HomeMy WebLinkAbout20090108Vol III [technical hearing begins] pgs 93-321.pdfORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF I DAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS
RATES AND CHARGES FOR ELECTRIC
SERVICE TO ELECTRIC CUSTOMERS IN
THE STATE OF IDAHO.
)
) CASE NO. IPC-E~08-10
)
)
)) Idaho Public Utilties Commission
Office of the Secretary) RECEIVED
JAN" 8 2009
Boise, Idao
BEFORE
COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER MACK A. REDFORD
COMMISSIONER JIM D. KEMPTON.
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:December 16, 2008
VOLUME III - Pages 93 - 321
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
(208) 890-5198 * (208) 337-4807
Email csb~heritagewifi.com
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1 APPEARANCES
2 For the Staff:
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5 For Idaho Power Company:
Neil Price, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Barton L. Kline, Esq.
and Lisa D. Nordstrom, Esq.
and Donovan E. Walker, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
RICHARDSON & 0' LEARY
by Peter J. Richardson, Esq.
Post Office Box 7218
Boise, Idaho 83702
RACINE, OLSEN, NYE, BUDGE
& BAILEY
by Eric L. Olsen, Esq.
Post Office Box 1391
Pocatello, Idaho 83204-1391
Arthur Perry Bruder, Esq.
Assistant General Counsel
U. S. Department of Energy
1000 Independence Ave., SW
Washington, DC 20585
GIVENS PURSLEY LLP
by Conley E. Ward, Esq.
Post Office Box 2720
Boise, Idaho 83701-2720
BOEHM, KURTZ & LOWRY
by Kurt J. Boehn, Esq.
36 E. Seventh Street
Suite 1510
Cincinnati, Ohio 45202
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FISHER PUSCH & ALDERMAN LLPby John R. Hamond, Jr., Esq.
Post Office Box 1308
Boise, Idaho 83701
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For Industrial Customers
of Idaho Power:
For Idaho Irrigation
Pumpers Association:
For The United States
Department of Energy:
For Micron Technology,
Inc. :
For The Kroger Company:
(Of Record)
(Of Record)
CSB REPORTING
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APPEARANCES
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1 A P PEA RAN C E S (Continued)
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3 For the Community Action
Partnership of Idaho:
Brad M. Purdy, Esq.
Attorney at Law
2019 North 17th Street
Boise, Idaho 83702
Mr. Ken Miller
5400 West Franklin
Boise, Idaho 83705
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5 For Snake River Alliance:
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CSB REPORTING
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APPEARANCES
1 I N D E X.2
3 WITNESS EXAMINATION BY PAGE
4 J.LaMont Keen Mr.Kline (Direct)101
(Idaho Power Company)Prefiled Direct Testimony 103
5 Mr.Richardson (Cross)117
Mr.Olsen (Cross)120
6 Mr.Ward (Cross)122
Mr.Bruder (Cross)127
7 Commissioner Redford 129
Commissioner Kempton 137
8 Mr.Kline (Redirect)141
Mr.Olsen (Recross)144
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John R.Gale Mr.Kline (Direct)149
10 (Idaho Power Company)Prefiled Direct Testimony 151
Mr.Olsen (Cross)178
11 Mr.Richardson (Cross)182
Commissioner Redford 194
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Maggie Brilz Mr.Kline (Direct)195.13 ( Idaho Power Company)Prefiled Direct Testimony 198
Prefiled Rebuttal Testimony 218
14 Mr.Purdy (Cross)226
Commissioner Redford 228
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Theresa Drake Mr.Kline (Direct)231
16 (Idaho Power Company)Prefiled Direct Testimony 234
Prefiled Rebuttal Testimony 257
17 Mr.Purdy (Cross)284
Mr.Olsen (Cross)289
18 Mr.Price (Cross)290
Commissioner Kempton 305
19 Commissioner Redford 315
Commissioner Smith 317
20 Mr.Kline (Redirect)318
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1 EXHIBITS
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3 NUMBER DESCRIPTION
4 FOR IDAHO POWER COMPANY:
5 1 - Idaho Power's Return on Equity Premarked
Admitted
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2 - Idaho Power Credit Rating History Premarked
Admitted
8 4 - Overall Service Level Premarked
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5 - Top Utili ties Providing
Comprehensive Information During
Outages
Premarked
11 6 - Number of Billing Options Year-
to-Date Premarked
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7 - Irrigation Write Offs and Past
Due Balances
Premarked
14 8 - Meter Reading Quality Premarked
15 9 - Annualized Average Number of
Outages Per Customer
Premarked
16 10 - Customers with 6 or More Premarked
17 Sustained Outages
18 11 - Energy Efficiency Programs Summary Premarked
19 12 - Energy Efficiency & Demand Response Premarked
Programs~ Sectors & Operational Type
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13 - 10 Largest Utilities/Program Premarked
21 Administrators 2007 vs 2006 Savings
22 14 - Energy Efficiency Measurements Premarked
23 15 - Customer Satisfaction Research Premarked
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EXHIBITS
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1 E X H I BIT S (Continued)
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3 NUMBER DESCRIPTION PAGE
4 FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
5 210 - Bloomberg commodity report Identified 119
6 211 - House Bill No. 694 Identified 184
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8 FOR THE IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.:
9 307 The Parties' Final Report in
Case No. IPC-E-04-23
Identified 180
Admitted 181
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EXHIBITS
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1 BOISE, IDAHO, TUESDAY, DECEMBER 16, 2008, 9:30 A. M.
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4 COMMISSIONER SMITH: Good morning, ladies
5 and gentlemen. This is the time and place set for a
6 technical hearing in Idaho Public Utili ties Commission
7 Case No. IPC-E-08-10, further identified as in the matter
8 of the application of Idaho Power Company for authority
9 to increase its rates and charges for electric service to
10 its customers in the State of Idaho. We'll begin this
11 morning by taking the appearances of the parties and
12 we'll begin with the Applicant.
13 MR. KLINE: Thank you, Madam Chair. My
14 name is Bart Kline. I'm an attorney appearing on behalf
15 of Idaho Power. There will be two other attorneys from
16 Idaho Power that will also be appearing in this ca$e,
17 Lisa Nordstrom and Donovan Walker. We will play a little
18 musical chairs up here at the front table to accommodate
19 their participation. Thank you.
COMMISSIONER SMITH: Thank you, Mr. Kline.
MR. PRICE: Neil Price representing
22 Commission Staff.
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COMMISSIONER SMITH: Mr. Ward.
MR. WARD: Conley Ward for Micron.
COMMISSIONER SMITH: Mr. Olsen.
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1 MR. OLSEN: Yes, Madam Chairman, Eric
2 Olsen for Idaho Irrigation Pumpers Association.
3 COMMISSIONER SMITH: Mr. Purdy.
4 MR. PURDY: Brad Purdy on behalf of
5 Communi ty Action Partnership Association of Idaho.
6 COMMISSIONER SMITH: Mr. Richardson.
7 MR. RICHARDSON: Thank you, Madam Chair.
8 Peter Richardson of the firm Richardson & 0' Leary
9 appearing on behalf of the Industrial Customers of Idaho
10 Power.
11 COMMISSIONER SMITH: Thank you. Yes, sir.
12 KEN MILLER: Ken Miller on behalf of Snake
13 River Alliance.
14 COMMISSIONER SMITH: Ken Miller. Now,
15 sir, we have little microphones and if you push the
16 button that says touch, your red light will come on and
17 then the court reporter will have you clearly and so will
18 the rest of the room. Thank you. Could you please state
19 your name?
MR. BRUDER: Certainly. Arthur Perry
21 Bruder, Washington D. C. for the United States Department
22 of Energy.
23 COMMISSIONER SMITH: There you are. Thank
24 you, Mr. Bruder, and I think we've been informed that the
25 attorney for the Kroger Company will not be present until
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94 COLLOQUY
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1 Thursday.
2 MR. PRICE: That is correct. I was
3 informed earlier that Mr. Boehm will not be here until
4 Thursday.
5 COMMISSIONER SMITH: Okay. All right,
6 Mr. Kline -- oh, I don't know if it's necessary, but
7 since there are a large number of people in the room, I
8 will for those of you who may not have met the
9 Commissioners, my name is Marsha Smith. I'm one of the
10 three Commissioners. I'm Chairing this hearing. To my
11 left is Mack Redford who is president of the Commission
12 and to my right is Jim Kempton and the three of us are
the Public Utili ties Commission. I assume most everyone
here knows that, so Mr. Kline, could you please tell us
15 your plans for presenting your case?
16 MR. KLINE: Yes, Madam Chairman.
17 Yesterday we were informed that Staff counsel Weldon
18 Stutzman is ill and will not be able to participate in
19 the hearing, so in order to accommodate Mr. Price having
20 to do some catch-up on getting prepared for witnesses, we
21 are going to change the schedule of the witnesses that we
22 had previously sent over to the Commission Staff. We'll
23 start out with our first witness will be LaMont Keen, and
24 just so that we're clear, all of our witnesses that have
25 both direct and rebuttal, with one exception, we'll
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1 present the direct and the rebuttal at the same time.
2 The exception would be Mr. Gale. Mr. Gale
3 will present his direct testimony and then at the end of
4 the case, he'll present his rebuttal testimony, so we'll
5 start out with Mr. Keen. Then Mr. Gale will present his
6 direct. Then Maggie Brilz and Theresa Drake will present
7 their direct and rebuttal and it's at this point that we
8 want to change the schedule. Mr. Stutzman had planned to
9 be the -- to cross-examine Idaho Power Company witness
10 Dr. Avera and so we're going to move Dr. Avera and Steve
11 Keen and Lori Smith to Thursday, and what we're thinking
12 we should do is kind of have a cost of capital witness
13 day on Thursday morning, so I'm anticipating that Dr.
14 Avera would be the first witness that would be called,
15 then Steve Keen, because those are the Company's two cost
16 of capital witnesses, and then at the same time Terri
17 Carlock who is the Staff witness on cost of capital would
18 be a witness on Thursday as well as Matt Kahal who is the
19 DOE's cost of capital witness and Dennis Peseau who is
20 also a cost of capital witness, and it would be our
21 intention that the last two witnesses would be Lori Smith
22 from Idaho Power and Ric Gale. That would complete the
23 case. That way, Neil will have a full -- the full amount
24 of time to prepare for Lori Smith, so that's how we
25 would -- and then the rest of our witnesses would be
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96 COLLOQUY
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1 Catie Miller, Celeste Schwendiman, Greg Said, Tim Tatum,
2 Courtney Waites, Darlene Nenmich and Jeanette Bowman.
3 COMMISSIONER SMITH: Okay, thank you,
4 Mr. Kline. Are there any comments, suggestions or
5 obj ections to the proposal that Mr. Kline has laid out?
6 MR. BRUDER: If I may, Madam Chairman.
7 COMMISSIONER SMITH: Yes.
8 MR. BRUDER: I wanted to -- first, what
9 happened yesterday was that I was in transit for 20 hours
10 and I wasn't able to be in touch with Mr. Kahal. I know
11 we had talked to Staff about his testifying on Wednesday,
12 if he could, rather than apparently the day that's now
13 contemplated as a day just to do equity. We also talked
14 about Dennis Goins testifying. We talked about the 17th
15 which was Wednesday for both of them, so I do need to
16 ask. Now, this is something we would have worked out
17 among the parties if I had not been in such a turmoil
18 yesterday, but I guess I do need to ask now, could we
19 take Dr. Goins and/or Mr. Kahal on Wednesday as we
20 discussed at one point with Staff and I think with the
21 Company or do they need to be Thursday? We would prefer
22 Wednesday. We can go either way, but at this point what
23 I do need is if it's possible to establish what those
24 days will be.
25 COMMISSIONER SMITH: Mr. Kline? Any of
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1 the other parties?
2 MR. KLINE: Obviously, we'd like to keep
3 our case as intact as we can. If perhaps on Wednesday,
4 and this is just a suggestion, maybe on Wednesday, if
5 there's a break between our case and the Staff's case, we
6 could put those in that slot.
7 MR. PRICE: I have a recent update. I
8 apologize, Mr. Bruder. I was informed by Mr. Etheridge
9 that Mr. Kahal had made travel plans for Thursday, that
10 he will be here on Thursday now. This is while you were
11 in transit.
12 MR. BRUDER: Okay.
13 MR. PRICE: And I assumed that he had
14 informed you, but he sent me an e-mail that he did change
15 his travel plans, he was able to do that.
16 MR. BRUDER: So he will testify on
17 Thursday?
18 MR. PRICE: On Thursday.
19 MR. BRUDER: Did you happen to talk to
20 Mr. Goins?
21 MR. PRICE: We are still planning for him
22 to go on Wednesday.
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MR. BRUDER: Okay.
MR. KLINE: So Mr. Kahal will -- I mean,
the last time I thought that Mr. Kahal was planning to
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1 testify by telephone. Has that changed?
2 MR. BRUDER: Actually, you can probably
3 speak to that better than I can.
4 COMMISSIONER SMITH: Well, I guess I don't
5 think there's any need to take up our time here, but you
6 folks can work that out and let us know probably in the
7 morning what works best and we'll try to accommodate all
8 the witnesses depending on their travel schedule and
9 their availability.
10 MR. BRUDER: Okay, just one more thing
11 because the witnesses went by quickly, what day is Mr.
12 Tatum going to testify and what day will he be
13 cross-examined?
14 MR. KLINE: Well, it will be when the rest
15 of the witnesses have testified. I don't know when that
16 will be. It will depends on how long it takes people to
17 cross-examine.
18 MR. BRUDER: So it's late today or
19 tomorrow? Okay, again, pardon me, this is stuff we would
20 have worked out had I not been traveling.
21 COMMISSIONER SMITH: Yes, I understand
22 entirely. Thank you very much and when you're done
23 speaking, you just push that touch again and the red
24 light goes off.
25 All right, are there any preliminary
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99 COLLOQUY
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1 matters that need to come before the Commission before we
2 start hearing the testimony of the Company's witnesses?
3 MR. PURDY: Madam Chair.
4 COMMISSIONER SMITH: Mr. Purdy.
5 MR. PURDY: I do have a scheduling issue
6 wi th respect to Ms. Ottens. I don't know given what you
7 just said I should bring that up now or not. Several
8 weeks ago I prompted sort of a dialogue between the
9 parties to see if it would be possible to have Ms. Ottens
10 testify on Thursday, ideally. She has prior commitments.
11 She will be here about an hour-and-a-half now today and
12 has to be gone tomorrow on a previously scheduled
13 commi tment, so I would just request that that be a
14 possibili ty.
15 COMMISSIONER SMITH: I'm sure that we can
16 accommodate her on Thursday.
17 MR. PURDY: Thank you.
18 COMMISSIONER SMITH: It doesn't matter how
19 late we have to stay. All right, anything else? Then,
20 Mr. Kline, do you want to call your witnesses?
21 MR. KLINE: Thank you, Madam Chairman.
22 Idaho Power's first witness is LaMont Keen.
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100 COLLOQUY
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1 J. LAMONT KEEN,
2 produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. KLINE:
9 Q Mr. Keen, would you please state your name
10 for the record, please?
11 A My name is initial J. LaMont Keen.
12 Q And by whom and in what capacity are you
13 employed?
14 A I am the president and chief executive
15 officer of Idaho Power Company.
16 Q Mr. Keen, on June 27th of this year you
17 prefiled 14 pages of direct testimony and presented two
18 exhibi ts which have been preliminarily marked as Exhibits
19 1 and 2; is that correct?
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A That's correct.
Q Do you have any additions or corrections
22 that you need to make to your direct testimony?
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A I do not.
Q Mr. Keen, if I were to ask you the same
questions today as were posed in your pre filed testimony,
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101 KEEN (Di)
Idaho Power Company
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1 would your answers to those questions be the same
2 today?
3 A They would.
4 MR. KLINE: Madam Chairman, I would
5 request that Mr. Keen's direct testimony be spread on the
6 record as if it had been presented today and request that
7 Exhibi ts 1 and 2 be marked for identification.
8 COMMISSIONER SMITH: If there's no
9 objection, we will spread the prefiled testimony upon the
10 record as if read and Exhibits 1 and 2 will be admitted.
11 Seeing none.
12 (Idaho Power Company Exhibit Nos. 1 & 2
13 were admitted into evidence.)
14 (The following prefiled direct testimony
15 of Mr. J. LaMont Keen is spread upon the record.)
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102 KEEN (Di)
Idaho Power Company
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1 Q.Please state your name and business address.
2 A.My name is J. LaMont Keen and my business
3 address is 1221 West Idaho Street, Boise, Idaho 83702.
4 Q.What is your position at Idaho Power Company
5 (the "Company")?
6 A.I am the President and Chief Executive Officer
7 of the Company.
8 Q.What is your educational background?
9 A.I graduated magna cum laude in 1974 from the
10 College of Idaho in Caldwell , receiving a Bachelor of
11 Business Administration degree in Accounting. In 1994, I
12 completed the Advanced Management Program at the Harvard
13 Graduate School of Business. I have also attended many
14 utili ty management-training programs, including the Stone
15 & Webster Utility Management Development Program, the
16 University of Idaho Public Utilities Executive's Course,
17 and the Edison Electric Institute Executive Leadership
18 Program.
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Q.Please outline your business experience.
A.I have worked in the electric utility industry
21 at Idaho Power Company for over 34 years, the last 20
22 years as an officer of the Company. I joined the Company
23 in 1974 and advanced through several accounting, analyst,
24 and management positions. In July 1988, I was
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103 L. KEEN, DI 1
Idaho Power Company
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1 promoted to Controller. In November 1991, i was
2 appointed Vice President of Finance and Chief Financial
3 Officer and served in that capacity until March of 1999
4 when I was also given responsibility for all of the
5 administrati ve areas of the Company as Senior Vice
6 President of Administration and Chief Financial Officer.
7 In March of 2002, I was appointed President and Chief
8 Operating Officer where I had responsibility for the
9 Company's operating units. In July of 2004, I was
10 elected to the Board of Directors of IDACORP, Inc., and
11 Idaho Power Company and on November 17, 2005, was
12 appointed President and Chief Executive Officer of Idaho
13 Power Company. On July 1, 2006, I also became President
14 and Chief Executive Officer of IDACORP in addition to my
15 duties with Idaho Power Company. I am also a Board
16 Member of the Edison Electric Institute, a Board Member
17 and Chairman the Western Energy Institute, and a Board
18 Member and past Chairman of the Idaho Association of
19 Commerce and Industry.
20 Q.What are your duties as President and Chief
21 Executive Officer of Idaho Power Company?
22 A.I am responsible for policy and strategic
23 oversight of all utility operations, including power
24 supply, delivery, administration, finance, legal,
25 regulatory, and compliance acti vi ties.
104 L. KEEN, DI 2
Idaho Power Company
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1 Q.What is the purpose of your testimony in this
2 proceeding?
3 A.My testimony will provide a general overview of
4 our operating and financial status. I will explain the
5 challenges faced by the Company due to insufficient
6 recovery of our costs. I will explain how these
7 challenges, left unaddressed, are not in the best
8 interests of our owners, our communi ties, or our
9 customers. I will speak to the importance of having a
10 regulatory framework providing opportunity for us to earn
11 our allowed rate of return. Finally, I will respond to
12 any policy-related questions the Commission may have.
13 Q.What are the challenges facing the Company?
14 A.Decisions about energy are some of the most
15 important choices facing our nation and our Company
16 today. Rising prices and costs, constrained capacity, and
17 the uncertain impacts of climate change legislation are
18 challenges facing utilities across the nation, and our
19 company is no different . Despite considerable investment
20 and expansion in recent years, much of our system today
21 is fully utilized. We continue to experience growth in
22 demand for electricity due to increased customer numbers
23 and per-capita usage. To provide safe, reliable service
24 to all customers we must make maj or investments in both
25 new and
105 L. KEEN, DI 3
Idaho Power Company
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1 existing infrastructure. Worldwide demand for the
2 materials and services required to build needed
3 infrastructure has driven up prices dramatically over the
4 last several years. Climate change concerns require
5 selection of lower-emission but often more costly
6 generating resources. Also, we must operate under
7 increasingly stringent reliability standards.
8 Utilities across the nation and world face
9 constrained capacity and are looking to make significant
10 capital expenditures in infrastructure, increasing
11 competi tion for funding. The capital markets are
12 unsettled, driving up the cost and risk of being able to
13 finance required investments.
14 Idaho Power's credit quality as measured by the
15 national credit rating agencies declined over the last
16 several years, increasing our cost to access capital and
17 therefore the cost to our customers. Our stock price
18 languishes at the same level it was a decade or two ago
19 despite general rate cases, Power Cost Adj ustments
20 (" PCA"), and other rate activities over the last several
21 years. Rates in effect today do not provide the rate of
22 return necessary to assure access to the capital markets
23 under reasonable terms to finance needed investments.
24 Any delay in or lack of recovery of prudent operating or
25 financing
106 L. KEEN, DI 4
Idaho Power Company
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1 costs is seen as unnecessary risk by the financial
2 communi ty, including the credit rating agencies, during
3 this time of plant expansion. These pressures combine to
4 present a formidable challenge to sustaining the
5 financial health, operational excellence, and ultimately
6 the independence of the Company.
7 Q.In a prior response you mentioned increasing
8 demand for electricity. How much is the demand for
9 electrici ty increasing?
10 A.In 2007, our average customer count increased
11 by 12,126, a 2.6 percent increase. We experienced an
12 increase in average annual usage by residential customers
13 during four of the last five years. Peak demand levels
14 also continue to increase. During the summer of 2007,
15 customer demand for electricity surpassed the previous
16 summer peak demand record five times. A new record peak
17 of 3,193 megawatts was set on July 13.
18 Q.What actions is the Company taking to address
19 these trends?
20 A.Our legal obligation to serve and sense of
21 responsibility to our customers provide no other options
22 to serving these increasing demand levels. We are
23 addressing them on both the supply-side and demand-side
24 of the equation. In addition to expanding our production
25 and
107 L. KEEN, DI 5
Idaho Power Company
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1 delivery systems, we are aggressively promoting
2 demand-side management programs and services. These
3 energy efficiency efforts serve to slow the pace of
4 growth in a cost-effective manner by delaying the need
5 for additional generating resources. Additionally, these
6 efforts educate our customers on wise, responsible use of
7 our precious resource.
8 Q.What kind of progress has the Company made in
9 these areas?
10 A.From 2005 through 2007, exclusive of
11 depreciation, our electric plant investment increased
12 $578.2 million. This included capacity expansions and
13 new construction at 13 substation sites, addition of
14 1,157 pole-miles of distribution line, and capacity
15 expansion or new construction affecting 190 pole-miles of
16 transmission line. During the same three-year period,
17 our contractual obligations to purchase power from others
18 has grown from $876 million to $2.05 billion. Today our
19 generation system's nameplate capacity is 3,267 megawatts
20 compared to 3,087 megawatts at the start of 2005.
21 From 2004 through 2007, we more than quadrupled
22 the annual energy savings realized through our
23 demand-side management efforts.
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25
108 L. KEEN, DI 6
Idaho Power Company
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1 Q.Are these actions alone sufficient to ensure a
2 reliable and safe supply of electricity for your
3 customers?
4 A.No. The need to expand infrastructure and
5 obtain new energy supplies continues to grow. Our
6 recently filed update of our Commission-accepted
7 Integrated Resource Plan, or "IRP", forecasts the
8 addition of between 12,500 and 13,000 new customers per
9 year over the 20-year planning period. Energy demand is
10 forecast to grow about 30 average megawatts per year with
11 a 70 megawatt-per-year increase in peak demand levels
12 a growth rate that would be greater if not for our
13 demand-side management efforts during the period. These
14 trends will require continuing expansion of generation
15 and deli very systems and energy efficiency programs. The
16 IRP details our need to add 650 megawatts of supply-side
17 capaci ty and 225 megawatts of transmission capacity from
18 2008 through 2012. During the 20-year planning period,
19 we also have targeted 123 average annual megawatts of
20 energy efficiency program savings and 82 megawatts of
21 peak demand reductions from demand response programs.
22 Q.What is required of the Company to be
23 successful with these proj ects?
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109 L. KEEN, DI 7
Idaho Power Company
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1 A.Infrastructure expansion or improvement
2 proj ects must proceed through the traditional phases of
3 design, permitting, and construction. Depending on the
4 proj ect, either our engineering and construction crews
5 will build the necessary components of the system or we
6 will work directly with third-party developers and
7 contractors chosen through a competi ti ve bidding process.
8 Permi tting and siting processes for many of the proj ects
9 are extensive and expensive. This is especially true of
10 our planned 500-kilovolt ("kV") transmission proj ect.
11 Upcoming expansion and improvement of our infrastructure
12 will require some of the largest capital expenditure
13 levels in Company history. This era already has begun.
14 In 2008, we added a $65 million, 170-megawatt natural
15 gas-fired peaking plant at the Evander Andrews complex
16 near Mountain Home. This is only one piece of the $900
17 million investment in plant required from 2008 through
18 2010, not including costs associated with the 500-kV
19 transmission proj ects or the new baseload resource.
20 Q.How would you describe the environment that
21 Idaho Power encounters when seeking financing for capital
22 proj ects?
23 A.Today's capital financing environment is very
24 challenging. The international credit crisis has
25
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1 dri ven up borrowing costs. The supply of available
2 capi tal has tightened and lenders expect higher returns
3 in what is perceived as a riskier lending environment.
4 This is certainly true for the capital-intensive electric
5 utili ty industry that is now seen as riskier than it had
6 been historically. Credit ratings have declined across
7 the industry, our Company included. The resulting higher
8 capitalization costs are compounded by dramatic increases
9 in the prices for such construction materials as metals
10 and concrete and higher equipment costs due to
11 industry-wide demand for combined cycle combustion
12 turbines. Our obj ecti ve is to strike a balance between
13 borrowing and issuing equity. The heightened risk
14 profile for the utility industry has created a more
15 competi ti ve equity market as investors expect greater
16 returns than utili ties traditionally have offered. In
17 short, it is harder for utilities to attract investment
18 and what is available has become more costly.
19 Q.Is Idaho Power's return on investment
20 sufficient to attract the needed investment?
21 A.We retain the ability to attract capital, but
22 our credit quality has declined and it has become
23 increasingly expensive because we are not earning to our
24 potential. As shown in Exhibit No.1, entitled Idaho
25 Power
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1 Return on Equi ty, the Company failed to earn its
2 authorized rate of return over each of the last five
3 years. This contributed to five negative actions by
4 credi t rating agency Standard & Poore's since 2000 and
5 three negative actions by Moody's during the same period
6 as shown by Exhibit No.2, entitled Idaho Power Credit
7 Rating History. This has increased our costs of
8 borrowing, adding to the cost pressures created by low
9 stream flows and accompanying higher-than-normal power
10 supply costs.
11 As a result, our cumulative total return over
12 the past four years lagged behind those of the Edison
13 Electric Institute Electric Utili ties Index and our stock
14 price declined, driving down the value of our equity.
Q.Why is that a concern?
A.When a company's market value is only slightly
17 above or even lower than its book value, more shares must
18 be issued to raise needed capital and that company
19 becomes a more attractive acquisition target. This
20 occurs because under such circumstances, the premium
21 above book value an acquirer must pay is reduced.
22 I strongly believe a locally managed Idaho
23 Power is in the best interest of our customers, our
24 communi ties, our employees, our shareholders, and the
25 State of Idaho.
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1 Q.What is Idaho Power doing to improve its rate
2 of return in light of rising costs?
3 A.We must operate and maintain our system to
4 provide reliable and safe service to existing customers
5 and expand our power supply and delivery systems to meet
6 growing demand. Holding back on system expansion and
7 infrastructure and operations and maintenance
8 improvements is not an acceptable option. We pursue a
9 balanced approach to meeting customers' needs. This
10 approach includes aggressive promotion of energy
11 efficiency programs and services, preservation of the
12 efficiency of our existing generating resources,
13 expanding the use of renewable energy sources,
14 responsible development of conventional resources, and
15 strategic expansion of our transmission system to
16 increase capacity and optimize access to regional
17 resources. We refer to this as our Resource Cornerstones
18 strategy.
19 Q.Will your Resource Cornerstones strategy enable
20 the Company to earn its authorized rate of return?
21 A.No. Although the net benefit of our strategy
22 diminishes demand for capital, maj or investment still is
23 required to execute this strategy.To lower the cost of
24 financing this investment, it's necessary to increase
25 general rates to a level that enables us to earn
113 L. KEEN, DIll
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lour allowed rate of return in a fair and timely manner.
2 This strengthens our financial position resulting in a
3 stronger stock price and improving our ability to finance
4 capi tal investment through the equity markets.
5 Addi tionally, our debt financing costs will decrease
6 should this rate action result in improved credit
7 ratings. The Company and our customers can ill afford to
8 have our credit ratings drop any lower. We must maintain
9 assured access to the debt capital markets.
10 Q.Do you feel a general rate increase will
11 address all of the Company's cost-recovery concerns?
12 A.Not by itself. We are taking several actions
13 in addition to our proposal for a general rate increase.
14 We eagerly anticipate the PCA-related workshops as an
15 opportuni ty to make improvements in our primary power
16 supply cost recovery mechanism. The Company also is
17 seeking updates to charges for new customer connections
18 so they better reflect costs. We are seeking changes to
19 pricing of service for new customers with load
20 requirements greater than 25 megawatts. And we continue
21 to support the use of a forecast test year in general
22 rate case proceedings to mitigate the financial pressures
23 caused by regulatory lag.
24
25
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1 Q.Are there other actions being taken by Idaho
2 Power?
3 A.Yes. We have reviewed our budgets and have
4 taken action to responsibly reduce our operations and
5 maintenance expenses. We continuously pursue
6 efficiencies in our operations.
7 Q.Can you quantify the benefits?
8 A.Yes. We expect them to be $3.8 million in
9 2008.In her testimony, Ms. Smith provides greater
10 detail about these benefits, why they are only temporary,
11 and how they are reflected in our case filing.
12 Q.Can you summarize why this rate increase is
13 important to Idaho Power?
14 A.This increase in rates is important for our
15 Company to achieve fair and timely recovery of our
16 investment in our electrical system, which today' s rates
17 do not fully provide. Growing demand for electricity is
18 driving the need to invest large amounts of capital to
19 expand and improve electricity supply and reliability.
20 This increases our need to access both the debt and
21 equity markets to fund large amounts of capital
22 investment in our system. This is occurring when
23 financing costs and the costs of materials and supplies
24 are increasing. In this environment, timely and fair
25 recovery of our investment is
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14
15
16
17
18
19
20
21
22
23
24
25
1 cri tically important to helping us reduce these financing
2 costs. A low cost of capital ultimately has a beneficial
3 impact on customers' rates. By providing for fair and
4 timely recovery of our Company's investment the systems
5 and acti vi ties that serve our customers, this rate
6 increase is in the best interests of our Company, our
7 shareholders, and the people and communi ties we serve.
8 Q.Does this conclude your testimony?
9 A.Yes.
10
11
12
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1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: Let's see, where
4 should we start. Mr. Richardson, do you have any
5 questions for Mr. Keen?
6 MR. RICHARDSON: Just a couple, Madam
7 Chair. Thank you.
8
9 CROSS-EXAMINATION
10
11 BY MR. RICHARDSON:
12 Q Good morning, Mr. Keen.
13 A Good morning.
14 Q In your prepared direct testimony at page
15 4, beginning at the top of that page, you reference
16 worldwide demand for materials. I assume you're
17 referring to commodity prices for things like steel and
18 cement and stuff like that?
19
20
21
A Copper, exactly.
Q And your testimony was prepared when?
A It was prepared in May of 2008 for the
22 filing on June 1st.
23 Q And would you agree that in the interim
24 period since you filed your testimony the worldwide
25 markets for commodities have dramatically dropped?
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1 A Since the time frame that we filed our
2 testimony, they are below the levels that they were then.
3 If you look back historically, and I was speaking of the
4 time frame of a period of years, I'm not sure they've
5 dropped back to where they were initially, but they have
6 come off the prices they were at the time of my
7 testimony.
8 Q And you would characterize that drop in
9 the commodity prices as dramatic?
10 A Well, it depends on which commodity you're
11 looking at and I don't have that information in front of
12 me, but I do know there has been a reduction in worldwide
13 demand for a number of the commodities that we use in our
14 business.
15 MR. RICHARDSON: Madam Chair, may I
16 approach the witness?
17 COMMISSIONER SMITH: Yes, you may,
18 Mr. Richardson.
19 (Mr. Richardson approached the witness.)
MR. RICHARDSON: Mr. Keen, this morning I
21 went to the Bloomberg commodity report and printed off
22 their most current Bloomberg report on commodity prices
23 and this is just for the year 2008 and, Madam Chair, I'd
24 like this marked as Exhibit No. 210.
25
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1 (Industrial Customers of Idaho Power
2 Exhibit No. 210 was marked for identification.)
3 Q BY MR. RICHARDSON: According to this
4 exhibi t, wouldn't you agree that commodity prices have
5 dropped pretty dramatically since your testimony was
6 prepared?
7 A As I indicated, a number of commodities --
8 and I guess these are commodities indexes, am I correçt;
9 Mr. Richardson?
10 Q That's correct.
11 A are down from the time frame, I guess
12 it iS, June, July, August when they reached their peak,
13 but it is only a chart for one year and I think if you
14 had charts for multiple years, some of those commodities
15 were up hundreds of percents over a time frame beginning
16 in the four, five years I was discussing in my testimony,
17 but they have come down since this summer.
18 MR. RICHARDSON: Thank you, Madam Chair.
19 That's all I have.
20 COMMISSIONER SMITH: Thank you,
21 Mr. Richardson. Mr. Purdy.
22
23 Madam Chair.
MR. PURDY: I have nothing. Thank you,
24
25
COMMISSIONER SMITH: Mr. Olsen.
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3 BY MR. OLSEN:
4 Q
CROSS-EXAMINATION
Yes, Mr. Keen, your direct testimony that
5 was filed in this case, you cite that growth in customers
6 and a corresponding increase in energy usage and peak
7 demand is one of the driving factors of this case; is
8 that correct?
9 A That's correct.
Okay. Now, what customer classes do you
11 believe are generally causing this growth on the Idaho
10 Q
The ones in terms of number counts
14 certainly would be led by residential and small
16 Q
12 Power system?
13 A
15 commercial customers.
17 concentrated?
18 A
And where has that growth been
Well , it's been in pockets across our
19 service terri tory, but the bulk of the growth would be in
20 the Boise metropolitan area.
21 Q Okay. Now, Idaho Power filed a rate case
22 in 2003; isn't that right?
23
24
25
A
Q
That's correct.
Okay, and your testimony in that case, and
subj ect to check, indicated that one of the drivers for
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1 that case was growth on the system.
2 A I believe that's correct, subject to
3 check.
4 Q So isn't ita fair characterization to say
5 that residential growth on the system has been one of the
6 principal reasons that you have filed rate cases in '03,
7 '05 and '07 and this case right here?
8 A You're speaking specifically with regard
9 to residential?
10 Q Yes.
11 A The answer to that is yes, but maybe to
12 clarify a little, I indicate that growth is a significant
13 dri ver and it is, but it isn't an exclusive driver of our
14 increase in costs. We've had additional expenditures for
15 reliabili ty on the system, inflationary increases and
16 other things, but growth has been a significant component
17 of our need to come in here and file for price changes.
18 Q Okay. Now, recently the Company also
19 filed another case to modify its Rule H tariff and that
20 relates to new service attachments and distribution line
21 installations; is that correct?
22
23
A That's correct.
Q Okay, and one of the supporting testimony
24 of Mr. Said for Idaho Power indicated that the cost of
25 growth is not paying for itself; is that a fair
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1 characterization of his testimony?
2 A I've not actually read his testimony, but
3 it would be consistent with my belief.
4 MR. OLSEN: Okay, that's all I have, Your
5 Honor.
6 COMMISSIONER SMITH: Thank you, Mr. Olsen.
7 Mr. Ward?
8
9 CROSS-EXAMINATION
10
11 BY MR. WARD:
12 Q Well, Mr. Richardson asked one of the
13 lines of, pursued one of the lines of, inquiry I was
14 going to talk to you about and I'll not repeat that, but
15 the other thing that you cite as a reason for seeking an
16 increase is strong customer growth and growth in usage as
17 well. Do you anticipate that in the current economic
18 situation we are going to see any sort of growth in
19 ei ther customers or usage through the balance of this
20 year and next year?
21 A That speculates a little, but I can give
22 you my opinion. Despite what's gone on this year, we
23 have had customer growth. Our head count or customer
24 additions for 2008 will be somewhere between 5,000 and
25 6,000 new meters, so while it's down from the levels we
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1 saw in 2007 and in prior years, it still exists, and with
2 regard to consumption, I would tell you that the wild
3 card in my opinion that's out there is I expect
4 residential growth to be fairly weak, probably small
5 commercial, in 2009 would be new large loads because
6 every economic development agency in southern Idaho is
7 out trying to attract new business to provide new jobs
8 for the people in their service territories or their
9 areas of impact, including the State Department of
10 Commerce, including our Governor, so that's the part I
11 can't estimate for you is their level of success in
12 locating new businesses to settle in southern Idaho.
13 Q But do you think we're likely to see given
14 the collapse of the housing market, we i re likely to see
15 significant residential or small commercial growth?
16 A Excuse me, it would be my opinion, again,
17 that 2009 is going to be a weak year in that regard.
18 Q And the other thing is that I don't
19 normally toss witnesses a softball like this, but what
20 specifically -- you're well aware, are you not, that we
21 are in an economic crisis of some, something approaching
22 unprecedented magnitude; is that correct?
23
24
25
A You're talking nationally?
Q Nationally.
A Yes.
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1 Q And Idaho is not exempt, is it?
2 A No.
3 Q What specifically is Idaho Power doing to
4 respond to this economic situation?
5 A Well, we've done a number of things. We
6 actually reacted early that's included in my testimony
7 and some of the rest of our witnesses this spring when we
8 saw customer counts were down. We were in a bit of a
9 credi t crisis or liquidity issues in the capital markets
10 at that time, they've obviously become much more acute,
11 so we reviewed our budgets, O&M budgets, for 2008 and
12 reduced those and included that reduction in this filing.
13 Since that point in time we have had a soft freeze on new
14 employee additions that we put into effect this summer.
15 I say it's a soft freeze for us because unlike other
16 entities out there, be it the State of Idaho or other
17 businesses, we provide an essential service and do not
18 have the option to cut services back in areas that are
19 non-economic, so we have that obligation to serve, but we
20 have held hiring of new employees in areas not directly
21 related to serving the customer or reliability and by
22 December we'll be running about 50 full -time equivalents
23 down on a work force of about 2,000 as a result of those
24 actions.
25 The other thing we have done as a Company
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1 and we had a very painful time period in the 1980s when
2 we had the last economic event that impacted Idaho the
3 way this one may in fact end up impacting it is we had a
4 very painful downsizing of our Company, so we made the
5 decision at that time with regard to our skilled craft
6 workers that we would maintain a work force employed by
7 us to take care of all the reliability and maintenance
8 needs of the business and a certain amount of new
9 business, but beyond that, we would contract with others
10 to take care of the new business additions, so as a
11 result of that, as the new businesses have slowed down,
12 we've idled at least 50 full time, 50 FTE i S in contract
13 crews that were working to install new business
14 installations for us, so in the aggregate between our
15 work force and those that we employ, we're down
16 approximately 100 full-time equivalents from where we
17 would have been had the events not played out this year
18 as they have.
19 Q But notwithstanding that, you're still
20 scheduling, are you not, salary increases for your
21 employees?
22 A We have granted a structure adjustment for
23 our employees below senior manager to go into effect the
24 first of the year. We believe that it was absolutely
25 essential for the continuity of our work force. There is
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1 a shortage of skilled workers in the utility industry and
2 Department of Labor statistics would bear that out,
3 partly as a result of increased demands on the industry,
4 partly as a result of aging work force issues.
5 To give you a feel, our work force sitting
6 here today, 25 percent of them are eligible to retire if
7 they so chose. The other thing that's happened with
8 regard to that, then, is one way utili ties meet their
9 needs is to go hire skilled people from others and we
10 have had a troubling exodus, voluntary exodus, of skilled
11 people from our Company in 2008. We have lost engineers
12 in a number of areas, including principal engineers whom
13 we were grooming to fill key management spots for the
14 Company. We've lost energy schedulers and transaction
15 specialists, including the No. 2 person on our power
16 supply trading floor left us to go to another entity.
17 Our chief dispatcher in our control area operations left
18 us, retired and went to work for the Regional Reliability
19 Coordinator. We lost compliance personnel, we've lost
20 power plant technicians. It's happened across the board.
21 We even lost a regulatory analyst who was our
22 representati ve with BPA at a fairly critical time for the
23 Company, so we have had a loss of skilled workers.
24 In addition to that we have a non-union
25 work force for our crafts. We think the benefits to our
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1 customers of that are in our flexibility in the way we
2 deploy that work force and in the relationships we have
3 between management and the work force that facilitates
4 communication. We don't try to pay them less than their
5 counterparts in the union companies around us. We did a
6 salary survey of the contractual adj ustments in the
7 utili ties that circle us in the Northwest and they have
8 adj ustments scheduled from three to five percent, so we
9 granted a three percent salary adj ustment in order to
10 retain skilled laborers and to retain the flexibility we
11 have in our work force to continue to meet our customers'
12 needs.If we hadn't thought it was essential, believe
13 me, we wouldn't have done it in these times.
14 MR. WARD: That's all I have.
15 COMMISSIONER SMITH: Thank you, Mr. Ward.
16 Mr. Bruder, do you have questions?
17 MR. BRUDER: Just one, if I may.
18 COMMISSIONER SMITH: You don't need to
19 hold that.If it's in front of you, it will be fine.
MR. BRUDER: Okay, thank you.
CROSS-EXAMINATION
24 BY MR. BRUDER:
25 Q Sir, it's been said that the Company was
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1 until not too many years ago what is called energy
2 constrained, but that it has steadily become more of what
3 is called capacity constrained; is that correct?
4 A That's correct.
5 Q An apparent result of that is that the
6 level of peak usage rather than the level of year-round
7 average energy usage is driving the need for new
8 capaci ty; is that correct?
9 A As it's indicated in our integrated
10 resource plans that we file every two years, our peak was
11 growing at roughly 80 megawatts a year while our average
12 usage was growing at about 40 megawatts per year, so
13 while energy consumption was growing, it was growing at
14 about half the pace of our peak in the summer months, so
15 it has been peak that's been driving it more so than
16 energy, but we can't forget energy because consumption is
17 going up as well.
18 MR. BRUDER: Thank you. Nothing
19 further.
20
21
22
23
24
25
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: No.
COMMISSIONER SMITH: Mr. Price.
MR. PRICE: No questions.
COMMISSIONER SMITH: Do the Commissioners
have any questions? Commissioner Redford.
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1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 Q Yes, I have a couple of questions,
5 Mr. Keen.
6 A Okay.
7 Q As a result of the financial difficulties
8 that the country and the state is finding itself in and
9 Idaho Power, have you had to cancel or terminate any
10 planned projects for your service area, that is, energy
11 or transmission proj ects?
12
13
14
A We have not canceled any of the large
backbone transmission proj ects to date. I can tell you
what we are doing is looking at our planned 2009 capital
15 addi tions and cutting where we can primarily related to
16 our expectation of fewer new customer connects than what
17 we had previously planned. To this point most of the
18 things we have identified and we are looking across the
19 board in trying to decrease our need for capital in 2009
20 because of the economic conditions and unsettled capital
21 markets, but to date, we have not pulled those larger
22 proj ects out of our planning process and they would be
23 longer dated projects because, again, we're not sure if
24 this event is something that's long lasting that would
25 defer or avoid the need to do that or whether it's
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1 something that does correct itself and, again, we have
2 this issue of new large loads that economic development
3 agencies are trying to settle here and we need those
4 facili ties if those loads settle in southern Idaho.
5 Q You have partners, I believe, on your
6 transmission facilities. I think it's PacifiCorp or
7 Rocky Mountain. Have you seen any reluctance by any of
8 your partners to continue on with, say, transmission
9 facili ties?
10 A It would probably be a little bit of a
11 roundabout answer because they are our partner on the
12 Grid West proj ect in eastern Idaho, runs over into
13 Wyoming and down into Utah. What we have found is a
14 number of parties who indicated an interest in
15 participating in those lines at the outset have fallen
16 away to some degree as it gets to the point they actually
17 have to put up capital to stay in the game, so I think
18 the size of the lines may be affected, but between Rocky
19 Mountain and Idaho Power, we are still proceeding with at
20 least the permitting of those projects, so we have the
21 option to add. those facilities as needed.
22 Q I believe you stated in your earlier
23 testimony that the Treasure Valley here, Boise area, is
24 putting the most pressure on demand for energy and I
25 suppose transmission facilities?
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1 A The Boise metropolitan service area, so to
2 make sure we pick up Caldwell and Nampa and Kuna and the
3 outlying areas is our load center and while we have had
4 pockets of growth in other areas, we've had growth in
5 Pocatello, we've had growth in the Wood River Valley,
6 we i ve had some in the Magic Valley, what I was referring
7 to is the bulk of that growth in terms of number of
8 customers has been in the Boise metropolitan service
9 area.
10 Q We know that all the communi ties and
11 counties and so on in Idaho are attempting to encourage
12 and attract industrial or other businesses to come into
the state. Taking just one area, that is, the Boise
area, what would happen if you had a series or a number
15 of industrial customers that came in and needed, say, 500
16 megawatts, could you supply that area or that power?
17 A It would obviously depend on the time
18 frame that they needed the energy, but part of the
19 dilemma that we have as a Company and as a state between
20 our planning processes under the auspices of the
21 Commission and the desires of the economic development
22 agencies is we follow the integrated resource plan and
23 the integrated resource plan has had us planning for 80
24 megawatts of peak growth, 40 megawatts of average growth
25 for an extended period.
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22
1 When that plan comes out, that extends for
2 20 years into the future. The updated version has
3 actually scaled that back because of increased energy
4 efficiency ini tiati ves to about 70 megawatts of peak.
5 That does not contemplate loads of the 500 megawatt size,
6 so we have not planned to serve 500 megawatt loads in the
7 Boise metropolitan service area any time in the near
8 future. If we're going to do that and that's the desire
9 of the State of Idaho, the Commission, that we plan for
10 that, then we are going have to have further upgrades and
11 new generating facilities to do that and unfortunately,
12 the lead time is fairly long for us to add those
13 transmission facilities and new generating plant. It
14 doesn't exist on our system today.
15 Q Thank you. Because you filed an Exhibit
16 No. 1 and because your -- and I know this is jumping
17 ahead a little on the issue of return on equity, you have
18 filed Exhibit No. 1 which is a chart showing allowed
19 return on equity and actual return on equity and do you
20 have that in front of you?
21 A I do.
Q Okay. It shows that while you were
23 authorized a return on equity from 2003 to 2007, it shows
24 your actual return on equity to be significantly lower
25 than that.
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1 A That's correct.
2 Q If you were to go back and assuming that
3 you got the rate increase you're requesting today, would
4 your actual return on equity be any higher?
5 A Yes, it would. If we are granted the rate
6 increase that we filed in this case, it would bring our
7 costs current. It would bring our investment current
8 through the end of 2008 and, therefore, give us the
9 opportuni ty in 2009 if we manage our costs well to earn
10 our allowed return and, again, that would assume that we
11 don't have deviations in power supply costs that would
12 work against that, because I have to say that part of
13 this is because our rates weren't at the level we wished
14 they were. A number of these years, with the exception
15 of 2006, were also drought years and drought years, the
16 shareholder bears part of the cost of the drought the
17 same as customers do.
18 Q I'm sure you understand that your return
19 on equity as allowed by the Commission is not a guarantee
20 that you're going to earn that amount.
21 A I think my exhibit would demonstrate
22 that.
23 Q And I'm just wondering, are you saying
24 that because of low rates or growth or whatever your
25 return on equity actual didn't achieve the amount which
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1 was allowed by the Commission?
2 A It's a number of factors. What this shows
3 is the result and we believe that we did the right things
4 the right way to serve our customers over that time frame
5 and despite that, we weren't able to not only earn our
6 allowed return, we weren't able to get close to it with
7 the exception of one year and it's a number of factors.
8 Again, drought was certainly part of it. Growth is a big
9 part of that and I know looking at the testimony of some
10 of the witnesses here, that's a concern of who has to pay
11 for that growth, but to just give you a feel for that
12 because it impacts all of us in the Hearing Room, it
13 impacts why I'm sitting in this chair today is that our
14 average embedded cost rates that you combine generation
15 and transmission amount to about three cents a
16 kilowatt-hour and that's great, that's wonderful, that's
17 some of the lowest priced electricity in the United
18 States on the planet, but it's gone.
19 There is no more of it, so as we have to
20 add new generating and new transmission facilities to
21 serve new loads, it costs us some multiple of that.
22 Depending upon the generating resource and the
23 transmission to get it, it costs us six to nine cents in
24 order to produce that and deliver it to the new customer
25 who has the three cents embedded in the average price
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134 KEEN (Com)
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1 they pay, so that we get the opportunity to come down
2 here and try to collect the balance or that differential
3 from the folks sitting in this room.
4 I don't enjoy it, I'm sure they don i t
5 enj oy it, but as I understand the laws that you operate
6 under, the State of Idaho, it's very difficult for you to
7 discriminate or show preference between vintages of
8 customers and so that's the law, as I understand it,
9 that's what we live under, but it does put a lag in our
10 costs as it costs us between six to nine cents fully
11 loaded for generation and transmission to serve a
12 customer who pays us three cents, and that's part of the
13 reason this exists today and that's what we're trying to
14 eliminate in this process of getting our costs and our
15 investment as current as we can to match revenues that
16 are consistent with the costs that we have today.
17 Q But I guess primarily what you're talking
18 about, and I don't mean to put words in your mouth, but
19 one of the key factors in your not achieving the allowed
20 rate of return is because of the growth and cost of
21 materials and demands for power?
22 A Those are certainly factors in that and
23 then, of course, timeliness of rate relief, but this
24 exhibi t just reflects what actually happened. There's a
25 number of factors that caused it. What I also have in my
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1 testimony is it's not a situation that we can allow to
2 continue to exist and have us be a viable entity to go
3 out and raise the capital we need to build a new
4 generating plant and transmission lines and facilities to
5 serve our customers. It's had an effect on our credit
6 quali ty and believe me, the financial community is
7 watching this case, the credit rating agencies and the
8 folks that buy our stock.
9 I'm sitting here with a stock that's the
10 same price or less than it was 20 years ago and a
11 dividend that's a third less than it was 20 years ago, so
12 while we i ve provided wonderful benefits to our customers,
13 some of the lowest cost electric energy on the planet
14 over that 20 years, our stockholders have a stock price
15 that's at or below what it was 20 years ago and a
16 dividend that's a third less.
17 Q And comparing that to other comparable
18 utili ties like Idaho Power, are they all suffering?
19 A I would say that at this point in time
20 there is a bit of a negative bias toward the credit
21 ratings in our industry and others, but we have ranked
22 below the average with regard to our returns in the
23 industry despite being one of the lowest cost producers
24 in the industry.
25 COMMISSIONER REDFORD: I guess that i s all
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1 the questions I have. Thank you very much.
2 THE WITNESS: Thank you, Mr. Commissioner.
3 COMMISSIONER SMITH: Commissioner Kempton.
4 COMMISSIONER KEMPTON: Thank you,
5 Madam Chairman.
6
7 EXAMINATION
8
9 BY COMMISSIONER KEMPTON:
10 Q Mr. Keen, on page 8 of your testimony, you
11 talk about -- thank you, Madam Chairman -- you talk about
12 the need in addition to the investment you've made now to
13 include the Evander Andrews 170 megawatt CCT plant an
14 investment requirement of about $900 million between 2008
15 and 2010 and that doesn't include costs associated with
16 the 500 kV transmission projects or the new base load
17 resources.
18
19
A That's correct.
Q You mentioned a minute ago the timing on
20 transmission and I would suggest that there's probably
21 also significant timing lags on siting and planning,
22 pre-construction, actual construction, operational
23 testing and then on-line commission. Isn't the 2008 to
24 2010 pretty tight for $900 million of investment?
25 A It's much higher than what it's been
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137 KEEN (Com)
Idaho Power Company
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1 historically for our Company, but it really, again,
2 assumed an addition of 10 to 12,000 residential customers
3 a year over that time frame and the facilities to serve
4 them.It did include reinforcement of our transmission
5 system inside of our network in order to supply those
6 loads and distribution facilities and so forth, that's
7 why the number is large. What it does not include are
8 the maj or transmission proj ects, either Grid West or our
9 Boardman to Hemingway proposed line or the costs of the
10 new combustion turbine, because at the end of the day we
11 don't know if we bear that cost or if that's energy we're
12 going to buy from a third party. That's still yet to be
13 determined.
14 Q But the sense of adding that much capital
15 and actually have systems operational by 2010, isn't that
16 quite optimistic for $900 million worth of investment?
17 Also, if I might add, Mr. Keen, during this time we've
18 been talking about the general financial climate and so
19 over that three-year period with the financial climate
20 being what it is, isn't that also a factor in the
21 consideration of whether you could make it by 2010?
22 A It certainly would be a factor and as I
23 indicated, we are taking a hard look at 2009 first and
24 then we will 2010 and '11 with regard to the slowdown in
25 the economy and the capital additions that we can defer
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138 KEEN (Com)
Idaho Power Company
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1 and you say that's roughly $300 million a year, I would
2 expect that for 2009 we can probably reduce that 50
3 million or so from what we had previously planned if the
4 customer connections come in at a much lower level than
5 what we anticipated, and the other thing, a lot of those
6 dollars weren't necessarily for proj ects we're going to
7 complete in those years. Some of them take multiple
8 years, even upgrades on our transmission system, but it
9 is our belief in order to maintain the viability of the
10 system if we were adding 10 to 12,000 new customers a
11 year that those were the expenditures we needed to make
12 in order to serve them.
13 Q Okay. Then Exhibit 1 -- Exhibit 2, I
14 guess, is what I wanted to look at that shows the drop
15 that you've had on your credit ratings from basically
16 2000. That period of time includes the power crisis that
17 we had in the region, actually nationwide, but certainly
18 a very strong effect in the Northwest, and then it goes
19 into some market, interesting market, developments during
20 that period of time as well where there was considerable
21 speculation going into different commodity markets.
22 There was -- most of your mutuals were seeing a lot of
23 investment coming in from different pockets of where
24 there was a good supply of money. It would seem to me
25 that a part of this drop in addition to the risk factors
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139 KEEN (Com)
Idaho Power Company
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1 of Idaho Power is also associated not only with
2 recovering from the power crisis, but also because of the
3 economic competi ti ve issues associated with the market;
4 would you agree with that?
5 A Well, I would agree that there are macro
6 economic factors that impact ratings generally for an
7 industry just as there are micro factors that impact it
8 for the Company, and from the time frame if you start
9 where we did here in 2000 or 2001, there has been a
10 general degradation in the rating of our industry, which
11 one of those concerns nationwide is that the last time we
12 faced a build-out like many of us do today for new
13 transmission and other facilities, we were a strong
14 single A or A plus industry. We aren't any longer. We
15 are a triple B industry similar to what we are, so it
16 wasn't just us that were impacted by that, but the
17 factors pointed out that impacted us were the size of the
18 capi tal budgets versus our cash flows, and our cash flows
19 and interest coverages are much like my chart with regard
20 to return on equity, they have lagged behind and for
21 years we used the drought to explain part of that lag and
22 so then they said well, that must be a significant risk
23 factor as well, so they've added it in there and then the
24 other one would be regulatory support and they add those
25 together and say we think you're in a weaker condition
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140 KEEN (Com)
Idaho Power Company
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1 today than you were at that point in time which doesn't,
2 again, leave us well poised, not unlike others in the
3 industry, to go out and launch these large capital
4 programs, particularly with capital markets in the state
5 that they are today.
6 COMMISSIONER KEMPTON: That's all the
7 questions.
8 COMMISSIONER SMITH: Do you have any
9 redirect, Mr. Kline?
10 MR. KLINE: Yes, Madam Chair, just a
11 couple.
12
13 REDIRECT EXAMINATION
14
15 BY MR. KLINE:
16 Q Mr. Richardson asked you a question
17 regarding the decline of commodity prices and isn't it
18 true that other than fuel, those commodity prices are
19 directly related or are inputs to new construction?
20
21
A Primarily, that's correct.
Q And isn't it true that a big part of what
22 we're trying to recover in this rate case is for costs
23 that we've already spent?
24
25
A The costs we have in this case are for
facili ties that will be in service by the end of this
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141 KEEN (Di)
Idaho Power Company
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1 month or costs that we're already incurring and so it's
2 entirely correct and my reference to those things were
3 the environment that we've been in and the environment we
4 were expected to be in and if those commodities stayed at
5 the level that they were, it certainly made it more
6 problematic to do new investments, but they didn't
7 decline in time to reduce the cost of the facilities that
8 we closed this year.
9 Q Mr. Keen, I also want to talk a little bit
10 about growth. Mr. Olsen asked you a series of questions
11 regarding growth and who was causing the growth and where
12 was it occurring. One of the things that you mentioned
13 was reliability. Is cost that you incur for reliability
14 attributable to a particular class or to a particular
15 area of the state?
16 A No, not necessarily. That's something
17 that we do across our system in order to make sure that
18 it is a reliable system for the benefit of our customers
19 and there are new mandatory reliability requirements that
20 have been imposed by the National Electric Reliability
21 Council which is the electric reliability organization
22 designated by FERC for our industry. The other thing I
23 would say is our costs have increased, again, due to
24 general inflation and they tend to increase more during
25 times of peak demand.
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142 KEEN (Di)
Idaho Power Company
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1 Q And that's attributable to all customer
2 classes, they all get the benefit of that?
3 A They get the benefit of it, that's
4 correct.
5 COMMISSIONER SMITH: And, Mr. Keen, would
6 you accept, subj ect to check, that it's the North
7 American Electric?
8 THE WITNESS: What did I say?
9 COMMISSIONER SMITH: National.
10 THE WITNESS: Oh, yes, I misspoke.
11 Q BY MR. KLINE: There were a series of
12 questions from Commissioner Redford regarding new large
13 loads. Could you give us some idea of the magnitude of
14 some of those new large loads that at least you've heard
15 about?
16 A I would preface this with we probably hear
17 about a lot more than what's actually going to land, but
18 we have had projects that we have kicking the tires
19 across our service terri tory, some of those as large as
20 480 megawatts in one project and that's, obviously, a
21 significant load on our system. As we sit here today, we
22 probably have in the neighborhood of 5 or 600 megawatts
23 that are kicking the tires across our service terri tory
24 where we have been contacted by some economic development
25 agency, occasionally directly by an entity with regard to
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143 KEEN (Di)
Idaho Power Company
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1 the prospects of them locating in our service
2 territory.
And certainly, one new large load would be
4 the equivalent of multiple years of residential and other
3 Q
5 customer growth, would it not?
6 A Well, one 80 megawatt load with a 50
7 percent capacity factor utilizes one year's worth of
8 growth that we have planned for the entire system.
9
10
11 Mr. Keen.
12
13
14
MR. KLINE: That's all I have.
COMMISSIONER SMITH: We thank you,
MR. OLSEN: Just one quick question.
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: I apologize, I had a couple of
15 questions I omitted to ask. Is it out of order to --
20
21
16
17 allow it.
18
19
22 BY MR. OLSEN:
23
24
25
Q
A
Q
COMMISSIONER SMITH: Well, it is, but I'll
MR. OLSEN: Okay, thank you very much.
CROSS-EXAMINATION
Mr. Keen
Yes.
-- we did talk about the growth and you
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144 KEEN (X)
Idaho Power Company
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1 had indicated in your testimony, I believe, that you were
2 trying to deal with the growth on two levels. One was on
3 a supply side generation and the other on the demand side
4 looking at conservation measures.
5 A That's correct.
6 Q That's correct, okay. Now, what effect
7 does reducing system demand have on the growth that Idaho
8 Power is experiencing?
9 A It diminishes the growth and as I
10 indicated in our updated integrated resource plan, in
11 addi tion to the energy efficiency measures that we
12 previously had in there, because the 40 and 80 would have
13 been larger had we not had energy efficiency in there, we
14 believe that expanding those programs can reduce it to 70
15 megawatts peak, 30 megawatts average, but it certainly
16 has an impact and we're a strong advocate of energy
17 efficiency. It avoids us having to build power plants
18 and with the climate change, legislation looming on the
19 horizon, avoids the need for new transmission lines and
20 it's something we should all be dedicated to doing is
21 using energy as wisely as we can.
22 Q Okay, are you familiar with the Irrigation
23 Peak Rewards Program?
24
25
A I am, and let's just make sure, this is a
program that we're going to do the grow-out this summer
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145 KEEN (X)
Idaho Power Company
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1 or is it the existing program?
2 Q Well, there's two components. We have the
3 existing program, and maybe I can explain that, that's a
4 designated day program
5 A Right.
6 Q -- and now we have just recently worked
7 wi th the Company and the Commission Staff have filed
8 another proceeding to look at a dispatchable program
9 whereby the Company can turn off irrigation pumps when
10 they need it the most.
11 A I'm generally
12 MR. KLINE: Madam Chairman?
13 COMMISSIONER SMITH: Mr. Kline.
14 MR. KLINE: I'm going to object to this
15 question. This is not a plan that's been approved by the
16 Idaho Public Utilities Commission yet. It is somewhat
17 speculati ve and I would obj ect to the question.
18 COMMISSIONER SMITH: Okay, Mr. Olsen.
19 MR. OLSEN: Well, I think it's very
20 relevant to this point. It talks about just the demand
21 side resource issue of dealing with growth and I'm just
22 trying to say here are some of the plans and here are
23 some of the projections that could be seen on the system
24 and it's not unlike a proj ected test year or other
25 speculation that's had in this case, so I think it's
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146 KEEN (X)
Idaho Power Company
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1 relevant.
2 COMMISSIONER SMITH: Well, I'm sure it's
3 relevant to the case, but I guess my observation would be
4 that Mr. Keen is the Company's policy witness and to get
5 down in the weeds on some of the programs when the
6 Company has 13 other witnesses that perhaps one of them
7 might be more familiar. That was my concern.
8 MR. OLSEN: I guess I just want to keep it
9 at a high level. All I wanted to do was just say, you
10 know, mainly the effect it has on growth.
11 COMMISSIONER SMITH: Why don't you get to
12 the punch line, then.
13 MR. OLSEN: Okay, I will. Thank you.
14 Q MR. OLSEN: So the new program, I think,
15 subj ect to check, currently the Peak Rewards shaves about
16 39 to 40 megawatts of peak; is that correct?
17 A That's in the ball park of my
18 recollection, but I wouldn't want to be held to that, but
19 it's in the ball park of what I understand it to be.
20 Q So in general, the new program is looking
21 to shave additional peak, so, obviously, that would
22 benefi t the Company, would it not?
23 A Anything we can do to help manage the peak
24 in the summer months is beneficial. I'll qualify your
25 question, help the Company and also help our customers so
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147 KEEN (X)
Idaho Power Company
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1 we don't have to supply it some other way.
2
3
4 More redirect?
5
6
MR. OLSEN: Okay, that's it.
COMMISSIONER SMITH: Thank you, Mr. Olsen.
MR. KLINE: No redirect.
COMMISSIONER SMITH: Mr. Keen, we thank
7 you for your time this morning.
8
9
THE WITNESS: Thank you.
MR. KLINE: Madam Chairman, would it be
10 permissible for the Commission to excuse Mr. Keen at this
20
21
22
23
24
25
11 point?
12
13
COMMISSIONER SMITH: Yes, if there i s no
objection, he may be excused.
14
15
16
17
18
19
THE WITNESS: Thank you.
(The witness left the stand.)
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Idaho Power Company
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1
2
JOHN R. GALE,
produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6
7
8 BY MR. KLINE:
9 Q
DIRECT EXAMINATION
Would you please state your name for the
My name is John R. Gale. Typically, those
12 in this room know me as Ric Gale.
10 record?
11 A
13 Q Mr. Gale, by whom and in what capacity are
17 Q
14 you employed?
I am employed by Idaho Power Company as a
16 vice president of regulatory affairs.
15 A
And on June 27th of this year did you
18 prefile 27 pages of direct testimony?
20
19 A Yes, I did.
And you didn't have any exhibits with your
21 direct testimony; is that correct?
22
23
Q
A
Q
No.
Mr. Gale, do you have any additions or
24 corrections that you need to make to your direct
25 testimony?
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149 GALE (Di)
Idaho Power Company
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1 A Yes, I'm going to delete one line on page
2 27 -- excuse me, one sentence starting on line 10 and the
3 sentence that says, "Since the impact," that sentence I
4 would like to delete.
5 Q Wi th that deletion, Mr. Gale, if I were to
6 ask you the same questions that were posed in your
7 prefiled direct testimony today, ask you those same
8 questions today, would your answers be the same?
9 A Yes, they would.
10 MR. KLINE: Madam Chairman, I would
11 request that Mr. Gale's direct testimony be spread on the
12 record as if the questions and answers had been presented
13 today and there are no exhibits, so I move for the
14 spreading of the testimony.
15 COMMISSIONER SMITH: Without obj ection, it
16 is so ordered.
17 (The following prefiled direct testimony
18 of Mr. John R. Gale is spread upon the record.)
19
20
21
22
23
24
25
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150 GALE (Di)
Idaho Power Company
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1 Q.Please state your name and business address.
2 A.My name is John R. Gale and my business address
3 is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company ("the
6 Company") as the Vice President of Regulatory Affairs.
7 Q.Please describe your educational background and
8 business affiliations.
9 A.I received a BBA in 1975 and an MBA in 1981
10 from Boise State University. I maintain a close
11 affiliation with the university and serve on the College
12 of Business and Economics' Advisory Council and on the
13 Board of Directors of the Alumni Association. I have
14 also attended the Public Utilities Executive Course at
15 the Uni versi ty of Idaho and am now on the faculty of that
16 program covering "Regulation and Ratemaking."
1 7 I am an active member of the Edison Electric Institute's
18 Rates and Regulatory Affairs Committee, which is the
19 commi ttee that is concerned primarily with regulatory
20 issues and ratemaking methods. I am the current Chair of
21 this committee.
22
23
24
25
Q.Please describe your work experience.
151 GALE, DI 1
Idaho Power Company
.1 A. From 1976 to 1983, I was employed by the State
2 of Idaho primarily as an analyst in the Department of
3 Employment.In October 1983, I accepted a position at
4 Idaho Power Company as a Rate Analyst in the Rate
5 Department.I initially worked on rate design, tariff
6 administration, and line extension issues. In March
7 1990, I was assigned to the C9mpany's Meridian District
8 Office where I held the position of Meridian Manager,
9 which was a one-year cross training position established
10 to provide corporate employees with an extensive field
11 experience. I returned to the Rate Department in March
12 1991 and in June, I was promoted to Manager of Rates. In.13
14
July 1997, I was named General Manager of Pricing and
Regulatory Services. In March 2001, I was promoted to
15 Vice President of Regulatory Affairs, my current
16 position.
17 As Vice President of Regulatory Affairs, I
18 oversee and direct the acti vi ties of the Pricing and
19 Regulatory Services Department. These acti vi ties include
20 the development of jurisdictional revenue requirements,
21 the oversight of the Company's rate adjustment
22 mechanisms, the preparation of class cost-of-service
23 studies, the preparation of rate design analyses, and the
24 administration of tariffs and customer contracts. In my.25 current position, I have the primary responsibility for
policy matters
152 GALE, DI 2
Idaho Power Company
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1 related to the economic regulation of Idaho Power
2 Company. I have testified frequently before the Idaho
3 Public Utilities Commission ("the Commission") on a
4 variety of rate and regulatory matters. I have also
5 testified before or submitted direct testimony to the
6 regulatory commissions in Nevada and Oregon, the Federal
7 Energy Regulatory Commission ("FERC"), the Bonneville
8 Power Administration, and the United States Senate
9 Committee on Energy and Natural Resources.
10 Q.What it the purpose of your testimony in this
11 matter?
12 A.I will provide an overview of the Company's
13 case, describe the approach to the test year, discuss the
14 rate case treatment of a number of developing issues, and
15 provide the policy basis for the recommended spread of
16 the revenue requirement to customer classes and special
17 contract customers, as well as the approach to the
18 Company's rate design proposals.
19 CASE OVERVIEW
20 Q.What role did you play in the preparation of
21 the general rate case?
22 A.My role in the preparation of the general rate
23 case was to oversee, manage, and coordinate the filing
24 and to make the policy decisions related to regulatory
25
153 GALE, DI 3
Idaho Power Company
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1 matters in consultation with Mr. LaMont Keen, our
2 Company's President and Chief Executive Officer, along
3 wi th other senior officers wi thin Idaho Power.
4 Q.What was your level of involvement with the
5 preparation of the testimony and exhibits presented by
6 the other Company witnesses?
7 A.I discussed the content and preparation of the
8 wi tnesses' testimony and exhibits with Ms. Maggie Brilz
9 (former Director of Pricing), Mr. Greg Said (Manager of
10 Revenue Requirement), and Mr. Barton Kline (Senior
11 Regulatory Attorney), as well as Ms. Lisa Nordstrom and
12 Mr. Donovan Walker (Regulatory Attorneys) .
13
14
15
Q. Please provide an overview of the Company IS
general rate case filing.
A.The Company begins the presentation of its case
16 wi th Mr. LaMont Keen the Chief Executive Officer of the
17 Company. He addresses Idaho Power's current financial
18 and operating situation and need for general rate relief.
19 My testimony is next and covers the regulatory policy
20 matters related to the development of the general rate
21 case.
22 Ms. Maggie Brilz, Manager of Customer Service,
23 and Ms. Theresa Drake, Manager of Customer Relations and
24 Energy Efficiency, cover a number of customer issues in
25 their
154 GALE, DI 4
Idaho Power Company
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16
1 testimony. Ms. Brilz focuses on customer service
2 acti vi ties, including call center operations, metering,
3 si ting, and reliability. Ms. Drake describes the
4 Company i s advancements in energy efficiency and customer
5 relations acti vi ties.
6 The next witness is Mr. William Avera, who has
7 been retained by the Company as its return on equity
8 ("ROE") expert. Mr. Avera also performed this function
9 for Idaho Power in the last four general rate cases in
10 Idaho and has also testified on the Company's behalf
11 before the Oregon Public Utility Commission and the FERC.
12 Mr. Avera discusses risk factors relevant to Idaho Power
13 Company, performs calculations of ROE appropriate for the
14 Company using standard financial methodologies, and
15 recommends a reasonable ROE range appropriate for Idaho
Power.In this proceeding, Mr. Avera's ROE range is from
17 10.8 to 11.8 percent.
18 Mr. Steven Keen, Idaho Power Company's Vice
19 President and Treasurer, builds on Mr. Avera's
20 recommendations by more specifically addressing the
21 relevant risk factors impacting the Company. Mr. Keen
22 selects an 11.25 percent ROE point estimate as the
23 appropriate cost of equity, supports the cost of Idaho
24 Power's long-term debt, and includes the long-term debt
25 and
155 GALE, DI 5
Idaho Power Company
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.
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1 the 11.25 percent ROE in the test year capital structure
2 to derive the Company's proposed overall rate of return.
3 Ms. Lori Smith, the Company's Vice President of
4 Corporate Planning and Chief Risk Officer, next testifies
5 to the actual 2007 financial results with standard
6 ratemaking adj ustments. Ms. Smith describes the
7 development and application of the methodologies used to
8 prepare the 2008 test year and the system adjustments to
9 the test year data associated with deductions to certain
10 expenses not allowed in rates, annualizing adjustments to
11 expenses and rate base, and other adj ustments to
12 revenues, expenses, and rate base related primarily to
13 past Commission orders.
14 Ms. Catherine Miller, Director of Strategic
15 Analysis, presents testimony in support of the inclusion
16 in rates of $7.6 million of the Construction Work in
17 Progress ("CWIP") associated with the financing of the
18 Hells Canyon Relicensing.
19 Mr. Said provides the normalized net power
20 supply expenses for the test year and addresses the
21 requisi te changes to the Company's Power Cost Adj ustment
22 ("PCA") as a result of changing the normalized net power
23 supply expenses in Idaho Power Company's base rates.
24 Addi tionally, Mr. Said supports the calculation of
25 offsetting revenues
156 GALE, DI 6
Idaho Power Company
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1 associated with the annualizing adjustments made to the
2 test year.
3 Ms. Celeste Schwendiman, a Senior Pricing
4 Analyst, incorporates Ms. Smith's financial data, Mr.
5 Steven Keen's overall rate of return recommendation, Mr.
6 Said i s normalized net power supply expenses, and Ms.
7 Miller's CWIP amount, along with other necessary inputs
8 and prepares the jurisdictional separation study ("JSS").
9 The JSS, as its name states, separates system values for
10 rate base, revenues, and expenses for each state and the
11 federal jurisdiction through an assignment and allocation
12 process that is described in detail in Ms. Schwendiman IS
13 testimony. One result of the JSS is the Idaho retail
14 jurisdictional revenue requirement, which is the
15 Company's best representation of its expected annual cost
16 to serve its Idaho retail customers. The 2008 Idaho
17 jurisdictional revenue requirement is $739,757,826. In
18 order to obtain this amount, Idaho's annual retail
19 revenues will need to increase by $66,588,286 million or
20 9. 89 percent.
21 Mr. Timothy Tatum, a Senior Pricing Analyst,
22 uses the Idaho retail jurisdictional output from the JSS
23 as developed by Ms. Schwendiman and further separates
24 costs by customer class and special contract in preparing
25 three class cost-of-service studies. One of the studies
prepared
157 GALE, DI 7
Idaho Power Company
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1 by Mr. Tatum presents the approach most similar to that
2 used by the Company and approved by the Commission in
3 Idaho Power's 2003 general rate case proceeding, Case No.
4 IPC-E-03-13. A second study modifies the 2003 approach
5 by classifying PURPA and purchased power expenses as
6 demand- or energy-related in the same manner as
7 generation plant is classified. Finally, Mr. Tatum's
8 third study further modifies the historical approach in a
9 manner that allocates the costs of the Company's
10 generation peaking facilities differently that its
11 base-load resources. Of these three studies, Mr. Tatum
12 recommends the approach termed "3CP /12CP" be used as the
13 appropriate starting point for rate spread (the process
14 of spreading the Idaho jurisdictional revenue requirement
15 to the customer classes and special contract customers)
16 and rate design (the ultimate calculation of rates for
17 customers) .
18 Ms. Courtney Waites, a Pricing Analyst, and Ms.
19 Darlene Nemnich and Ms. Jeannette Bowman, both Senior
20 Pricing Analysts, support the Company's proposed price
21 changes to the customer classes that are consistent with
22 the Company's ratemaking obj ecti ves and that recover the
23 Company's Idaho revenue requirement. Primarily, Ms.
24 Waites supports residential rate design, Ms. Nemnich
25 covers commercial and industrial pricing, and Ms. Bowman
supports
158 GALE, DI 8
Idaho Power Company
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1 irrigation rate proposals.
2 THE TEST YEAR
3 Q.What is the Company's test year?
4 A.The test year is the 12 months ending December
5 31, 2008.
6 Q.Please describe Idaho Power's approach to the
7 determination of its test year in recent proceedings.
8 A.In both 2003 and 2005, Idaho Power filed for
9 general rate relief on test years that combined six
10 months of actual information with six months of forecast
11 information. This approach is commonly referred to a
12 "split test year." The 2007 general rate base was filed
13 as a full 12-month forecasted test year.
Q. What was the resolution of the test year
15 question in the last general rate case, Case No.
16 IPC-E-07-08?
17 A.The Company proposed a 2007 test year based
18 upon forecast data, while Staff and others proposed a
19 historical test year with adj ustments. The issue was not
20 defini ti vely resolved in the case. However, the parties
21 to the case did reach a settlement and signed a
22 Stipulation that addressed the test year issue.
23 Provision 6 (c) of the Stipulation stated:
24
25
159 GALE, DI 9
Idaho Power Company
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1 Forecasted Test Years: The Parties agree to
participate in a good faith discussion
regarding a test year methodology that balances
the auditing concerns of the Staff and the
Intervenors with the need for timely rate
relief expressed by the Company. The Parties
agree to discuss methodologies that include
both a twelve month period that can be audited,and techniques to adj ust the audi table data so
that it would accurately represent the costs
and revenues the Company will experience during
the future period of time in which the rates
would be in effect.
2
3
4
5
6
7
8 The Stipulation was ultimately approved by the
9 Commission.
10 Q.What transpired at the test year workshop?
11 A.Idaho Power put forth a straw man proposal for
12 developing its test year in its next general rate case.
13 The Company outlined an approach that would start with
14 actual 12-month results that would include typical and
15 traditional ratemaking adjustments consistent with past
16 Company methods and Commission orders. The 2007 actual
17 information would then be transformed into 2008 results
18 through the use of methodologies appropriate for that
19 particular revenue, expense, or asset classification.
20 The Company would support the types of methods used and
21 their application in much the same way that the Company
22 is responsible for supporting a variety of different
23 allocation methods in its cost models. Parties to the
24
25
160 GALE, DI 10
Idaho Power Company
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1 workshop expressed their desire that the Company not just
2 use one blanket methodology to escalate all costs and
3 that all known aspects (posi ti ve and negative) of
4 adj ustments be included in developing the test year.
5 Idaho Power agreed with these recommendations. The
6 workshop did not attempt to prescriptively address
7 methods prior to the next general rate case.
8 Q.Has the Company prepared its test year in this
9 proceeding consistent with input received in the
10 workshop?
11 A.Yes, it has. The Company started with actual
12 2007 results adjusted for typical and traditional
13 ratemaking adj ustments, and then adj usted the data to
14 2008 levels based upon a number of methodologies
15 appropriate for each of the revenue, expense, or asset
16 classifications. The Company included additional 2008
17 adjustments associated with the inclusion of CWIP and
18 targeted cost reductions implemented by Company
19 management in response to current financial
20 circumstances.
21 Q.How does the test year approach address the
22 past concerns raised by the Company, the Commission Staff
23 and other parties to the Stipulation?
24
25
A.The Company's proposed 2008 test year begins
from a 2007 foundation of actual information. One
primary
161 GALE, DIll
Idaho Power Company
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1 concern expressed by the Commission Staff regarding the
2 Company's test year in the last general rate case was
3 that there was no actual audi table information to review
4 and there was discomfort in reviewing only forecasted
5 data and methods. The Company's approach this time
6 provides an actual audi table base for review, while at
7 the same time adj usting the historic information into a
8 more current time period.
9 Q.What attributes should be considered when
10 selecting a test year?
11 A.In practice, in every rate case, a test year
12 must be selected. Whether the test year selected is
13 historical, future, or some hybrid, the most important
14 attribute of the selected test year should be that it
15 accurately reflects the best expectation of the cost of
16 service that will prevail when the rates will be in
17 effect.
18 Idaho Power has developed a test year
19 consistent with protocol discussed by the Company and the
20 parties during workshop. The test year consistently
21 applies assumptions and uses trends across all aspects of
22 the revenue requirement. I am confident that in this
23 instance, the Company-proposed test year is a reasonable
24 representation of 2008 cost of service and appropriate
25 for setting rates in 2009.
162 GALE, DI 12
Idaho Power Company
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1 Q.Are the methods used to develop the test year
2 common in determining revenue requirement?
3 A.Yes. The Company proposed methods for
4 developing the test year are similar to methods used by
5 numerous states since at least the 1970s. Idaho is
6 surrounded by states, including Oregon, California, Utah,
7 and Wyoming that authorize their Commissions to adopt
8 future test years to determine representative levels of
9 revenues, expenses, rate base, and capital structure.
10 Accordingly, many utili ties in these states are filing
11 rate proceedings with future test years. The Oregon
12 Commission has, for many years, viewed the future test
13 year as the appropriate choice of test year. The Utah
14 legislature has recently amended existing legislation and
15 statutorily mandates that the Utah Commission give
16 serious consideration to the adoption of the very same
17 type of future test year period that Idaho Power is
18 proposing in the instant case. PacifiCorp uses the
19 future test year in Oregon, Utah, and Wyoming to
20 establish jurisdictional revenue requirement.
21 Commissions and policy makers throughout the
22 country, and particularly in the West, are increasingly
23 recognizing that in an era of heavy construction, future
24 test years are necessary to allow utili ties a reasonable
25
163 GALE, DI 13
Idaho Power Company
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1 opportuni ty to earn their authorized rate of return.
2 Currently over 20 states allow for the use of forward or
3 hybrid designed test years. Utili ties that operate in a
4 period of rapid expansion and rate base growth will
5 chronically under-earn if test years are historical in
6 nature and fail to synchronize the matching of expenses
7 and revenues.
8 Q.Beside the concern of confiscation of
9 shareholder assets associated with under-earning, are
10 there other pragmatic implications?
11 A.Yes. Under-earning is symptomatic of cash
12 outflow recovery risk. When cash outflows are allowed to
13 materially outpace authorized cash inflows, significant
14 recovery risk exists. Recovery risk creates the
15 potential for write-downs and therefore has severe credit
16 rating implications. If the Company's
17 cash-from-operations to debt ratio declines from its
18 current low teen range to a single digit, it is likely
19 that the Company' s credit rating will fall below industry
20 average. Ultimately reduced credit ratings increases
21 financing costs and puts additional pressure on already
22 rising customer rates.
23 Q.Is the Commission accustomed to analyzing
24 forward looking cost and revenue conditions?
25
164 GALE, DI 14
Idaho Power Company
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1 A.Yes. The first to come to mind is the PCA
2 mechanism. Since 1993, the Company has been seeking and
3 obtaining interim adj ustments to its power supply costs
4 based, in part, upon a forecast component. The
5 administration of these filings has come to be quite
6 routine. The PCA is a consensus mechanism which
7 recognizes that in the case of one of the single largest
8 expenses for the Company, costs incurred in the past are
9 not the best predictor of what is reasonable or required
10 for the future.
11 Regardless of which test year is adopted, the
12 ratemaking process is inherently prospective and requires
13 reliance upon proj ections. Whether the test year is
14 completely historical or based totally on future results,
15 the ratemaking process requires an informed determination
16 of what conditions will prevail in the future. Idaho
17 Power has used its best financial and operational
18 information to construct its forecast test year.
19 Q.Why is moving away from the use of a historical
20 test year important?
21 A.Ul timately, Idaho Power needs a test year
22 approach that. is both timely and reflective of the costs
23 that the Company can reasonably expect to incur going
24 forward. An historical test year is by definition not
25 timely and may not be a reflection of costs going
forward.
165 GALE, DI 15
Idaho Power Company
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1 As an example of how actual costs might not be reflective
2 of reasonably expected ongoing costs, one could look at
3 Idaho Power's actual net power supply costs for almost
4 anyone year and conclude that - although the dollars may
5 represent what actually occurred that year - it would not
6 be appropriate for setting future rates. Similarly, a
7 test year based on a reasonable forecast may be more
8 indicati ve of the costs the Company will be experiencing
9 during the time rates are in place.
10 Q.Why is regulatory lag such a critical issue to
11 Idaho Power at this time?
12 A.To begin with, I would like to reiterate that
13 it is important to more parties than just Idaho Power.
14 As Mr. Steven Keen notes in his testimony, it is also
15 extremely important to those who invest and lend money to
16 the Company. From the Company's standpoint, during
17 periods of escalating costs where marginal costs are
18 higher than average costs, new rates are already
19 inadequate by the time they go into place. If this
2 0 situation continues for a prolonged period of time, the
21 Company will be denied a reasonable opportunity to earn
22 its authorized rate of return.
23 Q.Is regulatory lag always harmful to a utility?
24
166 GALE, DI 16
Idaho Power Company
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1 A. No. The impact of regulatory lag is dependent
2 upon the situation - if costs are not going up faster
3 than rates, then the utility is not harmed and may even
4 be helped by lag. Unfortunately, Idaho Power is not in
5 that situation and will not likely be for the foreseeable
6 future. Using the split test year approach pursued in
7 the 2003 and 2005 general rate cases, Idaho Power rates
8 trailed the start of the cost period they were intended
9 to reflect by 17 months. And even the 2007 forecast test
10 year in the Company's last general rate case resulted in
11 rates implemented 14 months after the proposed cost
12 period began.
13 RATE CASE TRETMNT OF DEVELOPING ISSUES
14 Q. You have described the approach Idaho Power
15 used in developing the 2008 test year. Were there other
16 developing regulatory issues that were considered for
17 inclusion in the test year?
18 A.Yes. These issues included: (1) the treatment
19 of CWIP, (2) the procurement and deployment of Advanced
20 Metering Infrastructure ("AMI"), (3) the handling of
21 ongoing costs related to energy efficiency and demand
22 response acti vi ties, and (4) the 2008 cost reductions
23 implemented in response to the Company's deteriorating
24 financial situation.
25
167 GALE, DI 17
Idaho Power Company
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1 Q.Please describe the Company's approach to CWIP
2 in this proceeding.
3 A.Legislative changes enacted in 2006 give the
4 Commission the authority to consider a return on Plant
5 Held for Future Use and CWIP in current rates. In Idaho
6 Power's 2007 general rate case, the Company proposed some
7 specific investments in Plant Held for Future Use for
8 inclusion in rate base. In this current case, the
9 Company is proposing the inclusion of a modest level of
10 CWIP in current rates. This is the first time the
11 Company has made such a proposal since the change in
12 legislation. While I discuss the policy implications in
13 my testimony, Ms. Catie Miller's testimony is solely
14 devoted to supporting the accounting treatment associated
15 with the CWIP addition.
16 Does Idaho Power envision seeking recovery ofQ.
17 other investments through CWIP in the future?
18 Yes. Idaho Power is experiencing a cycle ofA.
19 heavy infrastructure investment needed to address
20 reliabili ty, customer growth, peak demand growth, and
21 aging plant ahd equipment. The Company's aging
22 hydroelectric and thermal facilities require continuing
23 upgrades and component replacement. In addition, costs
24 related to relicensing hydroelectric facilities and
25 complying with the new licenses are substantial.
Continuing load growth also
168 GALE, DI 18
Idaho Power Company
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1 requires that the Company add to its transmission system
2 and distribution facilities to provide new service and to
3 maintain reliability. As a result, Idaho Power expects
4 to spend approximately $900 million in construction
5 expenditures from 2008 to 2010 which excludes any
6 estimated expenditures for a nominal 250-MW combined
7 cycle combustion turbine expected to be operational in
8 mid-2012, the Gateway West transmission proj ect expected
9 to be in service between 2012 and 2014, and the proposed
10 Hemingway-Boardman Line that could be in service as early
11 as 2012. The excluded projects and their estimated costs
12 are currently under review by the Company.
13 The Company has not made a combined investment
14 of this magnitude since it built the Hells Canyon Complex
15 in the 1950s and will need to rely on both internal and
16 external sources to fund it. Idaho Power envisions
17 seeking the Commission' approval to recover CWIP in rate
18 base on a proj ect-by-proj ect basis, and is hopeful that
19 the Commission and its customers will partner with the
20 Company using CWIP to ensure Idaho Power has the
21 requisi te funds to invest in future construction.
22 Q.AMI is another activity that has rate recovery
23 implications. What are Idaho Power's plans related to
24 AMI deployment across its system?
25
169 GALE, DI 19
Idaho Power Company
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1 A.Idaho Power has been assessing the value that
2 AMI could bring to its customers for a number of years.
3 Information regarding AMI's potential for our system has
4 been provided to the Commission formally through
5 compliance reports and informally through various
6 meetings with the Commission Staff. As noted in the
7 Company's AMI compliance report dated August 31, 2007,
8 Idaho Power plans a three-year deployment of AMI across
9 its entire system beginning in 2009. Ideally, the
10 Company would include the revenue requirement impacts of
11 the first year of the deployment in the current rate
12 filing; however, due to timing of the vendor Request for
13 Proposals and the ultimate awarding of contracts, the
14 Company was unable to have cost information in time for
15 the general rate case filing, so the AMI costs have not
16 been included in this request.
17 Q.Why is AMI cost recovery important to Idaho
18 Power?
19 A.AMI implementation will bring customer
20 operational benefits and provide a foundation for
21 customer information, programs, and dynamic pricing. For
22 these reasons, Idaho Power finds it reasonable to pursue
23 full implementation of AMI staged over three years.
24 However, the significant customer and economic growth
25 that the Company has been experiencing requires continued
170 GALE, DI 20
Idaho Power Company
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20
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1 investments in infrastructure to connect and meet the
2 energy needs of these customers. Additionally, there is
3 an ongoing need to replace existing infrastructure to
4 continue to reliably serve existing loads. Although AMI
5 will provide benefits to customers, it is not an
6 investment that is necessary for Idaho Power to fulfill
7 its obligation to meet new and existing service
8 requirements. Accordingly, Commission support of AMI
9 cost recovery is an important factor in the Company
10 proceeding with implementation.
11 Q.What are your plans to address AMI cost
12 recovery outside the general rate case?
13 A. Once cost information is known later this
14 summer, the Company will bring a separate filing before
15 the Commission to address the cost recovery aspects of
16 AMI. The Company will propose a parallel cost recovery
17 track to the general rate case and attempt to time the
18 AMI rate adjustments to coincide with the results from
19 the general rate case.
Q.How is energy efficiency currently funded at
21 Idaho Power?
22 A.The Company's energy efficiency acti vi ties are
23 primarily funded through our Energy Efficiency Rider,
24 Schedule 91, which applies a fixed percent of each.25 customer's bill to be used for purposes of energy
171 GALE, DI 21
Idaho Power Company
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1 efficiency and demand response. The Commission in its
2 Order No. 30560 recently authorized an increase in the
3 percentage applied to retail customer bills from 1.5
4 percent to 2.5 percent. This change became effective on
5 June 1, 2008.
6 Q.Is the Company proposing to transfer any of the
7 ongoing costs of funding energy efficiency acti vi ties in
8 this rate filing?
9 A.No. While one could make an argument for
10 including an ongoing amount of expenses in base rates,
11 the Company decided not to do so in this rate proceeding
12 in part to not add more pressure to the general rate
13 filing and in part to allow more time to assess the
14 regulatory model most appropriate for energy efficiency.
15 Q.What is the implication for energy efficiency
16 funding going forward?
17 A.The Company presently plans to spend more on
18 energy efficiency acti vi ties than the Energy Efficiency
19 Rider is forecast to collect. Eventually, if Idaho Power
20 is to invest in conservation, demand response, and energy
21 efficiency at the level it envisions, the Company will
22 have to raise the rider amount again or find al ternati ve
23 funding methods.
24.25
172 GALE, DI 22
Idaho Power Company
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1 Q.Please discuss the rate adjustment related to
2 the 2008 cost reductions.
3 A.As discussed in Ms. Smith's testimony, Idaho
4 Power implemented a cost containment effort that
5 identified $3,834,000 in estimated cost reduction to
6 other operations and maintenance expenses. Because these
7 cost reductions were a direct result of the Company
8 managing through the current financial situation and not
9 reductions that can be sustained over time, there is a
10 reasonable argument that they should not be deducted from
11 the cost of service, a. k. a. the revenue requirement.
12 However, following much discussion at the senior level,
13 the Company decided it was appropriate to include their
14 impact because these reductions were known at the time of
15 the filing.
16 RATE SPRE AN RATE DESIGN
17 Q.What has been Idaho Power's policy with regard
18 to rate spread and rate design proposals?
19 A.Idaho Power has consistently advocated for the
20 principle that rate spread among the customer classes and
21 for component pricing wi thin the customer classes should
22 be primarily cost-based. Accordingly, the Company's
23 ratemaking proposals have traditionally advocated
24 movement toward cost-of-service results which assign.25 costs to those customers that cause the Company to incur
the costs.
173 GALE, DI 23
Idaho Power Company
1 Q.Do the Company's proposals in this case.2 strictly adhere to that obj ecti ve?
3 A.No. The Company realizes that there are often
4 other ratemaking obj ecti ves, such as rate stability,
5 abili ty to pay, and rate shock, which the Commission may
6 consider in making its determination. However, the
7 Company believes that the best starting point for
8 Commission deliberations is an economic one.
9 Nevertheless, since some ratemaking situations may cause
10 abrupt change, Idaho Power has traditionally proposed
11 some limits to the movement toward cost-of-service. The
12 specifics of the Company's proposed rate spread and an.13 exhibi t delineating the target revenue requirement for
14 each customer class are contained in Mr. Tatum's
15 testimony.
16 Q.What guidance did you provide Mr. Tatum
17 regarding cost of service constraints applied to the rate
18 spread ultimately recommended?
19 A.First, I discussed the three Class Cost of
20 Service Studies prepared for this case with Mr. Tatum and
21 agreed with his conclusion that the 3CP/12CP Class Cost
22 of Service Study was the preferred starting point in this
23 proceeding to develop the recommended rate spread.
24 However, this method when applied without constraints,.25 does show a significant impact to a number of customer
classes
174 GALE, DI 24
Idaho Power Company
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1 and contract customers. Gi ven recent rate pressures and
2 the somewhat subj ecti ve nature of cost allocation and
3 year-to-year cost components, I asked Mr. Tatum to run
4 several rate mitigation scenarios to look at the impacts
5 of constraining the rate increase at different levels.
6 After this review, the Company chose to impose a 15
7 percent cap on any change to a customer class or special
8 contract customer. This level allowed rate movement of
9 no more than approximately one and a half times the
10 average rate change, while not dramatically impacting the
11 remaining classes that had to make up the shortfall.
12 Q.How has Idaho Power addressed the cost-based
13 obj ecti ve in its rate design proposals?
14 A. In the Company's last several general rate
15 cases, this obj ecti ve has been met by the implementation
16 of seasonal rates for all metered service schedules,
17 tiered summer rates for Residential and Small Commercial
18 customers, mandatory time-of-use rates for Large Power
19 Service customers, and two-tiered blocked rates for Large
20 General Service Customers taking secondary service. In
21 addition, this objective has been met by the
22 implementation of rates that reflect a greater emphasis
23 on the demand and customer components.
24
25
175 GALE, DI 25
Idaho Power Company
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1 Q. Are there any other policy obj ecti ves regarding
2 rate design?
3 A.Yes. The Company is committed to providing
4 customers cost-based price signals which encourage the
5 wise and efficient use of energy. As such, I have
6 directed the three pricing analysts sponsoring testimony
7 in this case to design cost-based rate proposals that
8 encourage increased energy efficiency among the Company IS
9 Residential, Large General Service, and Irrigation
10 customer groups. Ms . Waites is sponsoring testimony and
11 exhibi ts supporting tiered rates for Residential
12 customers in both the summer and non-summer season. Ms.
13 Nemnich is sponsoring testimony and exhibits supporting
14 the implementation of mandatory time-of-use rates for
15 Large General Service customers taking service at both
16 the Primary and Transmission Service Levels. Finally,
17 Ms. Bowman is sponsoring testimony and exhibits
18 supporting the implementation of load-factor pricing for
19 Irrigation customers.
20 Q.Is there another issue regarding the
21 development of the revenue requirement, the class cost of
22 service studies, and the rate design that you would like
23 to call to the attention of the Commission and the other
24 parties to this proceeding?
25
176 GALE, DI 26
Idaho Power Company
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21
22
23
24.25
1 A. Yes. The Company has prepared its case using
2 forecasted retail revenues that corresponded to those
3 that were filed in Case No. IPC-E-08-01, which was the
4 case seeking rate recovery for the costs of the Danskin
5 Combustion Turbine that came on line this spring. In
6 Order No. 30559, the Commission excluded a relatively
7 small part of the investment from inclusion in rates
8 ($422,000). Idaho Power has not included this small
9 impact in this filing because of the time required to
10 reprocess all the analyses and studies to match the
11 revenue.
12 Q.Is it your opinion that the granting of the
13 rate relief proposed by the Company is in the public
14 interest?
15 A.Yes. The proposed rates will allow Idaho Power
16 to continue providing safe, reliable service at
17 reasonable rates while maintaining its financial health.
18 Q.Does this conclude your testimony?
19 A.Yes, it does.
177 GALE, DI 27
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: And the witness is
4 available for cross?
3
5
6
MR. KLINE: That is correct.
COMMISSIONER SMITH: All right. Let's see
7 if Mr. Ward has any questions.
8 MR. WARD: My understanding is we're
9 holding Mr. Gale's rebuttal till a later time and all my
10 questions relate to rebuttal, so I have no questions.
.
11
12
13
14
15
16 BY MR. OLSEN:
17 Q
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: Yes, Your Honor.
CROSS-EXAMINATION
Mr. Gale, in your position as VP of
18 regulatory affairs, have you seen -- have you overseen
19 the preparation of past rate cases in '03, '05 and '07?
20
21
A
Q
Yes, I have.
Now, do you recall the last, I guess, full
22 hearing rate case that we had for Idaho Power was in
23 2003; is that correct?
24.25
A
was.
The last one that went to hearing, yes, it
CSB REPORTING
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178 GALE (X)
Idaho Power Company
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21
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23
24
25
1 Q Okay. Now, are you familiar, and I'm
2 digging up a little bit of memories here, but when the
3 cost of service issue was last dealt with by the
4 Commission, the Commission had requested that a separate
5 docket be opened and that a number of workshops be held.
6 Do you recall that?
7 A Yes, I do.
8 Q Okay, and do you recall specifically that
9 one of the issues that was outstanding there was whether
10 new growth is properly covering its cost of service; is
11 that correct?
12 A Yes.
13 Q Now, I know subsequent to that 2003 rate
14 case there was workshops that were held and the parties
15 got together to talk about the issues that were raised
16 that the Commission asked it to look at and specifically,
17 a report was filed with the Commission. Do you recall
18 that?
19 A Vaguely.
Q Okay.
MR. OLSEN: May I approach the witness?
COMMISSIONER SMITH: Yes, you may.
(Mr. Olsen approached the witness.)
MR. OLSEN: I'm handing you a copy of The
Parties' Final Report. If we could have this marked as
CSB REPORTING
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179 GALE (X)
Idaho Power Company
1 Irrigator Exhibit 307..2 COMMISSIONER SMITH: So we will identify
3 this as Exhibit 307.
4 (Idaho Irrigation Pumpers Association
5 Exhibi t No. 307 was marked for identification.)
6 Q BY MR. OLSEN: Mr. Gale, could you turn to
7 page 4 of that report?
8 A I'm there.
9 Q Okay, and down at the bottom in paren 3,
10 it talks about whether new growth is properly covering
11 its cost of service, and just to paraphrase what the
12 parties came up with here, they indicated that there was.13 something troubling with the way costs, associated with
14 growth, were allocated, but they couldn't come up with
15 any technical remedy for that matter citing, I guess,
16 legal concerns and that the matter would have to be later
17 decided by the Commission on a policy basis.
18 Now, since the prior rate cases since 2003
19 have been settled, has the Commission had a chance to
20 address this policy issue?
21 A No.
22 Q Okay; so is it fair to say that one of the
23 prime issues in the '03 rate case is still open today,
24 whether growth and the costs of growth covering itself is.25 one of the key issues in this rate case?
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180 GALE (X)
Idaho Power Company
.1 A Having had a chance to look at your
2 document, it refreshes my mind of what occurred after the
3 2003 case. We did have a robust discussion of attempting
4 to try to obj ecti vely or mathematically find a way to
5 incorporate growth in allocations and that was a robust
6 effort. Ultimately we weren't able to do it through a
7 method and the conclusion stated there that the parties
8 came to an acknowledgment that it was an issue, but that
9 it was probably best left in the hands of the
10 Commissioners as a policy issue.
11 MR. OLSEN: Madam Chairman, I'd move for
12 the admission of Exhibit 307 for the record..13 COMMISSIONER SMITH: Without objection, it
14 will be admitted.
15 (Idaho Irrigation Pumpers Association
16 Exhibit No. 307 was admitted into evidence.)
17 MR. OLSEN: I have no further questions.
18 COMMISSIONER SMITH: Mr. Purdy.
19 MR. PURDY: They all pertain to rebuttal.
20 Thank you.
21 COMMISSIONER SMITH: Okay, Mr.
22 Richardson.
23 MR. RICHARDSON: Thank you,
24 Madam Chairman..25
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181 GALE (X)
Idaho Power Company
.
.
.
1 CROSS-EXAMINATION
2
3 BY MR. RICHARDSON:
4 Q Good morning, Mr. Gale.
5 A Good morning, Mr. Richardson.
6 Q First of all, on page 14 of your direct
7 testimony on line 8, you're asked a question that
8 presupposes a concern about confiscation of shareholder
9 assets has been raised in your testimony. Can you point
10 to me where that issue was raised?
11 A What was your question?
12 Q On page 14, line 8, you're asked a
13 question that presupposes that a concern about
14 confiscation of shareholder assets was raised in your
15 testimony. I was wondering where that issue was raised.
16 A Other than on line 8?
17 Q Other than on line 8.
18 A I would say it's on line 8.
19 Q And that's the only place that issue is
20 raised in your testimony; correct?
21 I think that's the only place where thatA
22 term is used.
23 And it's used in a question. It's not inQ
24 your testimony, it's not actually one of your answers;
25 correct?
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Idaho Power Company
.
.
.
1 A It is in a question.
2 Q Then turning over to page 17 of your
3 direct testimony, you're addressing what you term a
4 developing issue and it's relating to CWIP in rate
5 base?
6 A Yes, that's one of them.
7 Q And CWIP stands for what?
8 A Construction work in progress. I think
9 that's defined in my testimony.
10 Q And in your testimony on page 18, you
11 state that there was legislation in 2006 that gives the
12 Commission authority to allow plant held for future use
13 and construction work in progress in current rates;
14 correct?
15 A Yes.
16 Q And you state that you are the Company's
17 policy witness on this topic, while Ms. Miller is the
18 technical witness who addresses the accounting issues
19 associated with CWIP in rates; correct?
20 A Yes, I am the policy witness in this
21 regard.
22 Q And you reference legislation, the
23 legislation you reference, do you recall whether or not
24 that legislation was attached to Ms. Miller's testimony
25 or her workpapers?
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183 GALE (X)
Idaho Power Company
.
10
.
.
1 A I don't recall.
2 MR. RICHARDSON: Madam Chairman, may I
3 approach the witness?
4 COMMISSIONER SMITH: Yes, you may.
5 (Mr. Richardson approached the witness.)
6 Q BY MR. RICHARDSON: Mr. Gale, I'll
7 represent that this was attached to Ms. Miller's
8 testimony as a workpaper.
9 A Thank you.
Q Is this the legislation which you were
11 referring to in your testimony?
12 A It appears that it is.
13 MR. RICHARDSON: Madam Chair, I'll ask
14 that this document entitled House Bill 694 be marked as
15 Exhibit No. 211.
16 COMMISSIONER SMITH: All right, we'll
17 identify this as Exhibit 211.
18 (Industrial Customers of Idaho Power
19 Exhibit No. 211 was marked for identification.)
20 BY MR. RICHARDSON: Mr. Gale, is it fairQ
21 to assume that Idaho Power played a major role in the
22 passage of this legislation?
23 I know that I and a number of others fromA
24 the Company were interested advocates for this
25 legislation.
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184 GALE (X)
Idaho Power Company
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.
1 Q So is it fair to characterize Idaho Power
2 Company's role as a maj or role in the passage of this
3 legislation?
4 We were active advocates in its motion ofA
5 the legislation.
6 Q Can you tell me who Rich Hahn is?
7 A Rich Hahn is a public affairs employee of
8 Idaho Power who's involved with lobbying efforts
9 primarily at the state legislature.
10 Q And if you would look at the last page of
11 Exhibit No. 211, very close to the bottom there's a block
12 enti tled "Contact." Can you tell me why Rich Hahn's name
13 is on this legislation?
14 A Not specifically.
15 Q Now, this legislation, you testify that
16 it's changed Idaho Code section 502A by, as you testify,
17 gi ving the Commission the authority to consider a return
18 on plant held for future use and CWIP; correct?
19 A Yes.
20 And prior to this legislation, did theQ
21 Commission not have the authority to grant a return on
22 CWIP?
23 They -- I believe since 1981, somewhere inA
24 our testimony it describes the exact date of when this
25 ini tial prevention of the use of CWIP was initiated, but
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185 GALE (X)
Idaho Power Company
.
.
.
1 from then until 2006 the Commission didn't have this
2 tool.
3 Q And would you agree, subj ect to check,
4 that that date is 1984?
5 A Yes, I would, subj ect to check.
6 Q So in 1984 the legislature passed section
7 502A that prohibited the Commission, I believe except in
8 cases of extreme emergencies, from putting CWIP in rates.
9 Now, you were a rate analyst at Idaho Power Company in
10 1984, were you not?
11 A I go back that long.
12 Q So do you have any idea what prompted the
13 Idaho legislature to make this practice illegal? What
14 was so bad about CWIP in rates in 1984?
15 MR. KLINE: I'm going to object,
16 Madam Chairman. I think we're certainly getting into an
17 area that's well beyond the scope of the policy
18 discussion that Mr. Gale contains in his testimony and
19 we're certainly bordering perhaps even on an
20 interpretation of the legislation.
21 COMMISSIONER SMITH: Mr. Richardson.
22 MR. RICHARDSON: Madam Chair, I'm not
23 asking the witness to interpret the legislation
24 whatsoever. Whether or not CWIP in rates is a good thing
25 or a bad thing is the heart of this witness's policy
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186 GALE (X)
Idaho Power Company
.
.
20
1 testimony. He was a rate analyst at Idaho Power when the
2 Idaho legislature made CWIP illegal and I'm asking him if
3 he has any ideas why they did that, what was the policy
4 reason behind that legislation.
5 COMMISSIONER SMITH: I'm going to allow
6 the question. Mr. Richardson, we always have called it
7 CWIP. Is this a new thing? It's just distracting.
8 MR. RICHARDSON: Thank you, Madam
9 Chairman. With that quip, I'll move forward.
10 Q BY MR. RICHARDSON: So do you have the
11 question in mind?
12 A Would you rephrase it for me, please?
13 Q Certainly. I was wondering if you as a
14 rate analyst with Idaho Power Company at the time the
15 legislature made CWIP illegal in Idaho if you have any
16 recollection as to what was motivating, what was the
17 policy reason behind that.
18 A I actually do not. I'm not sure I even
19 knew what CWIP was.
Q Okay, but prior to 1984, this Commission
21 had the legal authority to put CWIP in rates; correct?
22
23
A That's my understanding.
Q And presumably, the Commission addressed
24 the issue of CWIP in rates prior to the time the law was.25 passed that essentially prohibited the practice;
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187 GALE (X)
Idaho Power Company
.
.
.
1 correct?
2 A I don't know.
3 MR. RICHARDSON: May I approach the
4 witness, Madam Chair?
5 COMMISSIONER SMITH: Yes, you may.
6 (Mr. Richardson approached the witness.)
7 MR. RICHARDSON: Madam Chair, I'm not
8 going to ask that this be identified as an exhibit
9 because it's a prior Commission Order and you have the
10 authori ty to take official notice of this document.
11 Madam Chair, this is an Order from Docket No. U-1008-155
12 and 156, and I'm going to ask Mr. Gale to take a look at
13 page 3. I have highlighted an instance where this
14 Commission addressed CWIP in rates. I was wondering if
15 you could take a moment and read for the record the
16 highlighted portion of the Order for us.
17 THE WITNESS: Before I read the highlight,
18 may I take a second and read the document?
19 MR. RICHARDSON: Certainly.
20 THE WITNESS: Okay.
21 COMMISSIONER SMITH: I think this might be
22 a good time for all of us to take about an eight-minute
23 break, so we'll come back at 10 till.24 (Recess. )
25 COMMISSIONER SMITH: We'll go back on the
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188 GALE (X)
Idaho Power Company
1 record. Mr. Richardson..2 MR. RICHARDSON: Thank you, Madam Chair.
3 Q BY MR. RICHARDSON: Mr. Gale, have you had
4 a chance to familiarize yourself with this document over
5 the break?
6 A Yes, thank you.
7 Q And I'll identify this document for the
8 record as Commission Order No. 16945. Mr. Gale, before
9 the break I asked you to read the highlighted position of
10 this Order beginning on page 3, going over to page 4.
11 Could you do that now, please?
12 A Yes. " . .. a maj ori ty of the Commission.13 opposes, in principle, the concept of CWIP in rate base.
14 There is substantial evidence in the record to support
15 this finding. The Commission notes that it was impressed
16 wi th the testimony of Intervenor Committee for Fair
17 Rates, Inc. witness Bertschi. Bertschi argued that
18 allowance of CWIP in rate base redefines the term 'rate
19 base' and violates the regulatory principle that
20 ratepayers should only pay a return on utility property
21 that is 'used and useful.' The Commission Staff also
22 endorsed this argument. Furthermore, Bertschi" -- maybe
23 it Bertschi. It's B-e-r-t-s-c-h-i -- "argued that the
24 allowance of CWIP in rate base violates the principle.25 that rates should correspond to current costs of
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189 GALE (X)
Idaho Power Company
.1 providing service. Bertschi also argued that allowance
2 of CWIP in rate base blurs the traditional roles and
3 responsibili ties of investors and consumers. Bertschi
4 also contended that allowance of CWIP in rate base
5 confiscates ratepayer capital because the cost of money
6 is less to the company than it is to ratepayers.
7 Finally, Bertschi argued that the allowance of CWIP and
8 rate base" -- probably is in rate base -- "dampens
9 management incentive for prudent resource planning and
10 aggressive cost control. According to Bertschi, CWIP in
11 rate base is 'political allocation of capital,'
12 'corporate welfare,' and 'cost-plus regulation,' and.13 interferes with the incentive for prudent investment that
14 is naturally built into the current mechanism for capital
15 acquisition. "
16 Skipping down, "A maj ority of the
17 Commission adopted Bertschi' s and Staff's arguments
18 against CWIP in rate base. That decision was based upon
19 substantial evidence in the record."
20 Q Thank you, Mr. Gale. On page 19 of your
21 testimony, you testify that Idaho Power envisions seeking
22 the Commission's approval to recover CWIP in rate base on
23 a proj ect-by-proj ect basis, and what are the policies
24 that the Company has developed to decide when and under.25 what circumstances it will request CWIP in rate base?
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190 GALE (X)
Idaho Power Company
.
.
.
1 A Well, I would say at this point broadly
2 there are two. Applications of CWIP as a tool are
3 dependent upon Company circumstances, but the types of
4 applications would be big dollar proj ects that occur over
5 mul tiple years, so you have that impact of the carrying
6 costs of the proj ect creating a problem or a potential
7 problem for the eventual rate recovery and large enough
8 that you'd have cash flow implications.
9 Q And you're requesting seven point
10 something million dollars in this case in CWIP?
11 A Well, I think
12 MR. KLINE: Madam Chairman, I'm going to
13 obj ect. Catie Miller is the witness that has the
14 specific dollar amounts.
15 THE WITNESS: Oh.
16 MR. KLINE: I would expect that she'd be a
17 better witness to address these questions to.
18 MR. RICHARDSON: I'm not asking Mr. Gale
19 how the number was derived. I'm asking if he knew what
20 the number is that the Company is requesting in this
21 case. It seems, that the dollar amount is related to the
22 policy of when the trigger requested CWIP, so I would
23 presume that the policy witness would know that.
24 COMMISSIONER SMITH: I'll allow the
25 question.
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191 GALE (X)
Idaho Power Company
.
.
.
1 THE WITNESS: Thank you. What I was
2 checking was what I had said in my testimony. That was
3 my hesitation. Okay, on page 18 of my testimony starting
4 on 9, since I'm getting good at reading, "In this current
5 case, the Company is proposing the inclusion of a modest
6 level of CWIP in current rates. This is the first time
7 the Company has made such a proposal since the change in
8 legislation. " The purpose of an, of the immediate
9 application is really to walk through the CWIP accounting
10 and the CWIP ratemaking on a small piece, relatively
11 small piece, of our case as it relates to relicensing,
12 so, if you will, a test case on CWIP for potentially
13 larger ones down the road.
14 Q BY MR. RICHARDSON:And when you call this
15 a test case on CWIP, what do you mean by that?
16 A Well, in this instance Ms. Miller does
17 describe the accounting and ratemaking treatment that the
18 Company proposes in this specific instance and we think
19 it was useful to show the Commission and other parties
20 how CWIP might be applied, get a determination on that
21 before larger issues come down the road.
22 Q And you're the policy witness on CWIP and
23 do you think it would have been useful to the Commission
24 for the Company to have addressed the Commission's prior
25 explicit policy prohibiting CWIP in this case as a test
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192 GALE (X)
Idaho Power Company
.
.
.24
25
1 case so that the Commission could understand why CWIP is
2 good now when it was so bad just back in 1981 when this
3 Order that you read from was issued?
4 A Well, I think as a matter of policy, this
5 Commission might view this as a good tool, that we've had
6 a prohibition and now a reinstatement of CWIP since that
7 Order, so I think the Commission may look at the evidence
8 and decide that CWIP is a tool that they want to use on
9 occasion.
10 Q And when you say we had a reinstatement of
11 CWIP, what you really mean is that the legislature
12 eliminated the prohibition against CWIP; correct?
13 A Well, when I said reinstatement, I used it
14 to say that there was an ability to ask for CWIP again,
15 but the exact thing that happened in the legislation was
16 the prohibition was struck.
17 MR. RICHARDSON: Thank you,
18 Madam Chairman. That's all I have.
19 COMMISSIONER SMITH: Mr. Miller, do you
20 have questions?
21 MR. MILLER: Nothing for Mr. Gale at this
22 time. Thank you.
23 COMMISSIONER SMITH: Mr. Bruder.
MR. BRUDER: Nothing, thank you.
COMMISSIONER SMITH: And Mr. Price.
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193 GALE (X)
Idaho Power Company
..
.
.
1 MR. PRICE: No questions.
2 COMMISSIONER SMITH: Questions from the
3 Commission. Commissioner Redford.
4 COMMISSIONER REDFORD: Yes, I have one
5 question.
6
7 EXAMINATION
8
9 BY COMMISSIONER REDFORD:
10 Q Are you the appropriate witness to talk
11 about the accounting treatment of CWIP?
12 A I would defer to Ms. Miller, but I will be
13 on later in case she can't answer all your questions.
14 COMMISSIONER REDFORD:Thank you. I have
15 no other questions.
16 COMMISSIONER SMITH: Commissioner
17 Kempton.
18 COMMISSIONER KEMPTON: Madam Chairman, I
19 have one question on page 17, beginning with line 9, but
20 it's better addressed in rebuttal examination and I would
21 like to when we get to rebuttal come back to page 17 on
22 direct.
23 COMMISSIONER SMITH: All right. Any
24 redirect, Mr. Kline?
25 MR. KLINE: No.
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194 GALE (Com)
Idaho Power Company
.
.
.
1
2
COMMISSIONER SMITH: Thank you, Mr. Gale.
You're not excused.
3
4
(The witness left the stand.)
MR. KLINE: Didn't even try. Idaho
5 Power's next witness is Maggie Brilz whenever you're
6 ready, Madam Chairman.
7
8
COMMISSIONER SMITH: We're ready.
9 MAGGIE BRILZ,
10 produced as a witness at the instance of the Idaho Power
11 Company, having been first duly sworn, was examined and
12 testified as follows:
20
13
14
15
16 BY MR. KLINE:
17 Q
18 record?
19 A
Q
21 what capacity?
22 A
DIRECT EXAMINATION
Could you please state your name for the
Yes, my name is Maggie Brilz.
Ms. Brilz, by whom are you employed and in
I'm employed by Idaho Power Company as
23 manager of customer service.
24
25
Q And on June 27th of this year, you
pre filed direct testimony consisting of 19 pages and
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195 BRILZ (Di)
Idaho Power Company
.
.
.
1 seven exhibits which were marked Exhibits 3 through 10;
2 is that correct?
3 A That is correct.
4 Q And on December 3rd of this year you also
5 filed prefiled rebuttal testimony consisting of eight
6 pages; is that correct?
7 A That is correct.
8 Q And did you have any exhibits with your
9 rebuttal testimony?
10 A I did not.
11 Q Do you have any additions or corrections
12 that you need or updates that you need to make to either
13 your direct testimony or your prefiled rebuttal
14 testimony?
15 A I have one update to my prefiled direct
16 testimony. On page 10, line 5, I refer to a position
17 called customer service specialist that was created in
18 2001 to facilitate focused communication with customers
19 during outages and that position has recently been
20 reti tled outage specialist.
21 Q Wi th that update to your testimony, if I
22 were to ask you the same questions today that were posed
23 in your direct testimony and your rebuttal testimony that
24 has been prefiled, would your answers be the same?
25 A Yes, they would.
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196 BRILZ (Di)
Idaho Power Company
.
.
.
18
19
20
21
22
23
24
25
1 MR. KLINE: Madam Chairman, I would
2 request that Ms. Brilz' s direct testimony and rebuttal
3 testimony be spread on the record as if presented today
4 and that Exhibits 3 through 10 be marked for
5 identification.
6 COMMISSIONER SMITH: If there i s no
7 obj ection, we will spread the prefiled testimony upon the
8 record as if read and identify the exhibits.
9 (The following prefiled direct and
10 rebuttal testimony of Ms. Maggie Brilz is spread upon the
11 record.)
12
13
14
15
16
17
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197 BRILZ (Di)
Idaho Power Company
.
.
.
17
1 Q.Please state your name and business address.
2 A.My name is Maggie Brilz. My business address
3 is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company as Manager
6 of Customer Service.
7 Q.Please describe your educational background.
8 A.In May of 1980, I received Bachelor of Arts
9 degrees in Economics and Psychology from Smith College in
10 Northampton, Massachusetts. In 1998, I completed the
11 Uni versi ty of Idaho's Public Utili ties Executive Course
12 in Moscow, Idaho. I have also attended numerous
13 seminars, conferences, and courses involving public
14 utili ty regulation.
15 Q.Please describe your business experience with
16 Idaho Power Company.
A.I started employment with Idaho Power Company
18 in November of 1984 as a Financial Analyst in the
19 Planning Department. In 1986, I was promoted to the
20 position of Rate Analyst in the Rate Department. In July
21 of 1993, I was promoted to Rate Design Supervisor. In
22 October of 1996, I was promoted to Pricing Director in
23 the Pricing and Regulatory Services Department. My
24 duties as
25
198 BRILZ, DI 1
Idaho Power Company
.
.
.
1 Pricing Director included overall management of the
2 development of rate design and pricing strategies, the
3 analysis of the impact on customers of rate design
4 changes, the preparation of cost-of-service studies, and
5 the administration of the Company's tariffs. I was
6 promoted to my current position as Manager of Customer
7 Service in May 2008. In my current position, I am
8 responsible for the overall operation of the Company IS
9 Customer Service Center, including incoming call
10 handling, credit and collection acti vi ty, and customer
11 account management.
12 Q.What is the purpose of your testimony in this
13 proceeding?
14 A. I will describe the various improvements and
15 initiatives Idaho Power has undertaken over the past
16 several years relating to its customer service
17 acti vi ties.
18 Q.Before proceeding with details on the Company's
19 customer service improvements and initiatives, would you
20 please briefly describe Idaho Power's business model for
21 providing customer service?
22 A.Yes. Idaho Power operates a centralized
23 Customer Service Center ("CSC") that provides customers
24 full service access to Customer Service Representatives
25 ("CSRs") weekdays from 7:30 a.m. to 6:30 p.m. and outage
and emergency access to Customer Service Specialists
199 BRILZ, DI 2
Idaho Power Company
.
.
.
1 ("CSSs") 24 hours a day, seven days a week. Other
2 benefi ts of our centralized Customer Service Center
3 include a single phone number for customers in the
4 Treasure Valley, a single toll-free 800 number for
5 customers outside the Treasure Valley, consistency in
6 service and information regarding our policies and
7 procedures, and prompt service with over 80 percent of
8 our inbound calls answered wi thin 30 seconds.
9 The Customer Service Center employs a
10 well-trained staff with specific customer service skills
11 and uses state of the art technology. Calls are
12 moni tored for quality and to provide on-going training
13 support to personnel. A performance management system is
14 utilized to provide feedback to ensure that our customers
15 receive superior customer service.
16 Idaho Power employs bilingual CSRs that provide
17 service to the Company's Spanish-speaking customers.
18 Additionally, we utilize a third-party language service
19 to help us communicate with other non-English speaking
20 customers.
21 In addition to the services provided by CSRs
22 during business hours and by CSSs 24/7, Idaho Power
23 provides its customers access to account and outage
24 information 24 hours a day, seven days a week, through an
25 Interactive Voice Response (" IVR") unit. Through the
IVR, customers can make
200 BRILZ, DI 3
Idaho Power Company
.
.
.
1 payment arrangements, retrieve billing, payment, and
2 meter reading information, sign up for Budget Pay, access
3 energy efficiency and usage information, and receive
4 information on outages. Twenty-four hours a day account
5 access via the Company's Web site also allows customers
6 the same "self-help" options available through the IVR
7 plus the ability to start and stop service and engage in
8 an energy usage analysis for their home or small
9 business.
10 Outside of the Customer Service Center, Idaho
11 Power provides customer service through its operations
12 centers located throughout the service terri tory. The
13 operations centers are primarily responsible for
14 building, operating, and maintaining the Company's
15 distribution facilities. These centers are open Monday
16 through Friday for general business activities primarily
17 related to service installations and line extensions.
18 Idaho Power manages its operations to respond
19 to emergency situations and after-hours service
20 connection requests 24 hours a day, seven days a week,
21 and is staffed at 13 strategically located service
22 centers throughout the service terri tory to ensure quick
23 response as well as a presence wi thin the communi ties we
24 serve.
25 Each of the operations centers has a drop box
201 BRILZ, DI 4
Idaho Power Company
1 available for check or money order payments.In.2 addition,
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
202 BRILZ, DI 4a
Idaho Power Company
.
.
1 each center also provides assistance to customers via a
2 direct telephone line to the Customer Service Center and
3 can direct customers to the appropriate personnel for
4 non-customer service related inquiries.
5 Idaho Power also has representatives staffed
6 locally wi thin the regions to accommodate customers at
7 their homes or businesses. Personal assistance from the
8 Company's Customer Representatives is available for
9 customers in all customer classes regarding billing
10 inquiries, energy efficiency programs, power quality, and
11 other inquiries best accommodated through face-to-face
12 interaction at the customer's residence or business. In
13 addi tion, large industrial and commercial customers have
14 a dedicated representative who actively manages their
15 accounts. These large customers have telephone access to
16 their representative as well as to the Company's dispatch
17 center for emergency assistance 24 hours a day, seven
18 days a week.
19 Q.What changes have been made during the past
20 several years to improve the service provided through the
21 Customer Service Center?
22 A.Over the past several years the Company has
23 increased its focus on improved training of our CSRs, on
24 internal quality improvements, and on improvements to the.25 usabili ty of the IVR.
203 BRILZ, DI 5
Idaho Power Company
.
.
.
1 Q. Please describe the training program for the
2 Company's CSRs.
3 A.Idaho Power uses skills-based routing to direct
4 inbound calls to CSRs who are best trained to handle the
5 particular call. The Company's training is structured
6 such that CSRs progress through a skills-based program to
7 ensure that mastery of certain skills is attained prior
8 to moving into more detailed or complicated types of
9 services. New CSRs spend approximately four weeks in
10 classroom training. As part of this training, they spend
11 time with mentors who are the most experienced CSRs.
12 During the mentoring sessions the new CSRs listen to
13 inbound calls and observe how the calls are handled.
14 Once the formal classroom training is completed the new
15 CSRs are paired with their mentors while they handle
16 calls until the CSR, the mentor, and the trainer all are
17 confident the CSR can handle calls on his or her own. As
18 the CSR' s experience grows, additional training to
19 enhance the CSR' s skills to handle more complex issues,
20 such as new construction and commercial and irrigation
21 service requests, is conducted.
22 The Company also has a call monitoring and
23 coaching program that is designed to develop the overall
24 knowledge, skills, and abilities of our CSRs. On a
25 monthly basis, each CSR has two recorded phone calls that
are reviewed
204 BRILZ, DI 6
Idaho Power Company
.
.14
1 wi th his or her supervisor. The calls are reviewed for
2 both how well the CSR handled the interaction with the
3 customer and how accurate the CSR was in processing the
4 transaction.In addition, each supervisor spends 30
5 minutes of phone time with each CSR on a monthly basis.
6 During these one-on-one sessions, the supervisor listens
7 to the CSR' s interaction with customers and provides
8 on-the-spot coaching and assistance to enhance the CSR' s
9 knowledge, skills, and abilities.
10 Q.What changes have been made over the past
11 several years regarding quality improvement?
12 A.The Company has developed an internal quality
13 assurance program that focuses on identifying trends and
issues related to customer complaints and CSR accuracy.
15 Each month the Customer Service Quality Administrator
16 prepares" complaint" reports detailing all customer
1 7 contacts in which the customer expressed some level of
18 dissatisfaction with the Company. The trends and issues
19 identified through these reports are reviewed by the
20 Company's management to determine areas of customer
21 concern that can be addressed with process or system
22 changes. In addition, the Customer Service Quality
23 Administrator prepares monthly reports detailing the
24 accuracy rates for each of the CSRs. These reports are.25 likewise reviewed to
205 BRILZ, DI 7
Idaho Power Company
.
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1 identify areas where additional training or corrective
2 action is needed.
3 Q.What changes have been made recently to the
4 IVR?
5 A.Idaho Power's IVR is designed to route calls to
6 the CSR who is best trained to serve that specific
7 customer while subj ecting the customer to as few menu
8 prompts as possible. For example, a customer who selects
9 the Irrigation Option wi thin the IVR is routed directly
10 to a CSR with the specific training and skill level
11 needed to meet the needs of irrigation customers.
12 Prior to February of this year, customers
13 selecting the Residential Option were not immediately
14 gi ven the option to speak with a representative. In
15 response to feedback from customers about the lack of
16 this option, the Company revamped its residential queue
17 within the IVR. The revamped IVR was launched in
18 February 2008 and lets customers who select the
19 Residential Option immediately choose to speak with a
20 CSR. In March of this year, E Source, a research company
21 that focuses on issues relevant to energy service
22 providers, benchmarked Idaho Power's IVR against the 2007
23 survey results of 103 other utilities' IVRs. Idaho
24 Power's performance index was 797 points out of a
25 possible 1,000 points. Based on our performance index
206 BRILZ, DI 8
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1 of 797, Idaho Power's IVR ranks 10th out of the 103
2 utili ty IVRs included in the survey. Based on E Source's
3 research, Idaho Power's new IVR is considered to be in
4 the top quartile of those assessed.
5 Q.Have the improvements within the Customer
6 Service Center resulted in improvements to the quality of
7 service provided to customers?
8 A.Yes. Over the past four years, the number of
9 calls received by the Customer Service Center as well as
10 the number of calls handled by CSRs has remained stable
11 even though the number of customers over this same time
12 period has increased by almost 13 percent.In addition,
13 the number of customer contacts logged as "complaints" by
14 the CSRs declined by almost 40 percent from 2006 to 2007
15 and is on track to maintain the 2007 level as of the end
16 of the first quarter of 2008. Over this same time
17 period, the Customer Service Center has consistently
18 achieved an overall CSR accuracy rate greater than 99
19 percent. The stable trend in the number of calls
20 received, the decrease in the number of "complaints"
21 logged, and the consistently high CSR accuracy rate, I
22 believe, are the result of our CSR training and
23 monitoring program, our quality initiatives, and our
24 customers' growing acceptance of "self-help" through the
25 IVR and the Company's Web site.
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Idaho Power Company
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1 Exhibi t No. 3 and Exhibit No. 4 detail Idaho
2 Power's call statistics for the period 2004 through 2007.
3 Q.How has Idaho Power improved its outage
4 management and communication systems?
5 A.In 2001, the Customer Service Specialist
6 posi tion was created to facilitate focused communication
7 wi th customers during outages and to allow dispatch
8 personnel to more fully focus on communications with
9 field personnel. The CSSs, although part of the Customer
10 Service Center, are physically located with dispatch
11 personnel wi thin the Company's Distribution Operations
12 Center ("DOC") to more effectively provide service to
13 customers during outages. In 2007, the Customer Service
14 Center and the Distribution Operations Center were
15 relocated into the same facility to further enhance the
16 quality of customer service. The close proximity of the
17 Company's CSC and DOC personnel has improved
18 communications during outages between Idaho Power
19 personnel and between Idaho Power and its customers.
20 Among the 76 national utilities whose residential
21 customers were surveyed by J. D. Power and Associates in
22 2007, Idaho Power was ranked second in the nation with
23 regard to outage communication. Exhibit No.5, titled
24 "Top Utili ties Providing Comprehensive Information During
25 Outages," shows the ratings for the top-rated
208 BRILZ, DI 10
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1 utili ties in this category.
2 Q. What billing and payment options does Idaho
3 Power offer its customers?
4 A.Customers have numerous ways in which they can
5 pay their bills. Check or money order payments may be
6 mailed in, placed in a drop box, or made at a pay
7 station. Customers may also participate in automatic
8 bank debiting (PreferredPay) and electronic billing and
9 payment (E-bill Services). Customers can also use a
10 third-party vendor and pay their bills using a credit
11 card or a check by phone. Customers' satisfaction with
12 the number of billing options provided has consistently
13 been increasing as detailed on Exhibit No.6, which
14 details results from the Burke, Inc., customer
15 satisfaction survey described by Ms. Drake in her direct
16 testimony.
17 Q.Has Idaho Power made any changes over the past
18 several years that have reduced uncollectible amounts?
19 A.Yes.. In October 2004 the Company implemented a
20 tiered deposit structure for irrigation customers. Under
21 this structure, customers who have an outstanding past
22 due balance of $1,000 or more as of December 31 are
23 required to pay a deposit roughly equal to four months of
24 irrigation usage prior to having service reconnected the
25 following season. Prior to implementing
209 BRILZ, DIll
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1 the tiered deposit structure, all deposits required from
2 irrigation customers were equal to approximately one and
3 a half months of irrigation usage. Also, over the past
4 several years, the Company's Agricul tural Representatives
5 have made a concerted effort to work with customers who
6 have challenges paying their bills to help them
7 understand the deposit requirements and to encourage them
8 to make timely payments. Both the tiered deposit
9 structure and the improved communication between the
10 Company' s Agricultural Representatives and its irrigation
11 customers have resulted in a 73 percent reduction in past
12 due irrigation balances and a 93 percent reduction in the
13 irrigation write off amount at the end of 2007 when
14 compared to the end of 2003. Exhibit No.7 details the
15 amount of irrigation year-end past due balances and write
16 offs over the past five years.
17 Q.Has Idaho Power taken any other steps over the
18 past several years to improve customer service?
19 A.Yes.Idaho Power has taken steps to improve
20 its metering quality, its distribution and transmission
21 facility siting process, and its system reliability.
22 Al though I am not responsible for the efforts in these
23 three areas, they nonetheless impact the quality of the
24 Company's customer service.
25
210 BRILZ, DI 12
Idaho Power Company
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1 Q.How well is Idaho Power's metering system
2 performing?
3 A. Idaho Power's metering system is performing
4 very well. The Company's meter reading accuracy rate has
5 consistently been 99.8 percent since 2003. In addition,
6 the Company processes 99.4 percent of all requests for
7 service connection on the same day as the request with
8 99.8 percent of all service connection requests processed
9 wi thin three business days. Idaho Power processes 99.8
10 percent of all requests for service disconnection within
11 four business days and 99.8 percent of all requests for a
12 meter re-read wi thin three business days. Additionally,
13 Idaho Power's system-estimated meter reads, corrected
14 meter reads, and meter reread requests are minimal as
15 indica ted by Exhibit No.8.
16 Q.What steps has Idaho Power taken to improve its
17 metering quality?
18 A.In 1999, Idaho Power began developing a meter
19 quali ty system based upon the International Standards
20 Organization (ISO 9001-2000) model. This quality system
21 focuses on monitoring of metering operations, identifying
22 the root cause of all discrepancies, implementing an
23 action plan to resolve issues, and seeking opportunities
24 for continuous improvement. An example of how successful
25 this
211 BRILZ, DI 13
Idaho Power Company
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1 quali ty program is in identifying and addressing metering
2 problems occurred in late 2006 when the Company began a
3 targeted inspection program of all current transformer
4 ("CT") meters. This inspection program revealed
5 approximately 15 incidences where an incorrect multiplier
6 associated with the CT meter was resulting in incorrect
7 billings. As a result of the discovery of this error,
8 process changes were made, employees were trained on the
9 new process, a new maintenance program for CT meters was
10 implemented, new reports were created, and the Company's
11 Customer Information System ("CIS") was modified to
12 prevent billing from occurring if a meter multiplier
13 error existed. Although this example highlights an issue
14 that had a large impact on a small number of customers,
15 it illustrates the improvements in processes and training
16 that ultimate result in improved customer service.
17 What steps has Idaho Power taken to improve itsQ.
18 distribution and transmission facility siting process?
19 For many years, it was Idaho Power's practiceA.
20 to develop long-range plans for its transmission and
21 distribution facilities and then share these plans with
22 jurisdictional authorities and customers in order to
23 foster an understanding of the facilities needed to meet
24 electrici ty needs, to purchase substation sites, and to
25
212 BRILZ, DI 14
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1 acquire transmission rights in advance of the need and
2 before physical development in a given area overtook our
3 ability to economically provide the necessary
4 infrastructure. Beginning in 2005, Idaho Power began
5 forming Customer Advisory Committees ("CAC") in order to
6 cooperatively develop long-range plans for transmission
7 and distribution facilities with input and guidance from
8 the public. So far three CACs have been created. The
9 Treasure Valley Electrical Plan CAC was formed in mid
10 2005, the Wood River Electrical Plan CAC in early 2007,
11 and the Magic Valley Electrical Plan CAC in late 2007.
12 Each CAC is comprised of jurisdictional members such as
13 mayors, city council members, county commissioners,
14 economic development staff, Idaho Transportation
15 Department and County Highway District staff, and city
16 and county planning staff, environmental organization
17 staff, customers, developers, staff from the Bureau of
18 Land Management, U.S. Forest Service, and Idaho
19 Department of Fish & Game, and chamber of commerce
20 representatives. This broad group of interested parties
21 works with Idaho Power over the course of several months
22 to develop the long-range build-out plan for facilities
23 in the affected region. Idaho Power is working to have
24 the results of the final plans placed into the
25 jurisdictional comprehensive plans (in map form) wi thin
213 BRILZ, DI 15
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1 the regions in which they are developed so they become a
2 part of each jurisdiction's long-range growth strategy.
3 Q.What has Idaho Power done to improve system
4 reliability?
5 A.In 2007, Idaho Power created a management level
6 posi tion as part of its concentrated effort to improve
7 the reliability of its electrical distribution system
8 used to serve customer load. The Manager of Distribution
9 Reliability and Maintenance is charged with developing a
10 long-term organizational structure and strategy to
11 support the Company's reliability obj ecti ves. Since the
12 inception of the Distribution Reliability and Maintenance
13
14
Department, new processes have been established to
identify and prioritize infrastructure needs and funding
15 requirements. In addition, a long-term reliability
16 improvement strategy, which was launched in early 2008,
17 has been developed. This strategy focuses on three
18 primary areas. First, emphasis is placed on outage data
19 accuracy in order to minimize the number of outages
20 associated with unknown causes. By focusing on the cause
21 of outages, the effectiveness of corrective
22 infrastructure proj ects is enhanced. Second, focus is
23 placed on identifying system defects through the ongoing
24 patrolling of the Company's facilities. Through this
25 identification, a plan is
214 BRILZ, DI 16
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1 implemented to prioritize infrastructure maintenance work
2 and capital improvements to address the defects. And,
3 third, emphasis is placed on reviewing the system
4 protection schemes established for various distribution
5 circui ts in order to minimize the number of customers who
6 might be affected by an outage. In addition to focusing
7 on the three primary areas identified as part of the
8 Company's reliability strategy, Idaho Power has purchased
9 and is utilizing new design tools to assist in the
10 development of more reliable infrastructure designs.
11 Q.Has Idaho Power focused more attention on
12 system reliability in ways other than through the
13 creation of the Distribution Reliability and Maintenance
14 Department?
15 A.Yes.In 2006 the Company established the
16 electrical system's performance for Schedule 7 and
17 Schedule 9 customers as a component of Idaho Power's
18 Employee Incentive Program. By establishing specific
19 reliabili ty targets for this group of customers, the
20 Company has provided a financial incentive for all
21 employees, managers, and officers to focus on
22 improvements in system reliability.
23 Q.Has Idaho Power's system reliability improved
24 since the Distribution Reliability and Maintenance
25 Department was established and reliability targets were
215 BRILZ, DI 17
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1 incorporated into the Employee Incentive Plan?
2 A.Yes. Exhibit No. 9 details the System Average
3 Interruption Frequency Index ("SAIFI") for all Idaho
4 Power customers. As can be seen from Exhibit No.9, the
5 annualized average number of outages per customer
6 declined during 2007 compared to the number of outages
7 during 2006. In addition, with the exception of the
8 first several weeks of 2008 during which heavy snow
9 storms occurred throughout much of the Company's service
10 terri tory, the annualized average number of outages
11 experienced by customers has continued to decline during
12 2008 compared to the number of outages during 2006.
13 Likewise, the number of customers with more than six
14 outages per year continues to be less during both 2007
15 and 2008 than was experienced during 2006, as can be seen
16 from Exhibit No. 10.
17 Q.Is Idaho Power committed to providing superior
18 service to its customers?
A.Yes. Idaho Power is committed to providing
20 superior service to our customers not only through our
21 high quality Customer Service Center but in all facets of
22 our business, as is demonstrated by the various
23 ini tiati ves undertaken over the past several years both
24 within the CSC and throughout the Company's planning and
25 operations
216 BRILZ, DI 18
Idaho Power Company
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10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1 organizations.
2 Q.Does this conclude your direct testimony in
3 this case?
4 A.Yes, it does.
5
6
7
8
9
217 BRILZ, DI 19
Idaho Power Company
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14
1 Q.Please state your name.
2 A.My name is Maggie Brilz.
3 Q.Are you the same Maggie Brilz that has
4 previously presented direct testimony?
5 A.Yes, I am.
6 Q.Have you had the opportunity to review the
7 pre-filed direct testimony of Commission Staff witnesses
8 Ms. Parker and Mr. Thaden and CAPAI witness Ms. Ottens?
9 A.Yes, I have.
10 Q.What is the scope of your rebuttal testimony?
11 A.My testimony will focus on the issue of
12 convenience fees for credit card and check-by-phone
13 payments raised by Ms. Parker, the issue of payment
arrangements raised by Mr. Thaden, and the recommendation
15 made by Ms. Ottens that a monthly arrearage report be
16 prepared and provided to all interested parties.
17 Q.Are you sponsoring any exhibits with your
18 direct rebuttal testimony?
19
20
21
A.No.
CONVNIENCE FEES
Q.Ms. Parker recommends that the Company 'explore
22 al ternati ves to requiring customers to pay convenience
23 fees and report its findings to the Commission
24
25
218 BRILZ, DI REB 1
Idaho Power Company
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1 Staff. Has the Company previously explored al ternati ves
2 to convenience fees?
3 A.Yes. As Ms. Parker noted in her testimony,
4 Idaho Power has recently negotiated with a new vendor to
5 provide credit and debit card and check payments
6 beginning in January 2009. At the time the project to
7 select a new vendor was undertaken, Idaho Power was
8 interested in pursuing a "no fee" credit card, debit car,
9 and electronic check payment service for its customers.
10 However, as the project evolved, it became clear that
11 offering a no-fee service had potential negative
12 consequences, including increased payment processing
13 costs that would be passed on to all customers. As a
14 resul t, the Company chose not to offer a no-fee service
15 at this time.
Q.What are the various payment methods that
17 customers can use?
18 A.Customers can pay their bills by mailing a
19 check to the Company's payment processing center, using
20 the Company's automatic bank debiting program
21 PreferredPay, using the Company's e-bill on-line payment
22 option, making a payment at a pay station, and using the
23 third-party credit and debit card and check payment
24 options either over the phone or via the Company's Web
25 si te. In addition,
219 BRILZ, DI REB 2
Idaho Power Company
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1 customers can pay their bills using on-line bill payment
2 offered through their banks.
3 Q.How do the costs associated with credit card
4 and check-by-phone payments compare to the costs
5 associated with other forms of payment?
6 A.The costs associated with credit card payments
7 are estimated to be more than two times more expensive
8 than the costs associated with processing a pay station
9 payment (currently the most expensive payment processing
10 method for which the Company pays the fee) and almost
11 twenty times more expensive than the costs associated
12 wi th processing a mailed-in check.
13 Q. Were there concerns other than increased costs
14 associated with credit card processing that were
15 considered by the Company?
16 A.Yes. During the investigation, concerns were
17 raised about the potential for customers who normally pay
18 their bills through a lower-cost method to use their
19 credi t cards to pay their bills in order to earn benefits
20 such as air miles and rebates. Such a practice under a
21 "no-fee" option would have the potential to significantly
22 increase the Company's costs for processing payments.
23 Q.Is the Company aware of any utility that has
24 offered a "no-fee" credit card payment option?
25
220 BRILZ, DI REB 3
Idaho Power Company
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1 A.Yes. As part of its investigation, the Company
2 became familiar with the "no-fee" service offered by
3 Pacific Gas and Electric (" PG&E") in California. PG&E
4 had initiated the 18-month pilot program, under which
5 customers were not charged to pay their utility bills by
6 credit, debit, or prepayment cards, in December 2006.
7 The utility discovered during the course of this pilot
8 that the savings from the program did not cover the
9 costs. On October 1 of this year, PG&E stopped accepting
10 credit card payments altogether. At the same time, the
11 utili ty began charging a transaction fee for debit card
12 payments which are processed by a third-party vendor.
13 Q. Is the Company willing to discuss with Staff
14 the findings from its "no-fee" investigation?
15 A.Yes. The Company would welcome the opportunity
16 to meet with Staff to discuss the results of its
17 investigation and to gather input from Staff on concerns
18 and suggestions they may have.
19 PAYMNT ARGEMNTS
20 Q.Mr. Thaden discusses in his testimony the issue
21 of payment arrangements and makes several suggestions
22 regarding efforts that might be made to improve
23 customers' follow through in meeting the terms of payment
24
25
221 BRILZ, DI REB 4
Idaho Power Company
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1 arrangements. What is Idaho Power's approach to payment
2 arrangements?
3 A.When customers find themselves in the situation
4 in which service is scheduled to be disconnected due to
5 non-payment of their bills, Idaho Power prefers to make
6 reasonable and workable payment arrangements with them in
7 order to avoid the costs associated with terminating
8 service as well as to recover the revenue associated with
9 providing service. When customers who are unable to pay
10 their bills contact the Company, or are contacted by the
11 Company through our out-bound calling process, Idaho
12 Power's customer service representatives ("CSRs") work
13 with them to identify mutually agreeable payment
14 arrangements that allow them to continue receiving
15 service. In addition, the Company's Meter Specialists
16 are authorized to make payment arrangements with
17 customers who have not previously done so at the time
18 they arrive at the customers' premises to disconnect
19 service for non-payment.
20 Q.Does Idaho Power grant its employees
21 flexibility in working with its customers to make payment
22 arrangements?
23 A.Yes. Employees are granted flexibility in
24 working with customers to establish payment arrangements
25 that meet the needs of both the customer and the Company.
222 BRILZ, DI REB 5
Idaho Power Company
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1 CSRs and Meter Specialists are provided general
2 guidelines as part of their training, but are also
3 encouraged to make "good" business decisions based on
4 individual circumstances. A customer's ability to pay,
5 the account balance owing, the payment history, the
6 payment arrangement history, and the length of time to
7 pay the balance are factors that are taken into
8 consideration when working with the customer.
9 Arrangements can span the gamut from extending the
10 scheduled service termination date for a few days so that
11 the customer can pay the balance due, to paying one-half
12 the balance now with the balance due in thirty days, to a
13 levelized arrangement in which the past-due balance is
14 paid over twelve months.
15 Q.Mr. Thaden suggests that the Company provide
16 monthly customer reminder calls or provide customers a
17 payment book to reinforce the importance of making the
18 agreed upon payment. Does Idaho Power currently offer
19 any of these reminders?
20 A.Yes. Whenever a customer enters into a payment
21 arrangement, Idaho Power sends a letter to the customer
22 detailing the. terms of the arrangement and detailing when
23 each payment is due and the amount of each payment.
24
25
223 BRILZ, DI REB 6
Idaho Power Company
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1 Q. Has Idaho Power seen a shift in the number of
2 customers who are entering into and subsequently
3 defaul ting on their payment arrangements?
4 A.No. Over the past three years, the number of
5 customers who entered into payment arrangements and
6 subsequently failed to meet the terms of those
7 arrangements has held steady at about 45 percent.
8 Q.Mr. Thaden recommends that Idaho Power confer
9 with Staff and attempt to identify solutions to payment
10 arrangement defaults. Is the Company willing to do so?
11 A.Yes. The Company would be happy to discuss
12 this issue with Staff.
13 MONTHLY ARGE REPORT
14 Q.Ms. Ottens proposes that a monthly arrearage
15 report be compiled and provided to all interested parties
16 so that CAPAI can stay on top of these trends without
17 wai ting for a rate case to obtain information. Do you
18 agree with this proposal?
19 A.I do not disagree with providing CAPAI
20 information on arrearages in order to help the
21 organization be better able to meet its service demands
22 in the future. However, rather than have the Commission
23 order Idaho Power to provide a report similar to that
24 provided to CAPAI by.25
224 BRILZ, DI REB 7
Idaho Power Company
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18
19
20
21
22
23
24
25
1 PacifiCorp, I would prefer to work with CAPAI (and any
2 other interested parties) to identify the information
3 that would be most helpful to it while minimizing the
4 resources and costs Idaho Power would need to devote to
5 such an endeavor. As Ms. Ottens states in her testimony,
6 Idaho Power does not track which customers are low income
7 and therefore has limited ability to provide information.
8 However, I believe a constructive discussion with CAPAI
9 can lead to the identification of information that is
10 both useful and available and that both parties find
11 mutually agreeable.
12 Q.Does this conclude your rebuttal testimony?
13 A.Yes, it does.
14
15
16
225 BRILZ, DI REB 8
Idaho Power Company
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2 open hearing.)
(The following proceedings were had in
MR. KLINE: And with that, Ms. Brilz is
4 available for cross-examination.
3
5
6 questions?
7
8
9
10
11
12
13
14
15 BY MR. PURDY:
16 Q
COMMISSIONER SMITH: Mr. Ward, do you have
MR. WARD: No questions. Thank you.
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: No questions.
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: Just this, Madam Chair.
CROSS-EXAMINATION
Ms. Brilz, good morning.
Good morning.
Would you just turn quickly to your
19 rebuttal testimony on page 7, specifically the Q&A that
17 A
20 begins on line 15?
21
22
23
24
25
18 Q
Yes.
Do you have that?
I have that.
Okay. I just want to clarify, are you
regarding Ms. Ottens' proposal that the Company provide a
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A
Q
A
Q
226 BRILZ (X)
Idaho Power Company
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1 report similar to that provided to Community Action by
2 PacifiCorp as part of a recent agreement, are you -- is
3 the Company Idaho Power refusing to provide any specific
4 information or what?
5 A No, the Company is not refusing at all.
6 What I recommended in my rebuttal testimony is that we
7 si t down and have a discussion as to what specific
8 information would be useful and have a report designed to
9 meet those specific needs.
10 Q And are you able and willing to do that in
11 the relatively near future?
12 A Yes.
13 Q And it could be done outside the context
14 of this case, could it not?
15 A Absolutely.
16 MR. PURDY: Good enough. That's all I
17 have. Thank you.
18 COMMISSIONER SMITH: Thank you.
19 Mr. Richardson.
MR. RICHARDSON: No questions,
21 Madam Chair.
22
23
24.25
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: No questions.
COMMISSIONER SMITH: Mr. Bruder.
MR. BRUDER: No questions.
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Idaho Power Company
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1 COMMISSIONER SMITH: Mr. Price.
2 MR. PRICE: No questions.
3 COMMISSIONER SMITH: Does the Commission
4 have questions? Commissioner Redford.
5
6 EXAMINATION
7
8 BY COMMISSIONER REDFORD:
9 Q Yes, Ms. Brilz, I'm sorry, what is the
10 magni tude of the dollars of the costs that we're talking
11 about as far as convenience fees, just convenience
12 fees?
13 A I'm not totally clear on what you're
14 asking me, Commissioner.
15 Q Well, you're indicating in your testimony
16 that you have chosen not to offer a no fee service on
17 certain payment methods. I'm wondering what is the cost
18 to the Company for accepting credit cards on line, debit
19 cards, check payments and so on.
A I see. Currently because we do charge a
21 convenience fee for customers who use credit cards, there
22 is no cost to the Company for that service. Those fees
23 are paid directly by our customers. We do have costs
24 associated with payment processing and depending on the.25 type of payment, the least expensive types of payments
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Idaho Power Company
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1 are, of course, the electronic payments that are made
2 ei ther electronically through the internet or our
3 preferred pay service and our most expensive right now is
4 pay station where customers walk in and pay at one of our
5 various authorized pay stations throughout our service
6 terri tory.
7 Q Okay, and you don't have any idea as to
8 the magnitude of the overall cost to the Company, for
9 instance, walking into one of your pay stations or I
10 guess you've said that if I pay on line with my credit
11 card, I don't get charged extra?
12 A Idaho Power doesn't pay those fees.
13 Customers do pay those fees and there currently is a
14 $2.85 charge for the first $300 transaction.
15 Q So the only thing that you charge fees on
16 is for your walking into an office to pay, anything
17 else?
A Customer's don't get charged, but Idaho
19 Power does pay a fee to the company that processes those
20 pay station payments, so there are no fees that our
21 customers pay. for anything other than credit card or
22 check by phone payments that they make through a third
23 party.
24
25
Q You say the credit card, I pay something
for that?
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Idaho Power Company
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1 A Yes.
2 Q And the check, I pay something for that?
3 A A check by phone which basically is a
4 service that allows me to talk to a third party and
5 they'll create the check to debit my account.
6 Q Well, it just seems to me being a customer
7 that it's kind of unfair when I try to pay my bill that I
8 get charged for paying my bill because I use a certain
9 method of payment. Doesn't that strike you as kind of
10 inconsistent? You want me to pay my bill, but you want
11 me to pay a charge for it.
12
13
14
A Well, we're looking at ways to make sure
that we can keep our costs down for all of our customers
and depending on how the credit card companies will
15 negotiate for the fees, we have seen that the fees for
16 the credit card payment are significantly higher than any
17 of our other costs that we incur for the other forms of
18 payment. At this point we made the determination that
19 having all of our customers pay those higher fees was an
20 avenue that we did not want to pursue; however, we are
21 open to having further discussions and continuing that
22 research to see if there is some way down the road that
23 we can have those fees lessened or some other mechanisms
24 that would allow customers additional options with no fee
25 to pay their bills.
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230 BRILZ (Com)
Idaho Power Company
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2
COMMISSIONER REDFORD: I have no further
questions. Thank you.
3 COMMISSIONER SMITH: Do you have any
4 redirect, Mr. Kline?
5
6
7
8
9 Theresa Drake.
10
MR. KLINE: No.
COMMISSIONER SMITH: Thank you, Ms. Brilz.
(The witness left the stand.)
MR. KLINE: Idaho Power's next witness is
11 THERESA DRAKE,
12 produced as a witness at the instance of the Idaho Power.13 Company, having been first duly sworn, was examined and
14 testified as follows:
15
16
17
18 BY MR. KLINE:
19 Q
20 record?
21
22
A
Q
DIRECT EXAMINATION
Could you please state your name for the
Theresa Drake.
And by whom and in what capacity are you
23 employed, Ms. Drake?
24.25
A I'm employed by Idaho Power as a manager
of customer relations and energy efficiency.
CSB REPORTING
(208) 890-5198
231 DRAKE (Di)
Idaho Power Company
.
.
.
1 Q And on June 27th of this year did you
2 prefile direct testimony consisting of 23 pages and five
3 exhibi ts which have been preliminarily identified as
4 Exhibits 11 through 15?
5 A Yes.
6 Q And on December 3rd did you prefile
7 rebuttal testimony consisting of 27 pages?
8 A Yes.
9 Q And do you have any exhibits that went
10 with your rebuttal testimony?
11 A No.
12 Q I'm sorry, no?
13 A No.
14 Q Do you have any corrections or updates
15 that you need to make to either your prefiled direct or
16 your prefiled rebuttal testimony?
17 A Yes, I do. On my direct testimony on page
18 3, line 5, I state that I included three exhibits as part
19 of my direct and in fact there's five.
20 Q All right, with that one correction, Ms.
21 Drake, if I were to ask you the same questions that were
22 posed to you in your direct, prefiled direct, and
23 prefiled rebuttal testimony, if I were to ask you those
24 same questions today, would your answers be any
25 different?
CSB REPORTING
(208) 890-5198
232 DRAKE (Di)
Idaho Power Company
.1 A No, they wouldn't.
MR. KLINE: With that, Madam Chairman, I
3 would request that the prefiled direct testimony and
2
4 prefiled rebuttal testimony of Ms. Drake be spread on the
5 record as if presented today and that Exhibits 11 through
6 15 be marked for identification.
7
8 is so ordered.
COMMISSIONER SMITH: Without obj ection, it
9 (The following prefiled direct and
10 rebuttal testimony of Ms. Theresa Drake is spread upon
.
20
21
22
23
24.25
11 the record.)
12
13
14
15
16
17
18
19
CSB REPORTING
(208) 890-5198
233 DRAKE (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is Theresa Drake. My business address
3 is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company as Manager
6 of Customer Relations and Energy Efficiency.
7 Q.Please describe your educational background.
8 A.In May of 1990, I received a Bachelor of
9 Science degree in Marketing with emphasis in Finance from
10 Jacksonville State University in Jacksonville, Alabama.
11 I have attended numerous seminars and conferences on
12 pricing issues, regulatory issues, marketing research,
13 and energy efficiency.
14 Q. Please describe your business experience with
15 Idaho Power.
16 A.I joined Idaho Power in January 1997 as a
17 Pricing Analyst. In July 2001, my posi tion evolved into
18 a Senior Pricing Analyst and included preparing
19 cost-of-service studies, development of the Company's
20 tariffs, and performance of duties as a regulatory
21 liaison for customer related issues. In February 2004, I
22 became Manager of Customer Relations and Research (now
23 referenced as Customer Relations and Energy Efficiency) .
24 In that capacity, I
25
234 DRAKE, DI 1
Idaho Power Company
.
.
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1 manage staff members and activities associated with
2 customer satisfaction, process improvement, and energy
3 efficiency.
4 Q.What is the scope of your testimony in this
5 proceeding?
6 A.My testimony will address the Company's energy
7 efficiency efforts and customer relations acti vi ties.
8 ENERGY EFFICIENCY
9 Q.Please define energy efficiency as referenced
10 by the Company.
11 A.Energy efficiency refers to the Company's
12 acti vi ties involved with energy efficiency, demand
13 response, and small scale renewable programs and
14 initiatives.
15 Q.Why does the Company use the term "energy
16 efficiency" instead of Demand-Side Management?
17 A.The Company intentionally refers to all the
18 above-mentioned activities as "energy efficiency" because
19 our research shows this term is generally understood by
20 our customers. We incorporate energy efficiency
21 terminology into our customer education efforts and
22 program participation recruitment. When the Company is
23 referring to a specific type of demand response, it is
24 specific to
25
235 DRAKE, DI 2
Idaho Power Company
.
.
1 characterize management of electrical demand as
2 appropriate.
3 Q.Will you be sponsoring any exhibits as part of
4 your testimony?
5 A.Yes. I am including five exhibits as part of
6 my testimony. Exhibit No. 11, titled Energy Efficiency
7 Programs Summary provides an outline of current programs
8 offered by the Company. Exhibi t No. 12 is titled Energy
9 Efficiency and Demand Response Programs, Sectors, and
10 Opera tional Type. Exhibit No. 13 is a graph depicting
11 the energy savings achieved by the ten largest
12 utilities/program administrators in 2007 compared with
13 2006.
14 Q.Please describe Idaho Power's obj ecti ves in
15 promoting and implementing energy efficiency and demand
16 response programs.
17 A.The Company's two main obj ecti ves for energy
18 efficiency and demand response are:(1) to acquire all
19 cost-effective resources in order to efficiently meet the
20 Company's electrical system's needs and to provide
21 customers with programs and (2) information to help them
22 manage their energy and demand use and lower their bills.
23 Q.Has the Company made progress in promoting and
24 implementing energy efficiency and demand response.25
236 DRAKE, DI 3
Idaho Power Company
.
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19
1 programs?
2 A.The Company's most recent Demand-Side
3 Management 2007 Annual Report was filed with the Idaho
4 Public Utilities Commission (" IPUC") on March 14, 2008.
5 This report specifically describes progress made by the
6 Company in providing energy efficiency and demand
7 response programs. As noted in the report, energy
8 savings from energy efficiency acti vi ties increased on a
9 system-wide basis by 29 percent and expenditures on
10 related activities increased by 36 percent as compared to
11 2006. Overall energy efficiency activities in 2007
12 resulted in a 57 MW peak reduction and 91,145 MWh in
13 energy savings. Since 2002, the Company has
14 substantially increased the amount of dollars spent on
15 energy efficiency. For example, in 2002, energy
16 efficiency program expenses were about $1.94 million
17 while in 2007 the Company spent approximately $15.66
18 million.
Q.Is the Company's goal or philosophy to pursue
20 all cost-effective energy efficiency and demand response?
21 A.Yes. The Company is in the process of pursuing
22 all cost-effective energy efficiency and demand response
23 through various programs as determined feasible through
24 the Integrated Resource Planning (" IRP") process.
25
237 DRAKE, DI 4
Idaho Power Company
.
.
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1 The programs offered by the Company and the resulting
2 energy savings have increased dramatically in recent
3 years.
4 Q.Are there other indicators of the Company's
5 increasing commitment to energy efficiency?
6 A.Yes. In pursuit of energy efficiency and
7 demand response programs, the Company's Customer
8 Relations and Energy Efficiency Department ("CR&EE") has
9 grown significantly since the beginning of 2006. In
10 January 2006, the CR&EE department consisted of
11 approximately 10 employees. The CR&EE department now
12 consists of 29 employees, including two leaders with
13
14
backgrounds in regulatory affairs, energy efficiency,
customer analysis, program operation, and marketing. The
15 department staff provides a diverse background of skill
16 sets. Employees include engineers; employees with
17 Leadership in Energy and Environmental Design
18 certification; certified energy managers; analysts with
19 advanced degrees in economics, business, and marketing;
20 and marketing and advertising professionals. The
21 addi tion of new staff has had a direct affect on
22 increased energy efficiency savings and education. The
23 department also has coordinators for each market segment:
24 residential, commercial, industrial, and irrigation and
25 customer satisfaction research.
238 DRAKE, DI 5
Idaho Power Company
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1 The Company actively participates in market
2 transformation efforts as a method of achieving energy
3 savings. These efforts aid national and regional
4 organizations, such as the Northwest Energy Efficiency
5 Alliance ("NEEA"), to improve the design of products,
6 services, and methods to be more energy efficient.
7 Appliance standards and building code improvements are
8 other means of market transformation the Company has
9 supported.
10 Other areas of pursuit by the Company include
11 residential and commercial education initiatives for
12 energy efficiency and the Local Energy Efficiency Funds
13 ("LEEF"). The purpose of these funds is to provide modest
14 funding for short-term proj ects and acti vi ties that do
15 not fit within other categories of energy efficiency
16 programs but still further energy efficiency efforts.
17 For example, in 2007, funds were distributed to the Idaho
18 Office of Energy Resources for the installation and
19 monitoring of a cold climate heat pump at an Energy Star~
20 home in McCall, Idaho, to test the heat pump's
21 effectiveness in a cold climate.
22 Q.How does the Company determine if programs are
23 cost-effective?
24 Program cost-effectiveness is determined by theA.
25 Total Resource Cost test and the Utility Cost test as
239 DRAKE, DI 6
Idaho Power Company
.
.
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1 defined by the Electric Power Research Institute End Use
2 Technical Assessment Guide and the California Standard
3 Practice Manual. For each test, if the benefi t/ cost
4 ratio is greater than "1," the program is considered
5 cost-effecti ve.
6 Q.How does Idaho Power determine which energy
7 efficiency or demand response programs to offer?
8 A.Since 2004, program planning has been part of
9 the IRP process. This process occurs every two years and
10 is used to identify energy and demand needs to reliably
11 serve all retail customers in the Company's service
12 terri tory. If energy efficiency and demand response
13 programs are determined to be cost-effective, they are
14 evaluated on an equal basis with supply-side resources to
15 meet the identified demand and energy needs. The
16 evaluation verifies if the program's costs and energy
17 savings potential warrants inclusion in the Company's
18 preferred resource portfolio.
19 Q.Does the Company implement new energy
20 efficiency and demand response programs during the time
21 period between each IRP?
22 A.The Company may implement new programs during
23 the time period between each IRP if the new program is
24 determined to be cost-effective, will provide energy
25
240 DRAKE, DI 7
Idaho Power Company
.
.
.
1 savings or demand reduction that will contribute to the
2 IRP resource stack, and if market potential for energy
3 efficiency exists. One tool the Company will utilize to
4 guide program growth is an updated energy efficiency
5 market potential study. This assessment will be used to
6 determine where additional energy efficiency and demand
7 response opportunities exist and will provide a basis for
8 program expansion and new program development.
9 Q.Are programs offered to customers in each
10 customer class or market sector?
11 A.Yes.
12 Q.Please describe the energy efficiency and
13 demand response programs available to each sector of
14 customers.
15 A.Programs available to residential customers
16 include one demand response program, eight energy
17 efficiency programs, and an educational ini tiati ve
18 program. The commercial and industrial sectors have three
19 programs available. The Company also provides a
20 Commercial education program for this sector. Two
21 programs are offered to the irrigation sector: a demand
22 response program and an energy efficiency program
23 designed to encourage replacement or improvement of
24 inefficient systems and components . Exhibit No. 12 lists
25 Idaho Power's energy
241 DRAKE, DI 8
Idaho Power Company
.
.
.
1 efficiency and demand response programs and Exhibit No.
2 11 provides an overview of each program offered by the
3 Company.
4 Q.Are there any additional programs identified
5 for the residential marketplace?
6 A.Yes. At the May 13th Energy Efficiency
7 Advisory Group meeting ("EEAG"), a Home Weatherization
8 Pilot was discussed that will be launched this summer.
9 This pilot will target customers who have income wi thin
10 151-250 percent of federal poverty level and may not be
11 investing in energy efficiency and to offer established
12 home weatherization improvements.
13 Q. Does the Company administer other energy
14 efficiency programs that have not been previously
15 mentioned?
16 Yes. The Company offers two small-scaleA.
17 renewable programs including the Green Power program and
18 Net Metering. Green Power is a voluntary program for
19 customers who wish to support certified green energy from
20 renewable resources. Net Metering provides an option for
21 customers to offset all or part of their electricity
22 usage by operating their own small-scale renewable power
23 generators. This program provides customers the
24 opportunity to sell their excess generation to the
25 Company.
242 DRAKE, DI 9
Idaho Power Company
.
.
.25
1 Q.How many participants does Idaho Power have in
2 the Green Power Program?
3 A.As of May 2008 the Company had 2,538
4 residential customers and 112 commercial customers
5 participating in the Green Power program.
6 Q.How many net metering customers does Idaho
7 Power have?
8 A.As of May 2008 the Company had approximately 48
9 residential customers and 12 non-residential customers
10 participating in the net metering program.
11 Q.Does the Company participate in or offer
12 efficiency-related acti vi ties other than the programs you
13 mentioned?
14 A. Yes. The Company sponsors and participates in
15 many organizations and community events that are directly
16 related to energy efficiency efforts. For example, the
17 Company is an active participant in the Northwest Power
18 and Conservation Council's ("NWPCC") Regional Technical
19 Forum, NEEA, Better Bricks, and the Consortium for Energy
20 Efficiency. Company staff participates in many trade
21 shows and community events such as the Idaho Green Expo,
22 home and garden shows, agricultural shows, and has spoken
23 to many civic and community groups as well as employers
24 at their employee
243 DRAKE, DI 10
Idaho Power Company
.
.
24
. 25
1 meetings.
2 The Company is actively participating in
3 several regional studies to identify and promote emerging
4 technologies that may further enhance opportunities for
5 new program deployment. Some examples include: a study
6 managed by NEEA to determine efficient ways to design and
7 operate distribution feeders through voltage regulators,
8 a regional study to evaluate the energy savings potential
9 of ductless heat pumps, and regional efforts to measure
10 the impacts of light-emitting diode ("LED") lighting.
11 Is there opportunity for public input to theQ.
12 Company's energy efficiency planning process?
13 A. Yes. Idaho Power relies on the input of the
14 EEAG to provide customer and public interest guidance on
15 energy efficiency program design and implementation
16 strategies. The EEAG consists of 12 members spanning a
17 cross-section of the public including residential,
18 industrial, commercial, irrigation, the elderly, and low
19 income customers; state agencies, including regulatory
20 commissions; environmental and technical interests; and
21 representatives from Idaho Power. The EEAG meets several
22 times a year and has been instrumental in the development
23 of Idaho Power's programs and studies since 2002.
244 DRAKE, DIll
Idaho Power Company
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.
.
1 Q.Are Idaho Power's energy efficiency programs
2 proving to be successful?
3 A.Yes. Each program offered has provided
4 benefi ts to the Company and to customers. Most programs
5 provide monetary incentives for participants, while
6 others target educational efforts and long-term energy
7 saving opportunities. Increased participation in the
8 Company's programs benefits all customers by using
9 resources wisely and avoiding or delaying development of
10 supply-side resources.
11 From an energy savings perspective, the
12 Company's programs and initiatives saved 91,145
13 megawatt-hours and provided 57 megawatts of peak
14 reduction across the Company's electrical system in 2007.
15 Each sector contributed to the energy savings total. In
16 2007, the residential sector realized energy savings of
17 12,441 megawatt-hours, commercial and industrial sectors
18 saved 37,790 megawatt-hours, and the irrigation sector
19 provided 12,304 megawatt-hours of energy savings. Other
20 programs and activities, including LEEF, resulted in nine
21 megawatt-hours savings. Additional energy savings were
22 obtained through market transformation partnership
23 activities with NEEA. NEEA estimated that 28,601
24 megawatt-hours were saved in the Company's service
25 territory in 2007.
245 DRAKE, DI 12
Idaho Power Company
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1 The Company is reviewing and evaluating several
2 programs to ensure they are achieving levels of success
3 consistent with program planning. Programs are changed
4 as it is deemed necessary.
5 Q.How do Idaho Power's recent energy efficiency
6 acti vi ties compare with other regional utili ties efforts?
7 A.As depicted in Exhibit No. 13, according to the
8 NWPCC, Idaho Power ranks third among the 10 largest
9 northwest utili ties or program administrators in annual
10 savings of average megawatts from 2006 to 2007.
11 Q.Do Idaho Power's energy efficiency acti vi ties
12 contribute to customer satisfaction?
13 A . Results of the Company's Customer
14 Satisfaction Survey's have shown steady improvement over
15 recent years as the percentage of customers who have a
16 positive perception of the Company's energy conservation
17 efforts has continued to increase. As depicted in
18 Exhibi t No. 14, customers' posi ti ve perception of the
19 Company's conservation efforts increased from 39 percent
20 in early 2003 to 50 percent in late 2007. This
21 represents a 28 percent increase in posi ti ve customer
22 perception.
23
24
25
246 DRAKE, DI 13
Idaho Power Company
.
.
.
1 CUSTOMER RELATIONS
2 Q.Please describe Idaho Power's continuing
3 practice of surveying its customers about their levels of
4 satisfaction.
5 A.Idaho Power has contracted with Burke, Inc., to
6 conduct quarterly customer relationship surveys since
7 1995. These Burke surveys represent Idaho Power's
8 primary customer relationship research.In addition to
9 the Burke surveys, Idaho Power acquires the results of
10 the annual J. D. Power and Associates Electric Utility
11 Residential Customer Satisfaction Study. The J. D. Power
12 and Associates study is used primarily as a benchmark to
13 other electric utili ties. As its name implies, the J. D.
14 Power and Associates study is for residential customers
15 only, as the number of Idaho Power commercial customers
16 is not sufficiently voluminous at this point in time to
17 qualify for a subscription to the J. D. Power's commercial
18 customer study.Idaho Power also utilizes focus groups
19 for proj ect-specific quali tati ve research when the
20 si tuation is appropriate. Examples of situations when
21 the Company used focus groups in the past include getting
22 a general sense of customer opinion prior to developing a
23 comprehensive survey and getting qualitative feedback
24 from customers on Idaho Power's website experience.
25
247 DRAKE, DI 14
Idaho Power Company
.
.
.
1 Idaho Power also conducts a transactional study
2 for new construction proj ects. These surveys are
3 conducted by Idaho Power personnel by making a follow-up
4 phone call to a random selection of customers requiring
5 line construction work by the Company. Surveys are
6 tracked in a data base for reporting and trending
7 purposes.
8 Q.Please describe the Company's customer
9 satisfaction performance results in recent years.
10 A. Based on the Burke surveys, Idaho Power
11 customers' satisfaction has steadily improved and the
12 Company is experiencing levels of customer satisfaction
13
14
at significantly higher levels than when we began
measuring in 1995. Results of the 2007 J.D. Power and
15 Associates Residential study reflected very consistent
16 performance by Idaho Power with regard to residential
17 customer satisfaction at a time that many other utilities
18 represented in the study demonstrated much more turbulent
19 results.
20 Q.Please describe the Burke survey methodology
21 and the resulting information made available to the
22 Company.
23 A.Idaho Power provides a data file of randomly
24 selected accounts to Burke, Inc., each quarter from four
25 customer segments - residential, small and medium
business,
248 DRAKE, DI 15
Idaho Power Company
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1 large commercial and industrial, and irrigation.
2 Annually, Burke surveys 400 residential customers, 200
3 small and medium business customers, 200 irrigation
4 customers and approximately 100 large commercial and
5 industrial customers. These customer sample numbers are
6 large enough to supply statistically valid results.
7 Surveys are conducted by telephone and an average survey
8 takes approximately 15 minutes.
9 On a quarterly basis, Idaho Power receives
10 results from Burke based on these customer interviews.
11 Quarterly results include an overall index score, the
12 Customer Relationship Index ("CRI"), as well as more
13 detailed information in the form of average response data
14 collected for numerous questions in six general
15 categories: Company Image , Quality of Service, Cost &
16 Pricing , Responsiveness to Customers, Communication and
17 Billing and Payment.
18 Q.What is Idaho Power's primary way of measuring
19 its success in providing customer satisfaction?
20 A.Idaho Power's primary measure for customer
21 satisfaction is the CRI derived by Burke from quarterly
22 customer surveys. The CRI is comprised of five key
23 questions where customers, representing all customer
24 segments, rate Idaho Power on each question on a scale of
25 zero to four points. The five questions relate tooverall
249 DRAKE, DI 16
Idaho Power Company
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1 satisfaction, overall quality, overall value, likelihood
2 to recommend Idaho Power, and perception of Idaho Power's
3 caring attitude. For each customer a total score is
4 computed for all five questions, ranging between zero and
5 20 points. Each customer' s individual score is divided
6 by 20 to determine a percentage for that customer. All
7 individual customer data are accumulated to establish the
8 overall CRI, which can range from a low of zero to a
9 maximum of 100 percent. The CRI is the best single
10 satisfaction measure available to Idaho Power because it
11 depicts the customers' overall attitudes toward the
12 Company. The CRI is based on research that is conducted
13 at various points in time throughout the year. This
14 eliminates the potential for anyone event or
15 circumstance to have a significant influence on the
16 overall customer satisfaction levels. It is a
17 statistically reliable measurement of customer opinions
18 and it provides a historical trend that allows us to
19 track our performance over time.
20 Q.Would you please describe the Company's
21 customer satisfaction performance?
22 A.Idaho Power achieved a CRI of 82.95 percent for
23 the 12 months ending first quarter of 2008. This
24 reflects a substantial improvement in the CRI from the
25
250 DRAKE, DI 17
Idaho Power Company
.
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1 80.75 percent from third quarter of 2005 as reported in
2 preparation for the Company's last general rate case.
3 Not only has the Company improved its overall customer
4 satisfaction level since 2005, improvements have been
5 made in every individual customer segment. The
6 residential CRI has improved from 77.70 percent to 81.05
7 percent, small and medium business CRI has increased from
8 80.70 percent to 82.65 percent, large commercial and
9 industrial from 89.30 percent to 90.35 percent and
10 irrigation from 76.35 percent to 78.80 percent on a
11 12-month rolling average basis. Please refer to Exhibit
12 No. 15 for a detailed representation of these results.
13 Q. How does Idaho Power utilize the information
14 deri ved from these surveys and how are survey results
15 communicated with Idaho Power employees?
16 A.There are several ways the research results are
17 utilized and communicated in the Company. First is
18 through the regional staff that has direct contact with
19 customers.Idaho Power has four field positions titled
20 Customer Relations Advisors that work closely with
21 Regional leadership and employee groups. The Customer
22 Relations Advisors responsibilities are twofold. The
23 first is to follow-up with any individual customers that
24 are identified as having an actionable situation that
25 needs to be
251 DRAKE, DI 18
Idaho Power Company
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1 addressed. These are customers that have either
2 requested a follow-up on a particular issue from Idaho
3 Power or have responded to questions in such a way that
4 dissatisfaction with an aspect of service is apparent.
5 The Customer Relations Advisors also communicate survey
6 resul ts and improvement opportunities to employees in
7 their regions through team meetings. Second, the Company
8 utilizes Market Segment Coordinators representing each of
9 the customer segments as "champions" of their respected
10 customer segments. These positions communicate
11 customers' desires in process improvements and other ways
12 to meet their needs throughout the Company. Finally,
13 Idaho Power publishes survey results and improvement
14 opportuni ty information identified in both the Burke
15 surveys and the J. D. Power and Associates' study through
16 internal publications to all active employees. In
17 addi tion, Idaho Power sponsors an informational meeting
18 about the results of the J. D. Power and Associates' study
19 every year with Company leadership and representatives
20 from J. D. Power and Associates. Idaho Power has also
21 incorporated the CRI as the measurement for customer
22 satisfaction in determining annual employee incentive
23 payments.
.24
25
Q.Does the Company have programs for serving
customers with "special needs"?
252 DRAKE, DI 19
Idaho Power Company
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1 A.Since 2004, the Company has employed a program
2 manager specifically focused on more sensi ti ve groups of
3 residential customers such as low income and senior
4 citizens. This position manages the Weatherization
5 Assistance for Qualified Customers program that, in
6 conjunction with the Community Action Partnership
7 agencies, provides a no-fee weatherization of
8 electrically heated homes for low income-qualified
9 residents. Today, the state guidelines for low income
10 are 150 percent of the federal poverty level which is
11 approximately an annual income of $30,900 for a family of
12 four. This program, historically referred to as Low
13 Income Weatherization Assistance or LIWA, in 2007 served
14 397 homes and six non-profit buildings in Idaho, saving
15 approximately 3,300 megawatt-hours of energy. As
16 mentioned in the testimony above, this position has
17 recently developed a Home Weatherization Pilot program
18 aimed at customers with financial needs who may not be
19 investing in energy efficiency. This program will launch
20 this summer and is expected to focus on customers who are
21 just above the low income limit (151 percent to 250
22 percent of federal poverty level) served by the
23 Weatherization Assistance program. In addition to home
24 weatherization, the program manager coordinates annual
25 symposiums to bring together local energy assistanceoffices and utili ties for
253 DRAKE, DI 20
Idaho Power Company
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1 process sharing and improvement opportunities. This
2 position also coordinates the Company's partnership with
3 the Salvation Army through the Project Share program. In
4 2006, the Company entered into a unique proj ect to expand
5 its reach for Proj ect Share donations by partnering with
6 a local coffee company and promoting specialty coffee and
7 lemonade. With each sale, a donation is made to
8 Sal vation Army's Proj ect Share. The program manager is
9 also actively involved in administering the Gatekeeper
10 program which utilizes Company field staff to support and
11 assist vulnerable elderly people who need help but may be
12 unable to get it for themselves. Other acti vi ties
13 include participating in the annual Fort Hall Indian
14 Reservation Energy Fair, Governor's Conference on Aging,
15 and serves on the Policy Advisory Council to Department
16 of Health and Human Services for Idaho's weatherization
17 program.
18 Q.What comes from this involvement in the various
19 outreach acti vi ties and committees?
20 A.By taking an active role in our communi ties and
21 with those acti vi ties targeting customers with special
22 needs, the Company is better able to serve special needs
23 customers by understanding their needs and how best to
24 serve them. This participation enables the Company to
25 bring those ideas and understandings into our planning
254 DRAKE, DI 21
Idaho Power Company
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1 process and ultimately serve those customers better.
2 Q.How else is Idaho Power involved with the
3 communi ties it serves?
4 A.Idaho Power continues to work with our
5 communi ties and to encourage employee participation in
6 local acti vi ties. Idaho Power has five Community
7 Relations Representatives ("CRRs") and five Community
8 Education Representatives ("CERs") dedicated to working
9 wi th the communi ties and schools to educate the public on
10 energy usage, electrical safety, hydroelectric
11 relicensing, and rate-related issues, to plan and manage
12 growth, and to assist local economic development efforts
13 wi th consideration to energy planning.
14 In addition, Idaho Power contributes annually
15 (over $184,000 contributed in 2007 alone) to community,
16 civic, health, educational, and other non-profit
17 organizations. These contributions are made on behalf of
18 our shareholders and are not part of our current rate
19 request.
20 The Company's employees are among the most
21 giving in the region in both time and contributions. In
22 2007, Idaho Power employees donated over $214,000 to
23 chari table organizations and individuals in need. Idaho
24 Power employees, families, and friends have a major
25 impact on the local community through volunteering and
they have set the
255 DRAKE, DI 22
Idaho Power Company
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20
21
22
23
24.25
1 standard for several events. Idaho Power volunteers
2 consistently raise the most money per employee for Idaho
3 Public TV and have had the highest employee participation
4 rate for years. Company employees are very active
5 participants in the American Heart Association Heart
6 Walk, in Rake Up Boise and Paint the Town, and in the
7 Idaho Food Bank's "Take a Turkey to Work Day." Idaho
8 Power employees also participate in numerous civic and
9 community organizations, Chamber of Commerce events,
10 scouting troops, and fund raisers.
11 Q.Why do you highlight Idaho Power's increasing
12 levels of customer satisfaction and its employees'
13 extensi ve community involvement?
14 A. Idaho Power's vision is to be regarded as an
15 exceptional utility. Focusing on customer satisfaction
16 and demonstrating our commitment to the communities we
17 serve enables. the Company to accomplish its vision.
18 Q.Does this conclude your testimony?
19 A.Yes.
256 DRAKE, DI 23
Idaho Power Company
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1 Q.Please state your name.
2 A.My name is Theresa Drake.
3 Q.Are you the same Theresa Drake that has
4 previously presented direct testimony in this case?
5 A.Yes I am.
6 Q.What is the scope of your rebuttal testimony?
7 A.My testimony will address Staff Witness Mr.
8 Lynn Anderson's recommendation that the Commission defer
9 a prudency finding for Idaho Power's accumulated Demand
10 Side Management ("DSM") expenses. I will also respond to
11 several portions of Mr. Anderson's testimony that
12 incorrectly describe the completeness of the Company's
13 evaluations of its energy efficiency and DSM programs.
14 Finally, I will address the Company's concern that Mr.
15 Anderson is recommending a fundamental change to the
16 cri teria used to evaluate the cost effectiveness of the
17 Company's DSM and energy efficiency programs.
18 I will also raise a concern regarding Mr. Tony
19 Yankel' s testimony concerning the avoided capacity costs
20 used by Idaho Power.
21 It should be noted that any omission on my part in
22 addressing issues raised by any of these witnesses does
23 not indicate my concurrence with those issues.
24
25
257 DRAKE, DI REB 1
Idaho Power Company
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1 I will also address Ms. Terri Ottens's
2 recommendation that Idaho Power fund more energy
3 efficiency education.
4 PRUDENCY OF ENERGY EFFICIENCY /DSM EXPENSES
5 Q.Why does the Company believe that the prudency
6 of DSM expenses should be determined in this general rate
7 case?
8 A.It has been five years since the Company
9 ini tiated the conservation rider to fund operation of the
10 Company's DSM and energy efficiency programs. As Mr.
11 Gale notes in his testimony, the Company has been
12 informally discussing with the Commission Staff the need
13 for a prudency review of the Company's DSM expenses. The
14 Company's desire to obtain such a review is consistent
15 wi th Staff comments presented in past Commission
16 proceedings. For example, on page 5 of Staff Comments in
17 Case No. IPC-E-08-12, the Mountain Home Airbase Cool
18 Credits contract case, Staff states: "Staff will analyze
19 the reasonableness of Idaho Power's planning,
20 implementation and evaluation of all of its energy
21 efficiency and demand response programs including this
22 one, during the usual course of a future rate case."
23 On page 10 of Comments of the Commission Staff in
24 Case No. IPC-E-08-03, the Company's recent filing to
25
258 DRAKE, DI REB 2
Idaho Power Company
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1 increase the conservation rider rate, Staff states:
2 ". when reviews of program processes and results are
3 required for a prudency determination of past DSM efforts
4 during future rate cases "
5 Most significantly , it has been 5 years since the
6 conservation rider rate was initiated and the Company has
7 in place a full range of energy efficiency programs. It
8 is time for the Commission to confirm that these dollars
9 have been well spent.
10 Q.Do you agree with Mr. Anderson's assessment in
11 his testimony that there is not sufficient information
12 presented in this rate case to allow the Commission to
13 assess the prudency of the Company's DSM expenditures?
14 No,I do not agree with Mr. Anderson's opinionA.
15 on this issue. The Company has supplied a very large
16 amount of data in this case showing that its DSM
17 investments are prudent. In addition to the information
18 presented in this case, since 2003 the Company has
19 provided the Commission with numerous reports evaluating
20 its DSM acti vi ties such as the Annual Demand-Side
21 Management Report, which the Commission can and should
22 consider in this case.
23 Q.Mr. Anderson asserts on page 10 of his
24 testimony that, "Due in part to Idaho Power's late
25 response
259 DRAKE, DI REB 3
Idaho Power Company
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1 to production requests and other staff priori ties, the
2 Company's DSM expenses from 2003 through 2007 were not
3 audi ted. " Was the Company late in responding to Staff's
4 requests?
5 A.No. I believe that this is an unfair
6 characterization of the Company' s responsiveness to
7 Staff's production requests. Staff's production requests
8 asked for hundreds of pages of information covering five
9 years of detailed information. Because Commission Staff
10 and the Company have been discussing the need for a
11 prudency review of DSM expenses for several years, the
12 Company actually expected an on-site audit of DSM
13 expenses for the years 2003 through 2007 would have taken
14 place.
15 More to the point of the question though, is whether
16 Commission Staff has been provided sufficient information
17 to determine prudency of DSM expenses incurred since
18 2003. I believe they have. First, the Company believes
19 that through Mr. Anderson' s active participation (since
20 2002) in Idaho Power's Energy Efficiency Advisory Group
21 ("EEAG"), the Northwest Energy Efficiency Alliance
22 ("NEEA") Board, the NEEA Cost Effectiveness and Savings
23 Expert Committee, various other committees, and through
24 various regulatory proceedings, Mr. Anderson has been
25 provided many forums and dozens of opportunities to
submi t any and all questions
260 DRAKE, DI REB 4
Idaho Power Company
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1 concerning prudency and to observe Idaho Power's
2 conscientious approach to pursue all cost-effective
3 energy efficiency and demand response resources.
4 In addition to the information provided in this
5 case, which I will address later in my testimony, the
6 Company has made numerous filings that have provided the
7 Commission and Commission Staff with thousands of pages
8 of detailed information concerning Idaho Power's Energy
9 Efficiency efforts.
10 Q.What are these filings?
11 A.Annually, the Company files its detailed
12 Demand-Side Management Report and has done this since
13 2002. From 1989 to 2002, the Company filed its
14 Conservation Report annually. In compliance with
15 Commission Order No. 30194, the Company annually files
16 its Irrigation Peak Rewards Report. The Company has
17 provided detailed program information with filings to
18 either approve or modify Schedule 23 (Irrigation Peak
19 Rewards), Schedule 81 (Residential Air Conditioner
20 Cycling Program, also know as the AC Cool Credit), and
21 Schedule 91 (Energy Efficiency Rider). Idaho Power has
22 also provided detailed energy efficiency information in
23 the 2004 Integrated Resource Plan ("IRP") and the 2006
24 IRP.
25
261 DRAKE, DI REB 5
Idaho Power Company
.
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1 Q.What about information provided in discovery in
2 this case?
3 A.In response to Staff Production Request No. 89,
4 the Company provided a breakdown of annual and 5-year
5 total costs of all Idaho-funded energy efficiency and
6 demand response programs and ini tiati ves.
7 In response to Staff Production Request No. 91, the
8 Company made available copies of all post-implementation
9 evaluations of all Idaho-funded DSM programs completed by
10 or for Idaho Power from 2003 through 2008. In Idaho
11 Power's response to Production Request No. 91, Idaho
12 Power provided electronic and paper copies of 29 studies
13 and/or evaluations conducted by third-parties of Idaho
14 Power's energy efficiency and demand response programs.
15 Addi tionally, Idaho Power made available 28 studies that
16 were conducted by third-parties or Idaho Power staff.
17 In response to Staff Production Request No. 96, the
18 Company provided post-implementation benefit/cost ("B/C")
19 ratio estimates from the Total Resource Cost ("TRC") and
20 the Utility Cost ("UC") perspectives for each
21 Idaho-funded DSM program for the years 2003 through 2007.
22 In response to Staff Production Request No. 98,
23 Idaho Power described its dynamic post-implementation B/C
24
25
262 DRAKE, DI REB 6
Idaho Power Company
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1 ratio analysis, which is changed as new information
2 becomes available or as program changes are considered.
3 In all, the Company provided responses to 43 Staff
4 production requests and 6 supplemental requests. Staff's
5 requests for this data were received by the Company
6 during the last two weeks of the discovery period and the
7 responses were completed in an expedited manner. These
8 responses included detailed information spanning several
9 years for energy efficiency programs , cost-effectiveness,
10 planning, Company internal organization, staff salaries,
11 program promotional materials, and past and future
12 program evaluation.
13 I believe that Idaho Power has provided Staff with
14 more than an adequate amount of information to determine
15 prudency of specific energy efficiency and demand
16 response programs as well as overall DSM ini tiati ves.
17 Q.Can you cite any specific examples in Mr.
18 Anderson's testimony where he claims that Idaho Power did
19 not provide specific pieces of information that were
20 needed to determine prudency of the Company's DSM
21 expendi t ure s ?
22 A.Yes. Mr. Anderson claims that the Company only
23 provided some of the minutes for EEAG meetings that he
24 requested and needed to assess prudency. In Staff's
25 response to Idaho Power's Production Request No. 12, Mr.
263 DRAKE, DI REB 7
Idaho Power Company
.
.
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1 Anderson now acknowledges that he has received all of the
2 approved EEAG minutes.
3 Mr. Anderson also infers that his investigation was
4 hampered by a lack of transparency of Idaho Power's
5 decision making process in regards to DSM spending.
6 Specifically, he is critical of the Company's inability
7 to provide him with records of the Company's internal
8 Energy Efficiency Guiding Council's meetings. Mr.
9 Anderson misunderstands the role of the Energy Efficiency
10 Guiding Council. The role of this Council, which has
11 been in place since the fall of 2007, is to provide a
12 forum for high level policy discussions between the
13 Company's senior management and its DSM staff concerning
14 Energy Efficiency acti vi ties. Mr. Anderson asked for the
15 records of these internal management meetings. As with
16 most internal meetings at Idaho Power, no minutes are
17 kept. These meetings provide a forum to align the
18 Company's Energy Efficiency efforts with those of the
19 Company as a whole. The results of decisions made in
20 these meetings are subsequently presented to the EEAG for
21 their consultation prior to final program design and
22 implementation.
23 Q.Does Mr. Anderson provide any guidance as to
24 what additional information Staff needs to assess the
25 prudency of the Company's DSM programs?
264 DRAKE, DI REB 8
Idaho Power Company
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1 A.In Mr. Anderson's response to Idaho Power's
2 Production Request No. 11, he states that he needs
3 addi tional information for all specific DSM programs
4 except Irrigation Peak Rewards, Weatherization Assistance
5 for Qualified Customers, and the Northwest Energy
6 Efficiency Alliance. He also indicated that he would not
7 need more information for the Custom Efficiency Program
8 if evaluations for all of the Custom Efficiency projects
9 are available.
10 Q.What is the status of the Custom Efficiency
11 proj ect evaluations?
12 A.As the Company told Mr. Anderson in its
13 response to Staff's Audit Request No. 114, all of the
14 engineering analyses for Custom Efficiency proj ects are
15 available for Staff review.
16 Q.Has the Company provided Staff with information
17 on all its other DSM programs?
18 A.Idaho Power has provided Staff with adequate
19 information to assess prudency for all of its DSM
20 programs. For example, Idaho Power funded independent
21 third-party evaluations of the A/C Cool Credit program
22 and/or the pilot program that preceded it for the years
23 2003, 2004, 2005, 2006, and 2007. These reports have
24 been provided to
25
265 DRAKE, DI REB 9
Idaho Power Company
.
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1 Commission Staff along with numerous filings for approval
2 of this program offered under Rate Schedule 81.
3 Other programs Idaho Power offers have undergone
4 significant analysis and this information has been made
5 available to Staff. For example, the Energy Star~ Homes
6 program is based on analysis originally developed by a
7 third-party contractor in 2004 and reviewed and changed
8 in 2007 due to improved building codes in Idaho. This
9 program has had several market progress evaluations
10 conducted by the NEEA. Other examples include the Energy
11 House Calls and Rebate Advantage programs which were
12 originally developed by the Bonneville Power
13 Administration ("BPA") and are based on deemed energy
14 savings through the Northwest Power and Conservation
15 Council's Regional Technical Forum ("RTF"). Certain
16 programs are still in early stages of delivery. However,
1 7 these programs are developed using analyses from
18 third-party contractors or deemed savings for end use
19 measures from credible sources such as the RTF or the
2 0 Database for Energy Efficient Resources (" DEER
21 Database"), the California Measurement Advisory Council,
22 the Consortium for Energy Efficiency, or reports for
23 other Northwest Utilities.
24 Has Idaho Power previously received anyQ.
25 indication from Commission Staff or the Commission that
266 DRAKE, DI REB 10
Idaho Power Company
.
.
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10
11
12
13
14
15
1 it was not conscientiously pursuing energy efficiency and
2 demand response resources?
3 A.No. In fact, on multiple occasions, the
4 Commission has indicated that Idaho Power was doing a
5 good job and encouraged the Company to expand its
6 efforts.
7 In 2005, in Commission Order No. 29762, on page 10
8 the Commission states:
9 We are pleased to see that Idaho Power's 2004
IRP calls for 124 MW of demand response and
energy efficiency programs . Given the
continuation of drought conditions in Idaho, we
believe that speedy implementation of the DSM
and energy efficiency programs are critical to
serving Idaho customers. Though we are pleased
wi th the efforts so far, we find that Idaho
Power could and should do more to implement
conservation. We encourage the Company to
actively promote and expand participation in
its AC Cycling, Irrigation Peak Clipping, and
other cost-effective conservation programs.
16 In Commission Order No. 29784, issued in 2005, the
17 Commission states:
18 We join the Northwest Energy Coalition and the
Snake River Alliance, as well as Commission19 Staff, in commending Idaho Power for its
efforts in procuring cost-effective energy20 efficiency programs and measures, and treating
DSM as a part of its overall resource21 portfolio.
22 In Commission Order No. 30281, issued in 2007, the
23 Commission states: "We are also pleased that the Company
24
25
267 DRAKE, DI REB 11
Idaho Power Company
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1 is expanding its DSM programs and increasing the amount
2 of renewable energy resources in its portfolio."
3 In Commission Order No. 30560, issued in 2008, the
4 Commission states: "Idaho Power has significantly
5 increased its DSM programs during the past six years, and
6 many more customers are participating in and seeing the
7 benefi ts from the Company's DSM programs."
8 Q.On page four of this testimony, Mr. Anderson
9 rei terates his position that there is not enough
10 information available now for a prudency review and it is
11 his belief that the Company is currently taking some
12 actions that will ensure that sufficient information will
13 be available in the near future. Is he correctly
14 assessing the situation?
15 No. First, I have previously testified thatA.
16 the Company has provided sufficient information that
17 would allow the Commission to assess the prudency of the
18 Company's DSM expenditures. Second, I believe Mr.
19 Anderson's testimony regarding actions the Company is
20 taking to obtain more information is based on a
21 misunderstanding of the Company's response to Staff's
22 Production Request No. 94. This production request asked
23 the Company to "Please Describe any post-implementation
24 DSM program evaluations that are not yet completed, but
25 are
268 DRAKE, DI REB 12
Idaho Power Company
.
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1 currently in progress." The response described some
2 on-going evaluation proj ects the Company is conducting;
3 however, Mr. Anderson erroneously concluded that this
4 means the Company does not have sufficient information
5 wi th which Staff could complete a prudency review.
6 In support of his conclusion that moreQ.
7 evaluation is needed, Mr. Anderson notes that the Company
8 has recently hired a full-time evaluator. Has the
9 Company hired a full-time evaluator?
10 Yes. But although the full-time evaluator wasA.
11 hired on March 26, 2007, he was not needed to complete
12 the evaluatioh of current DSM programs. As previously
13 mentioned, evaluation activities commenced several years
14 ago. By adding a full-time evaluator to Idaho Power l s
15 staff, the Company's obj ecti ve is to enhance its
16 evaluation capability for future DSM programs.
17 Do you agree that Mr. Anderson is unable toQ.
18 determine prudency because of information that the
19 Company provided is incorrect or missing?
20 I think Mr. Anderson is perceiving problemsA.
21 that may not really exist. For example, in support of
22 his assertion, some of the information needed for a
23 prudency review is not available, Mr. Anderson cites
24 Idaho Power's Appendix 2 in the 2007 DSM Annual report as
25 being defective
269 DRAKE, DI REB 13
Idaho Power Company
.
.
1 because it mixes funding sources for Energy Efficiency
2 expenses. While an initial review could lead to that
3 conclusion, a closer analysis would show that all of the
4 funding sources are delineated in separate columns so the
5 reader can differentiate which funding comes from what
6 source. Only the totals have mixed funding sources. The
7 reader could easily sum whichever columns desired.
8 Q.What is your response to Mr. Anderson's
9 statement that the amounts shown on Staff Exhibit No. 149
10 are not 100 percent accurate?
11 A.Staff Exhibit No. 49 is a copy of an appendix
12 to the Company's Demand-Side Management 2007 Annual
13 Report, entitled "2007 DSM Expenses by Funding Source."
14 This appendix is 100 percent accurate. The example that
15 Mr. Anderson cites as "a significant missing piece of an
16 additional $380,000 amount due to the Northwest Energy
17 Efficiency Alliance (NEEA)" is not missing from Appendix
18 2. Appendix 2 is titled "2007 DSM Expenses by Funding
19 Source" and the dollar amounts shown are the actual
20 expenses. In Appendix 1 of the Demand-Side Management
21 Annual Report, entitled "Idaho Rider, Oregon Rider, BPA,
22 and NEEA Funding Balances," the NEEA Payments and Escrow
.
23 Credit Funds are broken out and, when necessary,
24 footnoted for clarity.
25
270 DRAKE, DI REB 14
Idaho Power Company
.1 Q.Mr. Anderson states that the cost-effectiveness
2 ratios included in Staff's Exhibit No. 148 are
3 preliminary. Is this a correct interpretation of the
4 information?
5 A.No. These cost-effectiveness ratios were
6 calculated using the costs and saving metrics provided in
7 the Demand-Side Management Annual Report filed with the
8 Commission.
9 Q.Mr. Anderson takes issue with Idaho Power's
10 method of reporting annual energy savings both in your
11 testimony and in the Company's Demand-Side Management
12 annual reports. Is Mr. Anderson's criticism valid?.13
14
A. No. The methods the Company uses in reporting
annual savings follow industry standards and are
15 identical to the methods used by other utili ties and
16 regional groups who report energy efficiency savings.
17 The Company's methodology also aligns with the methods
18 used in reporting other data in the rate case process,
19 where financial information is annualized. As matter of
20 bookkeeping procedure, the Company ties expenses to
21 savings for reporting purposes. If the Company were to
22 follow Mr. Anderson's theory of reporting, it would be
23 necessary to report partial year's savings at the
24 beginning of each measure life as well as at the end of.25 each measure life.
271 DRAKE, DI REB 15
Idaho Power Company
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1 Many programs have multiple measures. One of the
2 Company's programs alone has over 120 measures. Mr.
3 Anderson's preferred method of reporting annual savings
4 is not practical. It would be impossible to track
5 savings by the mid-year completion of each measure in the
6 first year and consequently at corresponding mid-year end
7 of the measure life.
8 Q.Do you agree with Mr. Anderson's recommendation
9 that the cost~effecti veness of DSM programs should be
10 judged by comparison to al ternati ve DSM costs and not to
11 supply-side resources?
12 A.No. While the Company believes that each DSM
13 program or ini tiati ve should be managed as
14 cost-effectively as possible, numerous prior Commission
15 orders direct the Company to pursue all cost-effective
16 DSM programs and provide these programs to all customer
17 sectors. That is why the Company is concerned by Mr.
18 Anderson's statement (s) that the applicable
19 cost-effectiveness test is one that judges one DSM
20 program by comparing it to other DSM costs. If that
21 really is Mr. Anderson's position, he is recommending
22 that the Commission change the rules in the middle of the
23 process. If the decision of which DSM programs are to be
24 offered is based on a ranking of the cost-effectiveness
25 of programs, many
272 DRAKE, DI REB 16
Idaho Power Company
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1 programs, particularly in the residential sector, would
2 never be offered. It is generally accepted that the most
3 cost-effecti ve programs are in the industrial sector
4 while the least cost-effective are in the residential
5 sector.
6 Q.Can you explain how you conclude that the
7 Commission desired that the Company pursue all cost
8 effective DSM, not just the most cost-effective?
9 A.Yes. I look to prior Commission orders
10 specifically addressing this issue. Commission Order No.
11 29065, issued in 2002, on page 8 states:
12 The Commission anticipates that Idaho Power and
the Energy Efficiency Advisory Group will
create and implement a balanced portfolio of
DSM programs for all customer classes over the
long-term. In the short term, however, Idaho
Power and the Advisory Group shall have the
flexibili ty to focus on different classes
during different years if necessary to achieve
the most cost-effective energy conservation in
the shortest amount of time. We expect this
resul t-oriented approach to be the primary
guide for initial program selection, regardless
of which customer class (es) will directly
benefi t. The energy savings generated by such
an approach will indirectly benefit all
ratepayers as more class-specific DSM programs
are implemented over time. As more DSM funds
become available, the Commission expects that
Idaho Power and the Advisory Group will ensure
that specific programs are targeted toward each
specific customer class - including industrial
facili ties. The
13
14
15
16
17
18
19
20
21
22
23
24
25
273 DRAKE, DI REB 17
Idaho Power Company
.
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1 Commission anticipates that DSM expenditures
will balance out among the customer classes
over time and will review DSM expenditures
annually to see that a fair result is achieved.
2
3
4 Commission Order No. 28722, issued in 2002, states:
5 ". basic fairness demand that all rate classes be
6 afforded the opportunity to enj oy the benefits of guided
7 conservation and efficiency improvements .." and
8 continues,"... in particular, the Company should
9 consider addressing conservation proposals for
10 residential customers in the highest block rate that
11 typically use electric space heating."
12 Commission Order No. 28894, issued in 2001, on page
13 7 directs the Company as follows:". the Commission
14 orders Idaho Power to form the Energy Efficiency Advisory
15 Group and establish a plan for implementing long-term DSM
16 programs .." and continues, "To screen the
1 7 cost-effectiveness of potential DSM proj ects, the
18 advisory group shall use the following tests: total
19 resource cost, utility cost and participant cost." The
20 calculations of the TRC and the UC, as defined by the
21 EPRI End-Use Technical Assessment Guide ("End-Use TAG"),
22 Volume 4 and the California Standard Practice Manual:
23 Economic Analysis of Demand-Side Programs and Projects,
24 both utilize avoided supply side costs as a benefit and.25 increase supply side
274 DRAKE, DI REB 18
Idaho Power Company
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1 costs as a cost in the calculations. By the very nature
2 of these tests they are comparing DSM programs to supply
3 side alternatives.
4 Commission Order No. 28784, issued in 2005, on page
5 6 states:
6 However, our approval of the increase in
funding is done with the expectation that there
7 will be faster deployment of programs, not a
further accumulation of funds. Idaho Power
8 should pursue additional, cost-effective DSM
programs as quickly as it is reasonably able to9 do so.
10 The Order does not state the Company should pursue
11 only the most cost-effective DSM programs nor does the
12 order direct the Company to somehow rank the programs for
13 deployment based on levels of cost-effectiveness.
14 In Commission Order No. 29762, issued in 2005, on
15 page 5 and 6 states:
16 The Staff was pleased that the 2004 IRP
reflects renewed emphasis on cost-effective DSM
17 programs. Implementation of effective DSM
programs mitigate the need for more supply-side18 resources. . . . However, the Staff expressed
some disappointment that the Company did not19 include two other efficiency programs that were
demonstrated to be cost effective. . . .
20
21 Commission Order No. 30281, issued in 2007, on page
22 7 states:
23
24
25
275 DRAKE, DI REB 19
Idaho Power Company
.
.
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1 While the 2006 IRP demonstrates a higher
commi tment to DSM efforts than in the past,
Staff believes that the Company does not yet
propose to pursue all cost-effective DSM
opportuni ties and incorporate associated energy
and peak demand savings into its determination
of new supply-side resources needs.
2
3
4
5 Commission Order No. 30560, issued in 2008, on page
6 5 states:
7 Even if the Company's DSM program costs
increase, all cost-effective DSM programs will
delay the need to construct new, costly
generation facilities. This delay in new
investment and facilities will benefit all
Idaho Power Customers.
8
9
10
11 Q.What conclusion do you draw from these
12 Commission Orders and Staff Comments?
13 A. That the Commission expects Idaho Power to
14 pursue all cost-effective (as compared to supply-side
15 resources) DSM opportunities. I see no indication that
16 the Company is supposed to pursue only the most
17 cost-effecti ve.
18 What is Idaho Power's current policy concerningQ.
19 DSM opportunities?
20 As stated in numerous filings, publications,A.
21 and my direct testimony, the Company's two main
22 obj ecti ves for energy efficiency and demand response are:
23 (1) to acquire all cost-effective resources in order to
24 efficiently meet the Company's electrical system's .needs
25
276 DRAKE, DI REB 20
Idaho Power Company
.
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1 and (2) to provide customers with programs and
2 information to help them manage their energy and demand
3 use and lower their bills.
4 Q.Do you agree with Mr. Anderson's statement that
5 it is increasingly important that the utili ties, other
6 parties, and the Commission have clear concepts of what
7 consti tutes DSM prudency?
8 A.Yes. I believe that not only is it important
9 that all parties have a clear concept of what constitutes
10 DSM prudency but that this standard be applied
11 consistently among all utilities under the Commission's
12 jurisdiction. Idaho Power bases much of its concepts of
13 what constitutes prudency on previous Commission orders,
14 including orders issued to other Idaho electric
15 utilities. The Company believes that if it complies with
16 Commission orders, not only literally but in the spirit
17 of the orders, the Company's DSM expenditures should be
18 judged prudent.
19 Q.Based on historic Commission orders, what do
20 you conclude the Company needs to show the Commission to
21 demonstrate the prudency of its DSM expenditures.
22 A.Based on Commission Order No. 29065, issued in
23 2002, on page 8, I believe the Commission expects Idaho
24 Power to form and maintain a DSM advisory group, the
25 EEAG, as a forum with which to establish and plan for
277 DRAKE, DI REB 21
Idaho Power Company
.
.
.
1 implementation long-term DSM programs. With the
2 assistance of the EEAG, Idaho Power is expected to offer
3 Energy Efficiency and Demand Response programs to all
4 customer groups. I believe that the Company and the EEAG
5 are expected to design and implement these programs
6 cost-effectively as compared to supply-side resources and
7 to pursue all cost-effective energy efficiency and demand
8 response resources. I believe that the Commission
9 expects the Company to utilize the TRC and the UC test to
10 determine cost-effectiveness. However, I believe that
11 the Commission expects these tests to be used merely as
12 guidelines that should not be used to exclude proj ects
13 that may be desirable as good public policy.
14 Q. Do you believe the Company has complied with
15 this measure of prudency in its DSM expenditures?
16 A.Yes.
17 Q.Do you have any further comments concerning Mr.
18 Anderson's testimony?
19 A.I have two final comments. First, as mentioned
20 earlier, Mr. Anderson participates in EEAG and other
21 forums as a representative of the Commission and/or its
22 Staff. Specifically, as a member of EEAG, the Company
23 relies on this active participation to provide
24 perspective, guidance, and to assist the other members to
25 "shape" the
278 DRAKE, DI REB 22
Idaho Power Company
.1 design and management of the Company's energy efficiency
2 efforts by contemplating appropriate program design and
3 parameters. By this participation, the customers of
4 Idaho Power are assured complete representation not only
5 by members of each customer class and environmental
6 interests, but also by the public utilities commissions.
7 It also provides a forum to supply information to and
8 revenue information from the Commission Staff concerning
9 the Company's energy efficiency efforts strategy.
10 Finally, the Company assumes the Commission Staff will
11 use the EEAG to informally advise the Company if the
12 Staff disagrees with the direction and execution of the.13
14
Company's energy efficiency efforts. It is important to
the Company that Commission Staff fully engage in
15 advisory activities.
16 Second, it is important to note that the continued
17 deferral of a prudency review of years of energy
18 efficiency efforts and expense presents an element of
19 uncertainty that can have unintended adverse affects on
20 EEAG members, customers, trade allies, and employees
21 involved in the success of energy efficiency programs.
22 Such deferral. can have a chilling effect because it casts
23 doubt on the meaningful work that has been performed to
24 date and the energy savings yet to be experienced..25
279 DRAKE, DI REB 23
Idaho Power Company
.1 AVOIDED CAPACITY COSTS CITED BY TONY YANKEL
2 Q.On page 31, lines 19-20 of Mr. Yankel' s
3 testimony, he states, "Based upon these options that IPCo
4 is pursuing, the $98/kW-year figure is a good
5 representation of the avoided cost of a program like the
6 Irrigation Peak Rewards program." Do you agree with this
7 statement?
8 A.No. In his testimony, Mr. Yankel cites as his
9 basis for comparison the capacity costs for three
10 separate resource categories listed in Idaho Power's 2006
11 IRP. The "comparable" resources selected by Mr. Yankel
12 include a 50 MW Geothermal resource, a 100 MW Wind.13
14
resource, and three energy efficiency resource options .
He wrongly concludes that based on the capacity costs of
15 these resources, the $98/kW-year figure used by Rocky
16 Mountain Power is reasonable for Idaho Power. However,
17 wind, geothermal, and energy efficiency resources are
18 typically not thought of as peaking resources. In fact,
19 none of the resources used by Mr. Yankel in his
20 comparison provides dispatchable peaking capacity, so a
21 comparison to these costs is not valid.
22 The capacity cost associated with the proposed
23 dispatchable irrigation demand response program
24 referenced by Mr. Yankel should more appropriately be.25 compared to the
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1 levelized cost for a simple cycle combustion turbine.
2 Page 68 of Technical Appendix D of the 2006 IRP states
3 that levelized cost factors applied to a 162 MW simple
4 Cycle Combustion Turbine plant is $ 64.92 per kW-year.
5 This amount includes capacity costs and fixed O&M.
6 On page 32, lines 4-5 of Mr. Yankel' sQ.
7 testimony, he states, "Collectively, these cost should be
8 substantially below the $ 98 per kW benefit that was
9 calculated for a similar program for PacifiCorp." Do you
10 agree with this statement?
11 Yes, this is true. However, Idaho Power'sA.
12 measure of cost-effectiveness for a demand response
13 program is that all the costs Mr. Yankel cited need to
14 sum to less than $ 64.92 per kW /year as published in the
15 Company's 2006 IRP.
16 FUING FOR ENERGY EFFICIENCY EDUCATION
AS RECOMMNDED BY TERI OTTENS
17
18 Ms. Ottens is proposing that the Company fund aQ.
19 low-income energy conservation education program and
20 provide additional energy conservation resource
21 materials. Has Idaho Power provided energy efficiency
22 education materials to the agencies working with
23 low-income customers?
24
25
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1 A.Yes. Energy efficiency education is an
2 important tool the Company uses to assist customers in
3 modifying their homes and behavior to achieve energy
4 savings. Idaho Power provides its customers with various
5 types of written information, such as brochures giving
6 winter and summer energy conservation tips, energy
7 management booklets, and coloring books for children
8 themed with energy conservation. These written materials
9 are distributed to a variety of resource outlets,
10 including senior centers and community action agencies.
11 In addition, the Company has offered to make available
12 resources such as a CD/DVD on energy efficiency for the
13 agencies to use in the waiting room while energy
14 assistance clients are waiting for an agency
15 representati ve. It is the Company's understanding that
16 the Department of Energy also provides agencies with
17 similar information; however, the Company stands ready to
18 provide more of these materials if desired by the
19 agencies.
20 Q.Are there other methods the Company uses to
21 distribute this information?
22 Yes. The Company employs a group of employees,A.
23 Communi ty Education Representatives, that are charged
24 with educating the public on a variety of energy issues,
25 including energy conservation. They target their
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1 efforts toward all audiences, with an emphasis on
2 elementary schools and senior citizen centers.
3 Q.Is there a case currently pending before the
4 Commission in which the Commission is considering an
5 expansion of funding for energy conservation education?
6 Yes. In Case No. IPC-E-08-11, the CommissionA.
7 established a forum to examine how $500,000 of energy
8 education funds could best be utilized to advance energy
9 efficiency education.
10 Q.How does this case relate to Ms. Ottens's
11 request for additional energy efficiency education
12 funding?
13 A. With the IPC-E-08-11 case currently pending and
14 the recent Commission-sponsored workshops and other
15 activities relating to energy affordabili ty moving
16 forward in Case No. GNR-U-08-01, it seems premature to
17 consider additional education funding in this case before
18 a decision is made in the other two proceedings.
19 Does this conclude your testimony?Q.
20 A.Yes.
21
22
23
24
25
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2 open hearing.)
(The following proceedings were had in
MR. KLINE: And with that, Madam Chairman,
4 Ms. Drake is available for cross-examination.
3
5 COMMISSIONER SMITH: Okay. Mr. Bruder, do
6 you have any questions?
.
7
8
9
10
11
12 Madam Chair.
13
14
15 you.
16
17
18
19 BY MR. PURDY:
20 Q
MR. BRUDER: I have no questions.
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: No questions.
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: No questions,
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: Yes, just a couple. Thank
CROSS-EXAMINATION
Ms. Drake, would you turn to your
21 rebuttal, page 25, please, and beginning on line 16, you
22 provide rebuttal to the direct testimony of Teri Ottens;
.
23 is that correct?
24 A Yes.
Now, Ms. Ottens, as you note, has25Q
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1 recommended that the Company fund a low income energy
2 conservation education program and provide additional
3 resource materials. Your overall reaction to that is to
4 say either you disagree or it's premature; is that a fair
5 characterization?
6 A I do believe it's premature.
7 Q Okay, fair enough. Then beginning on line
8 1 of page 26, you provide a list of the energy education
9 efforts that the Company currently has underway; is that
10 right?
11 A Correct.
12 Q Are any of these listed on page 26, these
13 efforts, these various programs, designed specifically to
14 target low income customers?
15 \
Yes, they are by distribution. WhereA
16 they're distributed at the particular agencies, they are
17 distributed to an area that serves low income
18 customers.
19 Q But they are distributed to any number of
20 areas, to use your word, are they not?
21 A Yes, they have various distribution points
22 and one includes an area that serves low income
23 customers.
24.25
Q Right; so my question is more are there
any programs listed here that specifically target the
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20
1 characteristics of low income customers, their type of
2 usage, their ability to obtain this information, that
3 sort of thing?
4 A You know, Idaho Power, as we stated, does
5 not qualify customers as low income, so we look to the
6 places that low income customers seek guidance and
7 assistance and we provide information for energy
8 efficiency at those particular outlets.
9 Q Would you agree that one of those places
10 might be as Ms. Ottens proposes when a low income
11 customer comes in, for instance, to attempt to qualify
12 and obtain LIHEAP funding that that would be an opportune
13 time to provide conservation education to the customer?
14 A Yes.
15 Q And do you know whether or not all of the
16 Company's customers who currently receive low income
17 weatherization necessarily that that's the same as all
18 the number of customers that seek LIHEAP funding?
19 A I'm not sure what your question is.
Q Okay, let me restate that. Isn't it true
21 that the number of customers that seek LIHEAP funding
22 greatly exceeds those who seek low income weatherization
23 funding?
24.25
A I don't have that for certain.
Q You don't know?
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1 A No..2 Q Okay, that's fine. Now, you go on to
3 state that one rationale for deeming Ms. Ottens' proposal
4 to be premature is that you currently have a case
5 pending, Case No. IPC-E-08-11. Obviously, you don't know
6 what the outcome of that case will be, do you?
7 A No, I don't.
8 Q And do you know whether or not the
9 Commission would necessarily in that case order that low
10 income energy education as proposed by Ms. Ottens be
11 implemented?
12 A I don't know..13 Q All right. You also refer to the energy
14 affordabili ty workshop currently pending. Do you
15 percei ve that the Commission in that case might actually
16 order utili ties such as Idaho Power to engage in specific
17 programs and set the dollar amount or do you perceive
18 that program to result in something else?
19 A As I stated in my rebuttal testimony, it's
20 uncertain what the outcome is going to be, but I do know
21 that energy affordabili ty is being discussed as well as
22 reaching out to customers that have a need for additional
23 information. I don't know what the outcome is going to
24 be, but those are the topics that are contemplated..25 Q Okay, then finally, at what point in time,
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.1 then, in your opinion would it not be premature, would it
2 be right, to consider implementing a low income
3 conservation education program? If not now, when?
4 A Well, the Company provides many different
5 areas of information to low income customers and as I
6 stated in my rebuttal testimony on page 27, if those
7 particular cases provide additional avenues that we
8 haven't yet explored, we're open to understand how we can
9 better reach those customers. We feel we have
10 distributed enough information in places to be able to
11 reach all customers, especially those that have energy
12 efficiency needs that might have income qualifications.13 that we can consider.
14 Q All right.Well, I'm sorry, I just want
15 to be clear. You say you feel you have enough
16 information out there. Are you saying, then, that it's
17 not just a matter of Ms. Ottens' proposal being
18 premature, you simply don't want to implement a low
19 income specific conservation program, education
20 program?
21 A No, that's not what I'm saying. I feel
22 that we need to have those cases fully explored to see if
23 there are different ways that we haven't contemplated yet
24 or if there is something that comes out of that case. We.25 feel we've done a superior job of being able to reach out
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1 to those customers in need, but if others have other
2 suggestions, we're open to figure that out with them.
3 MR. PURDY: Okay, I'll leave it at that.
4 Thank you.
5 COMMISSIONER SMITH: Thank you. Mr.
6 Olsen.
7 MR. OLSEN: Yes, just one question.
8
9 CROSS-EXAMINATION
10
11 BY MR. OLSEN:
12 Ms. Drake, in page 24 of your testimony,Q
13 you address the avoided capacity cost cited by
14 Mr. Yankel; is that correct?
15 MR. KLINE: Is that the rebuttal
16 testimony?
17 BY MR. OLSEN: Oh, yes, sorry, rebuttalQ
18 testimony, I apologize, page 24 of your rebuttal.
19 A That's correct.
20 Okay, now specifically on page 25, line 4,Q
21 you say that the more appropriate avoided cost is $64.92
22 per kilowatt year; is that correct?
23 That's correct.A
24 Does that price take into account theQ
25 energy used to run the combustion turbine?
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11
12.13
14
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1 A I'm not sure what you're asking. As
2 stated in the rebuttal testimony, our avoided cost is
3 $64.92 per kW here.
4 And right below that you say this amountQ
5 includes capacity costs and fixed operating and
6 maintenance, but variable costs such as natural gas, is
7 that included in that price?
8 I'm not sure of all the detail that madeA
9 up that figure.
MR. OLSEN: Okay, no further questions.
COMMISSIONER SMITH: Mr. Ward.
MR. WARD: No questions. Thank you.
COMMISSIONER SMITH: Mr. Price.
MR. PRICE: Thank you, Madam Chair.
15
16 CROSS-EXAMINATION
17
18 BY MR. PRICE:
19 Good morning, Ms. Drake.Q
20 Good morning.A
21 The Staff had made a number of productionQ
22 requests to the Company, to you; correct?
23 A Yes.
24 And one of those requests was ProductionQ
25 Request No. 91 where the Staff asked for a number of
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.1 studies regarding the Company's DSM programs; correct?
2 A I don't have the information in front of
3 me. I don't remember what number is associated with what
4 request.
5 I'm just saying any number. Would youQ
6 argue that the number was approximately 57 evaluations
7 that you provided?
8 Approximately.A
9 And some of those evaluations involvedQ
10 pre-program evaluations, correct, not
11 post-implementation?
12.
.
A Correct.
13 Q And did any of those evaluations evaluate
14 the irrigation efficiency program after it was
15 implemented?
16 A I don't recall.
17 Do you happen to know how much money IdahoQ
18 Power spent in that program from 2003 to 2007?
19 I don't have that information with meA
20 today.
21 Would you accept the number 5 million,Q
22 subj ect to check?
23 Subject to check. I don't have that withA
24 me today, but we can go with that figure as an
25 approximate.
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1 Q Well, I'm about to go down the list of.2 various programs. It sounds like you don't have any
3 information here with you, but bear with me. One of
4 those studies
5 MR. KLINE: Mr. Price, do you have a copy
6 of the production request or the information that has
7 that information that you could give to Ms. Drake?
8 MR. PRICE: I do have the production
9 request.
10 COMMISSIONER SMITH: Let's be at ease for
11 a few minutes while the witness gets the material she
12 needs to answer..13 (Pause in proceedings.)
14 MR. PRICE: Well, Madam Chair, as a
15 practical matter, I think this is going to be very
16 difficul t in that the production request response was
17 made available via CD-ROM.
18 COMMISSIONER SMITH: Well, then I think we
19 need to take a little break so that the witness can get
20 the materials that she evidently is responsible for in
21 providing information in the production request so that
22 the cross-examination can more forward.
23 (Off the record discussion.)
24 COMMISSIONER SMITH: We'll go back on the.25 record, then. Mr. Price.
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1 Q BY MR. PRICE: To the extent that this
2 information I was speaking earlier about, the irrigation
3 efficiency program and later about the building
4 efficiency program, to the extent that those program
5 evaluations aren't contained in the Company's response to
6 Staff's Production Request No. 91, do you believe that
7 it's possible for the Commission to make a prudency
8 review of those programs absent those evaluations?
9 A We have information that's available on
10 all of our programs that can produce adequate information
11 for evaluation of every program that we have.
12 Q In your previous testimony you said you
13 "were not aware whether or not you had an evaluation for
14 those programs; correct?
15 A I can tell you that the way we produce
16 evaluations of programs that we have programs that are
17 evaluated prior to their launch, while they're launched
18 and then after they've been launched for some time, so
19 it's a common practice for the Company to have every
20 single program have data points that are needed for an
21 evaluation.
22 Q Okay, so is your testimony here today that
23 regardless of whether it's a pre-implementation
24 evaluation or a post-implementation evaluation, that is
25 enough information for the Commission to utilize in order
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.1 to determine prudency of that program?
2 A Yes.
3 Q So do you agree that the
4 post-implementation impact of these programs is important
5 information for the Commission to have in order to
6 determine prudency?
7 A Whether it's pre-implementation or
8 post-implementation, all pieces are important pieces of
9 information to see what was put into the models for
10 evaluation and cost effectiveness as well as how they're
11 being managed as they're going forth in their program
12 life, so yes, all those elements are important to.13 determine evaluation.
14 Q I guess my question is getting at the
15 pre-implementation evaluation is going to reveal a
16 certain set of facts; correct?
17 A Yes.
18 Q And then the post-implementation
19 evaluation is going to ideally reveal how that program
20 actually worked in practice; correct?
21 A Yes.
22 Q Okay, and I'd like to refer you to your
23 rebuttal testimony on page 16, lines 12 through 14. Do
24 you have that in front of you?.25 COMMISSIONER SMITH: I missed the page.
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1 MR. PRICE: Page 16, lines 12 through
2 14.
3 COMMISSIONER SMITH: Is that rebuttal?
4 MR. PRICE: Of rebuttal, correct.
5 BY MR. PRICE: In there you state on linesQ
6 12 through 14 that the Company believes that each DSM
7 program should be managed as cost effectively as
8 possible; is that correct?
9 A Yes.
Q And is it your opinion that Staff's
11 opinion as to the evaluation of DSM programs mirrors that
.
.
12 of the Company's?
13 Can you restate your question, please?A
14 Do you believe that Staff, specificallyQ
15 Staff member Lynn Anderson who evaluates the DSM
16 programs, that he also believes that these DSM programs
17 should be managed cost effectively?
18 A Yes.
19 Okay. I'd like to refer you to page 13,Q
20 line 23 of your rebuttal testimony, I'm sorry.
21 MR. KLINE: I'm sorry, Neil, which page?
22 MR. PRICE: Page 13, line 23 of the
23 rebuttal testimony.
24 MR. KLINE: Thank you.
25 BY MR. PRICE: In there it's referring toQ
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1 Appendix 2 of the 2007 DSM annual report and you mention
2 it as being defective because it mixes funding sources or
3 rather that Mr. Anderson believes it' s defective; is that
4 correct?
5 A My answer as stated in the rebuttal
6 stands, yes.
7 Q Can you cite where Mr. Anderson referred
8 to the DSM, Appendix 2, 2007 DSM annual report, Appendix
9 2, as being defective?
10 A I don't have Mr. Anderson's testimony with
11 me today.
12 Q In your previous -- did you review his
13 testimony previous to today?
14 A Yes.
15 Q And is it your testimony here that from
16 your review of his testimony your interpretation is that
17 he believes that appendix to be defective?
18 A That's my belief.
19 Q And what is that belief based on?
20 MR. KLINE: Madam Chairman, if we could
21 have a minute, we could go to Lynn's testimony and find
22 it if that's what we need to do here.
23 COMMISSIONER SMITH: I think we do. The
24 wi tness doesn't seem to have the material she needs.
25 (Mr. Kline approached the witness.)
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1 COMMISSIONER SMITH: Mr. Price, it might
2 be helpful if you would repeat your question and maybe
3 direct the witness to a certain place.
4 BY MR. PRICE: I'm simply trying to findQ
5 out what Ms. Drake bases her opinion that Mr. Anderson
6 finds the Appendix 2 of the 2007 DSM annual report as
7 being defective. I can't direct her to any spot in his
8 testimony. That's what I'm trying to ascertain.
9 COMMISSIONER SMITH: Okay, thank you.
10 THE WITNESS: I can answer the question.
11 BY MR. PRICE: Okay.Q
12 In Mr. Anderson's direct testimony on pageA
13 10, starting on line 9.
14 Q Can you read that for the record?
15 "However, the amounts shown are neitherA
16 entirely complete nor 100 percent accurate. For example,
17 a significant missing piece is the additional $380,000
18 amount due to the Northwest Energy Efficiency Alliance
19 that was credited from Idaho Power funds being held by
20 NEEA (IPC' s 3rd Supplemental Response to Staff's
21 Production Request No. 89)."
22 And it's your interpretation that he'sQ
23 referring to Appendix 2 in this comment or rather that
24 he's referring to amounts due to the Northwest Energy
25 Efficiency Alliance?
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.1 A At the same page on line 3, the answer
2 "Exhibi t No. 149, copied directly from Idahostarts,
3 Power's Appendix 2 in its 2007 DSM annual report, shows
4 the Company's expenses and funding sources for its
5 various DSM efforts," and that is our connection to
6 Appendix 2.
7 Okay; so the appendix isn' t defective,Q
8 it's just missing information?
9 A That's -- you can interpret the comment
10 that way, I don't.
11
.
.
Q I don't want to interpret it for you.
12 What is your interpretation for the record?
13 A My interpretation is as stated in the
14 rebuttal testimony. On my rebuttal testimony at page 13,
15 at the bottom I state that Mr. Anderson cites Idaho
16 Power's Appendix 2 in the 2007 DSM annual report as being
17 defecti ve because it mixes funding sources for energy
18 efficiency expenses, and I can read further on my answer,
19 but--
20 Q That's sufficient.
21 A Okay.
22 Does Appendix 2 of the Company's 2007Q
23 annual DSM report, does it contain information that is in
24 the normal course valuable for the Commission to use in
25 evaluating DSM programs?
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1 A Yes.
2 And did the Company's application in thisQ
3 case or any of the testimony or exhibits filed with it
4 provide this type of information for the Commission?
5 Yes, the report that is referenced hereA
6 contains a lot of data points about our programs, funding
7 and expenses associated with energy efficiency.
8 Okay, let's move on to page 15, line 9 ofQ
9 your rebuttal testimony, and here you are implying that
10 Mr. Anderson is suggesting that the Commission adopt an
11 alternative manner in interpreting or evaluating DSM
12 programs; is that correct?
13 A What was the question, please?
14 I'm sorry, I'll restate. In this sectionQ
15 you are, my interpretation of it and you can correct me,
16 is that you are saying that Mr. Anderson's pre filed
17 testimony is suggesting an al ternati ve way of standard
18 DSM reporting~
19 Well, as I stated in my question andA
20 subsequent answer, we understand Mr. Anderson to have an
21 issue with the way we report annual energy savings.
22 And isn't it more accurate to say that heQ
23 is perhaps correcting the manner in which the Company is
24 reporting in the language that it uses? In your previous
25 testimony, in your direct testimony on page 12, lines 14,
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1 15 and 24, your testimony says that the Company -- well,
2 I'll let you have a chance to go to that testimony.
3 A Could you repeat the reference, please?
4 Q It's page 12.
5 A Of the rebuttal?
6 Q Of your original testimony, direct, I'm
7 sorry, lines 14, 15 and 24. Can you read lines 14 and
8 15? I guess it would probably be better to start from
9 the top of the paragraph and go through 15.
10 A "From an energy savings perspective, the
11 Company's programs and initiatives saved 91,145
12 megawatt-hours and provided 57 megawatts of peak
13 reduction across the Company's electrical system in 2007.
14 Each sector contributed to the energy savings total. In
15 2007, the residential sector realized energy savings of
16 12,441 megawatt-hours," and continues on.
17 Q Okay, isn't it more accurate to say that,
18 instead saying that program operations in 2007 are
19 credi ted with X amount of savings instead of saying, what
20 were your words, that the Company saved 91,145
21 megawatt-hours in 2007, that it was the program
22 operations in that year that led to those savings, the
23 savings didn't occur wi thin that 2007 year?
24 A Some of the savings may have been
25 experienced the full year and some may not have been a
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1 full year.It's standard industry practice to annualize
2 energy savings, very similar to other industry factors
3 that analyze financial information. It's impractical to
4 understand what kind of energy savings happen with one
5 customer putting in a proj ect in January 2nd versus a
6 proj ect that's distributed March 2nd. As a standard
7 practice for utilities , it's common practice to state
8 that it's energy savings in that year.
9 Q And I'll refer you to the top of page 15
10 in your rebuttal testimony and in that, you say that
11 Mr. Anderson incorrectly interprets as preliminary the
12 cost-effecti veness ratios provided by the Company, you
13 said, because these cost-effectiveness ratios were
14 calculated using the cost and savings metrics provided in
15 the DSM annual report filed with the Commission. Are
16 Idaho Power's DSM annual reports approved by the
17 Commission?
18 A They're not filed for approval. They're
19 information reporting on an annual basis.
20 Q Is it true that many of those numbers in
21 the DSM annual report are based on pre-implementation
22 assumptions rather than post-implementation
23 evaluations?
24 A I would say the maj ori ty are post. If
25 there are programs that have just launched, we include
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301
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1 pre-information as well as post-information.
2 Q So it does include some pre-implementation
3 evaluations or studies?
4 A I believe so.
5 Q Okay; so some of these numbers could be
6 considered preliminary; right?
7 A I think I would need a specific example to
8 be able to answer that entirely. The report is due at
9 the end of March for the year prior acti vi ty, so we look
10 at the year prior acti vi ty and that's all based on our
11 very thorough process that we have looking at energy
12 efficiency opportunities, programs that are designed with
13 pre-implementation cost effectiveness, brought before the
14 Energy Efficiency Advisory Group for further
15 contemplation, and then they're monitored for
16 effectiveness on a continual basis, so the programs may
17 be at a variety of stages as each annual report is
18 produced.
19 Q I understand that, but my point here in
20 asking you the question is sometimes when the Company
21 files an annual DSM report, it's based on numbers that
22 are preliminary in that you don't have a
23 post-implementation study or evaluation to go with it.
24 A Whatever is available at the time the
25 program is launched, and whether it's a seasonal program
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15
1 or an annual program, the information that is experienced
2 is included in the report.
3 Q I'll refer you to page 6 of your rebuttal
4 testimony, lines 17 through 21, and in that testimony,
5 you state that in response to Staff Production Request
6 No. 96, Idaho Power Company provided post-implementation
7 benefi t/ cost ratio estimates both from the total resource
8 cost and the utility cost perspective; is that
9 accurate?
10 A Yes.
11 Q And do you agree that at least some of the
12 benefi t/ cost ratio estimates provided are for programs
13 for which post-implementation evaluations have not yet
14 been completed?
A You know, I really don't know exactly
16 what's contained in there to be able to answer that
17 question. I can answer it in general terms in that as a
18 program is launched, again, we continually analyze the
19 cost effectiveness of that program and produce the
20 information.
21 Q I'm not trying to trip you up here. I'm
22 just simply asking in terms of what you posit in lines 17
23 through 21 is that Idaho Power provided
24 post- implementation benefit/cost ratio estimates from
25 both the total resource cost and utility cost
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23
1 perspective, given that, given that that's your position,
2 do you agree that at least some of those estimates are
3 based upon programs for which there are no
4 post-implementation studies?
5 A You know, again, without looking at the
6 specific information, I can't tell you what stage in the
7 process a program might have been.
8 MR. PRICE: Can we have a brief recess at
9 this point?
10 COMMISSIONER SMITH: We'll be at ease for
11 about five minutes.
12 (Pause in proceedings.)
13 MR. PRICE: Thank you, Madam Chair, I
14 apologize.
15 COMMISSIONER SMITH: No problem.
16 Q BY MR. PRICE: I just have one question
17 just to wrap up with this. I think the whole point of
18 Mr. Anderson's testimony is that the Commission should
19 defer their prudency review of the Company's DSM
20 programs, do you think that's accurate?
21 A I believe that's Mr. Anderson's
22 testimony.
Q Can you point to anything in his testimony
24 where he suggests in any way that any of the expenses,.25 the actual expenses, that the Company has incurred were
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1 imprudent for DSM programs?
2 A No.
3 MR. PRICE: That's all I have.
4 COMMISSIONER SMITH: Okay, do we have
5 questions from the Commission? Commissioner Kempton.
6 COMMISSIONER KEMPTON: Thank you,
7 Madam Chairman.
8
9 EXAMINATION
10
11 BY COMMISSIONER KEMPTON:
12 Q I'm going to have to bob and weave in here
13 between the questions that have been previously asked.
14 Counselor, if I repeat one that you specifically think
15 has been answered, you can so advise.
16 COMMISSIONER SMITH: You were waiting to
17 hear that.
18 Q BY COMMISSIONER KEMPTON: So there's a
19 question in the rebuttal section on page 16 that you
20 respond to without correction. The question is, "Do you
21 agree with Mr. Anderson's recommendation that the
22 cost-effecti veness of DSM programs should be judged by
23 comparison to alternative DSM programs and not to
24 supply-side resources." Do you remember that question?.25 A Yes, I do.
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1 Q Do you feel that that question accurately
2 reflects what Mr. Anderson actually said?
3 A That's my interpretation of what he
4 said.
5 Q Do you have a copy of Mr. Anderson's
6 direct?
7 A I don't. Well, I do now. Yes, I do.
8 Q It will be handy if you could get one
9 because I'm going to ask you to read a statement.
10 A Okay.
11 Q Do you have it on page 6? Starting with
12 line 13, would you read that sentence, please, because
13 that's the applicable sentence to the question that you
14 responded to? It starts with "furthermore."
15 A Oh, sure. "Furthermore, while achieving
16 DSM cost-effectiveness vis-a-vis supply-side alternatives
17 is important, it is just as important that the DSM
18 al ternati ves as implemented be as cost-effective as
19 practicable from the utility perspective."Do you want
20 me to read on?
21
22
Q Yes.
A "This does not mean that other goals
23 (e. g. customer class equity, intra-class distribution,
24 and total resource, participant and non-participant cost.25 effecti veness) are not also important, but rather that
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1 within the bounds of due consideration of all goals, the
2 least-cost DSM implementation al ternati ve is the most
3 prudent. In other words, it is not prudent to pay more
4 for a DSM resource than is necessary."
5 Q That's the only place in Mr. Anderson's
6 testimony that I can find anything that applies to the
7 condensed version of Mr. Anderson comparing DSM side by
8 side with comparisons to al ternati ve DSM costs. Do you
9 believe in reading what you read here, what Mr. Anderson
10 said, that Mr. Anderson is not -- is saying that supply
11 side considerations are not important; in other words,
12 the last sentence in the question that you asked, should
13 they be judged by comparison to alternative DSM costs and
14 not to supply-side resources, that's attributed to
15 Mr. Anderson. Do you see in this sentence where
16 Mr. Anderson said that supply side was not important or
17 that DSM should be considered as a priority to supply
18 side?
19 A It was our interpretation that that was
20 the intention of his statement.
21 Q Thank you. Okay, Ms. Drake, is
22 conservation a resource? Is it a cost-efficient
23 resource?
24
25
A Yes.
Q Do you state that as such in your
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1 testimony any place where you actually would include the
2 conservation in addition to other cost-effective
3 resources? You don't have to -- if you believe that you
4 did, I will accept that. I'm not trying to have you
5 review this word for word.
6 A Yes, I can't cite specifically where it
7 is, but we do have as our obj ecti ve outlined in my direct
8 testimony, page 3, the main obj ecti ves for energy
9 efficiency and demand response are to acquire all
10 cost-efficient resources in order to effectively meet the
11 Company's electrical system's needs and to provide
12 customers with programs and information to help them
13 manage their energy and demand use and lower their
14 bills.
15 Q And I'm sorry, which page was that?
16 A Sure, it's in my direct on page 3,
17 starting on line 17.
18
19
Q Would you read it to me again, please?
A Uh-huh. "The Company's two main
20 obj ecti ves for energy efficiency and demand response are:
21 (1) to acquire all cost-effective resources in order to
22 efficiently meet the Company's electrical system's needs
23 and to provide customers with programs and (2)
24 information to help them manage their energy and demand
25 use and lower their bills."
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1 Q Okay, Ms. Drake, I agree that the
2 obj ecti ve is to acquire all cost-effective resources. My
3 question is do you consider conservation one of those
4 cost-effecti ve resources?
5 A Yes.
6 Q Okay.
7 A Yes, absolutely.
8 Q On page 17 you state at the top, in
9 rebuttal you state, "It is generally accepted that the
10 most cost-effective programs are in the industrial sector
11 while the least cost-effective are in the residential
12 sector. " Given the size of the residential sector, if
13 there is any cost efficiency gained through conservation,
14 it looks like in some it would at least come someplace
15 near meeting the industrial sector, if not exceeding it,
16 and in this rate case, you're proposing, Idaho Power is
17 proposing, tiered rates. That will be a conservation.
18 It certainly is an energy efficiency program, but it's
19 primarily associated with the conservation you're looking
20 to achieve; is that correct?
21 A That's my understanding of the Company's
22 proposal.
23 Q That conservation en masse extended across
24 the public --
25 A I'm sorry, could you repeat it? I can't
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1 hear you.
2 Q That program, the tiered rate program,
3 applied across the entire residential population, would
4 that not at least approach in your mind the quantity of
5 the cost-efficient program that comes out of the
6 industrial side of the house?
7 A Boy, I don't know. I'm not sure how the
8 two would compare.
9 Q Okay. On page 22, there's a couple of
10 questions that I have in the testimony from line 1
11 through line 13. First of all, in measuring
12 cost-effecti ve efficiencies, would you define what the
13 total resource cost, what the utility costs are, those
14 two things and also what your cost ratio is, how it's
15 obtained and what it means?
16 A Sure. The utility cost is what it costs
17 the utility to offer that type of resource reduction,
18 what does it cost for us to administer that program,
19 including incentives. Total resource cost would also
20 include what the customer's costs would be to join into
21 that program in simple terms.
22 Q And all the supply side costs would be a
23 part of that as well; right?
24
25
A For energy efficiency.
Q Supply side costs would
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1 A Yes, for energy efficiency.
2 Q Okay, and the ratio that you get when you
3 apply the benefit of the program that you put in versus
4 the cost that it takes to implement it is your ratio that
5 you're looking for?
6 A Right.
Q Is that correct?
A Yes.
Q And what does that ratio have to equal to
in order to exhibit cost effectiveness,if you will?
7
8
9
10
11 A It has to be a number of one or greater.
12 Q And were those kind of ratios provided on
13 all the information that you provided to Staff in their
14 production requests?
15 A Yes, they were.
16 Q In the last sentence you talk about the
17 fact that the Commission expects the Company -- let me,
18 on page 22, starting with line 10, you state, however --
19 let's see, let me go up to line 8. I believe that the
20 Commission expects the Company to utilize the TRC, which
21 is the total resource cost, and the utility cost test to
22 determine cost effectiveness, we've talked about that.
23
24
25
A Yes.
Q Then you say, "However, I believe that the
Commission expects these tests to be used merely as
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1 guidelines and should not be used to exclude projects
2 that may be desirable as good public policy."
3 A Yes.
4 Q Is there anyplace in any Commission
5 direction where we've indicated that good public policy
6 should be a part of the measurement of a cost-effective
7 program?
8 A Yes.
9 Q Do you have a reference to that?
10 A Yes. It will take just a moment, I'll
11 find it. The start of the reference is on my rebuttal
12 testimony, page 18.
13 Q I'm sorry, page what?
14 A Page 18 of the rebuttal, rebuttal
15 testimony. Wi thin that answer, we cite the Order that
16 outlines the various tests that the Commission
17 recommended at the time be used for evaluating cost
18 effectiveness and --
19
20
21
22
Q What line are you on?
A Sure, it starts on line 14.
Q Okay.
A And there's particular references to that
23 Order throughout line 14 and continuing on to page 19.
24 The specific reference tò the TRC and the UC is on page
25 18, line 21, actually starting on line 18, "To screen the
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.1 cost-effecti veness of potential DSM proj ects, the
2 advisory group shall use the following tests: total
3 resource cost, utility cost and participant cost. The
4 calculations of the TRC and the UC, as defined...," we
5 further explore how they're defined and part of that
6 Order describes that they are to be used as guidelines
7 and does not exclude a proj ect that the advisory group
8 and the Commission would consider a good public policy.
9 Q Okay, and that was the substance of my
10 question, who had actually determined the priority of
11 policy in comparison to something that would come before
12 the Commission for consideration at a later date, so we.13 don't have that specific language, but it's something
14 that I would like to have Idaho Power provide for the
15 record.
16 MR. KLINE: Specific language?
17 COMMISSIONER KEMPTON: The language that
18 talks about, yes, the good policy. Some of this is
19 before my time on the Commission and consequently, I have
20 put primary consideration in my looking at the
21 cost-efficiency programs and the cost-efficiency ratio,
22 not on policy that's ambiguous, can be ambiguous.
23 Q BY COMMISSIONER KEMPTON: Finally, I have
24 one last question and that is that you mention that the.25 Commission has a member that's on the Energy Efficiency
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1 Advisory Group and you are quite critical in -- if they
2 have a concern as Mr. Anderson has expressed that
3 Mr. Anderson who is the member had not apparently advised
4 you of his concerns. You state, "The Company assumes the
5 Commission Staff will use the EEAG to informally advise
6 the Company if the Staff disagrees with the direction and
7 execution of the Company's energy efficiency efforts. It
8 is important to the Company that the Commission Staff
9 fully engage in advisory activities." I would assume
10 that Mr. Anderson would discuss these, but he doesn't act
11 as a policy -- I'm preaching here. Do you consider
12 Mr. Anderson to be a policy point for the Commission on
13 his own interpretation of issues coming before the
14 EEAG?
15 A We look at the Commission Staff members as
16 a significant role in any advisory group we have at the
17 Company and knowing that Mr. Anderson is connected with a
18 variety of technical groups regarding energy efficiency
19 in the region, we welcome his support in whatever
20 capacity he's able to provide at the forum of the Energy
21 Efficiency Advisory Group, and in fact, we really
22 appreciate the collaboration that the Company has been
23 able to enjoy having Commission Staff members be part of
24 the advisory groups and we would enj oy having some
25 discussion on being able to have his expertise in
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1 connection with the other acti vi ties that he's involved
2 wi th to help shape and guide and educate the other
3 advisory group members, not just the Company, but the
4 advisory group representing customers and environmental
5 groups and so forth and be able to share that expertise
6 at those forums.
7 Q Did Mr. Anderson ever express concern
8 about post-implementation measurements of projects that
9 were proposed or under development on the EEAG?
10 A No.
11 COMMISSIONER KEMPTON: Thank you. That's
12 all I have, Madam Chairman.
13 COMMISSIONER SMITH: Commissioner
14 Redford.
15
16 EXAMINATION
17
18 BY COMMISSIONER REDFORD:
19 Q After you filed your rebuttal testimony or
20 even before, did you ever speak with Mr. Anderson or did
21 your attorneys, if you know, speak with each other about
22 the deficiencies that Mr. Anderson states in his
23 testimony?
24
25
A No.
Q So he felt the information was deficient,
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1 you gave him what information you thought he wanted and
2 there was no communication back and forth between the
3 Company and the Staff to resolve the issue of whether the
4 information was deficient or not, do you know whether
5 that was done?
6 A I don't believe so.
7 COMMISSIONER REDFORD:I might ask
8 Mr. Kline, do you know?
9 COMMISSIONER SMITH: He's not a witness.
10 COMMISSIONER REDFORD: I know he isn't. I
11 think it's just a matter of procedure.
12 MR. KLINE: I know that we have had
13 discussions with Commission Staff counsel. That's the
14 only person that I talked to at the Commission about
15 ongoing discussions. Sometimes those discussions don't
16 go anywhere because, of course, people want to do it in
17 the formal process that we have in place here at the
18 Commi s s i on, you know, product i on reque s t s, a udi t
19 requests. They want to keep the record that way,
20 Commissioner Redford.
21 COMMISSIONER REDFORD:The reason I raise
22 this is because this is a form of discovery and most
23 generally in the event in discovery if the information is
24 not supplied as was requested, then usually there's some
25 sort of motion to compel or some other manner in which
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19
1 you get the discovery dispute resolved.
2 MR. KLINE: Yeah, and that didn't occur
3 here. I think part of the problem was that we were
4 getting very close in time to when the Staff had to file
5 its testimony and the discovery process had been very
6 compressed and so I think that's why.
7 COMMISSIONER REDFORD: Thank you. I have
8 no more questions. I'm done.
9
10 EXAMINATION
11
12 BY COMMISSIONER SMITH:
13 Q I just had one question that I think
14 Mr. Price asked that I would like to have answered and
15 the question is does the Commission need
16 post-implementation information to assess the prudency of
17 a program?
18 A I don't think so.
20 you have any redirect, Mr. Kline?
COMMISSIONER SMITH: Okay, thank you. Do
21 MR. KLINE: Well, I do. Hopefully, it
22 will add something to the discussion and I'm going to
23 follow up with the question that you just asked to
24 Ms. Drake.
25
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1 REDIRECT EXAMINATION
2
3 BY MR. KLINE:
4 Q As kind of a preface for that, when Idaho
5 Power Company is putting together a DSM program, an
6 energy efficiency program, it puts together the program,
7 it discusses internally .as to how it's going to be
8 operated. It then takes that program to the Energy
9 Efficiency Advisory Group and if it's properly reviewed
10 there, then the Company goes ahead and starts spending
11 money to implement the program, and during the course of
12 that program's progress, there will be a pre-launch
13 assessment, there may be a mid-term assessment and then
14 at the end there may be a post or, you know, a far enough
15 down the line point where you have sufficient
16 information, then you do the post-implementation report.
17 My question to you is at the time that the Company
18 launches the program and starts spending money, isn't
19 it -- would it be unfair after the fact for someone to
20 come back and say wait a minute, that was imprudent based
21 on the information that you knew at the time? Have I
22 described the process accurately?
23 A You have and we take this issue very
24 seriously and as Bart outlined, he outlined the high
25 level steps the Company goes through to have evaluation
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1 done. Whether it's pre-evaluation or post-evaluation or
2 when post-evaluation happens, our opinion is that
3 evaluation happens from the time a program concept is
4 originated all the way through the life of the program,
5 and just because a program is launched doesn't mean that
6 we stop post-evaluation at one point in time. It's
7 evaluated continuously. Things can change, building
8 codes can change, technologies can change. We could have
9 better information from our regional technical forums
10 that we rely on that would cause us to make sure that we
11 had a constant evaluation process to ensure that all the
12 facts were in line with what is expected for providing
13 cost-effecti ve resources, so yes, we do take it
14 seriously. Evaluations are ongoing and there's a number
15 of utility industry standard and regional experts that
16 are consulted as part of that process, including the EEAG
17 group.
18 Q So if a post-evaluation or a
19 post-implementation report were to conclude that the
20 cost/benefit, the analysis that was done pre-launch that
21 initiated that program, if that post-implementation
22 report said well, it didn't turn out quite as well as we
23 thought it was going to be --
24 A Right.
25 Q -- would it be fair to use that
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1 post-implementation report to conclude that what you had
2 spent so far was spent imprudently?
3 A No, no, it wouldn't because we use the
4 best information available to assess whether a program is
5 anticipated at being cost effective. As information is
6 gained on the actual experience of a program and we
7 evaluate that ongoing, we make adjustments accordingly.
8 Some measures we will stop offering because they i re not
9 cost effective as we had more experience and usage in the
10 program to gain the reality of what it is.
11 All right. Now, Commissioner KemptonQ
12 asked you a couple of questions about Mr. Anderson's
13 testimony and what I want to look at is whether or not
14 maybe we may have misinterpreted Mr. Anderson's
15 testimony. Let me ask you this: If Mr. Anderson's
16 testimony could be correctly interpreted to say that
17 comparing a program to a supply side resource after it's
18 gone through all of the pre-launch analysis, if comparing
19 a program to a supply side resource is the test for
20 prudency, is the Company okay with that?
21 A Yes.
22 If Mr. Anderson's testimony could beQ
23 interpreted to say well, we're going to compare one DSM
24 program against another DSM program and if you happen to
25 have launched one that wasn't as cost effective as the
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.1 other one, then that would be imprudent, would the
2 Company be okay with that?
3 A No.
MR. KLINE: All right, and I'll ask these
5 same questions to Mr. Anderson. That's all I have.
4
6
7 for your help.
8
9
COMMISSIONER SMITH: Thank you, Ms. Drake,
THE WITNESS: Thanks.
COMMISSIONER SMITH: And do you want her
10 excused or do you care?
11
12.
MR. KLINE: Yes, I would.
COMMISSIONER SMITH: Okay, without
13 obj ection, she may be excused.
14
15
(The witness left the stand.)
COMMISSIONER SMITH: It looks like we've
16 reached the lunch time. I suggest we adjourn for lunch
17 and return at 1: 30.
18 (Lunch recess.)
.
19
20
21
22
23
24
25
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