20090108Vol X [technical hearing ends] pgs 2476-2594.pdf

ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION'.
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS
RATES AND CHARGES FOR ELECTRIC
SERVICE TO ELECTRIC CUSTOMERS IN
THE STATE OF IDAHO.
)
) CASE
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Idaho Public Utilties Commission
Office of the SecretaryRECEIVED
NO. IPC-E,;08-10
JAN - 8 2009
Boise, Idaho
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 19, 2008
VOLUME X - Pages 2476 - 2594
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csbCÐheritagewifi.com
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1 APPEARANCES
2 For the Staff:
3
4
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. Boehm, Esq.
36 E. Seventh Street
Suite 1510
Cincinnati, Ohio 45202
-and-
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:
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11 For Idaho Irrigation
Pumpers Association:
(Telephonically)
For The United States
Department of Energy:
For Micron Technology,
Inc. :
For The Kroger Company:
(Of Record)
CSB REPORTING
[phone]
APPEARANCES
1 APPEARANCES (Continued).2
3 For the Community Action Brad M.Purdy, Esq.
Partnership of Idaho:Attorney at Law
4 2019 North 17th Street
Boise,Idaho 83702
5 For Snake River Alliance:Mr.Ken Miller
6 5400 West Franklin
Boise,Idaho 83705
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CSB REPORTING APPEARANCES
(208 )890-5198
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1
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3 WITNESS
I N D E X
EXAMINATION BY PAGE
Mr. Boehm (Direct) 2476
Prefiled Direct Testimony 2478
Prefiled Rebuttal Testimony 2491
Mr. Kline (Direct-Reb)
Prefiled Rebuttal Testimony
Mr. Richardson (Cross-Reb)
Mr. Purdy (Cross-Reb)
Mr. Ward (Cross-Reb)
Mr. Price (Cross-Reb)
Commissioner Kempton
Mr. Kline (Redirect-Reb)
2511
2513
2551
2553
2559
2574
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2581
4 Kevin C. Higgins
(Kroger Company)
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6 John R. Gale
(Idaho Power Company)
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CSB REPORTING.
[phone]
INDEX
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1 EXHIBITS
2
3 NUMBER DESCRIPTION
4 FOR IDAHO POWER COMPANY:
5 3 - 88 -Admitted
6
7 FOR THE STAFF;
8 1 - 156 -Admitted
9
10 FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
11 201 - 212 -Admitted
12
13 FOR THE IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.:
14 301 - 306 & 308 -Admitted
15
16 FOR KROGER COMPANY:
17 401 -Admitted
18
19 FOR COMMUNITY ACTION PARTNERSHIP ASSOCIATION OF IDAHO:
501 -Admitted
22 FOR U. S. DEPARTMENT OF ENERGY:
23
24.25
601 - 613 -Admitted
PAGE
2593
2593
2593
2593
2593
2593
2593
CSB REPORTING
Wilder, Idaho 83676
EXHIBITS
1 EXHIBITS (Continued).2
3 NUMBER DESCRIPTION PAGE
4 FOR MICRON TECHNOLOGY,INC. :
5 701 - 709 -Admitted 2593
6
7 FOR THE PUBLIC:
8 801 -Admitted 2593
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11
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13.14
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CSB REPORTING EXHIBITSWilder,Idaho 83676
.1 BOISE, IDAHO, FRIDAY, DECEMBER 19, 2008, 9:30 A. M.
2
3
4 COMMISSIONER SMITH: Good morning, ladies
5 and gentlemen. We'll start again what we hope is our
6 final day in the Idaho Power rate case. Someone has
7 taken my list~ Help me with your name.
8 MR. BOEHM: Boehm.
9 COMMISSIONER SMITH: Mr. Boehm, do you
10 have a witness you'd like to call?
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11 MR. BOEHM: Yes, Kroger calls Kevin
12 Higgins.
13
14 KEVIN C. HIGGINS,
15 produced as a witness at the instance of the Kroger
16 Company, having been first duly sworn, was examined and
17 testified as follows:
18
19 DIRECT EXAMINATION
20
21 BY MR. BOEHM:
22 Good morning, Mr. Higgins.Q
23 A Good morning.
24 Are you the same Kevin Higgins who filedQ
25 direct testimony marked as Exhibit 401 and rebuttal
CSB REPORTING
[phone]
2476 BOEHM (Di)
Kroger Company
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1 testimony marked as Exhibit 402?
2 A Yes, I am.
3 Q Do you have any changes or corrections to
4 that testimony?
5 A I do not.
6 Q If I was to ask you the same questions
7 today as appear in your testimony, would your answers be
8 the same?
9 A Yes, they would.
10 MR. BOEHM: Kroger moves for the admission
11 of Exhibits 401 and 402 as if they were read in full.
12 COMMISSIONER SMITH: We don't usually give
13 exhibi t numbers to the prefiled testimony, so what I will
14 do is just order that the prefiled direct and rebuttal
15 testimony of Mr. Higgins be spread upon the record as if
16 read.
17 MR. BOEHM: Thank you.
18 COMMISSIONER SMITH: And if you'd like, we
19 could call his Attachment A which is his vitae as Exhibit
20 401.
21 MR. BOEHM: Thank you.
22 (The following prefiled direct and
23 rebuttal testimony of Mr. Kevin Higgins is spread upon
24 the record.)
25
CSB REPORTING
[phone]
2477 BOEHM (Di)
Kroger Company
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1 DIRECT TESTIMONY OF KEVIN C. HIGGINS
2 Introduction
3 Q.Please state your name and business address.
4 A.Kevin C. Higgins, 215 South State Street, Suite
5 200, Salt Lake City, Utah, 84111.
6 Q.By whom are you employed and in what capacity?
7 A.I am a Principal in the firm of Energy
8 Strategies, LLC. Energy Strategies is a private
9 consulting firm specializing in economic and policy
10 analysis applicable to energy production, transportation,
11 and consumption.
12 Q.On whose' behalf are you testifying in this
13 proceeding?
14 A.My testimony is being sponsored by The Kroger
15 Co., ("Kroger"), doing business as Fred Meyer and
16 Smith's. Kroger is one of the largest grocers in the
17 Uni ted States. Kroger has over 25 accounts served by
18 Idaho Power, which together consume over 40 million kWh
19 per year. A large portion of Kroger's load takes service
20 under Schedule 9. Kroger's Schedule 9 load takes service
21 at both secondary and primary voltage.
22 Q.Please describe your professional experience and
23 qualifications.
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25
A.My academic background is in economics, and I
have completed all coursework and field examinations
2478 Higgins, Di 2
Kroger
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1 toward a Ph.D. in Economics at the University of Utah. In
2 addi tion, I have served on the adj unct faculties of both
3 the University of Utah and Westminster College, where I
4 taught undergraduate and graduate courses in economics
5 from 1981 to 1995. I joined Energy Strategies in 1995,
6 where I assist private and public sector clients in the
7 areas of energy-related
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9 /
/
2479 Higgins, Di 2a
Kroger
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1 economic and policy analysis, including evaluation of
2 electric and gas utility rate matters.
3 Prior to joining Energy Strategies, I held
4 policy positions in state and local government. From
5 1983 to 1990, I was economist, then assistant director,
6 for the Utah Energy Office, where I helped develop and
7 implement state energy policy. From 1991 to 1994, I was
8 chief of staff to the chairman of the Salt Lake County
9 Commission, where I was responsible for development and
10 implementation of a broad spectrum of public policy at
11 the local government level.
12 Q.Have you ever testified before this Commission?
13 A.Yes. I testified in Idaho Power's 2007 general
14 rate case, Case No. IPC-E-07-8, and in its 2003 general
15 rate case, Case No. IPC-E-03-13.
16 Q.Have you testified before utility regulatory
17 commissions in other states?
18 A.Yes. I have testified in over one hundred
19 proceedings on the subj ects of utility rates and
20 regulatory policy before state utility regulators in
21 Alaska, Arkansas, Arizona, Colorado, Georgia, Illinois,
22 Indiana, Kansas, Kentucky, Michigan, Missouri, Minnesota,
23 Montana, Nevada, New Mexico, New York, Ohio, Oklahoma,
24 Oregon, Pennsylvania, South Carolina, Utah, Washington,
25 Virginia, West Virginia, and Wyoming. I have also filed
2480 Higgins, Di 3
Kroger
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1 affidavi ts in proceedings at the Federal Energy
2 Regulatory Commission.
3 A more detailed description of my
4 qualifications is contained in Attachment A, attached to
5 this testimony.
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2481 Higgins, Di 3a
Kroger
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1 Overview and Conclusions
2 Q.What is the purpose of your testimony in this
3 proceeding?
4 A.My testimony addresses the proposal by Idaho
5 Power to introduce time-of-use ("TOU") pricing for
6 Schedule 9 customers taking service at either primary or
7 transmission voltage.
8 Q.What conclusions have you reached in your analysis
9 of Idaho Power's proposal to introduce TOU rates for
10 certain Schedule 9 customers?
11 A.I recommend adoption of the TOU rate design
12 proposed by Idaho Power for Schedule 9 customers taking
13 service at either primary or transmission voltage
14 (Schedules 9- P and 9-T). Currently, TOU rates are not
15 available to Schedule 9 customers. The Company's proposed
16 rate design improves the price signals for Schedule 9-P
17 and 9-T customers and is responsive to the directive in
18 the Commission's Order issued in Case No. IPC-E-07-8, in
19 which the Company was instructed to develop a time-of-use
20 rate proposal for Schedule 9 customers.
21
22 Idaho Power's TOU Rate Design for Schedules 9-P and 9-T
23 Q.By way of background, please describe the type of
24 service that iS available under Rate Schedule 9.
25 A.Schedule 9, Large General Service, is generally
2482 Higgins, Di 4
Kroger
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10
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1 available to customers with monthly energy usage in
2 excess of 2,000 kilowatt-hours and billing demands less
3 than 1,000 kilowatts. The rate schedule contains pricing
4 provisions for service taken at secondary voltage (9-S),
5 primary voltage (9-P), and transmission voltage (9-T).
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2483 Higgins, Di 4a
Kroger
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1 In the Idaho Power tariff, Schedule 9 is
2 si tuated between Schedules 7 and 19. Non-residential
3 customers with energy usage less than 2,000
4 kilowatt-hours per month are generally served under
5 Schedule 7, Small General Service, whereas customers with
6 billing demands of 1,000 kilowatts or more generally take
7 service under Schedule 19, Large Power Service.
8 Q.How are Schedule 9- P and 9-T rates currently
9 structured?
10 A.The Schedule 9-P and 9-T rate components are
11 comprised of: (1) a service charge, which is a monthly
12 customer charge; (2) a basic charge which a billed on a
13 demand basis; (3) a seasonally-differentiated demand
14 charge; and (4) an energy charge that also is
15 seasonally-differentiated.
16 Q.How does the design of Schedule 9-P compare with
17 that of Schedule 19-P?
18 A.With the exception of the energy charge,
19 Schedules 9-P. and 19-P are nearly identical. Schedules
20 9-P and 19-P have the same service charges, basic
21 charges, and non-summer demand charges. The summer
22 demand charges are also identical, except that the
23 Schedule 19-P summer demand charge is divided into an
24 on-peak and a non-peak component (the sum of which is
25 equal to the Schedule 9-P summer demand charge) .
2484 Higgins, Di 5
Kroger
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1 The big difference between the two rate
2 schedules occurs in the design of the energy charge.
3 Currently, the Schedule 9-P energy charge has no TOU
4 price differentiation. It is a flat energy charge that
5 does not vary with the hour of the day in which energy is
6 consumed. In contrast, the Schedule 19-P energy charge is
7 differentiated into three time periods in the summer
8 (on-peak, mid-peak, and off-peak) and two time periods in
9 the non-summer months (mid-peak and off-peak) .
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2485 Higgins, Di 5a
Kroger
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20
1 Q.How does the design of Schedule 9-T compare with
2 that of Schedule 19-T?
3 A.The relationship between Schedules 9-T and 19-T
4 mirrors that of Schedules 9- P and 9-T, described above.
5 Q.What rate design has Idaho Power proposed for
6 Schedules 9-P and 9-T in this proceeding and how does it
7 relate to that of Schedules 19-P and 19-T?
8 As explained in the direct testimony of IdahoA.
9 Power witness Darlene Nemnich, the Company is proposing
10 to bring the designs for Schedules 9 and 19 even closer
11 together for customers taking service at primary and
12 transmission voltages. For customers taking service at
13 the same voltage level, the demand charges would be
14 identical for Schedules 9 and 19 - including the on-peak
15 and non-peak components in the summer demand charge. And
16 significantly, the energy charges for 9-P and 9-T would
17 move from flat energy charges to a TOU design.
18 Q.What is your assessment of the Company's proposed
19 changes to the design of Schedules 9-P and 9-T?
A.I support Idaho Power's proposal. The
21 introduction of TOU pricing for these customers will
22 improve the price signals they receive and better align
23 cost recovery with cost causation wi thin the rate
24 schedule. The proposal is also consistent with the
25 instructions issued in the Commission's Order in Case No.
2486 Higgins, Di 6
Kroger
1 IPC-E-07 -8,in which Idaho Power was directed to "develop.2 a time-of-use rate proposal for Schedule 9 customers and
3 present it to the Commission." The Order further
4 specified that "Idaho Power should include the Schedule 9
5 customers in
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2487 Higgins,Di 6a
Kroger
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1 that process, and if possible, present a proposal that is
2 agreeable to the Schedule 9 customers." (Order at 9. J
3 Q.Are you familiar with efforts by Idaho Power to
4 include Schedule 9 customers in the process of
5 introducing TOU rates?
6 A.Yes. Idaho Power invited Kroger and other
7 Schedule 9 customers to discuss different approaches for
8 introducing TOU rates for Schedules 9-Pand 9-T. The
9 Company solicited input from Schedule 9 customers and has
10 been responsive to Kroger's feedback.
11 Q.What are the benefits of TOU pricing?
12 A.Energy costs vary across the hours of the day,
13 with the most' expensive hours typically occurring from
14 the late morning to early evening. Designing the energy
15 price to end-use customers to reflect these variations in
16 energy costs sends the proper signal to customers
17 regarding the relative cost to operate the system during
18 the peak, mid-peak, and off-peak hours. Customers can
19 then use this pricing information to alter their
20 discretionary patterns of usage, increasing efficiency
21 and lowering the overall cost of energy to the system.
22 Q.Are there other reasons besides economic efficiency
23 to make TOU rates available to Schedule 9-P and 9-T
24 customers?
25 A.Yes. In addition to providing these customers
2488 Higgins, Di 7
Kroger
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1 wi th an incentive to better respond to price signals, TOU
2 rates will ensure that these customers pay rates that are
3 more closely aligned with the costs they cause. Basic
4 fairness dictates that customers whose patterns of energy
5 consumption are less expensive to serve because of their
6 load pattern should see that lower cost reflected in
7 their bills.
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2489 Higgins, Di 7 a
Kroger
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1 Moreover, the introduction of TOU rates for
2 Schedule 9- P and 9-T customers will improve the already
3 close alignment between these rates schedules and
4 Schedules 19- P and 1 9-T, further smoothing the transition
5 for customers who may move between Schedules 9 and 19 as
6 their usage level changes.
7 Q.Please summarize your recommendation to the
8 Commission on this issue.
9 A.I recommend adoption of the TOU rate design
10 proposed by Idaho Power for Schedule 9 customers taking
11 service at either primary or transmission voltage. The
12 Company's proposed rate design improves the price signals
13
14
for Schedule 9-P and 9-T customers and will ensure that
these customers pay rates that are more closely aligned
15 wi th the costs they cause. Further, the introduction of
16 TOU rates for Schedule 9-P and 9-T customers will more
17 closely align their rates with Schedules 19-P and 19-T,
18 improving the transition for customers who may move
19 between Schedules 9 and 19 as their usage level changes.
20 Finally, the proposal is consistent with the instructions
21 issued in the Commission's Order in the previous Idaho
22 Power rates case, in which the Company was directed to
23 develop a TOU rate proposal for Schedule 9 customers that
24 included the Schedule 9 customers in the process.
25 Q.
A.
Does this conclude your direct testimony?
Yes, it does.
2490 Higgins, Di 8
Kroger
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1
2 In troduction
3 Please state your name and business address.Q.
4 Kevin C. Higgins, 215 South State Street, SuiteA.
5 200, Salt Lake City, Utah, 84111.
6 By whom are you employed and in what capacity?Q.
7 I am a Principal in the firm of EnergyA.
8 Strategies, LLC. Energy Strategies is a private
9 consulting firm specializing in economic and policy
10 analysis applicable to energy production, transportation,
11 and consumption.
12 Are you the same Kevin C. Higgins who previouslyQ.
13 testified on behalf of The Kroger Co. in this proceeding?
14 A.Yes, I am.
15 What is the purpose of your rebuttal testimony?Q.
16 My rebuttal testimony responds to certainA.
17 proposals made in the direct testimony of Staff witness
18 Matt Elam and Idaho Irrigation Pumpers Association
19 wi tness Anthony J. Yankel.
20 Please summarize the maj or points in your rebuttalQ.
21 testimony.
22 (1) My direct testimony expresses strongA.
23 support for Idaho Power's proposal to introduce
24 time-of-use rates for Schedule 9 customers taking service
25 at primary and transmission voltages. Staff witness Matt
2491 Higgins, Reb 1
Kroger
1 Elam also expresses support for Idaho Power's proposal,.2 but Mr.Elam proposes modifications to Schedule 9 rates
3 consistent with Staff's lower proposed revenue
4 requirement.I
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2492 Higgins,Reb la
Kroger
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1 have reviewed Mr. Elam' s proposed rate design for
2 Schedules 9-P and 9-T and conclude that his proposal is
3 consistent with the time-of-use design proposed by Idaho
4 Power. Therefore, I support Mr. Elam' s proposed rate
5 design at Staff's revenue requirement, while also
6 supporting and Idaho Power's proposed rate design at the
7 Company's proposed revenue requirement.
8 (2) Mr. Yankel proposes to revise Idaho Power's
9 Base Case cost-of-service study by allocating a portion
10 of class costs based on a ten-year forecast of class
11 growth. Mr. Yankel' s proposal would assign generation and
12 transmission costs to current customers based on
13
14
proj ected increases to class load that have not yet
materialized. In my opinion, this proposal is
15 unreasonable and I recommend that it be rej ected.
16 (3) Mr. Yankel also proposes to change the
17 basis for allocating the revenue credits to classes
18 attributable to Sales for Resale. Mr. Yankel' s proposal
19 fails to take proper account of the differing cost
20 burdens borne' by different customer classes for recovery
21 of the production plant from which Sales for Resale are
22 made. In my opinion, Mr. Yankel' s proposed change is
23 grossly inequitable and should be rejected.
24 Response to Matt Elam
25 Q.In your direct testimony, you expressed strong
2493 Higgins, Reb 2
Kroger
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1 support for Idaho Power's proposal to introduce
2 time-of-use rates for Schedule 9 customers taking service
3 at primary and transmission voltages. Have you reviewed
4 the
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2494 Higgins, Reb 2a
Kroger
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1 proposed modifications to Schedule 9 rates proposed by
2 Staff witness Matt Elam?
3 A.Yes, I have.
4 Q.What is your assessment of Mr. Elam' s proposed
5 modifications?
6 A.Mr. Elam also expresses support for Idaho
7 Power's time-of-use proposal for Schedule 9-P and 9-T
8 customers. However, because Staff proposes a lower
9 revenue requirement than Idaho Power, it is necessary for
10 Mr. Elam to modify the Schedule 9-P and 9-T time-of-use
11 charges to be consistent with this lower revenue
12 requirement.
13 I have reviewed Mr. Elam' s proposed rate design
14 for Schedules 9-P and 9-T and conclude that his proposal
15 is consistent with the time-of-use design proposed by
16 Idaho Power. Therefore, I support Mr. Elam' s proposed
17 rate design at Staff's revenue requirement, while also
18 supporting Idaho Power's proposed rate design at the
19 Company's proposed revenue requirement.
20
21 Response to Anthony J. Yankel
22 Q.What has. Mr. Yankel' s proposed with respect to
23 revising Idaho Power's Base Case cost-of-service study?
24 A.Mr. Yankel has proposed that 50 percent of
25 generation and transmission costs in the Company's Base
2495 Higgins, Reb 3
Kroger
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1 Case analysis be allocated on the basis of proj ected
2 class load growth over the next ten years. Mr. Yankel
3 argues that such an approach would better reflect
4 "forward-looking" costs. i
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25 i Direct testimony of Anthony J. Yankel, p. 18, line 1 - p. 24, line
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2496 Higgins, Reb 3a
Kroger
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1 Q.What is your assessment of this proposal?
2 A.The fundamentals of this proposition are
3 unreasonable. The proposal would assign generation and
4 transmission costs to current customers based on
5 proj ected increases to class load that have not yet
6 materialized. The first problem here is that the expected
7 load growth is not necessarily attributable to current
8 customers, but to customers who do not yet exist. As
9 customers who do not yet exist cannot be charged for the
10 "growth correction" being proposed by Mr. Yankel, the
11 burden of this proj ected growth is instead assigned to
12 the existing customers in the growing classes. Under this
13 approach, class cost responsibility is weighted by
14 (higher) future kilowatt-hours, but costs can only be
15 recovered from current kilowatt-hours, creating an
16 unreaonable cost burden for the affected customer
17 classes.
18 A further problem is that current class cost
19 responsibility would be allocated based on a ten-year
20 growth projection that may not develop as forecasted.
21 This would introduce an undue degree of speculation into
22 the assignment of class cost responsibility.
23 Q.What is your recommendation with respect to Mr.
24 Yankel' s proposal to revise Idaho Power's Base Case
25 cost-of-service study?
2497 Higgins, Reb 4
Kroger
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1 A.I recommend that the proposed revision be
2 rejected.
3 Q.What change has Mr. Yankel proposed for the
4 allocation of the revenue credits to classes attributable
5 to Sales for Resale?
6 A.Mr. Yankel obj ects to the traditional
7 allocation of Sales for Resale revenues based on class
8 energy or demand. Instead, Mr. Yankel proposes that
9
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2498 Higgins, Reb 4a
Kroger
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1 each customer class be assigned a percentage share of
2 production plant based on the class's allocation of
3 production plant costs. Each class then would be credited
4 with Sales for Resale revenues to the extent that its
5 load is less than its assigned share of production plant
6 in a given hour. The credit would be for a share of the
7 off-system sales taking place in that hour as well as for
8 deemed "sales" to other customer classes that are
9 consuming more power than their respective "shares" of
10 production plant. Conversely, to the extent that a
11 class's load exceeds its assigned plant share in a given
12 hour, the class would be assessed "purchased power" costs
13 in that hour.. As I noted, this crediting of Sales for
14 Resale revenue and assignment of purchased power costs
15 would not be limited to the actual sales and purchase
16 transactions with third parties, but would extend to
17 hourly" sales" and "purchases" that are deemed to take
18 place between "surplus" and "deficit" retail customer
19 classes.
20 The upshot of Mr. Yankel' s proposal is that he
21 is intending to allocate a greater portion of Sales for
22 Resale revenue (than would occur under a traditional
23 energy or demand allocator) to those classes that have
24 highly variable usage patterns throughout the year. Mr.
25 Yankel justifies this change based on his claim that
2499 Higgins, Reb 5
Kroger
.
.
20
21
22
23
24.25
1 classes with highly variable usage patterns "cause"
2 off-system sales to happen because their variable usage
3 patterns result in periods of under-utilization of plant
4 for retail needs, thus "freeing up" the production plant
5 to make off-system sales.
6 Q.What is your assessment of Mr. Yankel' s proposal for
7 allocating Sales for Resale revenues?
8
9 /
10
11 /
12
13 /
14
15
16
17
18
19
2500 Higgins, Reb 5a
Kroger
.1 A.Mr. Yankel' s proposal is grossly inequitable
2 and should be rej ected. Mr. Yankel' s proposal fails to
3 take proper account of the differing cost burdens borne
4 by different customer classes for recovery of the
5 production plant from which Sales for Resale are made.
6 This inequity can be illustrated using the same example
7 Mr. Yankel developed to make his point.
8 Q.Please proceed.
9 A.On pages 38-39 of his direct testimony, Mr.
10 Yankel assumes that a utility serves a customer Class A
11 that consumes a constant 500 MWh every hour of the year
12 and a second customer Class B that consumes a constant.13
14
500 MWh every hour for six months and zero for the
remaining six months. The utility responds to this usage
15 pattern by installing 1000 MW of capacity, which exactly
16 meets retail customer requirements for six months of the
17 year; the utility then sells 500 MW off system for the
18 six months in which Class B' s consumption falls to zero.
19 Mr. Yankel correctly notes that under the 12 CP
20 method for allocating production plant costs, Class A
21 would be allocated 2/3 of generation demand costs and
22 Class B would be allocated the remaining 1/3. I expand
23 upon Mr. Yankel' s observation by presenting this cost
24 allocation on a month-by-month basis below:.25
2501 Higgins, Reb 6
Kroger
1.2
3
4
5
6
7
8
9
10
11
12
13.14
.
.,---
Month 1 2 3 4 5 6 7 8 9 10 11 12 Total
Class A CP 500 500 500 500 500 500 500 500 500 500 500 500 6000
Class B CP 500 500 500 500 500 500 a a a a a a 3000
System CP 1000 1000 1000 1000 1000 1000 500 500 500 500 500 500 9000
/
/
/
15
16
17
18
19
20
21
22
23
24
25
2502 Higgins, Reb 6aKroger
.
.
.
1 I point out in passing that, in this example,
2 the 2/3 allocation of generation demand costs to Class A
3 and the 1/3 allocation of generation demand costs to
4 Class B is the same allocation that would obtain if costs
5 were allocated on an energy basis; thus, the set up of
6 this simple example bears some nexus with the historical
7 cost allocation practices in Idaho Power's service area
8 for generation demand cost, which has traditionally been
9 based on a combination of energy and 12 CP allocation
10 factors.
11 Mr. Yankel goes on to correctly note that under
12 a conventional treatment for allocating Sales for Resale
13 revenues (such as occurs in Idaho Power's terri tory) ,
14 Class A would be allocated 2/3 of the revenue and Class B
15 would be allocated 1/3 of the revenue, based on the
16 principle that the benefit of the revenue credit should
17 track the allocation of plant costs. Mr. Yankel maintains
18 that this result is inappropriate. He argues that the
19 abili ty for the utility to make off-system sales derives
20 from the highly variable usage pattern of Class B.
21 Because Class B' s load disappears for six months out of
22 the year, thus making 500 MW available for off-system
23 sales, Mr. Yankel argues that Class B should receive a
24 greater proportion of the Sales for Resale revenues - 2/3
25 to be exact. Thus, Class B would pay for 1/3 of the plant
2503 Higgins, Reb 7
Kroger
.
.
.
18
19
20
21
22
23
24
25
1 costs, but receive 2/3 of the Sales for Resale benefit.
2 To appreciate the inequity of Mr. Yankel' s
3 proposal, it is instructive to consider what happens in a
4 month in which an off-system sale is made in his example.
5 Let's consider Month 7 in the table on the preceding
6 page. In Month 7, the utility sells 500 MWh each hour
7 from its production plant of 1000 MW. Mr.
8
9 /
10
11 /
12
13 /
14
15
16
17
2504 Higgins, Reb 7a
Kroger
.
.
.
1 Yankel argues that Class B is entitled to 2/3 of the
2 benefit of this sale, since its demand of zero is 333 MW
3 less than its (annual) allocated share of plant costs of
4 333 MW.
5 But how have cost responsibilities been
6 allocated for this month? Because its demand is zero in
7 Month 7, Class B has already been absolved of any cost
8 responsibili ty in Month 7 under the 12 CP method (or
9 under an energy allocation method, for that matter) .
10 Instead, the full burden of paying for the cost of
11 production plant in Month 7 has fallen to Class A - which
12 means that absent Sales for Resale revenues, Class A
13 would not only have to pay for the production plant that
14 serves its 500 MW of load, it would also have to pay for
15 the 500 MW that was built to serve Class B for six months
16 of the year, as Class B has not been assigned any costs
17 in Month 7. Of course, in light of this cost burden, it
18 is entirely appropriate for Class A to receive the lion's
19 share of the benefit for Sales for Resale in Month 7, as
20 would occur under a conventional allocation. Indeed, a
21 reasonable case can be made that Class A is entitled to
22 100 percent of the Sales for Resale revenues in Month 7,
23 as Class A has been allocated 100 percent of the
24 production plant costs in that month. If anything, a
25 conventional allocation approach is revealed as being
2505 Higgins, Reb 8
Kroger
.
.
.
1 unduly generous to Class B by sharing 1/3 of the Sales
2 for Resale revenues in a month in which Class B was
3 absol ved of any production plant cost responsibility.
4 Q.But how can you claim that Class B is absolved of
5 any production plant cost responsibility in Month 7 when
6 Class B is allocated 1/3 of production plant costs?
7
S /
9
10 /
11
12 /
13
14
15
16
17
is
19
20
21
22
23
24
25
2506 Higgins, Reb Sa
Kroger
.
.
.
1 A.Look at the table. Class B is allocated 1/3 of
2 production plant costs on an annual basis. It is
3 allocated 50 percent of plant costs for Months 1-6 and
4 zero plant costs in Months 7-12. This averages out to be
5 1/3 of production plant costs during the course of the
6 year. But in the months in which off-system sales are
7 made, Class B. is asked to contribute nothing. This is the
8 key consideration that Mr. Yankel overlooks when he
9 proposes to transfer to this class the maj ori ty of the
10 off-system sales benefit.
11 This point can be further illustrated through
12 an analogy. Consider two roommates who share a house and
13 spli t the rent evenly for six months out of the year.
14 Roommate A resides in the house year-round, whereas
15 Roommate B leaves for six months. When Roommate B is
16 gone, Roommate A has full responsibility for the rent. To
17 mi tigate this impact, he sublets the vacant room for six
18 months and (generously) offers Roommate B 1/3 of the
19 proceeds. Roommate B declines the offer and cites Mr.
20 Yankel' s argument: Roommate B claims that 2/3 of the
21 proceeds should go to him because if he hadn't moved out
22 for six months, the sublet would not have been possible.
23 i think most parties would agree that Roommate
24 B' s claim is unreasonable. It is fundamentally the same
25 claim being made by Mr. Yankel in his example.
2507 Higgins, Reb 9
Kroger
1 Q.Does this concl ude your rebuttal testimony?.2 A.Yes,it does.
3
4 /
5
6 1
7
8 /
9
10
11
12
13.14
15
16
17
18
19
20
21
22
23
24.25
2508 Higgins,Reb 9a
Kroger
.1
2 open hearing.)
(The following proceedings were had in
MR. BOEHM: Mr. Higgins is available for
COMMISSIONER SMITH: Thank you.
6 Mr. Bruder, do you have questions?
.
20
21
3
4 cross-examination.
5
7
8 Chairman.
9
10
11 Madam Chair.
12
13
14
15
16
17
18
19
22 Chairman.
23
MR. BRUDER: No questions, Madam
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: No questions,
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: No questions.
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: No questions, Madam Chair.
COMMISSIONER SMITH: Mr. Ward.
MR. WARD: No questions. Thank you.
COMMISSIONER SMITH: Mr. Price.
MR. PRICE: No questions.
COMMISSIONER SMITH: Mr. Walker.
MR. WALKER: No questions, Madam
COMMISSIONER SMITH: Does the Commission
24 have any questions?.25 COMMISSIONER KEMPTON: No questions.
CSB REPORTING
[phone]
2509 HIGGINS
Kroger
.
.
.
1 COMMISSIONER REDFORD: No questions.
2 COMMISSIONER SMITH: Nor I.
3 THE WITNESS: I have a few of myself.
4 COMMISSIONER SMITH: You know, many
5 wi tnesses have felt that way and I think I've effectively
6 cut most of it off, but you're excused. Thank you for
7 making the trip.
8 THE WITNESS: My pleasure.
9 (The witness left the stand.)
10 COMMISSIONER SMITH: Does that conclude
11 your case, Mr. Boehm?
12 MR. BOEHM: I think so. Thank you.
13 COMMISSIONER SMITH: Mr. Kline.
14 MR. KLINE: Thank you, Madam Chair. Idaho
15 Power would call as its final witness, hopefully, Ric
16 Gale.
17
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
2510 HIGGINS
Kroger
.1
2
JOHN R. GALE,
produced as a rebuttal witness at the instance of the
3 Idaho Power Company, having been previously duly sworn,
4 resumed the stand and was further examined and testified
.
5 as follows:
6
7
8
9 BY MR. KLINE:
10 Q
DIRECT EXAMINATION
Would you please state your name for the
John R. Gale, typically referred to as Ric
And you're the same Mr. Gale that
15 presented direct testimony in the case; is that
11 record?
12 A
Yes, it is.
And just again for the record, who is your
19 employer and the capacity of your employment there?
20
13 Gale.
I work for Idaho Power Company and I'm
21 their vice president of regulatory affairs.
22
14 Q
And you filed 38 pages of rebuttal
23 testimony on December 3rd of this year; is that
16 correct?
17 A
18 Q
A
Q
24 correct?.25 A Yes.
CSB REPORTING
[phone]
2511 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 Q Do you have any additions or corrections
2 that you need to make to your rebuttal testimony?
3 A Yes, I have one correction and it is a
4 deletion of a Q&A that starts on page 8, line 14 and I
5 would delete to page 9, line 10.
6 MR. WARD: Excuse me, Mr. Gale, that's
7 your rebuttal?
8 THE WITNESS: Yes.
9 MR. KLINE: Yes.
10 MR. WARD: I'm sorry, go ahead.
11 THE WITNESS: That's okay. In fact,
12 rebuttal is all I have up here with me, but starting on
13 line 8 -- excuse me, page 8, line 14, that "Q" and that
14 answer through line 10 of page 9.
15 BY MR. KLINE: With that one correction toQ
16 your testimony, if I were to ask you the same questions
17 today that were posed in your prefiled rebuttal
18 testimony, would your answers be the same?
19 A Yes, they would.
20 MR. KLINE: Madam Chairman, I would
21 request that Mr. Gale's rebuttal testimony be spread on
22 the record as if read in its entirety.
23 COMMISSIONER SMITH: Wi thout obj ection, it
24 is so ordered.
25 (The following prefiled rebuttal testimony
of Mr. John R. Gale is spread upon the record.)
CSB REPORTING
[phone]
2512 GALE (Di-Reb)
Idaho Power Company
.
.
1 Q.Please state your name and whom you are
2 representing.
3 A.My name is John R. Gale, commonly addressed as
4 Ric Gale, testifying on behalf of Idaho Power Company
5 ("Idaho Power" or "the Company").
6 Q.Are you the same Ric Gale that presented direct
7 testimony before the Idaho Public Utilities Commission
8 ("the Commission") in this docket?
9 A.Yes.
10 Q.What was your role in developing the Company's
11 rebuttal testimony in this case?
12 A.My role in the development of the Company's
13 rebuttal testimony was to oversee, manage, and coordinate
14 the Company's rebuttal.
15 Q.Have you read the direct testimony submitted by
16 the Idaho Public Utili ties Commission Staff and other
17 Intervenors in this case?
18 A.Yes, I have. As a result of that review, there
19 are five maj or issues that I wish to respond to: (1) the
20 proper test year to be used in this proceeding, (2) the
21 proposed labor expense disallowances to the cost of
22 service determination, (3) the inclusion of Construction
23 Work in Progress ("CWIP") as a policy matter in the
24 Company's revenue requirement, (4) Staff's proposal.25 regarding an
2513 GALE, DI REB 1
Idaho Power Company
.
.
.
1 energy efficiency prudency review, and (5) the Company's
2 posi tion on energy affordabili tý as it relates to this
3 proceeding.
4 THE TEST YEA
5 Q.Staff Witness Randy Lobb' s testimony references
6 Idaho Power "continually" changing test year methodology,
7 which he attributes to the Company's effort to reduce the
8 impact of regulatory lag. Is this conclusion correct?
9 A.I take a small exception to the "continually"
10 changing label, but understand why it was used. While
11 methods have changed starting with the 2003 test year,
12 they have changed purposefully and with the intent to
13 make a transition from historical to forward test year at
14 a pace that was acceptable to the Commission and our
15 customers. The assertion that the Company's focus on a
16 more current test year to reduce regulatory lag is
17 correct. I have testified a number of times, including
18 my direct testimony in this case, as to why this is
19 important.
20 Q.Please define your use of the term regulatory
21 lag.
22 A.I define regulatory lag as the difference
23 between the time period when test-year costs are incurred
24 and the time period when rates are implemented to recover
25
2514 GALE, DI REB 2
Idaho Power Company
.
.
.
1 those costs. As I stated in my direct testimony in this
2 case, the impact of regulatory lag is dependent upon the
3 si tuation. As I also stated in my direct testimony,
4 Idaho Power is not currently experiencing the
5 circumstances where regulatory lag is beneficial.
6 Q.Mr. Lobb' s testimony discusses the Staff's
7 approach to the test year and references the workshops
8 that occurred following the conclusion of the Company's
9 last general rate case. Please respond to his
10 assessment.
11 A.I am encouraged with the conceptual progress
12 that has been accomplished since our last rate case. Mr.
13 Lobb indicates on page 11 of his testimony that "Staff
14 generally accepts the Company proposed 2008 test year
15 that begins with actual 2007 calendar year costs updated
16 through December 31, 2008." He also states on pages 11
17 and 12 that the "Staff supports some but not all of the
18 Company's proposed escalation of expense and capital
19 accounts on the basis of a CAGR." Additionally, on page
20 12, "Staff agrees that the methodology used by the
21 Company in this case, an escalator applied to historic
22 account totals, is superior to the fully budgeted future
23 test year proposed by the Company in its last general
24 rate case." These statements by the leader of the
25 technical Staff signify progress on
2515 GALE, DI REB 3
Idaho Power Company
1 acceptance of the concept of using a more current test.2 year and are consistent with the workshop outcomes.
3 The primary disagreement between Staff and the
4 Company in this case arises out of the respective methods
5 used to escalate 2007 accounts into 2008. The
6 disagreement surfaces in several maj or areas, including
7 normalized net power supply expenses, operating expense
8 escalation, and test year labor expense. Mr. Said, Ms.
9 Smith, and I provide the Company rebuttal to these areas
10 respectively. The other significant difference between
11 Staff and Idaho Power related to revenue requirement has
12 to do with the appropriate return on equity, where Mr..13 Steven Keen and Dr. William Avera provide Idaho Power's
14 rebuttal, and the method and amount of CWIP to be
15 included in test year costs, which Ms. Catherine Miller
16 addresses from a technical perspective.
17 Q.If all the adjustments proposed by the Staff
18 and Intervenors are adopted by the Commission, will Idaho
19 Power have a reasonable opportunity to earn its
20 authorized return?
21 A.Unfortunately no. Putting aside whether the
22 return on equity is 11.25 percent, 10.25 percent, or
23 points in between; to constitute just and reasonable
24 rates, the application of the approved rates to the.25 customer loads
2516 GALE, DI REB 4
Idaho Power Company
.
.
.
1 during the time period when the rates are in effect must
2 gi ve the Company a reasonable opportunity to earn
3 whatever return is authorized. My concern with the
4 totali ty of the Staff case is that Idaho Power will not
5 have that opportunity under the current and near-term
6 circumstances to earn whatever the Commission determines
7 as the authorized return in this case.
8 Q.On page 9 of Micron Witness Dennis Peseau' s
9 testimony in support of his argument that regulatory lag
10 may not adversely impact utilities, Dr. Peseau refers to
11 the hiatus of general rate case filings by Idaho Power
12 Company prior. to its filing of the 03-13 Case in 2003.
13 Dr. Peseau states that he is unaware of any constraints
14 on Idaho Power that might have impacted its ability to
15 file for general rate relief. Is Dr. Peseau correct in
16 his recollection?
17 A.No. Dr. Peseau is not accurately describing
18 the historical facts. Idaho Power actually was legally
19 and practically constrained in its ability to file for
20 general rate relief prior to 2003. Mr. LaMont Keen
21 addressed these circumstances at length beginning on page
22 3 of his direct testimony in Case No. IPC-E-03-13 ("the
23 03-13 Case"). At that time I had worked on that section
24 of testimony with Mr. Keen and can speak to it now. The
25 last full general
2517 GALE, DI REB 5
Idaho Power Company
.
.
.
1 rate case filed with this Commission prior to the 03-13
2 Case was Case No. IPC-E-94-5 ("the 94-5 Case"). Idaho
3 Power filed the 94-5 Case in June of 1994 and the
4 Commission issued its final order in February of 1995.
5 Closely following the 94-5 Case, Idaho Power filed to
6 include the costs of the Twin Falls hydroelectric plant
7 upgrade in rates. The Commission authorized this rate
8 change in August of 1995. This was essentially a single
9 item rate matter that was incrementally added on to the
10 recently completed 94-5 Case.
11 Also in 1995, the Commission approved a rate
12 moratorium and earnings stability stipulation proposed by
13 Idaho Power and various Intervenor parties, Case No.
14 IPC-E-95-11. One of the provisions of the stipulation
15 was that Idaho Power would not file for a change to base
16 rates prior to January 2000. As many remember, the
17 western energy crisis began to manifest itself in the
18 second half of 2000 and into 2001. As a primary result
19 of that crisis, Idaho Power had several annual Power Cost
20 Adjustments ("PCA") that were more than $200 million
2 1 above base rates, representing rate increases that
22 averaged more' than 40 percent above base rates. Although
23 after 1999, Idaho Power did not have a legal or
24 regulatory restriction on filing general rate increases
25 in addition to these PCA rate
2518 GALE, DI REB 6
Idaho Power Company
.
.
.
1 changes, as a practical and political matter, it was
2 simply not possible to do so.
3 Q.In his discussion of forecast test years, Dr.
4 Peseau refers to his Exhibit No. 702, which is the Iowa
5 Utili ties Board report to the Iowa General Assembly
6 enti tled Review of Utili ty Ra temaking Procedures dated
7 January 2004. In his testimony, Dr. Peseau indicates
8 that Exhibit NO.7 02 shows that a historic test year
9 equates to a "traditional" test year. Does Exhibit No.
10 702 support Dr. Peseau' s conclusion?
11 Dr. Peseau' s testimony paraphrased sections ofA.
12 Exhibi t No. 702 to draw an incorrect conclusion that the
13 historical test year is the "traditional" test year. In
14 fact, the use of forecast test years has been common in
15 numerous states since at least the 1970s. Idaho is
16 surrounded by states, including Oregon, California, Utah,
17 and Wyoming, that authorize their Commissions to adopt
18 future test years to determine representative levels of
19 revenues, expenses, rate base and capital structure.
20 Accordingly, many utilities in these states are filing
21 rate proceedings with forecast test years. The Oregon
22 Commission has, for many years, viewed the future test
23 year as the appropriate choice of test year. Utah law
24 statutorily mandates that the Utah Commission give
25 serious
2519 GALE, DI REB 7
Idaho Power Company
.1 consideration to the adoption of a future test year
2 period. PacifiCorp uses a future test year in Oregon,
3 Utah, and Wyoming to establish jurisdictional revenue
4 requirement.
5 Commissions and policy makers throughout the
6 country, and particularly in the West, are increasingly
7 recognizing that in an era of heavy construction, future
8 test years are necessary to allow utilities a reasonable
9 opportuni ty to earn their authorized rate of return.
10 Utilities that operate in a period of rapid expansion and
11 rate base growth will chronically under earn if test
12 years are historical in nature and fail to synchronize.14
13 the matching of expenses and revenues.
Q. Dr. Peseau argued in his testimony that the
15 states that routinely use a fonmrd test year are almost
16 enclusively "highly populous states with very large
17 publie commission staffs." He opined that the Idaho
18 Staff is too small to properly administer a forward test
19 year. Do you agree?
20 A-No. I would not characterize Wyoming, Utah,
21 and Oregon as. states that are "highly populous states
22 ',dth very large public commission staffs." In
23 researching the application of for;Jard test years in the
24 West, it is my understanding that the staff resouree load.25 is not
2520 GALE, DI REB 8
Idaho Power Company
1 increased, but rather the focus of the staff.2 investigation changes.
3 For example, in the last tHO Rocky Hountain PO'l'r
4 general rate requests in Wyoming, there ',Jere five members
5 of the Public Service Commission Staff assigned to the
6 dockets. In Oregon, the Public Utility Commission
7 assigns appronimately the same number of Staff to Idaho
8 Power rate cases (which utilized a historic test year) as
9 it does to the 2005 PacifiCorp rate case (;Jhich utilizes
10 a future test year).
11 Q.Previously you spoke of the use of the forecast
12 test year as a tool to remove the detrimental effects of.13 regulatory lag. While the Iowa Utilities Board in its
14 report to the Iowa General Assembly (Exhibit No. 702)
15 recognized the eroding effects of regulatory lag on a
16 utili ty' s revenue stream, the Board chose not to
17 recommend a future test year option. Please explain why.
18 A.In its investigation, the Iowa Utilities Board
19 found that most concerns regarding the negative effects
20 of regulatory lag had been addressed by other Iowa
21 statutes. In fact, Iowa has numerous statutes or "tools"
22 in place that exist to reduce the effect of regulatory
23 lag. For example, Iowa allows for updates of
24 infrastructure investment nine months beyond a test year.25 and allows
2521 GALE, DI REB 9
Idaho Power Company
.
.
.
1 utili ties to place temporary rates into effect without
2 Board approval wi thin ten days of a filing for a general
3 rate increase. The Iowa Utili ties Board has authority to
4 allow for the automatic adjustment of rates and charges
5 for sudden and volatile costs, and the Board has approved
6 100 percent recovery of fuel and transportation costs for
7 electrici ty generation.
8 In addition, the implementation of two relatively
9 new Iowa laws allowing regulatory assurances for capital
10 investment decisions and for environmental improvements
11 and the ability to consider cost of capital changes after
12 the test year period go a long way to alleviate concerns
13 related to regulatory lag in Iowa and therefore are
14 useful regulatory "tools." These regulatory tools would
15 be very helpful to have in Idaho given the current and
16 forecasted energy and economic situation.
17 Q.Dr.' Peseau obj ects to the use of future test
18 years because he believes that utili ties will be tempted
19 to abuse the system. He calls this "systemic bias."
20 This Commission has often approved the use of a
21 historical test year adjusted for known and measurable
22 changes. Does a historical test year always produce a
23 totally obj ecti ve and unbiased revenue requirement?
24
25
2522 GALE, DI REB 10
Idaho Power Company
.
.
1 A.No. Every type of test year is subj ect to
2 criticism and obj ection if a rate increase is proposed.
3 When an historical test year is proposed, the arguments
4 simply shift from issues surrounding forecasting
5 technique to the choice of known and measurable
6 adj ustments. Utili ties are often criticized in their
7 choice of an historic test year; opponents argue that the
8 utili ty has an incentive to exaggerate its costs in the
9 period under review. Every type of test year has its
10 advantages and challenges.
11 Idaho Power is not asking for a blanket acceptance
12 of its calculations but rather acceptance of the concept
13 of a forward test year as being an appropriate tool to
14 provide timely recovery for the increased level of
15 expendi tures that are required to serve the growing Idaho
16 load.
17 Q.Let us now move on to Industrial Customers of
18 Idaho Power Witness Don Reading's forecast test year
19 concerns. Beginning on page 17 of his testimony, Dr.
20 Reading notes that in the current case, the Company has
21 filed a full twelve-month forecast test year and is
22 sympathetic as to the underlying reason for filing in
.
23 this manner. He is also complimentary (page 19) of the
24 Company for ". . . its efforts and communication with the
25 Staff and Interveners in the development of the
forecasted test year
2523 GALE, DI REB 11
Idaho Power Company
.1 in this case." Yet he is not supportive of the Company's
2 filing. Why?
3 A.My understanding of his testimony is that a
4 forecasted test year is based upon a proj ection that
5 ul timately may not be the case; thus, customers are
6 paying rates on unrealized proj ections. My difficulty
7 with his position is that rates based upon actual
8 historical costs are not reflective of future costs
9 either.
10 Q.Dr. Reading proposes that Idaho Power file
11 actual results for the first nine months of 2008 and
12 compare these to the test year to provide a better.13 "squaring" with reality. Does the Company agree with
14 this proposal?
15 A.Yes. Ms . Smith's rebuttal testimony includes
16 precisely this type of information. Idaho Power is
17 comfortable with validating its test year and would even
18 entertain the idea of a future true-up if that type of
19 mechanism would advance the cause of more timely rate
20 relief.
21 Q.Are. you proposing a true-up?
22 A.I do not think that a true-up of forecast
23 information is needed to set rates that are reflective of
24 the costs expected to be incurred during the time that.25 the rates are in place. Knowing how often the Company
will be
2524 GALE, DI REB 12
Idaho Power Company
.1 before this Commission over the next five years, the
2 Company has concluded that unreasonably inaccurate
3 forecasting would become readily apparent to all the
4 parties. With the challenge Idaho Power has to earn
5 authori zed returns, any in cent ive to "game" the forecast
6 would be short-term gain and long-term folly. However,
7 as a practical matter, if true-ups provide a comfort
8 level to the Commission and customers that would allow
9 the Commission to accept a full forecast test year, then
10 Idaho Power stands quite ready to accept the symetrical
11 application of a true-up to a forecast test year.
12 Q.What do you mean by a symetrical application.13 of a true-up?
14 A. If the Company estimate is higher than actual
15 values, rates would be reduced. If the Company estimate
16 is lower than actual, then rates would increase.
1 7 LAOR EXPENSE DISALLOWACE
18 Q.Staff Witness Joe Leckie proposes to make
19 several labor' expense disallowances to the Company's test
20 year. They include annualizing labor expense at August
21 and September levels instead of year-end, removing the
22 Salary Structure Adjustment (nSSA"), and removing most of
23 the normalized target incentives for employees. Do you
24 agree with Mr. Leckie's disallowances?.25
2525 GALE, DI REB 13
Idaho Power Company
.
.
.
1 A.From a ratemaking perspective, I disagree with
2 all of Mr. Leckie's labor expense adj ustments because
3 they are arbitrary and because their impact ignores costs
4 the Company will likely incur to serve its customers at
5 the time the ordered rates resulting from this proceeding
6 are effective.
7 Q.What is your concern with annualizing
8 employment levels partway through the year instead of at
9 year-end?
10 A.Annualizing adjustments are not new to
11 developing revenue requirements and, to my knowledge,
12 they are performed consistently at year-end. The purpose
13 of an annualizing adjustment is to reflect an amount that
14 would have existed had year-end circumstances been in
15 effect for the entire test period. Labor expense is a
16 classic annualizing adjustment because typically year-end
17 is a better reflection of labor expense going forward
18 than earlier in the year.
19 Q.What specifically is done in an annualizing
20 adjustment?
21 A.Year-end expense levels are treated as if they
22 had been in place throughout the year. Otherwise the
23 Company's labor expense for ratemaking purposes is
24 represented by essentially the average for the test year,
25
2526 GALE, DI REB 14
Idaho Power Company
.
.
.
1 which is not reasonably reflective of the costs going
2 forward. Annualizing is particularly important to apply
3 to account classifications that are typically growing or
4 declining in a predictable trend year over year.
5 Q.What is your understanding of why Mr. Leckie
6 proposed changing the method for annualizing labor
7 expense?
8 A.Mr. Leckie noted that there was a greater
9 opportuni ty to overstate annualized payroll expense
10 through a forecast method than by using actual numbers.
11 He does not present any evidence that this has occurred
12 or will occur. He only posits that it might occur.
13 Presumably, he believes his method is more reflective of
14 what the future costs will be.
15 Q.How do you answer Mr. Leckie's hypothetical
16 charge?
17 A.Admittedly, there is an opportunity to
18 manipulate a forecast. In my mind it would be a
19 short-sighted path for a utility that is attempting to
20 bring rates mQre current with costs to purposefully
21 pursue this strategy. In our case, just closing the time
22 gap is sufficient ratemaking progress. However, on the
23 flip side, when an expense category has proven to be
24 appropriate for annualization - as labor expense has -
25 annualizing it by an
2527 GALE, DI REB 15
Idaho Power Company
.
.
1 earlier time period than year-end will typically
2 understate the expense level.
3 Q.Wi th 2008 drawing to a close, what has happened
4 to employment levels at Idaho Power?
5 A.At the end of November, Full Time Equivalent
6 ("FTE") employment is 2079 positions. In August, FTEs
7 were 2085 and in September, they were 2084. While I
8 disagree with Mr. Leckie's adj ustment from a ratemaking
9 logic perspective, the actual plateaued employment levels
10 in 2008 support his adjustment.
11 Q.Why have employment levels plateaued in the
12 second half of 2008?
13 A. The Company is adjusting to the economic
14 slowdown and has instituted a selective hiring freeze to
15 help manage labor costs during difficult times.
16 Q.As a result of the economic slowdown, does the
17 Company accept Mr. Leckie's annualizing adjustment?
18 A.Yes. Again from a logic perspective, I would
19 disagree, but. from a review of employment data after the
20 Company filing, Mr. Leckie's annualizing proposal is
21 reasonable.
22 Q.Turning to Mr. Leckie's proposed disallowance
23 of the SSA, what is the purpose of the SSA at Idaho
24 Power?.25
2528 GALE, DI REB 16
Idaho Power Company
.
.
.
1 A. The purpose of an SSA is to realign base
2 compensation with prevailing market conditions.
3 Q.What is the process for determining the SSA?
4 A.Idaho Power gathers data from multiple sources
5 and evaluates factors when determining the appropriate
6 SSA. These include: the average percentage increase
7 among northwest utili ties; industry and region-specific
8 salary increase surveys; budget increases of other large
9 local corporations; the local and national economy; and
10 the national Consumer Price Index.
11 Q.Who approves the SSA?
12 A.The Company's Board of Directors approve any
13 annual SSA at their November meeting.
14 Q. What reasons did Mr. Leckie give for
15 disallowing this labor expense?
16 A.He made two arguments. First, the SSA proposed
17 by the Company was neither known nor measurable and,
18 second, the Staff is concerned about Company "raises"
19 during difficult economic times.
20 Q.Addressing the difficult economy first, why is
21 Idaho Power raising its employees' wages at this time?
22 A.There are two reasons: (1) to attract, retain, and
23 motivate a quality work force and (2) to offer a
24 competitive compensation package to our trade employees.
25
2529 GALE, DI REB 17
Idaho Power Company
.
.
1 While the current job market does offer a deep, qualified
2 applicant pool, there are frequently exceptions in
3 specialized fields that remain in high demand.
4 Addi tionally, there are also many companies continuing to
5 provide salary adj ustments to their employees. Even in a
6 softened economy, it is prudent to attract and retain a
7 quali ty workforce. For Idaho Power, there is the
8 additional need to offer a competitive compensation
9 package to the Company's trade employees. It is
10 imperative that the Company provide wages and benefits to
11 this employment group that they perceive as an equal or
12 higher value than other utilities with union
13 representation.
14 Q. Is Idaho Power opposed to unions?
15 A.Idaho Power values the flexibility and the
16 direct communication with employees that a non-union
17 environment provides to us and our customers. The
18 Company believes strongly that it is incumbent upon our
19 management team to provide a sustaining work environment
20 that negates the necessity for labor to organize. This
21 is not an anti-union position; it is a proactively
22 pro-employee position.
23 Q.Reg~rding Mr. Leckie's concern that the SSA is
24 not known and measureable, what was the SSA amount.25 included in the Company's 2008 revenue requirement?
2530 GALE, DI REB 18
Idaho Power Company
.
.
.
1 A.The SSA included in Idaho Power's rate request
2 was three percent.
3 Q.Did Idaho Power's Board of Directors take any
4 action at its November 2008 meeting regarding a year-end
5 SSA?
6 A.After much discussion, the Board of Directors
7 approved a three percent SSA. Idaho Power believes it is
8 important to provide employees with competi ti ve total
9 compensation and reward the value they bring to the
10 Company. The need to maintain the competi ti veness of our
11 base compensation structure comes at a difficult time.
12 The recent upheaval in the capital markets, downsizing
13 announcements by local businesses, including our largest
14 customer, and the significant downturn in the housing
15 market have and will affect us. In order to narrow the
16 gap between the higher pay of other northwest utili ties,
17 the Company's. original SSA recommendation to the Board
18 was 3.5 percent. However, considering the current state
19 of the economy, all of our stakeholders and the long-term
20 health of the Company, the Board of Directors approved a
21 3 percent SSA that becomes effective on December 27,
22 2008. This action makes the SSA revenue requirement
23 known and measurable and within the test year. More
24 importantly, the SSA is a real labor
25
2531 GALE, DI REB 19
Idaho Power Company
.
10
1 expense the Company will incur at the time the new rates
2 are in place.
3 Q.The last component of labor expense
4 disallowance proposed by Mr. Leckie has to do with the
5 appropriate target employee incentive level for
6 ratemaking purposes. Do you agree with Mr. Leckie's
7 contention that some of the incentive components included
8 by Idaho Power in its test year are of primary benefit to
9 the shareholders?
A.No. These components are customer-based
11 incentives. I am in agreement with Mr. Leckie that
12 incentives based solely on benefits accruing to.13
14
shareholders should be removed from revenue requirement.
Idaho Power routinely removes any incentives that are
15 driven by profits or earnings from its test year. The
16 Company also removes from its revenue requirement any
17 short-term incentives paid to or targeted for its senior
18 executives, whether those incentives are based on
19 shareholder benefits or customer benefits. Consistent
20 with Case No. IPC-E-05-28 settlement, only mid-level or
21 "target" levels of customer-based incentives are
22 requested to be included in rates. As stated previously,
23 these customer-based incentives are keyed to customer
24 satisfaction, budget management, and reliability..25
2532 GALE, DI REB 20
Idaho Power Company
.
.
.
1 Q.Which customer-based incentive does Mr. Leckie
2 propose to remove?
3 A.Mr. Leckie proposes to remove from the test
4 year the two percent target incentive related to O&M
5 budget management because he believes the incentive
6 should be "self-funding." He also proposes to remove
7 another 0.5 percent of the other incentive payments
8 because no incentives are paid unless the Company has
9 sufficient earnings to pay its $1.20 per share dividend.
10 Q.Is Mr. Leckie's argument that any incentive for
11 O&M budget management should be "self-funding" a valid
12 reason to remove target incentive payments?
13 A. No. Budget discipline is an important
14 management activity and an appropriate area to incent
15 employees. The balance and tension struck between
16 providing excellent customer service and improving
17 reliabili ty from an aging distribution system is
18 accomplished by including the O&M budget management as
19 part of the customer-related target incentive. In the
20 current environment, in which the Company is in the
21 posi tion of m~naging rising costs to the best of its
22 abili ty and filing rate cases everyone to two years, the
23 benefits of budget management are reflected in rates on
24 an ongoing basis, thus providing customers the direct
25 benefi t of cost management.
2533 GALE, DI REB 21
Idaho Power Company
1 Q.Do you agree with Mr. Leckie's proposal to.2 remove from the test year the 0.5 percent incentive
3 payment because of the $1.20 dividend threshold?
4 A.No. This is an arbitrary and unnecessary
5 disallowance. The Company has already removed from its
6 rate request all short-term executive incentives and all
7 employee incentives that are directly based on earnings.
8 One could logically argue that positive earnings do
9 provide the customers with an indirect benefit through
10 future lower financing costs. The Company has not made
11 this argument because we believe the four percent
12 normalized target strikes a fair balance between.13 customers, shareholders, and employees. The $ 1.20
14 threshold recognizes that if the Company's finances are
15 such that it does not earn enough to make its dividend
16 payments, then employee incentives should not be paid.
17 History has shown again and again that when utili ties
18 cannot pay their dividend, ultimately their financing
19 costs increase.
20 CONSTRUCTION WORK IN PROGRESS
21 Q.Staff Witness Cecily Vaughn, Dr. Reading, and
22 Dr. Peseau all criticize Idaho Power's proposal,
23 described in detail in Company Witness Catherine Miller's
24 testimony, to include some of its CWIP related to Hells.25
2534 GALE, DI REB 22
Idaho Power Company
.
.
.
1 Canyon relicensing expense in its revenue requirement in
2 this case. What are their criticisms?
3 A.Ms. Vaughn finds the Company's application of
4 CWIP in this case to be appropriate, but takes issue with
5 the appropriate AFUDC rate used to compute the amount of
6 CWIP to be included. As previously stated, Ms. Miller
7 provides a technical rebuttal to Ms. Vaughn's
8 recommendation. Dr. Reading and Dr. Peseau are opposed
9 to the Company's inclusion of CWIP in rate base under any
10 circumstances as a general principle.
11 Q.Why has the CWIP issue surfaced at this time?
12 A.For a number of years the Commission was unable
13 to allow utili ties to include CWIP in its revenue
14 requirement due to a specific prohibition in Idaho law.
15 Interestingly, that section of code also contained a
16 prohibition on including plant held for future use in
17 ratemaking. As Idaho Power started into its current
18 period of increasing capital investments, it became
19 apparent to the Company and to others that it would be
20 advantageous to at least have these regulatory tools
21 available to use at the discretion of the Commission.
22 Accordingly, in 2006, Idaho Power supported legislation
23 to strike the prohibition. This legislation was
24 successfully enacted.
25
2535 GALE, DI REB 23
Idaho Power Company
.
.
.
1 Q.Now that the legislation was revised, what is
2 Idáho Power's position regarding the potential inclusion
3 of CWIP in rate base in the future?
4 A.As described in my direct testimony, Idaho
5 Power views CWIP as a useful tool for itself, its
6 customers, and the Commission when used to smooth the
7 ratemaking and financing impacts of large multi-year
8 proj ects, which require capital outlays in the hundreds
9 of millions. Idaho Power believes it will benefit our
10 customers if the Commission allows the Company to include
11 CWIP in rate base for such items as major relicensing of
12 hydro proj ects, new base load production plants, and some
13 high voltage transmission construction.
14 Q. Why did Idaho Power introduce the concept as it
15 did in this case by proposing to include an AFUDC amount
16 related to relicensing?
17 A.Idaho Power wanted to test the concept in a
18 contested proceeding on a smaller amount at first. The
19 Company will likely have production and/or transmission
20 projects that may be considered for CWIP recovery in the
21 relatively near future.
22 Q.Dr. Peseau describes his opposition to
23 including CWIP in rate base as a "matter of principle."
24 Do you share his concern?
25
2536 GALE, DI REB 24
Idaho Power Company
.
.
.
1 A.No, I do not. On page 22 of his testimony, Dr.
2 Peseau expresses his concern that including CWIP in rate
3 base breaks the regulatory compact in that it "mitigates
4 efficiency incentives and is fundamentally unfair to
5 ratepayers. " Since the Company will be bringing specific
6 proj ect-by-proj ect CWIP proposals to the Commission, the
7 Commission will be in full control on how much, if any,
8 CWIP is allowed in rate base. In this instance, it is
9 limi ted to a portion of the carrying cost on financing
10 Hells Canyon relicensing. Future applications will be
11 based on well known and well vetted projects that likely
12 will have gone through a "Certificate of Public
13 Convenience and Necessity" process with the Commission.
14 These are unlikely candidates to fail a prudency test
15 particularly if amounts remain below approved commitment
16 estimates. Again, the Commission will be in full control
17 in the use of the CWIP tool. It can weigh valid "used
18 and useful" concerns against the customer benefits that
1 9 CWI P can provide.
20 Q.Dr. Reading is also opposed to the inclusion of
21 CWIP in rate base, citing a 1978 Commission order and the
22 Commission's long precedence in disallowing CWIP from
23 rates. What is your reaction to these points?
24
25
2537 GALE, DI REB 25
Idaho Power Company
.
.
.
15
1 A.There is a long precedence in CWIP' s absence
2 from rate base because from 1984 to the 2006, the
3 Commission did not even have the ability to use CWIP even
4 if it might have benefited customers. The 1978 order
5 points to a shareholder risk shift and a generational
6 customer mismatch. As I stated above in response to
7 essentially the same argument made by Dr. Peseau, the
8 Commission will be in full control of the application and
9 the degree that CWIP will potentially be used. The
10 Company does not believe that the Commission will blindly
11 approve inclusion of CWIP in rate base in this case or in
12 future ones. The Company understands that in each
13 instance it will have the burden of showing why including
14 CWIP in rate base is in the public interest.
Q.Why would the Commission consider including
16 some amount of CWIP in the revenue requirement
17 determination?
18 A.Including CWIP in rate base is a tool that
19 allows the Commission to smooth the rate impact of large,
20 multi-year projects allowing more gradual rate changes
21 rather than the one-time impact of putting the project
22 and its financing costs in at one time. CWIP does
23 provide better cash flow to utilities, thus improving key
24 financial ratios and lowering interest costs.
25
2538 GALE, DI REB 26
Idaho Power Company
.
.
1 ENERGY EFFICIENCY
2 Q.Staff Witness Lynn Anderson addresses Idaho
3 Power's energy efficiency efforts and recommends that the
4 Commission defer a prudency finding regarding these
5 efforts. What is the Company's reaction to this
6 recommendation?
7 A.This recommendation is frustrating to the
8 Company on several levels. Ms. Theresa Drake will
9 address its impact on energy efficiency operations, while
10 I will describe its potentially chilling effect on energy
11 efficiency investment.
12 Q.Please explain how Demand-side Management
13 ("DSM") and energy efficiency have risen to their current
14 prominence in Idaho Power's resource portfolio.
15 A.Following the wholesale energy volatility
16 experienced in the 2000-2001 energy crisis, the
17 Commission directed Idaho Power in Order No. 28722 to
18 develop and file a comprehensive DSM program to provide
19 customers with opportunities to reduce electric
20 consumption.. The Company did this in Case No.
21 IPC-E-01-13 by identifying a number of potential DSM
22 programs that could be implemented to assist customers in
23 reducing their bills and proposed that the expenditures
.25
24 for the analy~is and implementation of energy
conservation programs be funded through a charge known as
2539 GALE, DI REB 27
Idaho Power Company
.1 the Energy Efficiency Rider ("Rider"). On November 21,
2 2001, the Commission issued Order No. 28894 directing the
3 Company to implement limited DSM programs for the
4 2001-2002 winter heating season and to organize the
5 Energy Efficiency Advisory Group ("EEAG") to advise the
6 Company on the implementation of long-term DSM programs.
7 In April 2002, the Energy Efficiency Advisory Group,
8 comprised of members from the Company's customer groups,
9 technical experts, special interest groups, Commission
10 Staff, and Company personnel, was formed and has met
11 regularly since to advise Idaho Power on its energy
12 efficiency offerings.
13 On May 13, 2002, the Commission issued Order No..14 29026 authorizing the implementation of the Energy
15 Efficiency Rider as a means to fund DSM programs. The
16 Rider amount for each customer class targeted a level
17 approximately equal to 0.5 percent of overall class
18 revenue. As more program offerings became available and
19 expenses increased, in Order No. 29784, the Commission
20 increased the Rider amount to 1.5 percent of base revenue
21 with a monthly funding cap of $1.75 for residential
22 customers and a cap of $50 per meter per month for
23 irrigation customers. Recognizing Idaho Power's robust
24 growth in both demand response and energy efficiency.25 programs as well as the importance of additional funding
2540 GALE, DI REB 28
Idaho Power Company
.1 in sustaining DSM programs that benefit customers
2 individually and collectively, the Commission, in Order
3 No. 30560, authorized removal of the funding caps and
4 increased the Rider to 2.5 percent of base revenues
5 effective June 1, 2008.
6 Q.Has the Company's increased focus on energy
7 efficiency over the past six years impacted Idaho Power's
8 Integrated Resource Planning?
9 A.Yes. Idaho Power's 2004 Integrated Resource
10 Plan called for 124 MW of demand response and energy
11 efficiency programs, which demonstrated the Company's
12 renewed emphasis on demand-side resources. While the.13
14
Commission indicated in the April 2005 Order accepting
the 2004 Integrated Resource Plan for filing that it was
15 pleased with the Company's efforts thus far, it found
16 that "Idaho Power could and should do more to implement
17 conservation. We encourage the Company to actively
18 promote and expand participation in its AC Cycling,
19 Irrigation Peak Clipping, and other cost-effective
20 conservation programs." (Order No. 29762 at 10.)
21 Following the issuance of Order No. 29784 increasing
22 the amount of the Rider in Case No. IPC-E-04-29, Idaho
23 Power successfully implemented four of the six energy
24 efficiency programs identified in the 2004 IRP and both.25 of
2541 GALE, DI REB 29
Idaho Power Company
.
.
.
1 the demand response programs. In addition, as part of
2 the 2006 IRP process, Idaho Power implemented three new
3 DSM programs and a maj or expansion of a fourth program.
4 Following the suspension of the Bonneville Power
5 Administration's Conservation Rate Credit Program, two
6 programs developed by the Bonneville Power Administration
7 and implemented by the Company also began receiving Rider
8 funding in mid-2007. In the March 2007 order accepting
9 the 2006 Integrated Resource Plan, the Commission again
10 indicated that it was "pleased that the Company is
11 expanding its' DSM programs and increasing the amount of
12 energy sources in its portfolio." (Order No. 30281 at
13 12 )
14 Recognizing that energy efficiency programs continue
15 to benefit its customers by reducing the need for
16 additional generation resources, Idaho Power will
17 continue pursuing all cost-effective energy efficiency
18 programs as part of its resource planning process going
19 forward.
20 Q.To put the Company's DSM and energy efficiency
21 efforts in perspective, how has Idaho Power's financial
22 commi tment and resulting energy savings grown over the
23 past several years?
24 A.As the Commission noted on page 6 of Order No.
25 30560 issued in May 2008, "Idaho Power has significantly
increased its DSM programs during the past
2542 GALE, DI REB 30
Idaho Power Company
.
.
.
1 six years, and many more customers are participating in
2 and seeing the benefits from the Company's DSM programs."
3 Idaho Power currently has 13 programs and two pilot
4 programs serving all of its customer classes.Idaho
5 Power's DSM expenditures have grown rapidly from
6 approximately $1.8 million in 2002 to nearly $20 million
7 in 2008. The Company estimates that this investment in
8 energy efficiency will save an estimated 118,000 MWh in
9 2008.
10 Idaho Power is proud of the posi ti ve results its
11 increased energy efficiency efforts have achieved for its
12 customers. In October 2008, the state of Idaho received
13 national recognition by the American Council for an
14 Energy-Efficient Economy ("ACEEE") when it named Idaho as
15 the most improved state for employing energy efficiency
16 to grow its economy while meeting electricity demand,
17 combating global warming, and contributing to U. S. energy
18 securi ty. The commitment of more resources to energy
19 efficiency programs was a significant reason the state of
20 Idaho jumped 12 spots in ACEEE' s rankings. Idaho Power
21 is pleased to' have played a role in this achievement.
22 Q.Why does Idaho Power want to be in the business
23 of energy efficiency?
24
25
A.For a number of reasons:(1) energy efficiency
is a good activity to build positive
2543 GALE, DI REB 31
Idaho Power Company
.
.
.
1 relationships with our customers; (2) similarly, it is a
2 good acti vi ty to build posi ti ve relationships with our
3 regulators; (3) it is an integral and increasingly
4 important part of our resource planning; and (4) the
5 Company believes it can provide energy efficiency in a
6 more cost effective and efficient manner because of the
7 inherent discipline in place in the regulated
8 environment.
9 Q.Why is a prudency review of energy efficiency
10 measures important to Idaho Power?
11 A.Under Idaho Power's current regulatory model
12 for energy efficiency, out-of-pocket costs are largely
13 recovered through Schedule 91, the Energy Efficiency
14 Rider. Essentially the Rider provides for the collection
15 of funds in relatively close proximity to their
16 expenditures. The Company collects and spends dollars on
17 energy efficiency measures in a balancing account that
18 carries symetrically applied interest. However, there
19 is no earnings opportunity for the energy efficiency
20 acti vi ties at this time - other than one very small
21 performance-based pilot related to Energy Star~ homes.
22 The energy efficiency activity today is a close
23 regulatory parallel to the buying and selling of energy
24 for the system that is run through the Power Cost
25 Adj ustment (" PCA") mechanism. Typically, the Company
expects PCA
2544 GALE, DI REB 32
Idaho Power Company
.
.
1 costs to be deemed prudent and recovered, unless there
2 has been mismanagement of system operations. In like
3 manner, Idaho Power would expect Rider costs to be deemed
4 prudent and recovered, except in circumstances of
5 mismanagement. Any disallowance would result in reduced
6 earnings stemming from other Company operations unrelated
7 to DSM. Delayed prudency review places future earnings
8 at risk.
9 Q.Did the Company communicate this importance to
10 the Staff?
11 A.Yes.. Wi th the growing importance of energy
12 efficiency and demand-response programs in terms of
13 dollars, megawatts, and megawatt-hours and without a
14 clear understanding of when Rider expenditures can be
15 considered appropriately spent, the Company informally
16 asked the Staff to specifically include in its case audit
17 a review of Rider funds spent to date. As described in
18 Ms. Drake's rebuttal testimony, the Company has made
19 great strides in the area of energy efficiency and demand
20 response programs. Idaho Power has invested millions and
21 intends to invest even more. A timely prudency decision
22 from the Commission greatly assists our continued
23 commitment to what we believe is now our first resource.
.24
25
Q.What is your reaction to Staff's suggestion to
defer review?
2545 GALE, DI REB 33
Idaho Power Company
.
.13
14
1 A.Idaho Power believes that energy efficiency
2 activities since 2002 need some finality as to the
3 prudency of their expenditures, particularly when even
4 more dollars are planned for the near future. The
5 Company believes that it has supplied appropriate and
6 sufficient information for the Staff and Commission to
7 make a determination. Since the inception of the Rider,
8 Idaho Power has had multiple general rate proceedings and
9 Rider funding requests. Certainly, Rider funding spent
10 through either the last general rate case or Rider filing
11 should be determined as spent in the public interest and
12 not subj ect to continued jeopardy.
AFFORDABILITY ISSUES
Q.There have been concerns regarding energy
15 affordabili ty - and specifically, electric service
16 affordabili ty - raised in the testimony of the Staff and
17 by Community Action Partnership Association of Idaho
18 ("CAPAI"). Please summarize your understanding of these
19 issues.
20 A.Staff Witness Curtis Thaden and CAPAI Witness
21 Terri Ottens both address affordabili ty concerns. Mr.
22 Thaden discusses the soft economy and its impact on
23 customers, including some customers who may be facing
24 tough financial circumstances for the first time. Mr..25 Thaden
2546 GALE, DI REB 34
Idaho Power Company
.
.
1 also discusses the stress on current energy assistance
2 programs such as Low Income Home Energy Assistance
3 Program and Proj ect Share and the status of the Weather
4 Assistance for Qualified Customers ("WAQC"). Ms. Ottens
5 expresses similar concerns and recommends future
6 increases to WAQC funding.
7 Q. Regarding the issue of energy affordabili ty,
8 does the Commission currently have a docket open to
9 address aspects of this issue?
10 A.Yes. It is GNR-U-08-1, a generic Commission
11 inquiry into matters of energy affordabili ty.
12 Q.Is Idaho Power an active participant in this
13 proceeding?
14 A. Yes.Idaho Power has attended and actively
15 participated in both the October 14 and October 22 public
16 workshops. The Company has presented comprehensive
17 information on its current programs and acti vi ties that
18 specifically address low income customers, as well as
19 other customers who might be financially challenged in
20 today' s economy. Currently, the Company is reviewing
21 draft Staff comments on the matter that have been
22 publicly available since November 26, 2008, and will be
23 commenting fully by the December 19 due date.
24.25
2547 GALE, DI REB 35
Idaho Power Company
.
.
.
1 Q.Realizing that comments are not due until
2 December 19, please indicate what Idaho Power's position
3 has been during the public workshops?
4 A.The Company has emphasized that new and
5 addi tional action should be purposeful and productive.
6 Idaho Power believes that the capabilities of existing
7 programs and acti vi ties should be fully understood and
8 utilized as an appropriate first step. Further the
9 Company is supportive of matching ongoing WAQC funding
10 with the needs of the service area communities,
11 addressing energy efficiency to the impacted customers,
12 and supporting rate design that promotes efficient use of
13 energy. Additionally, in recognition of the impact that
14 the present economy has on some of Idaho's citizens,
15 Idaho Power is increasing its shareholder commitment to
16 Project Share from present levels to $100,000 for the
17 current heating season.
18 Q.Ms. Ottens proposes to increase funding for
19 WAQC progressively in 2010, 2011, and 2012. Do you agree
20 with her recommendation?
21 A.As stated previously, Idaho Power supports adequate
22 funding for the WAQC programs and these funds may
23 very well need to be increased in 2010 and in subsequent
24 years. Idaho Power believes this is the low hanging
25 frui t when it comes to addressing affordabili ty. The
Company has
2548 GALE, DI REB 36
Idaho Power Company
.
.
.
1 calculated that a $LOO investment in WAQC can return more
2 than $200 in present value customer benefits in future
3 bill savings and over $300 in system benefits because of
4 the selection of a lower cost resource option. Idaho
5 Power commits to work with Ms. Ottens and CAPAI to fund
6 WAQC appropriately., The Company also commits to bring to
7 the Commission the appropriate rate recovery request -
8 general rate case or other - for additional WAQC funding.
9 However, a 2010 issue does not need to be addressed now
10 when the generic energy affordabili ty docket and future
11 Rider funding filings are looming.
12 CONCLUSION
13 Q. Please summarize Idaho Power's rebuttal
14 posi tion to the collective recommendations of the Staff
15 and Intervenors.
16 A.This is Idaho Power's fourth general rate case
17 since 2003. The Company is evaluating a 2009 filing at
18 this writing and anticipates the need for additional
19 general rate cases in the next several years as we meet
20 the challenges of both our industry and our service
21 territory. As a result, our operations and financial
22 resul ts will be very transparent to both the Commission
23 and our customers. The Company is seeking a reasonable
24 opportunity to earn its authorized rate of return during
25 this time period. It is
2549 GALE, DI REB 37
Idaho Power Company
.
.13
14
15
16
17
18
19
20
21
22
23
24.25
1 the Company's opinion that this opportunity can be best
2 achieved through use of the forecast test year proposed -
3 January 1, 2008, to December 31, 2008 - to decrease the
4 time period between cost incurrence and rate
5 implementation. This ratemaking model, along with the
6 establishment of the proposed PCA changes currently
7 before this Commission in Case No. IPC-E-08-19, will give
8 Idaho Power a reasonable opportunity to earn its
9 authorized return for the first time in many years.
10 Q.Have you concluded your direct rebuttal
11 testimony?
12 A.Yes.
2550 GALE, DI REB 38
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
MR. KLINE: And Mr. Gale would be
4 available for cross-examination.
3
5 COMMISSIONER SMITH: Thank you.
6 Mr. Boehm, do you have questions?
.
7
8
9
10
11
12 Madam Chair.
13
14
15
MR. BOEHM: No questions.
COMMISSIONER SMITH: Mr. Bruder.
MR. BRUDER: No questions, Your Honor.
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: Just a couple,
CROSS-EXAMINATION
16 BY MR. RICHARDSON:
17 Q Good morning, Mr. Gale.
Good morning, Mr. Richardson.
Referring to page 24 of your rebuttal
20 testimony, I'd like to just get a sense of the magnitude
18 A
21 of what we're potentially talking about with CWIP and
19 Q
22 there on line 9, you state that Idaho Power believes it
23 will benefit our customers if the Commission allows the
24 Company to include CWIP in rate base for such items as.25 maj or relicensing of hydro proj ects, new base load
CSB REPORTING
[phone]
2551 GALE (X-Reb)
Idaho Power Company
.
.
.
1 production plants and some high voltage transmission
2 construction, and then later on that same page at line
3 18, you state that the Company will likely have
4 production and/or transmission projects that may be
5 considered for CWIP recovery in the relatively near
6 future, and then do you recall Mr. Keen's testimony,
7 LaMont Keen's testimony, his direct testimony on page 8,
8 where he states that this is only one piece of the $900
9 million investment in plant required from 2008 through
10 2010, not including costs associated with the 500 kV
11 transmission projects or the new base load resource, so
12 do you have a sense of the dollar volume, the magnitude
13 of the dollars, we're talking about that the Company
14 potentially will be asking for CWIP recovery on?
15 The Company may bring forth for CWIPA
16 consideration applications on future proj ects because of
17 the magnitude of our capital expenditures we see going
18 forward, but we've made no decisions at this time on
19 which ones. Part of that decision will depend upon the
20 Company's financial situation at the time.
21 Do you have a sense of the dollarQ
22 magni tude of the transmission proj ects that are on the
23 horizon for Idaho Power?
24 I don't have those dollars with me. TheyA
25 are substantial.
CSB REPORTING
[phone]
2552 GALE (X-Reb)
Idaho Power Company
.1
2
3
4
Q
A
Q
A
Like ball park figure?
Hundreds of millions.
Billions perhaps?
Hundreds of millions. Well, potentially,
5 but hundreds of millions I certainly would say.
10
11
12.13
14
15
16
6
7
8
9
BY MR. PURDY:
17
Q
A
Q
A
Q
And potentially billions?
Potentially.
MR. RICHARDSON: That's all I have.
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: Just one area.
CROSS-EXAMINATION
Good morning.
Good morning, Mr. Purdy.
I wanted to talk about Ms. Ottens'
18 proposal to increase funding for the Company's WAQC
19 program. That's weatherization assistance for qualified
20 customers; is that right?
21
22
A
Q
Yes.
And just for clarification, that's a
23 continuation of a somewhat longstanding program formerly
24 referred to as low income weatherization assistance, is.25 it not?
CSB REPORTING
[phone]
2553 GALE (X-Reb)
Idaho Power Company
.
.
.
1 A Yes it is.
2 Q It's the same program?
3 A Same program.
4 Q Okay, I've got to ask, any particular
5 reason for the name change?
6 A I'm not sure that we instituted the name
7 change.
8 Q Okay.
9 A I don't know the origination of the name
10 change, but LIWA and WAQC are the same thing.
11 Q It is a Company-funded program?
12 A It is a Company-funded program.
13 Q Okay, and in fact, if I understand your
14 rebuttal testimony accurately, it's a good one and if you
15 want a reference, I refer you to your rebuttal beginning
16 at the very last sentence that begins on page 36 and
17 carries over to page 37. Therein you testify that the
18 Company has made calculations regarding the benefits that
19 accrue from an investment in WAQC. Do you see that?
20
21
A Yes.
Q In fact, you state that, and I'll quote
22 you, "$100 investment in WAQC can return more than $200
23 in present value customer benefits in future bill savings
24 and over $300 in system benefits because of the selection
25 of a lower cost resource option."
CSB REPORTING
[phone]
2554 GALE (X-Reb)
Idaho Power Company
.
.
.
1 A Yes.
2 Q First of all, I'm just curious, where did
3 those calculations come from?
4 A Well, you're aware that in a parallel
5 docket, the affordabili ty issues are before this
6 Commission. We attended the workshops. I made that
7 statement in the workshop and I also provided that
8 analysis to Ms. Barker subsequent to that workshop and
9 the analysis was done by our energy efficiency evaluation
10 group.
11 Q Thank you, so that was my question.
12 That's the same as the information you've already
13 provided in the affordabili ty docket?
14 A The same, except for I rounded to $100
15 instead of more specific numbers that were provided in
16 the analysis.
17 Q Okay. Gi ven your statement, is it fair to
18 characterize WAQC, then, as a somewhat longstanding
19 energy resource that's efficient and has a proven track
20 record?
21 A i would certainly characterize it that
22 way.
23 Q All right. You do resist, however, the
24 proposal made by Ms. Ottens to commit to an increase in
25 WAQC funding in this docket, do you not?
CSB REPORTING'
[phone]
2555 GALE (X-Reb)
Idaho Power Company
.
.
.
20
1 A Well, I do because she makes that
2 recommendation for 2010 which is not the test period that
3 we're talking about, but while resisting the change in
4 this docket, we do not resist working with them to come
5 up with what the right number is and supporting that
6 number.
7 Q And historically, isn't it true that the
8 amount of what used to be LIWA funding has often been
9 established in general rate cases for Idaho Power?
10 A Well, it was, I believe, in 2003 and we
11 resisted that form of setting the dollar amount then
12 because our preference is to really work with Ms. Ottens
13 and the CAPAI group and productively fund that and then
14 we'll come in and ask for the rate recovery based upon
15 that determination.
16 Q When you say "we'll come in," you're
17 referring to some type of a docket that the Company would
18 ini tiate to recover whatever investment it has committed
19 to make to low income weatherization?
A Well, first of all, I'LL try to be a
21 little more specific with my language, but I did mean the
22 Company is responsible for coming in and recovering those
23 dollars and I separate that from the commitment to work
24 with individuals associated with WAQC and come up with
25 what the dollars are needed to fund it because that is
CSB REPORTING
[phone]
2556 GALE (X-Reb)
Idaho Power Company
.
.
1 our first priority in the affordabili ty list or hierarchy
2 of answers, so we're committed to that, coming up with a
3 number and that's our obligation to come ask for the
4 dollars. We separate those two acti vi ties.
5 Q All right, and without rehashing what
6 happened in the '03 case, the Commission did in fact
7 order an increased level of funding for what was then low
8 income weatherization assistance, did it not?
9 A Yes, they did.
10 Q Okay; so when Ms. Ottens makes her
11 recommendation for total funding levels in this case,
12 she's teeing off the existing levels that were
13 established in that case?
14 A Well, that's my presumption.
15 Q Okay. All right. Is -- are you familiar
16 enough with WAQC to tell me whether -- well, strike that.
17 Are you familiar enough with WAQC that you know there is
18 a contractual' process that takes place annually to set
19 forth the terms and conditions and funding levels for the
20 program between Idaho Power and Community Action
21 Association?
22 A I'm aware of the contractual process. I'm
23 not involved in the contractual process.
24.25
Q All right, and are you familiar enough to
be able to agree with me that when a maj or alteration is
CSB REPORTING
[phone]
2557 GALE (X-Reb)
Idaho Power Company
.
.
.
1 made to the program, including an increase in funding
2 levels, there's what could be characterized as a ramp-up
3 period required for the Community Action, for the CAP
4 agencies to be able to adequately and efficiently
5 implement the increased funds or respond to the
6 alteration?
7 A I would presume that there would be
8 operational considerations as contractual provisions
9 change. I would accept that.
10 Q And I assume that for budgeting purposes,
11 the Company would like to know as far in advance as
12 possible what its commitment level for funding is going
13 to be prior to actually funding the program?
14 A I am not sure in the magnitude of what
15 we're talking about for WAQC that that necessarily
16 applies.
17 Q You -- strike that. Let me try another
18 way. So if I understand your rebuttal testimony and I
19 refer you to page 37 if you'd like a reference, you're
20 proposing that the appropriate level of funding for WAQC
21 be addressed perhaps in the Company's next general rate
22 case or something else?
23
24
25
A Let me be explicit.
Q Thank you, please do.
A The Company is committing to work with the
CSB REPORTING
[phone]
2558 GALE (X-Reb)
Idaho Power Company
.
.
1 funding level for WAQC right now. I mean, we have the
2 ongoing affordabili ty docket, that's going to reach a
3 conclusion and we will work with the agencies to
4 establish the dollars that can be productively used and
5 we're not going to hesitate until we have a revenue
6 requirement proceeding to act upon that.
7 MR. PURDY: All right, fair enough. That
8 was my question. Thank you. That's all I have. Thank
9 you.
10 COMMISSIONER SMITH: Thank you, Mr. Purdy.
11 Mr. Olsen, do you have any questions?
12 MR. OLSEN: No questions, Madam Chair.
13 COMMISSIONER SMITH: Mr. Ward.
14 MR. WARD: Thank you.
15
16 CROSS-EXAMINATION
17
18 BY MR. WARD:
19 Q Mr. Gale, on page 5 and 6 of your
20 rebuttal, you criticize Dr. Peseau' s characterization of
21 a decade-long rate case hiatus and you specifically point
22 to a 1995 rate moratorium that Idaho Power entered into.
23 Do you recall that testimony?
24.25
A Yes, I do.
Q Now, isn't it true that Idaho Power
CSB REPORTING
[phone]
2559 GALE (X-Reb)
Idaho Power Company
.
.
.
1 voluntarily proposed that rate moratorium?
2 A We brought that proposal to this
3 Commission.
4 Q And you had reasons other than someone
5 having a gun to your head for entering into that
6 moratorium, did you not?
7 A We had reasons to offer the moratorium,
8 yes.
9 Q And you were under no legal constraint to
10 sign that or agree to it?
11 A Prior to the Order, we had no
12 constraint.
13 Q Okay. On page 7, you criticize
14 Dr. Peseau' s characterization of a historical test year
15 as the "traditional test year." I'm not quite sure what
16 you mean by that. The historical test year is
17 tradi tional in this sense, is it not, that up until, as
18 near as I can recall, the late '70s, maybe early '80s,
19 all commissions used a historical test year; isn't that
20 true?
21
22
23
24
25
A I can't confirm that.
Q You're not old enough?
A Oh, I'm older than I look.
Q Well, if that were the case, what's wrong
wi th using the word traditional test year to characterize
CSB REPORTING
[phone]
2560 GALE (X-Reb)
Idaho Power Company
.
.
.
1 that situation?
2 A Not to quibble, I think there are enough
3 jurisdictions that use test years other than historic
4 test years that I just think the label could apply more
5 broadly.
6 Q Okay, and Dr. Peseau acknowledges there
7 are other, that jurisdictions use other test years,
8 doesn't he?
9 A As he should.
10 Q I want to ask you a few questions about
11 construction work in progress. At page 24, lines 9
12 through 10, you say, "Idaho Power believes it will
13 benefi t our customers if the Commission allows the
14 Company to include CWIP in rate base," and then you go on
15 to finish out that sentence. I was trying to determine
16 from your testimony how it is that the customers are
1 7 supposed to benefit from CWIP, and as near as I can tell,
18 you have two arguments. First, on page 26, line 19
19 through 20, you say that it will smooth rate impacts, the
20 use of CWIP will smooth the rate impact of large
21 mul ti -year proj ects. Do you see that testimony?
22
23
A Yes, I do.
Q But if CWIP is going to be a continuing
24 process, that is, assuming the Commission grants it here
25 and Idaho Power proposes it in the future as you
CSB REPORTING
[phone]
2561 GALE (X-Reb)
Idaho Power Company
.
.
1 discussed with Mr. Richardson for other proj ects, that
2 smoothing is a one-time occurrence only, isn't it?
3 A I don't see it as a one-time occurrence.
4 Q Well, let me ask it this way: When you
5 get right down to it, what CWIP does is pushes forward
6 the period in. which the Company's proj ects become
7 eligible for recovery of and on capital; correct?
8 A It does.
9 Q But if you're going to continually push
10 each proj ect forward, then the benefits of rate smoothing
11 is only a one-time thing.
12 A Well, maybe that's where we have our
13 differences. We see applications of CWIP as very
14 selective and purposeful and with an obligation to prove
15 to this Commission the public interest of each
16 application, not a decision once now that we file CWIP
1 7 hereafter.
18 Q Well, I understand, but if in fact you
19 persuade the Commission that it is in the public
20 interest, which obviously is your intention, is it not?
21 A I think that the decision of the public
22 interest of CWIP applications has to be made with each
23 one. It can't be made generally.
24.25
Q I couldn't agree more; however, having
said that, the overall impact to the customers is that in
CSB REPORTING
(208) 890-519B
2562 GALE (X-Reb)
Idaho Power Company
.
.
.
1 the first year a proj ect becomes eligible for CWIP , it
2 moves forward the rate recovery, but thereafter to the
3 extent that the Commission grants CWIP again, it just
4 keeps moving forward the rate recovery, so all you
5 accomplish in the end is you don't smooth anything except
6 one time, the very first time. Other than that, you just
7 move all the recoveries forward; isn't that true?
8 A Well, I don't agree with you. Maybe I can
9 gi ve you an example of how I would see it potentially
10 being used, potentially being used, not that this is a
11 proposal we have in mind. Say we have a five-year
12 hundreds of millions of dollars transmission proj ect
13 that's constructed over those years, maybe uniformly.
14 What I would envision the Company to do is file for, and
15 very conservatively file for, a portion of that CWIP at
16 the revenue requirement proceeding after that first year
17 and maybe the second year, but you would stage in the
18 investment potentially over the five years if we had five
19 years of rate proceedings, but it would come in in
20 segments and it wouldn't necessarily come in in full
21 dollar amounts for the year, so I see potentially
22 mul tiple smaller rate changes rather than the big one at
23 the end and that is one problem I see with the existing
24 method.
25 Q Well, we're not going to agree on this.
CSB REPORTING
[phone]
2563 GALE (X-Reb)
Idaho Power Company
.
.
1 Let's drop this. The second reason you give for why CWIP
2 is in the public interest is that it will improve the
3 utili ty' s cash flow and that's clearly true, but is that
4 in itself an argument for CWIP? I mean, lots of things
5 will improve cash flow. I can improve mine, at least
6 temporarily, by sticking up a bank or two, but it's not a
7 good idea.
8 A Well, we're not proposing to hold up
9 banks, but the cash flow has been talked about
10 considerably this week and I agree. I think cash flow is
11 a consideration of your client, Micron, our biggest
12 customer, down to a public witness named Retta Green that
13 many of us are familiar with. Everyone has cash flow
14 issues and the Company has a cash flow issue, so what it
15 is for the Commissioners is is our cash flow issue in the
16 public interest to address and that can only be done in
17 the context of the Company's overall finances, will not
18 addressing a cash flow issue harm the Company to the
19 point that maybe our credit is either hard to get or more
20 expensive, so that's the context in which cash flow needs
21 to be evaluated. It's not, per se, better for the
22 Company to get cash flow as opposed to a customer. It's
23 what is the impact to cash flow on the Company.
.24
25
Q Well, you say the context in which the
Company's cash flow has to be evaluated has to do with
CSB REPORTING
[phone]
2564 GALE (X-Reb)
Idaho Power Company
.
.
.
1 the impact on your credit and other things and I couldn't
2 agree more, but the flip side of that is as you
3 acknowledge, your customers have cash flow concerns as
4 well, and in this particular situation -- well, let me
5 ask it this way: Is there any realistic danger that
6 Idaho Power is not going to be able to fund from cash
7 flow its continuing Hells Canyon relicensing
8 investigation proceeding?
9 A Well, you're talking about funding one
10 aspect of our business when we have all kinds of business
11 activities to fund.
12 Q Okay, let me put it another way: Idaho
13 Power's profitable today, is it not?
14 A Idaho Power is profitable.
15 Q All right, and it has a positive cash
16 flow?
17 A Idaho Power's cash flow, and I'm not the
18 financial witness, but I talk with them enough to, I
19 think, make this representation, I don't think Idaho
20 Power's cash generation can fund its investments by
21 itself.
22 Q Over any realistically lengthy time
23 period, that would be true for any utility at any time,
24 would it not? Utili ties always have to raise cash. They
25 always have tQ
CSB REPORTING
[phone]
2565 GALE (X-Reb)
Idaho Power Company
.
.
.
1 A You fund your business activities through
2 internal cash generation and through your borrowings and
3 through your issuance of stock and to the extent that we
4 improve cash flow, we have it available to plow back into
5 the business and we're able to have better ratios, to
6 have better credit ratings to be able to borrow at a
7 lower rate, so those are the two issues that I see from
8 the Company's perspective regarding cash.
9 Q And the flip side would be similar for
10 your customers, would it not? They too need to have
11 decent credit ratings, they need to be able to,
12 particularly those who are in business need to be able
13 to, borrow. If they're a household, they need to be able
14 to pay their mortgage and put food on the table.
15 A I acknowledge that cash flow is a
16 consideration for every customer biggest to smallest, but
17 it does vary from customer to customer how that cash is
18 used and we have some of our large customers who have
19 very, well, less desirable credit ratings than the
20 Company has that has to sit on cash in order to fund
21 their operations and we don't have that ability to sit on
22 cash to fund our operations.
23 Q Do you take the Idaho Statesman by any
24 chance?
25 A Yes, I do.
CSB REPORTING
[phone]
2566 GALE (X-Reb)
Idaho Power Company
.
.
.
20
21
1 Q Do you recognize that headline from
2 Friday, December 12th?
3 MR. KLINE: Can you see it?
4 MR. WARD: May I approach the witness? I
5 have the same problem.
6 (Mr. Ward approached the witness.)
7 THE WITNESS: Thank you. The Micron
8 article I assume you're referring to.
9 Q BY MR. WARD: The Micron article, yes, the
10 first of several as a matter of fact, isn't it?
11 A Micron has been in the news.
12 Q And by the way, before the I start into
13 this, I don't want anybody to draw any conclusions from
14 my questions.. I know nothing more about Micron's
15 finances than what I read in the paper. I'm not privy to
16 any of their management decisions or anything else, but
17 in this article, Micron's president characterized Micron
18 as cut up, bruised, scathed. That's the headline, is it
19 not?
A That's what I just saw.
Q And in the article, it says that Micron
22 has experienced seven consecutive losing quarters, is
23 working on its eighth and believes the ninth will be the
24 worst quarter in its history. Do you recall that
25 generally?
CSB REPORTING
[phone]
2567 GALE (X-Reb)
Idaho Power Company
.
.
.
1
2
A Well,Mr.Ward,I don't recall the exact
specifics of that article.
Q All right.
A But 1'11 accept it.
Q But I take it that Micron is your largest
customer,is it not?
3
4
5
6
7 A It's our largest and a very valued
8 customer.
9 Q So I take it you follow their economic
10 woes relatively closely without regard to newspaper
11 articles.
12 A I personally talk to Micron personnel.
13 Q Yes, and you're aware, are you not, that
14 over the last two years they've lost many hundreds of
15 millions of dollars?
16 A Yes.
17 Q Now, one other thing I wanted to ask you
18 about that had to do with this article is the -- is
19 Micron's CEO's statement that up to 2,500 jobs, local
20 jobs, at the fabrication plant are at risk. You recall
21 that, don't you?
22 A I don't recall if from the article, but I
23 certainly accept that, believe that.
24
25
Q Okay, and that's a significant if 2,500
jobs at Micron were to go away, that would be a
CSB REPORTING
[phone]
2568 GALE (X-Reb)
Idaho Power Company
.
.
.
1 significant impact on this valley and your Company as
2 well, would it not?
3 A Yes, it would.
4 Q Now, I've taken the liberty of doing some
5 crude calculations, Mr. Gale. Dr. Peseau suggests that
6 the inclusion of CWIP in accordance with the Company's
7 request in this case would amount to about $12 million
8 and without asking you to vouch for that calculation, I
9 did some rough calculations and it looks to me like that
10 would be about -- a little less than half of that would
11 fallon residential customers, about $ 6 million and about
12 three percent or 360,000 would fallon Micron. Now, $6
13 million to the residential customers of Idaho Power is a
14 significant number, is it not?
15 A I'm accepting all your representations,
16 but I haven't seen them, so...
17 Q I understand. Do you think that's
18 significant for residential customers?
A What was the amount again?19
20
21
22
23
Q $6 million, roughly.
A And that's for the residential customers?
Q Correct.
A And did you calculate the percentage along
24 with the dollar amount? I mean, I --
25 Q Let me represent I just used Mr. Hessing's
CSB REPORTING
[phone]
2569 GALE (X-Reb)
Idaho Power Company
.
.
.
1 exhibi t. They're a little less than half of the
2 Company's total revenue requirement, so a little less
3 than $ 6 million of the 12.
4 A It's hard for me to judge how significant
5 that is.
6 Q And in Micron's case where they're
7 scrambling to find every nickel, $360,000 is still a
8 significant sum, is it not?
9 A I have worked with Micron enough to know
10 that they are concerned with input costs, extremely
11 concerned with input costs, and that changes to the input
12 costs are very important to them.
13 Q Now, Mr. Gale, even if the Commission were
14 convinced that as a general policy CWIP is the greatest
15 regulatory idea to ever come down the pike, do you think
16 it would be in the public interest for them nevertheless
17 to pause and consider whether this time of all times is
18 the very best time to implement a policy that will
19 subtract cash flow from the pockets of Idaho Power's
20 customers?
21 A I think that is an extremely important
22 issue in their considerations. The amount of CWIP in our
23 rate request separate from other elements of our rate
24 request is the one piece that is a pay me now, pay me
25 later piece, so its direct implication to us is cash flow
CSB REPORTING
[phone]
2570 GALE (X-Reb)
Idaho Power Company
.
.
.
17
1 and so of the whole request, that is the one that is a
2 pay me now, pay me later piece.
3 Q Yes, and by the same token, the flip side
4 is true for your customers. It's a discretionary item,
5 if you will, right now, so it's a pay me now, pay me
6 later question for your customers, too, and isn't it
7 likely that a great many of them under their existing
8 circumstances would say thank you very much, I'll pay you
9 later?
10 A Well, that might be, but I would say the
11 future years, the immediate future years, unless this
12 economy completely tanks, but if the economy responds and
13 we start to resume some growth in the state, there is a
14 lot of investment on the horizon and it may be very well
15 to put in a moderate increase now and not have to get
16 that later along with other things.
Q But, of course, since there is a great
18 deal of investment on the horizon, the CWIP issue will
19 always be there for the Commission to consider in the
20 future, will it not, if the economy turns around?
21 A The CWIP issue since it's now a legal tool
22 for the Commission to use will be there when we bring it,
23 and as I said before, hopefully clearly, that we will
24 bring it very judiciously and depending upon the
25 Company's circumstances at the time and make a case for
CSB REPORTING
[phone]
2571 GALE (X-Reb)
Idaho Power Company
.
.
.
1 the public interest.
2 Q Okay, let's leave that. After the last
3 rate case, you and a number of Idaho Power
4 representatives met with myself and other Micron
5 representati ves, did we not?
6 A Yes.
7 Q And at that meeting we had a discussion,
8 among other things, about cost of service problems. Do
9 you recall that in general?
10 A Yes.
11 Q And one of the things we requested there
12 or in that meeting was even if you don't believe us about
13 the problems we see with the existing Idaho Power cost of
14 service approach, then please go get an independent third
15 party to review it and see what they say, and while I
16 don't recall that you committed to do that, I thought I
17 understood there was some interest in doing that. Did
18 Idaho Power ever follow up with that proposal?
19 A We have not engaged an independent third
20 party and I'm not necessarily inclined to for these
21 reasons: I think within the Company we have substantial
22 cost of service expertise on a variety of different cost
23 of service models and specifically models that treat the
24 allocation of' generation and transmission costs in
25 different ways. In fact, in the past we've brought as
CSB REPORTING
[phone]
2572 GALE (X-Reb)
Idaho Power Company
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.
.
1 many as five different cost of service models to this
2 Commission, but I don't want to stop there.
3 I think that Dr. Peseau, Dr. Reading, Dr.
4 Goins all are experts that bring a dimension and I think
5 that Keith Hessing brings 25 years of class cost of
6 service information, so the expertise is here. It's not
7 with a third party. It's with the folks that know Idaho
8 Power and Idaho Power's system. The last thing I'd say
9 about that is we have no ax to grind on cost of service.
10 We have changed some methods. We've changed some methods
11 specifically because of things that Dr. Peseau has
12 brought to our attention, the PURPA classification as an
13 example, and if convinced, we'll change other things, but
14 I don't think the third party is going to shed the light
15 for Idaho class cost of service.
16 MR. WARD: Fair enough. That's all I
17 have, Madam Chair.
18 COMMISSIONER SMITH: Mr. Price, do you
19 have questions?
20 . MR. PRICE: Just a couple. Thank you,
21 Madam Chair.
22
23
24
25
CSB REPORTING
[phone]
2573 GALE (X-Reb)
Idaho Power Company
.
.
.
1 CROSS-EXAMINATION
2
3 BY MR. PRICE:
4 Q Mr. Gale, can I refer you to page 7 of
5 your rebuttal testimony?
6 A Yes.
7 Q And this is the section that you speak
8 about other commissions that surround or other states
9 that surround Idaho that also authorize the use of a
10 future test year; is that correct?
11 A Yes.
12 Q And these states include Utah and Wyoming;
13 is that correct?
14 A Yes.
15 Q Isn't it true that in proceedings before
16 these commissions they're arguing about the same sorts of
17 issues that we're arguing about in this proceeding;
18 correct?
19 A I don't know that for a fact, but I would
20 not be surprised as you try to move from a historic year
21 into a more current year, it's not an easy path.
22 Q So the word authorize isn't the same as
23 mandating the use of a future test year; correct?
24
25
A Oh, I'd agree with that.
Q And just one last question. Isn't it fair
CSB REPORTING
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2574 GALE (X-Reb)
Idaho Power Company
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.
1 to say that the mechanics of determining a 2008 test year
2 in this case are similar to the issues surrounding a test
3 year in Utah and Wyoming?
4 A I'd have to accept your representation of
5 that.
6 Q Okay.
7 A I wouldn't be surprised.
8 MR. PRICE: Thank you.
9 COMMISSIONER SMITH: Do we have any
10 questions from the Commissioners?
11 COMMISSIONER KEMPTON: Madam Chair, I have
12 one.
13 COMMISSIONER SMITH: Commissioner
14 Kempton.
15
16 EXAMINATION
17
18 BY COMMISSIONER KEMPTON:
19 Q Mr. Gale, I'd like to go back to some
20 testimony that Theresa Drake gave. It's on DSM, and I'll
21 read the testimony so that you don't have to have it
22 before you, and it relates to how essentially the program
23 has been set up, at least in her mind, in terms of energy
24 efficiency, and she said "With the assistance of the
25 EEAG" -- that's the Energy Efficiency Advisory Group.
CSB REPORTING
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2575 GALE (Com-Reb)
Idaho Power Company
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.
.
1 A Yes, sir.
2 Q "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 cost
6 effectively as compared to supply side resources and to
7 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 A Yes.
15 Q So my question relates to the issue of
16 prudency
17
18
A Yes.
Q in evaluating those proj ects and
19 specifically, and here I'LL quote the testimony of
20 Mr. Lobb referring to testimony from Mr. Anderson, in
21 that testimony, Mr. Anderson talked about prudency and a
22 view that the Commission should defer approval of the
23 Company's DSM program expenditures for the DSM tariff
24 rider for calendar years 2003 through 2007 until
25 sufficient information is provided to evaluate prudency,
CSB REPORTING
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2576 GALE (Com-Reb)
Idaho Power Company
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22
23
24
25
1 and I guess my question relates, at least initially the
2 question relates, to the issue of prudency. Do you have
3 anything that you're aware of in your orders relating to
4 the tariff rider or any other documents that you're aware
5 of that the Commission has issued that addresses an issue
6 of prudency, per se?
7 A The Commission may very well have
8 addressed prudency in its Order and I wouldn't be
9 surprised if they haven't, but I don't know off of the
10 top of my mind.
11 Q If the issue of prudency is to be a
12 relati vely exact process, then I would refer you back to
13 the language of Ms. Drake when she said, "I believe the
14 Commission expects these tests to be used merely as
15 guidelines that should not be used to exclude proj ects
16 that may be desirable as good public policy." If you
17 have a combination of guidelines merely as guidelines and
18 policy which is not defined and doesn't in my mind
19 designate who will actually make that policy, do you
20 believe, then, that you can evaluate prudency in current
21 DSM programs?
A My answer broadly --
Q Yes.
A -- I think that Mr. Anderson and Ms. Drake
and the Company and the Commission share the same goals
CSB REPORTING
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2577 GALE (Com- Reb)
Idaho Power Company
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.
.
1 in regards to energy efficiency. I do think we're all
2 trying to achieve the same thing. From the Company's
3 standpoint, our concern to get right to it is the fact
4 that we want to do energy efficiency, we believe it's our
5 highest and first resource and we want to be engaged in
6 the acti vi ty. We do that in an expense recovery mode
7 without a return and that's not a complaint, that's how
8 we do it, but without a return, there's not a reward to
9 compensate for risk, so that's why we tend to be risk
10 adverse on these prudency issues and seek as much
11 regulatory certainty as we can. My view, my view on the
12 energy efficiency acti vi ties, is I'd very much like to
13 get it structured like our power operations, our PCA,
14 have enough parameters around what's expected, what
15 process is deemed appropriate, follow those guidelines
16 and feel good about the recovery, and if we don't follow
17 the guidelines or policy, I'm using the noun, you know,
18 however firmly it needs to be, but if we do the
19 activities like they're supposed to be done, we have an
20 expectation of recovery and if we don't, we don't.
21 Q It's safe, I think, to assume that you
22 have at least one of two concerns and I'd like to take
23 the first one which is the deferral program expenditures.
24 The recommendation in this case by Staff to defer
25 approval of the Company's DSM program expenditures is a
CSB REPORTING
[phone]
2578 GALE (Com-Reb)
Idaho Power Company
.1 financial concern to the Company that may affect risk
2 which in turn may affect your credit rating; is that a
3 fair assumption?
4 A Yes, in this way: To be very specific,
5 the rider has been around since, I believe, 2002 and at
6 first, the levels of expenditures weren't great and we've
7 ramped up to about a $20 million a year clip at the end
8 of 2008 and we have applications before you on Peak
9 Rewards. It's going to grow. We expect it to grow and
10 so throughout that whole time period, to the extent that
11 none of those dollars have been expressly acknowledged,
12 we'd like to eliminate at least either by program or by.13 year some of that exposure.
14 Q The second question, then, relates to your
15 concept of DSM and risk and it's always been my -- the
16 perspective that I like to exercise with this and also
17 when I'm talking to the Office of Energy Resources, OER,
18 when we talk about DSM programs, there's a financial
19 benefi t in terms of risk that's provided by the rider
20 money that's put into the program and then isn't there a
21 benefit to the Company in DSM programs in the energy
22 efficiency side of it that whatever energy efficiency you
23 achieve in a particular year can also be marketed on the
24 secondary market? I think you called ita surplus.25 market.
CSB REPORTING
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2579 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 A Well, I think there are benefits to the
2 Company of energy efficiency. I think that -- well, pure
3 economic benefit of opening up surplus to the market.
4 Then that other mechanism that I just described, the
5 power cost adj ustment, will ascribe either 90 are 95
6 percent of that benefit back to the customer, but I will
7 wi thout a doubt say there are Company perceived benefits
8 of running the energy efficiency program. They're not
9 just not in the form of a return.
10 Q I thought I said, Mr. Gale, that the
11 return was through secondary sales.
12 A Well, if an energy efficiency program
13 freed up surplus sales, to the extent we could make
14 surplus sales, there could be through the sharing piece
15 an economic benefit to the Company.
16 Q Ideally, I think we'd be talking about a
17 macro level energy efficiency. We're not talking about
18 200 megawatts here and 200 megawatts there, it has to be
19 on a larger scale, but after all, that's what we're
20 trying to achieve as we move forward with tiered rates,
21 AMI and everything that's attached to that for the
22 future; isn't that correct?
23 A On that point I could not agree with you
24 more. If we can get the whole portfolio off to a macro
25 level, that's the ideal.
CSB REPORTING
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2580 GALE (Com-Reb)
Idaho Power Company
.
.
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1 COMMISSIONER KEMPTON: No further
2 questions.
3 COMMISSIONER REDFORD: No questions.
4 COMMISSIONER SMITH: Mr. Ward asked my
5 question, so do you have redirect, Mr. Kline?
6 MR. KLINE: I have a list of questions I
7 might ask. Could we take maybe five minutes and I'll
8 talk to my witness?
9 COMMISSIONER SMITH: You can take seven.
10 MR. KLINE: Seven.
11 (Recess. )
12 COMMISSIONER SMITH: Okay, we'll go back
13 in order. Mr. Kline.
14 MR. KLINE: Thank you, Madam Chairman.
15
16 REDIRECT EXAMINATION
17
18 BY MR. KLINE:
19 Q Mr. Gale, I first want to talk about a
20 subj ect that Mr. Ward raised and it had to do with test
21 years and the test year that the Company has proposed
22 here and Mr. Ward asked you about historical versus
23 tradi tional and I guess the first question I'd lead is
24 that the test year the Company has proposed in this case
25 is not a historical test year, is it?
CSB REPORTING
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2581 GALE (Di-Reb)
Idaho Power Company
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.
.
1 A No, it's not.
2 Q How did the Company come to the conclusion
3 that it should move away from a historical test year or a
4 tradi tional test year?
5 A I believe I mentioned earlier about the
6 looking forward into the intermediate time period and the
7 amount of capital expenditures that could be needed by
8 the Company and it's not just the Company, it's the
9 industry and I think that's a fairly well known fact, so
10 in order to keep up with that investment and because
11 prices and costs were rising, the new costs or the
12 marginal costs were more expensive than the embedded, so
13 it creates a situation for the Company that if you have
14 delay between your cost recovery or your rates in place
15 and your time in cost, it's to a disadvantage, so in
16 looking forward, it became an obj ecti ve to try to move
17 the test year closer to the time in which rates would be
18 put in place,' so in 2003 and 2005, we proposed a, what I
19 call, hybrid or half historic/half forecast test year and
20 we made progress on that.
21 We closed the gap between the time that
22 costs were incurred and the time rates were in place by
23 six months, and then in 2007, we took another step and
24 proposed our first forecast year. It was 2007. It
25 wasn't very ambitious. We proposed a forecast year the
CSB REPORTING
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2582 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 year we were living in and as a result of that, we spun
2 off into the workshops. Staff had concerns, specific
3 concerns, about auditable data and we tried to address in
4 this year, the 2008 year, those concerns. I'll just take
5 one more sentence. The way we did that, as said in the
6 testimony, is we started out with 2007 and then we
7 escalated it or moved costs into 2008 as we thought was
8 best. Sorry for the long answer.
9 Q Mr. Ward also addressed some questions to
10 you regarding the Company's cost of service study and, of
11 course, we've had an awful lot of discussion in this case
12 about cost of service and Mr. Ward also raised the
13 question again about whether it would be appropriate to
14 use an independent third party to address this problem of
15 the cost of service study and he referred to, and I know
16 that we've heard from Mr. Goins, we've heard from
17 Dr. Peseau, it should be Dr. Goins, Dr. Reading about all
18 the complexities of cost of service studies, a long list
19 of problems that can be caused if you don't do a good job
20 of cost of service. My question to you is in your
21 judgment, is the cost of service dispute that we have in
22 this case so complex that you would need to use an
23 independent third party? Can the Commission simply
24 handle this very complex problem with all the issues that
25 have been raised?
CSB REPORTING
[phone]
2583 GALE (Di-Reb)
Idaho Power Company
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.
.
1 A Well, the short answer is you have
2 testimony by a number of experts and I would endorse
3 everyone as an expert in the area and you have supported
4 points of view on the various cost of service studies. I
5 mean, the dispute is really narrow. It's not a broad
6 dispute. We don't have a black box cost of service
7 study. It's Excel driven. It's very transparent and you
8 can see where the allocators are and you can allocate
9 differently, but they're primarily on the generation and
10 transmission allocations and different folks do it
11 differently, and I think the Commissioners can sort
12 through the rationale of those allocations and make a
13 determination~
14 Q Commissioner Kempton asked you a couple of
15 questions on the subj ect of energy efficiency and
16 Ms. Drake's testimony and the tests that we use to
17 determine prudency for energy efficiency, I think, was
18 the focus of his questions. Is getting obj ecti ve tests
19 that the Company can look to for determination of what
20 constitutes prudency in its energy efficiency
21 expenditures critical for the Company?
22 A By obj ecti ve tests, meaning if the rules
23 are clear?
24 Q Right.
25 A Yes. I mean, that's really what we're
CSB REPORTING
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2584 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 speaking about and that's where we'd like to have active
2 engagement of the different parties and with the Staff on
3 how do we do this best and let's be about it.
4 Q One of the specific tests that was
5 discussed at some length with Mr. Anderson was the
6 post-implementation evaluation test. After you heard
7 Mr. Anderson's testimony on that issue, do you have any
8 thoughts about what role that should play in the
9 evaluation and the prudency analysis is really what I'm
10 interested in?
11 A As far as prudency is related to
12 post-implementation tests, post-implementation tests may
13 be needed for every or some. I think there's some
14 arguments there, but the role should be how do you adjust
15 that program. You embarked upon a program, you
16 implemented it just like you said you would. In
17 retrospect when evaluated it doesn' t deliver like we had
18 thought, that to me shouldn't be grounds for a judgment
19 of imprudency. If you don't act on it going forward, I
20 think that might be.
21 Q And the post-implementation evaluation is
22 going to tell you that, that you shouldn't move forward,
23 isn't it?
24
25
A It's how you adj ust your programs.
Q Now, in response to a question from
CSB REPORTING
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2585 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 Commissioner Kempton, you talked a little bit about how
2 the benefits of energy efficiency might be able -- one of
3 those benefits would be the freeing up of energy that
4 might be sold on the surplus market, thereby providing
5 some benefit to the Company. How would that work in the
6 PCA methodology, the flowing through of that benefit?
7 A Well, if the -- and likely that energy
8 efficiency creates opportunities from time to time for
9 surplus sales, the surplus sales would flow through the
10 PCA and the benefit would be shared between customer and
11 Company. Currently it's 90 and there's a proposal before
12 the Commission to change it to 95, but what I didn't say
13 to Commissioner Kempton the first time is once the new
14 base rates are set and the energy efficiency is factored
15 in, then it's 100 percent customer benefit.
16 MR. KLINE: Thank you. That's all I
17 have.
18 COMMISSIONER SMITH: Thank you, Mr. Kline,
19 and thank you, Mr. Gale.
20 (The witness left the stand.)
21 COMMISSIONER SMITH: Earlier in the
22 proceeding I recall someone claiming that some question
23 shouldn't be allowed because there was a legal issue that
24 should be briefed, so now is the time if anyone sees the
25 need to brief- any issue, they should bring it up right
CSB REPORTING
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2586 GALE (Di-Reb)
Idaho Power Company
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now. I see everyone studiously avoiding eye contact and
looking at their hands, so I take that to mean that no
one believes there is any issue that needs to be briefed
in this case and so there will be no filing of briefs.
It appearing, therefore, that all of the
evidence that. -- oh, Mr. Ward.
MR. WARD: Madam Chair, I know it's not
customary, but I would like to take just a couple of
minutes to make a very brief closing statement.
COMMISSIONER SMITH: We certainly would
allow closing statements from anyone who wishes to make
one, so take it away.
MR. WARD: Thank you, Madam Chair. I
wanted to take just a couple of minutes to talk about the
cost of service problem in this case and as the parties
well know, closing statements in general must be based on
the evidence produced in the case and I'll try not to
cross over the line there by suggesting anything that
couldn't be reasonably inferred from the evidence you've
heard today or this week.
It seems to me, though, that we are
leaving this record in a very unsatisfactory situation.
If I was the Commission, I would be terribly unhappy with
the prospects in front of them trying to make a decision
on this record, and it further seems to me that there is,
CSB REPORTING
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2587 COLLOQUY
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.
.
1 no question about it, but cost of service studies when
2 properly done will paint you a picture of a system that
3 you're reviewing that is quite understandable. With
4 enough time and enough study, you can get to the point
5 where anyone can review them, but not when you have to
6 turn the inputs over to the modelers, so that is my small
7 suggestion for a step forward. If we go back to
8 transparent modeling, I honestly believe this thing will
9 become much easier for the Commission, not easy. It's
10 like Hemingway said about writing, you just put a sheet
11 of paper in the typewriter and stare at it until the
12 drops of blood form on your forehead, but it can be done.
13 It can be done without having technical modeling
14 expertise, so with that, thank you for the indulgence.
15 COMMISSIONER SMITH: Is there anyone else
16 who wishes to make a closing statement?
17 MR. BRUDER: If I may, Madam Chairman.
18 COMMISSIONER SMITH: Mr. Bruder.
19 MR. BRUDER: I actually scribbled down
20 some things so I make sure I say what I want to say and
21 this goes to the Commission, this goes to the Staff, this
22 goes to everyone we've met, everyone we've dealt with
23 here, for the Department, for our consultants, I want to
24 thank everybody for their courtesy and their
25 friendliness, everybody's willingness to accommodate us,
CSB REPORTING
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2590 COLLOQUY
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1 to guide us and cooperate with us and to listen and
2 consider, listen to and consider what we have to say.
3 Now, we all know that that kind of
4 treatment doesn't come to one either in this industry or
5 in the world at large very often and so when it does, we
6 say a sincere thank you very, very much. Everybody
7 please have a great holiday, everybody be safe and we
8 hope we'll see you again soon.
9 COMMISSIONER SMITH: Mr. Bruder, it's been
10 a pleasure to have you in our Hearing Room and this is
11 Idaho and that's how we do things here.
12 MR. BRUDER: It's a rare thing. We thank
13 you.
14 MR. KLINE: I can't resist it,
15 Madam Chairman.
16 COMMISSIONER SMITH: I didn't think that
17 you would, Mr. Kline.
18 MR. KLINE: Thank you. Two things. No.
19 1, on the issue that Mr. Ward just raised about the cost
20 of service study, I believe it is Idaho Power's position
21 as announced by Mr. Gale that the cost of service
22 analysis is a transparent process. It uses an
23 Excel-driven $preadsheet, essentially, to do it. What I
24 would suggest is rather than us debating this in front of
25 you in closing arguments, you should talk to your Staff
CSB REPORTING
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2591 COLLOQUY
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1 people that do the cost of service study and ask them
2 whether they believe the AURORA model is something that
3 has an awful lot to do with cost of service analysis.
4 We'll accept whatever they say about it. Everybody else
5 is going to have a position on it. It's always -- the
6 AURORA model, of course, is always characterized as the
7 black box. We don't think it's a big part of it. Ask
8 your Staff and see if they agree. We'll be okay with
9 that.
10 The other thing that I'd like to have you
11 do in considering and reviewing this case, there's just
12 about three things that Idaho Power thinks you need to
13 look at to evaluate the Company's presentation and
14 posi tion in this case. There are three exhibits. You
15 look at three exhibits , it really is a nutshell
16 representation of the Company's case and concern,
17 Exhibi ts 1 and 2 presented by Mr. Keen and Exhibit 83.
18 If you look at those three exhibits, you will see the
19 nutshell of the Company's case and the Company's concern
20 and why we're here today. That's it, I'm sorry.
21 COMMISSIONER SMITH: Thank you, Mr. Kline.
22 I guess I want to give my personal thanks to all of the
23 parties and attendees for your courteous conduct and
24 amiable conduct throughout this proceeding, even on very
25 long days and- evenings and it's very much appreciated on
CSB REPORTING
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2592 COLLOQUY
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.25
1 my behalf and of that of the whole Commission, so seeing
2 nothing further to come before the Commission, I think we
3 should declare -- oh, intervenor funding? No.
4 MR. PURDY: Actually, I'd love to talk
5 about that, but it wasn't my point, which is simply that
6 I neglected to move for the admission of Community
7 Action's Exhibit 501.
8 COMMISSIONER SMITH: But Brad, you don't
9 need to because now is the moment where I get to say all
10 exhibi ts previously identified in this matter are now
11 admitted, and- even if I neglected to say that, by
12 operation of Commission rule, that would happen.
13 MR. PURDY: That's right, thanks.
14 (All exhibits previously marked for
15 identification were admitted into the record.)
16 COMMISSIONER SMITH: So they're taking
17 care of us in the event of our incompetence, but I forget
18 what the rule says on intervenor funding, so whatever the
19 time line is, this is the day it starts because the
20 record closes today. That being said, I think the
21 hearing is closed and we're adjourned and I hope everyone
22 travels safely through the slick roads.
23 (The Hearing adjourned at 10:55 a.m.)
24
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2593 COLLOQUY
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1 AUTHENTICATION
2
3
4 This is to certify that the foregoing
5 proceedings held in the matter of the application of
6 Idaho Power Company to increase its rates and charges for
7 electric service to its customers in the State of Idaho,
8 commencing at 9:30 a.m., on Tuesday, December 16, 2008,
9 and continuing through Friday, December 19, 2008, at the
10 Commission Hearing Room, 472 West Washington Street,
11 Boise, Idaho, is a true and correct transcript of said
12 proceedings and the original thereof for the file of the
13 Commission.
14 Accuracy of all prefiled testimony as
15 originally submitted to the Reporter and incorporated
16 herein at the direction of the Comission is the sole
17 responsibili ty of the submitting parties.
--
CONSTANCECertified
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/ 4,. ~~" "
2594 //IIII"E Of ~ \\\'AUTHENTICATION1111111111\\\'\