei Da,-.(Eec :---=~:;,'..~\'..-,:~:-~';.,:_c.
';:.E/'~.~
"' orGÛL7 ."'".'.,-".;...,".. '~ -. "..
.::',..-\C'"-.' . ". '.
-',,....'.:. ";.,',.'''(......,... J:!/f:;~~,':~: ;;_;~~;'
,-
ARIZON
Ara Public 5ece Co.Elecri 696 11/41 61817 9~425.847 321.7 10.25 10.75.
258 PUlh 353AR
Ar we Ga Co.Ga 06-124.U 9151 7/1317 10/1/06 13.1 5.8 9.7 9.5
Enterg Arka In.Eletr 06101-U 81151 61517 £10/106.5 (5.67)11.0.9.91
258 PUtt 1
Okahom Ga & Elec Co.Beic 06-07o-U 7/81 1l57 12/3110 13.5 5.4 10.3 10.0"
255 PUR4lh 39
COlO
Colorado Natu Ga Ga 065.394G 7l5 2/2/07 31110 3.9 2.49 12.0 12.0
Public Serve Co. 01 Coordo Elec O6-234EG 4/14/06 12/110 12/1/05 178 107 10.75 10.5
Pubic See Co. of Co Ga O6-65G 12//06 7l37 611/06 41.5 32.3 10.5 10.25
258 PU 185
COCU
Co Natura Ga Co.Ga 06-03-04HOl 919/06 3/1417 6/06 37.1 25.7 10.8 10.1
Yankee Ga Se Co.Gas 06- 12.02PHOl 12/9/6/917 12/110 44.21 22.1'9.9 10.1'
259 PUlh 142
U1NO
AmerClLCO El 06-070 et at.12/710 11/21/0 12/110 43 21 11.02 10.12
AmerCJPS Elec 06-070 et ai.12/710 11/21/0 12/110 14 .8 11.35 10.08
AmernlP Ele 06.0070 et at.12/710 11/21/06 12/110 145 84 11.89 10.08
INDIA .
Lawrrg Ga Co.Gas 430 7/81 6~7 4~3 2.114 1.330 NA 8.84
Sorn Inia Ga & E. Co.Ga 43112 9/1/0 811107 31110 10.43 5.130 NA 10.15
Sorn Indi Ga & E. Co.Elec 43111 9/1/0 811517 311/0 90.410 67.25 NA 10.4
KA
Aqil-Kas Ga Ne Ga 07-AOLG.431-RTS 11/1/0 511617 61 7.2 5.1 ..
Kas Ci Pow & Ught El 06KCPE.828.RT 1/31/0 12/41 12/1/05 42.3 29 ..
Ka Ga Serv Co.Gas 06-KGSG.1209RTS 51151 11/16/06 12/1105 73.3 52.0 ..
DiY. of OneKE
Coia Ga of Kentuc Ga 207-~8 2/1917 819107 910,106 12.646 7.25 .10.5'
Duke Energ Kentu Elc 20-0172 5/1/0 12/1/06 12/1107 666 49 11.5 .
LOU
Clec Powr ILC Elec U.21496J 3l07 NA 910/06 NA'NA'11.25'11.25'
MAYL
Delmaa Pow & Ug Co.Elec 90 11/17/0 7/917 91306 20.333 14.882 14.75'10.0
The Potoac El Pow Co.Elec 9092 11/17/0 7/19/07 9/30/06 55.7 10.61 12.75'10.0
258 PU4lh 463MAms
Fitl1urg Gas & Elec Liht Co Gas DTE 06.109 11/29/1/26/07 12/110 3.961 1.2'10.0 10.0 :o
M1CIlGA C"
Cors Ene Ga U.14547 6/1/05 11/21/06 12/1104 132.4 80.80"11.4 11.0 Ò
253 PUlh 4n Z
Consumers Energ Co.Ga U.15190 2//07 811107 "88.3 49.75 11.0 10.75"0)00i:
MINNESA 0
Geter Point Enrg Gas GO8IGR.051380 11l2 1112 12/1/0 40.88 20.96 10.18 9.71 0.00
254 M4th 23 2
Nortern State Pow Co.Ga GOO2/GR.06.1429 11196 9/10107 12/1107 18.5 11.9 10.4 9.71 0-MII EAmerenUEleicER.2O7.002 7110 5/217 610/361 43 .10.2 0)
259 M4th 259 ~AmerenUE Ga GR-2oo7.003 71/06 3/1517 610/06 11 6 ..
I ~
Aquíla Inc.8eetri ER-2007 -O i 71306 5/1107 12/110 118.9"58.8 NA 10.25 -
I ~
..
o
.. 1.i C+
~ 0~ I ~
(I ~ 0)- I 00r: U (I
~ p. p.~-(, . 00000
i Z CoU 0)..00_. (I..¡.U..
Ii
"
44 Puuc Un Follimy NOVMBER 2007 ww.lortightl.co
........._...._~._... '.-.. \. '
..'. Co~,. ','
..:
Ty of .Ca Do ..Ap OnDall Tesl.ye In . Inc . d Ra of ii on ;
", . ':~'..... .Sø .'.:.'. Or De Dill . .En Dat in ,(DJ :: Co ~ / .
._~-::':,,'.- ,". ., . lEec',No Reqed Gr
orGa).l$Uo), ($Î Í'Ne\. .,'. ':'~' ..- ",".Aù .Au.':,....
..:'I..',Ra%. :Ra%..,,;.
257 PUth 424
Kans Cit Po & Ugh! Co.Ele EO.200-Q91 21110 12/110 12/110 57 50.6 12.5 11.25MIs Ga Enrg, a Div Ga GR-20060422 51110 3l7 12/1/05 41.7 27.2 10.5 10.5"
of Som Unio Co.256 PUth 250NE
Aqila Inc.Gas NG-l1 11/151 7/4/07 6J 16.3 9.2 10.4
NE II
Unltil En Sy Inc.El DE OS.178 11/4/OS 10l 6~4.65 2.267"9.67 9.67
NEW JER
Pubic serv Ele & Gas Co.Ga GR051 005 9~11l9 9~132.8 40.015 10.0 10.0
NE MECO
8 Pas El Co.El 06-0258 6~7137 12/1/05 13.100 5.80
Public Se Co. of Ga 06-00210 51 6l7 12/1/05 21.30 9.36 9.53
Ne Me
NE YORK
cetr Hu Ga &Ele O5.E-09 7/291 7/241 3/110 52.8"41.4"10.6 9.6"
Co. El
cetr Hu Ga &Ga O5.G.09 7/291 7/241 3/110 18.1"8"10.6 9.6"
8e Co.251 Pl4th 20
Orge & Ro Utilit Inc.Ga 0506.1494 11/281 10i 1011/07 23.7"6.5"NA 9.S"
252 PUth 351
NORT DAA
xc En Ga PU-0525 12/51 61317 12/1/07 2.8 2.2 11.5 10.5
ORON
Ca Na Ga Ga UGl73 2/517 617 9~NA (0.7)12.25 10.1
Order No. 07.07 -220
Pa Po & LI Co.El UE 179 2/31 1/1/07 12/1/07 112 43 10.0 10.0
Ord No. 0653Po Ge El El lI 180 3/151 1/1217 12/1/07 25 ill)"10.5 10.1
Orde No. 07.065
254 PURth 349
PEANIA
Natlna Fu Ga Ga R-D1493 51110 1/1/07 12/10 25.9 14.3 ..
Diuton Co.
PPL Ga Utit Co.Ga R-D1398 3/710 2l7 12/1/06 12.813 8.142 NA 10.4
255 Pl41l 20
SOUT CAOUNA
Lirt Po Co.EI 2oo7.33.E 217 7/917 12/110 0.593 0.48.11.5"12.0"
SO DAA
Black HiUs Pow Elec 8.06-019 6~12l 12/1/05 9.594 7.972 ..
TENE
At En Co.Gas 05.00258 21 II 910/7 i:(6.1)NA 10.48
Chatta Ga Co.Ga 0600175 6130 12 12/1/07 5.8 2.8 10.2 10.2
UTAHPacf Ele 06-035'21 31/06 121110 917 197.2 115"10.5 10.is
254 PUR41l 285
VEMON
iGrn Mounn Pow Co.Ele 71751176 4/19/12l 12/110 24.99 20.04 10.5 10.25
VIGINIA
Apctla Po Co.EJc PlJ.2Q.0056 7/110 11~2 61"62.1 21.3 NA 9.8-
Columbia Ga of Virginia Ga PUE.2oo5.0098 11/205 12/8/06 NA 21 .-ia.S-
255 PU1l 1
WASINGTON
PaciCo Ele UE.0617 10l 6/1/07 3/110 23.2 14.189 10.2 102
257 PUR4th 380
'I,
,
I
'1N
ÓZIICI 0i: .. 1.8. i 4-CI 00 0II 0~ ~ ~ ino tl i II ,-ooU ~~ ~p.p...,.-IIU '00
.Ë'£ZS2U~lIoo,SU CI~_ . tl..~¡.U..
ww.fortightly.com NOVMBER 2007 Puuc Ut Fo 45
.1 ~
i~" '-':Í'ôi~;Cå'ii''''L';~" cirdó~ : Tèdyet :.1n ':" '~"',:'i; .:,;,::_0(11' "":',"'~:.i'i".~ Oi,.":,';:;:;..:::se::, ,'(orDeon"::::dll~./~; H.~.~:r:- En'Da.'., ~l, '. (ii . ~..~ ~:~~ ~.' .' "
,',;;" ..... ~:r.. No:'.i';"i.::Ll::ii,:,'.lid;~::ff.r;.~;';' ':Y7:~;.':': '=i ~=~~. . .:.~.~. .. ,i::'.::.'~?i~ '..:.\.",:;.::............ ..",.. i."': . ,....(.,....::'. ".,,,.:. - ""'...f ~-;,'.~.;.,;,;:.".., "~'i"".: .... ';:-":':.,". :".- "::;':'.,". . .:' '-. ;.' . '~.,.;\.:. ;'~:' ........... . . . . 'C.' . '" . :::. C'.;.: '." :. ii ;¡':'-'k
Puge Sod En Be UE-06266 2/51 1/517 910105 33.m 17.17 10.3 10.4
PugetSOnd Energ Ga UG-060267 2/15/06 1l57 910105 39.00 31.29 10.3 10.4
255 PUlh 287
WE VIGINIA
Moela Pow Co. an Be O6-Q.42T 7/261 5/217 12/110 99.8 (6.2)10.85 10.5
Th Potom Edi Co.31 257 PU 186
WIONSIN
Supe Wat. LI &Elec 5820-UR.l 1 0 5/110 12l 12/1107 3.33"1.72"11'p'
Pow Co.254 PUlh 142
Supe Water, LI &Ga 58R.110 5/110 12l 12/1107 3.33 1.72 11.
Po Co. 254 PUR4lh 142
Win Poer & LI Co.EIe 66-UR-115 3/7/06 1/1917 12/1107 87.6 36 11.5 10.8
Wisin Poer & Ugh! Co.Ga 6680-UR-115 3/1710 1/1917 12/1107 8.7 (1.9)11.5 10.8
Wisin Public Se Co.El 6690-I.118 3/110 1/1217 2007 125.1 56.7 11.0 10.9
Wiscn Puic Se Co.Ga 669O-118 3/1/06 1/1217 207 22.6 18.9 11.0 10.9
.
18. R. ord ad iw li Th fì a ga ra in ap
iaie in i: de 5b Th send. a reue to Ra co of a ne
gccm plat. proud an ii of $42. i mi cI wh plco on Ii
19. Oiu se;l ia of i 1.25 to 11.75 pet with r:ucs se us 11.70 petfi
20. SctAgt inud ROE as 5b
21. On 9/16105 th Co Ad Di peti th T_ Re
bt Aiiy (T to op an inn to de wb At
En Co. wa oving
22 Fi oi pedi
23. Af an invag: by'r st me th ;l coa: ca pni th
TR dc on 10I06 il At ha a _ue IUrpW of $6 i mi
li ror ti 12 month en 9/30/07.
24. Iii sh is suje to ;l $30 mi i: (;L Ne of (;t, em
in by $85 mion cI 12/11/06 me by an adti $30 min on
611107.
25. Ree scent rc ROE as sh
26. Appücaòon ro ;ajus ca rate to ic prdy in inw
envilOnmew and n:i1iy co
27. Ba peod ror cacu incnw inveL
28. Figu shn icca curet lì condiòon Apab onl as .ca
ci" on inaia co dc in cut ci
~9. CoJ1ion adopt sòpuie pcba i: pl Ra fi of
eunt kv ror 5 yc ~nng Pn. i. 200.
30. Sòpuie pel'-b i: pl prde ih uiiiy wi sh ciin
0= figure show 75 pet to ra 25 pet to si
3 I. Finicuc figu suje to adusnt rot a1ti of po co.
32. Joim applicòon. Both com pacs corute a sine uiiiy sy with th
si iitc and po suply so
33. Fig show is io of dc gi ti wa opc
$.797 min apro dcac inca
$.347 min apro gi ii
$.54 mion ;ippro _te in
34. ROE aw :aplie to 55 pcnt comm cauiiy fice mio.
35. Rc aw inud CO offU
Attchment to Response No. 24
T. Carlock, Staff
Case No. IPC-E-08-10
11/18/08 Page 6 of 6
ENDNOTES
. Sct agL No ROE figu sttcd
I. Figu td fig by common ih uiiiy coca 40 pct of rc
ie di adjust daus. ma it les ri rh od copa-
ble uiiiy coin
2. Reue sct rc CO of equiiy :i shown.
3. Reue sh is af LNG mitigan.4. Reue sct inud eangwg mc. whch pr lO
alon to tatc of 100 pet of al eangs ab 6g show.
5. Sct stie ROE. Pt c. wa seed with no stte ROE.
6. Ord on peod =ngs re unde ci r:mbòon pla Fig
show is tlol lO ea shg.
7. Th la ca involvng th uåiy wh the COt of equiiy is no iaie in a
fi oi is Ma 1991. Fo me C2 Iied si il di we dc.
mine by sct agena ih did no spe any det of ti CO of
apia!
8. Th la ca imng th uiiiy wher th co of equiiy wa note iaie
in ;l fi ord is D=bc 1984. Six i: invgaons fì si il
date wa deerne by seemts wh did not sp any demt of ti
co of apiw.
9. An adòona $ i mi in to beme dfcc No. I. 2007.
10. In addirion to imuc in show. uòliiy is authoiù to ma peent
a rwyc 558.1 milon incr approed by ordu d:ued Ca. 14.20.
I I. P: seement agent incud ROE + Renue fìgu
12. Fig= showr: is to syem-wide incrc for Ud opng diviion is $45.1
mion. lii rot MPS opring diion is $ I 3.6 millon.
13. ROE fire show icca dowa adjwtmcni of 32.5 b:iis points ror
teud ri as with appro ;l stglt fì.v;le rate deign.
14. An adòona $358.853 in dTve Nov. 1.200; adòon:i $107.475
dT Mi 1.2007.
15. Fim ye of tlye reue set agenL
16. Eangs shg component of tate pla trgg if utiliiy ic 1 I pet
ROE. reuc to 10.8 put if compay f. ro ea "rc Cimu choia:
education intive."
17. Eangs sharg component of tae plan aiggte if uòliy achiev 10.6 pe"
cet ROE.
46 Puuc lh FoIC NOVBER 2007 ww.lortighll.co
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 18TH DAY OF NOVEMBER 2008,
SERVED THE FOREGOING STAFF RESPONSE TO IDAHO POWER COMPANY'S
SECOND PRODUCTION REQUEST TO THE COMMISSION STAFF, IN CASE
NO. IPC-E-08-10, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
BARTON L KLINE
LISA D NORDSTROM
DONOV AN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: bkline(ßidahopower.com
Inordstrom(ßidahopower .com
dwalker(ßidahopower .com
PETER J RICHARDSON
RICHARDSON & O'LEARY
PO BOX 7218
BOISE ID 83702
E-MAIL: peter(ßrichardsonandolear.com
RANDALL C BUDGE
ERIC L OLSEN
RACINE OLSON NYE ET AL
PO BOX 1391
POCATELLO ID 83204-1391
E-MAIL: rcb(ßracinelaw.net
elo(ßracinelaw.net
MICHAEL L KURTZ ESQ
KURT J BOEHM ESQ
BOEHM KURTZ & LOWRY
36 E SEVENTH ST STE 1510
CINCINATI OH 45202
E-MAIL: m.urt(ßBKLlawfrm.com
kboehm(ßBKLlawfirm.com
BRAD M PURDY
ATTORNEY AT LAW
2019N 17THST
BOISE ID 83702
E-MAIL: bmpurdy(ßhotmail.com
JOHNRGALE
VP - REGULATORY AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rgale(ßidahopower.com
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL: dreading(ßmindspring.com
ANTHONY Y ANKEL
29814 LAK ROAD
BAY VILLAGE OH 44140
E-MAIL: yanel(ßattbi.com
KEVIN HIGGINS
ENERGY STRATEGIES LLC
PARKS IDE TOWERS
215 S STATE ST STE 200
SALT LAKE CITY UT 84111
E-MAIL: khiggins(ßenergystrat.com
LOT H COOKE
ARTHUR PERRY BRUDER
UNITED STATE DEPT OF ENERGY
1000 INDEPENDENCE AVE SW
WASHINGTON DC 20585
E-MAIL: 10t.cooke(ßhg.doe.gov
CERTIFICATE OF SERVICE
DWIGHT ETHERIDGE
EXETER ASSOCIATES INC
5565 STERRTT PLACE, SUITE 310
COLUMBIA MD 21044
E-MAIL: detheridge(fexeterassociates.com
DENNIS E PESEAU, Ph.D.
UTILITY RESOURCES INC
1500 LIBERTY STREET SE, SUITE 250
SALEM OR 97302
E-MAIL: dpeseau(fexcite.com
arhur. bruder(fhg .doe. gov
CONLEY E WARD
MICHAEL C CREAMER
GIVENS PURSLEY LLP
601 WBANNOCKST
PO BOX 2720
BOISE ID 83701-2720
E-MAIL: cew(fgivenspursley.com
KEN MILLER
CLEAN ENERGY PROGRAM DIRECTOR
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 83701
E-MAIL: kmiler(fsnakeriverallance.org
L.~
SECRETARY
CERTIFICATE OF SERVICE