20091026Vol II BCA Hearing.pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO MODIFY ITS RULE H
LINE EXTENSION TARIFF RELATED TO
NEW SERVICE ATTACHMENTS AND
DISTRIBUTION LINE INSTALLATIONS.
CASE NO. IPC-E-08-22
BEFORE
COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER JIM KEMPTON
COMMISSIONER MACK REDFORD
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PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:October 20, 2009
VOLUME II - Pages 68 - 301
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb(qheritagewifi.com
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1 APPEARANCES
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3 For the Staff:
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6 For Idaho Power Company:
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9 For Ada County HighwayDistrict:
For Building Contractors
Association:
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Ms. Kristine A. Sasser, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Ms. Lisa D. Nordstrom, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
Mr. Scott D. Spears, Esq.
Ada County Highway District
3775 Adams Street
Garden City, Idaho 83714
GIVENS PURSLEY LLP
by Mr. Michael Creamer, Esq.
Post Office Box 2720
Boise, Idaho 83701
CSB REPORTING
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APPEARANCES
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10
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15
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1
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3 WITNESS
I N D E X
EXAMINATION BY
Ms Nordstrom (Direct)
Pre filed Direct Testimony
Mr. Creamer (Cross)
Ms. Nordstrom (Redirect)
Ms. Nordstrom (Direct)
Prefiled Direct Testimony
Mr. Spears (Cross)
Mr. Creamer (Cross)
Ms. Nordstrom (Direct)
Pre filed Direct Testimony
Mr. Spears (Cross)
Ms. Nordstrom (Redirect)
Mr. Creamer (Direct)
Prefiled Direct Testimony
Mr. Creamer (Direct-Cont' d)
Reconsideration Testimony
Ms. Sasser (Cross)
Mr. Creamer (Redirect)
Ms Nordstrom (Direct-Resp)
Prefiled Response Testimony
Ms. Sasser (Cross-Resp)
Mr. Creamer (Cross-Resp)
Commissioner Smith
PAGE
93
96
105
127
130
132
146
149
152
154
162
168
169
172
229
231
256
258
260
265
285
286
298
4 Gregory W. Said
(Idaho Power)
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6
7
Scot t D. Spar ks
(Idaho Power)
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9 David R. Lowry
(Idaho Power)
Richard Slaughter
(BCA)
Gregory W. Said
(Idaho Power)
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INDEX
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20
21
22
23
24
25
1 EXHIBITS
Premarked
Admitted
Premarked
Admitted
Premarked
Admitted
Premarked
Admitted
Premarked
Admitted
Premarked
Admitted
PAGE
300
171
171
171
171
300
Identified 290
Admi tted 300
2
3 NUMBER DESCRI PTION
4 FOR I DAHO POWER COMPANY:
5 1. Letters sponsored by David Lowry
(six pages)
6
7
FOR THE BUILDING CONTRACTORS ASSOCIATION:
8
201. Cost of Growth Example
9
10 202. Comparison of Existing and
Proposed Rule H Cost Distribution
11
12
203. Boise City-Nampa, ID MSA
Households that Can Afford to
Buy a House When Price Declines
13
14
204. IPCo, Allocation of Distribution
Rate Base, Case No. IPC-E-08-10
15 205. Comparison of Existing and
Proposed Rule H Cost Distribution
16
17
206. Rebuttal Testimony of Gregory
Said in Case No. IPC-E-95-18
18
19
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EXHIBITS
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1 BOISE, IDAHO, TUESDAY, OCTOBER 20, 2009, 9:00 A. M.
2
3
4 COMMISSIONER SMITH: Good morning, ladies
5 and gentlemen. This is the time and place set for a
6 hearing before the Idaho Public Utilities Commission on
7 Case No. IPC-E-08-22, further identified as in the matter
8 of the application of Idaho Power Company for authority
9 to modify its Rule H line extension tariff related to new
10 service attachments and distribution line installments.
11 We'll begin this morning by taking the
12 appearances of the parties. Mr. Creamer.
13 MR. CREAMER: Good morning, Madam Chair.
14 Michael Creamer here on behalf of Building Contractors
15 Association of Southwestern Idaho. With me today is Dr.
16 Richard Slaughter.
17 COMMISSIONER SMITH: Thank you.
18 Ms. Nordstrom.
19 MS. NORDSTROM: Good morning. Lisa
20 Nordstrom on behalf of Idaho Power Company. Seated with
21 me at the table is Greg Said, director of state
22 regulation.
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24
25
COMMISSIONER SMITH: And Staff.
MS. SASSER: Kristine Sasser, attorney for
Staff, entering an appearance.
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1 COMMISSIONER SMITH: And for Ada County
2 Highway District.
3 MR. SPEARS: Good morning. Scott Spears,
4 staff attorney, Ada County Highway District.
5 COMMISSIONER SMITH: Thank you. I think
6 that's everyone. We're here today to take the testimony
7 of the witnesses on rehearing on the issue of the
8 appropriate allowance amount in the Commission's -- in
9 the Rule H of Idaho Power. Are there any preliminary
10 matters that need to come before the Commission before we
11 begin?
12 MR. SPEARS: Madam Chair?
13 COMMISSIONER SMITH: Mr. Spears.
14 MR. SPEARS: Yes, there is the matter of
15 the Ada County Highway District's motion to strike all or
16 portions of written testimony of Idaho Power witnesses.
17 COMMISSIONER SMITH: Okay, we're ready to
18 hear that.
MR. SPEARS: All right.
COMMISSIONER SMITH: Or I guess would it
21 be your preference to do that initially or to wait until
22 Mr. Said is sworn in on the stand? I'm never clear about
23 this.
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MS. NORDSTROM: The Company's preference
is to hear it now.
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1 COMMISSIONER SMITH: Okay, we'll hear it
2 now, Mr. Spears.
3 MR. SPEARS: Thank you, Madam Chair.
4 There were two aspects of it and it's my understanding
5 that as a matter of your procedure, the first aspect will
6 be addressed when the witness takes the stand, but at any
7 rate, we will address it, that is, the matter we've --
8 Ada County Highway District has reviewed the rules of the
9 Commission and noted that all testimony is to be sworn.
10 Our concern is that this written testimony is unsworn and
11 there is case law that indicates that unsworn testimony
12 is considered inherently flawed and so we raise a concern
13 on the nature of this being unsworn testimony; No.1,
14 that it's not in compliance with Idaho Public Utili ties
15 Commission rules, but also the law suggests that it is
16 untrustworthy.
17 It is my understanding that as your matter
18 of practice, witnesses will be taken to the stand and
19 they will at some point be given an opportunity to swear
20 their written testimony and if that's the procedure, then
21 that addresses those concerns.
22 Our other concerns address specific
23 portions of testimony concerning Mr. Lowry and Mr. Said.
24 There were portions that we considered to be inadmissible
25 under your rules of procedure, specifically Rule 261 in
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1 that evidence that is irrelevant, unduly repetitious may
2 be excluded. There were portions of that testimony that
3 we considered wi thin those categories.
4 COMMISSIONER SMITH: All right, so let me
5 take care of your first concern. It is our standard
6 practice that testimony gets prefiled according to this
7 schedule established for a case and that when it's
8 presented at the hearing, the witness takes the stand, is
9 sworn and reaffirms at that point in time that those are
10 his answers and they remain the same today as they did
11 when they prefiled it, so I think that takes care of your
12 unsworn issue.
MR. SPEARS: Yes, it does.
COMMISSIONER SMITH: With regard to the
15 parts of the testimony, I think the most efficient way is
16 just to go page by page, line by line as to what you feel
17 is not appropriate and then Ms. Nordstrom will have the
18 opportunity to respond.
19 MR. SPEARS: Very well, I can do that,
20 Madam Chair. The first point raised was with regard to
21 Mr. Lowry, page 2, lines 10 through 12, wherein he stated
22 in a portion, "when those relocation costs should have
23 more appropriately been borne by real estate developers."
24 We believe that within the context that there is not
25 adequate foundation for this testimony and that it's an
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1 inappropriate attempt to offer a legal opinion and that
2 is the nature of our obj ection to that testimony.
3 COMMISSIONER SMITH: Ms. Nordstrom.
4 MS. NORDSTROM: Thank you. First of all,
5 Idaho Power would note that ACHD' s motion is not timely.
6 Just one week before oral argument ACHD moved to strike
7 testimony that has been on file with the Commission for
8 nearly one year and as you noted, Procedural Rule 121
9 clearly contemplates that testimony may be filed in
10 conj unction with applications to change rates or rules
11 and sometimes even requires it. Idaho Power filed its
12 application and testimony in October 2008 stating that it
13 stood ready for hearing. ACHD declined to file testimony
14 of its own like the Building Contractors Association did,
15 nor did it request a hearing to present evidence. By
16 waiting to raise the obj ection to evidence presented in
17 the underlying case until after a final Order was issued,
18 ACHD effectively waived its own obj ection.
i 9 According to Procedural Rule 265, grounds
20 for obj ection to the admission or exclusion of evidence
21 must be stated briefly at the time the evidence is
22 offered and in this instance, the time to object was in
23 the underlying case before it was fully submitted to the
24 Commission for decision and ACHD now argues that the
25 unsworn testimony is inherently unreliable and seeks to
CSB REPORTING
(208) 890 -519 8
72 COLLOQUY
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1 strike portions of testimony, some of which are wholly
2 unrelated to Section 10.
3 Idaho Power cannot be responsible for
4 ACHD' s failure to timely file a request for hearing so
5 that the witnesses could be sworn and their reliability
6 tested, but we are certainly willing to put our witnesses
7 on the stand today. Our witnesses are present and can
8 stand for cross-examination and given the likelihood that
9 this case will be appealed to the Supreme Court, Idaho
10 Power believes that this approach is the most
11 appropriate.
12 COMMISSIONER SMITH: I'm sorry, Lisa,
13 which approach?
14 MS. NORDSTROM: Having the witnesses
15 sworn.
16 COMMISSIONER SMITH: Okay.
17 MS. NORDSTROM: And as Chairwoman Smith
18 noted in last week's oral argument, the Commission is
19 experienced in determining how much weight to assign to
20 statements of witnesses and such an approach is
21 appropriate here. In this particular case on page 2 of
22 Mr. Lowry's testimony, that is a statement of opinion
23 based upon his experience and should be afforded that
24 weight.
25 COMMISSIONER SMITH: Well, if my fellow
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1 Commissioners disagree, they should tell me, but I think
2 I understand your argument with regard to the
3 untimeliness and I do have some sympathy with that, but I
4 think the best way for us to proceed is to just have all
5 the testimony in today even though you're right, the
6 issue before us today on reconsideration is very narrow,
7 but I think it would be appropriate to have this in the
8 record and to have people have the opportunity to
9 cross-examine if they so desire and so I would say I
10 would deny your untimeliness argument, but I do find that
11 as a witness, Mr. Lowry is qualified to offer his
12 opinion.I don't see it as any kind of legal conclusion
13 that he's trying to offer that he believes that someone
14 else should have borne a portion of relocation costs, so
15 I would deny the motion to strike this part of the
16 testimony. Next.
MR. SPEARS: Next, Madam Chair, was on,
18 again, the testimony of Mr. Lowry, page 3, lines 2
19 through 5, wherein he stated, "If a relocation of
20 facilities is required due to an identified and ~udgeted
21 highway proj ect, Idaho Power is legally required to fund
22 the relocation cost."Again, we obj ect to this
23 testimony as being an inappropriate attempt to offer a
24 legal opinion and also foundation. That is the nature of
25 our obj ection to this testimony.
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1 COMMISSIONER SMITH: Ms. Nordstrom.
2 MS. NORDSTROM: Mr. Lowry is stating the
3 posi tion of the Company and I would note that it's
4 consistent with the arguments that ACHD presented last
5 week.
6 COMMISSIONER SMITH:I think even though
7 he's not an attorney, he can state the position of the
8 Company, and then if legal briefs are required and some
9 have been filed, the lawyers can then argue whether he's
10 correct or not, so I would deny that motion to strike.
11 MR. SPEARS: All right. Madam Chair, the
12 next point of concern was, again, Mr. Lowry's testimony,
13 page 3, lines 17 through 20, wherein he stated, "However,
14 the current Rule H tariff does not clearly address cost
15 responsibility for all relocation situations, including
16 relocations requested by a public road agency on behalf
17 of a third party."We are concerned, again, that this
18 is again a legal conclusion. It's irrelevant and
19 argumentati ve. We believe clearly that the Commission is
20 perfectly able to determine for itself whether Rule H
21 addresses cost responsibility in relocation situations.
22 COMMISSIONER SMITH: Ms. Nordstrom.
23 MS. NORDSTROM: Mr. Lowry is stating his
24 opinion as someone who applies the provisions of Rule H
25 that it is lacking in this regard. He's stating the
CSB REPORTING
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75 COLLOQUY
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1 position of the Company and it is certainly wi thin the
2 Commission's purview to assess for itself whether or not
3 Rule H contains provisions that address relocations
4 requested by a public road agency on behalf of a third
5 party.
6 COMMISSIONER SMITH: And I agree, Mr.
7 Spears.I think it's the witness' opinion about the
8 scope of the tariff and you're correct that the
9 Commission could disagree, but there's nothing
10 inappropriate about him expressing his opinion, so I
11 would deny the motion to strike. Is your microphone on?
12
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14
MR. SPEARS: Yes, it is.
COMMISSIONER SMITH: Good, thank you.
MR. SPEARS: Madam Chair, the next point
15 of concern in regards to Mr. Lowry's testimony is on page
16 7, lines 7 through 12, wherein he stated, "ITD then
17 requires Idaho Power and other private utility companies
18 to fund the relocation costs of their utility facilities.
19 Correspondence between Idaho Power, ITD, and the City of
20 Nampa has been included in Exhibit No. 1 to my testimony
21 to illustrate how this cost shifting occurs."
22 Our concern on this point was that this
23 quote refers to the Idaho Transportation Department and
24 their issues and they were not a party to the
25 reconsideration and we're also concerned that it lacks
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1 foundation as to these other private utility companies.
2 The testimony in context doesn't talk about who these
3 other private utility companies are and so we were
4 concerned about this testimony and obj ect on that
5 basis.
6 COMMISSIONER SMITH: Ms. Nordstrom.
7 MS. NORDSTROM: Mr. Lowry is testifying to
8 his firsthand knowledge of the practices of the other
9 highway agencies that it deals with and although ITD is
10 not a party to this case, it had the opportunity to
11 participate and is one of the largest road agencies the
12 Company deals with and for whom provisions requested in
13 Rule H would apply.
14 COMMISSIONER SMITH: Any response, Mr.
15 Spears?
16 MR. SPEARS: No, Madam Chair.
17 COMMISSIONER SMITH: Commissioner Redford?
COMMISSIONER REDFORD: Yes, I just have
19 one statement. It appears to me that most of the things
20 that you're obj ecting to are issues of fact that the
21 witness is testifying to. ITD has been clearly defined
22 and it's a term that excuse me, it has been defined
23 and it is a question of fact, not of opinion, in my
24 estimation and I don i t quite understand what foundation
25 you're insisting that Idaho Power undertake. From a
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77 COLLOQUY
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1 legal standpoint or evidentiary standpoint, could you
2 gi ve me a little better idea of what you're talking about
3 as far as foundation?
4 MR. SPEARS: Madam Chair, Commissioner, on
5 this issue, Idaho Power brought in not only itself but a
6 reference to other private utility companies and we would
7 have liked to have seen some basis in this testimony as
8 to these other private utility companies who is it
9 referring to.
10 COMMISSIONER REDFORD:Well, they've all
11 been defined and so it's my understanding that if you had
12 questions about the foundation, you could have brought,
13 subpoenaed witnesses to have challenged that.11m just
14 afraid your obj ections which really don i t have a title, I
15 mean, other than lack of foundation, are appropriate.
16 That i s all I have to say.
17 COMMISSIONER SMITH: Thank you,
18 Commissioner Redford, so given that, I think we i 11 deny
19 the motion to strike.
MR. SPEARS: All right, and the last
2 i obj ection with regard to Mr. Lowry was on page 8,
22 section -- lines 16 through 20, wherein he was presented
23 a question, "Do you believe the proposed Rule H
24 relocation language, as described in greater detail in
25 Mr. Sparks' testimony, will provide public road agencies
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12
13
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1 and the public with needed clarity as to how
2 responsibili ty for relocation costs is to be
3 apportioned?"
4 His answer, "Yes." Again, we believe that
5 this testimony in answer to a question is argumentative.
6 It's irrelevant and I would also note that he's referring
7 to other testimony and so in our opinion, there are some
8 hearsay concerns in that he i s summarizing or at least
9 purporting to refer to other testimony. That is the
10 basis of our concern on this testimony.
11 COMMISSIONER SMITH: Ms. Nordstrom.
MS. NORDSTROM: Mr. Lowry is stating his
opinion as the person from the Company that is primarily
responsible for cost allocation and recovery with regard
15 to public road rights of way and improvements. It has
16 been his testimony that that area of Rule H has been
17 lacking and it is his opinion that these particular
18 provisions as provided in Rule H will address that
19 concern. He refers to Mr. Sparks i testimony because
20 Mr. Sparks' testimony has the specific tariff language
21 which Mr. Sparks was primarily responsible for collecting
22 and presenting to the Commission. His interpretation of
23 that tariff language, however, is his own and represents
24 that of the Company.
25 COMMISSIONER SMITH: And Mr. Spears, I'm
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1 going to deny the motion to strike.I think it is
2 appropriate that the witness offers his opinion on the
3 language that's proposed.
4 MR. SPEARS: Thank you, Madam Chair.
5 Moving then to the testimony of Mr. Gregory Said, the
6 first point concerns his testimony at page 3, lines 17
7 through 22, when he stated, "The Company believes that
8 these clarifications will alleviate apparent
9 misunderstandings where certain governmental entities
10 have forced responsibility for funding of line relocation
11 expenses onto Idaho Power customers that should have been
12 borne more appropriately" -- should have been borne -- I
13 think it was supposed to be "by," but it says "be borne
14 by developers."
15 Our concern is that this is irrelevant and
16 speculative and that it lacks foundation and is
17 argumentati ve and it should have been reserved, it's
18 testimony that should have been reserved, for argument by
19 counsel, basically, is our concern with this language.
20 COMMISSIONER SMITH: Ms. Nordstrom.
21 MS. NORDSTROM: Mr. Said is the Company's
22 policy witness in this matter and states the Company's
23 posi tion. That is also his opinion and he can attest to
24 his own opinions in this matter.
25 COMMISSIONER SMITH: I'm going to deny the
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80 COLLOQUY
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1 motion to strike. I think this is an appropriate
2 expression of the Company's policy in the case and Mr.
3 Said is going to be on the stand if people want to talk
4 to him about that.
5 MR. SPEARS: Okay, thank you, Madam Chair.
6 COMMISSIONER REDFORD: Can I ask one more
7 question? I'm sorry.
8 COMMISSIONER SMITH: Sure, Commissioner
9 Redford.
10 COMMISSIONER REDFORD:As you're aware,
11 I'm sure, all of this testimony has been filed, it has
12 not been admitted and we would expect that a lot of
13 things that you're complaining of would be taken up on a
14 vigorous cross-examination and at that time you might be
15 able to renew your objection, but it seems to me your
16 obj ections to evidence or testimony that has not been
17 admitted is a bit premature, but you run your case the
18 way you feel you should run it.
19 COMMISSIONER SMITH: Mr. Spears.
MR. SPEARS: Madam Chair, was that
21 testimony, I lost track, was that denied?
22
23
COMMISSIONER SMITH: It was.
MR. SPEARS: Okay, that's what I thought.
24 Our next point of concern, Madam Chair, was in page 5,.25 lines 7 through 22 of Mr. Said, "Is growth paying for
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1 itself? The answer is clearly no. Additional revenues
2 generated from the addition of new customers and load
3 growth in general is not keeping pace with the additional
4 expenses created and required to provide ongoing safe and
5 reliable service to new and existing customers. While
6 the provisions of Rule H have required some contributions
7 in aid of construction for new distribution facilities,
8 there are no requirements for contributions in aid of
9 construction for new transmission or generation
10 facilities which are also typically required to serve
11 customer growth. Reducing the customers -- the Company's
12 new customer-related distribution rate base by reducing
13 allowances and refunds will relieve one area of upward
14 pressure on rates and will take a step toward growth
15 paying for itself."
16 In the context of ACHD' s motion for
17 reconsideration, of course, this testimony was
18 irrelevant, but I realize, of course, that it is relevant
19 to other portions of Rule H and certainly understand the
20 context.
21 COMMISSIONER SMITH: Ms. Nordstrom, do you
22 want to respond?
23 MS. NORDSTROM: Idaho Power believes that
24 this testimony is very relevant and goes to the crux of
25 the technical hearing today.
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1 COMMISSIONER SMITH: And I think so, too.
2 I think we'll deny the motion to strike.
3 MR. SPEARS: Thank you, Madam Chair. I
4 only have two more.
5 COMMISSIONER SMITH: Okay.
6 MR. SPEARS: Page 6, lines 2 through 12,
7 again the testimony of Mr. Said, "Question: Please
8 describe how certain governmental entities are able to
9 force payment of line installation expenses onto Idaho
10 Power customers that should more appropriately be borne
11 by developers.
12 Answer: Under Idaho law, governmental
13 agencies charged with constructing, operating, and
14 maintaining roads, such as the Idaho Transportation
15 Department and the Ada County Highway District have the
16 authori ty to require the relocation of Company-owned
17 transmission and distribution facilities that are sited
18 in road rights of way at Company expense."
19 Again, we object to this testimony as
20 offering a legal conclusion and that is the nature of our
21 concern.
22 COMMISSIONER SMITH: So I think I'm going
23 to deny that based on the previous discussions we've had
24 that they're stating their opinion and the position of
25 the Company and if you disagree with it, you can
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21
22
1 certainly cross-examine the witness.
2 MR. SPEARS: Okay, and our last obj ection
3 is, again, the testimony of Mr. Said, page 7, line 4
4 through page 8, line 13. It's quite lengthy and I don't
5 really see a point in reading the entire text. I will
6 suggest that the Ada County Highway District objects to
7 this for the reason that it is conclusory, argumentative
8 and duplicative and again, it refers in a hearsay fashion
9 to testimony of Mr. Said in commenting on what Mr. Said
10 has testified in his written testimony.
11 COMMISSIONER SMITH: I think you mean
12 Mr. Lowry and Mr. Sparks.
13 MR. SPEARS: Well, Madam Chair, in this
14 excerpt, Mr.oh, I'm sorry, yes. He referred to what
15 Mr. Lowry and/or Mr. Sparks said. I apologize.
16 COMMISSIONER SMITH: Who will be available
17 today, so I would deny on the basis of hearsay and also
18 believe that as the Company's policy witness, Mr. Said is
19 able to express the Company's view of this matter and he
20 will be available for cross.
MR. SPEARS: Thank you.
23 motion, also.
COMMISSIONER SMITH: So I'd deny that
24
25
MR. SPEARS: That is the --
COMMISSIONER SMITH: Okay.
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1 MR. SPEARS: -- conclusion of our motion,
2 Madam Chair.
3 COMMISSIONER SMITH: All right. Are there
4 any other preliminary matters? Mr. Creamer, you're
5 reaching for your mic.
6 MR. CREAMER: Madam Chair, thank you. I
7 hope to break a long string of denials of motions that
8 just preceded me here, but Building Contractors would
9 like to, wi thout waiving their right to obj ect when the
10 testimony is offered, obj ect now and move to strike
11 testimony from Mr. Said's rebuttal testimony.
12 COMMISSIONER SMITH: Okay.
13 MR. CREAMER: The first matter
14 COMMISSIONER SMITH: This is his testimony
15 on reconsideration?
16 MR. CREAMER: Yes, I'm sorry, on
17 reconsideration, Madam Chair. The first would be Mr.
18 Said's testimony on page 14, beginning at line 20,
19 through page 15, line 18. The basis for our objection is
20 that this is clearly based on hearsay, and let me also
21 discuss page 16, line 13 through line 16. Again, our
22 obj ection is that it is hearsay. I understand that the
23 Commission's consideration of evidence and the
24 applicabili ty of the rules of evidence are somewhat more
25 liberal here, but clearly, this is hearsay attributable
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1 to no one who is available to testify to those facts.
2 It's inherently unreliable. It's not attributed to any
3 person in fact, so it lacks foundation. It's not subj ect
4 to independent verification on matters that are of some
5 importance, perhaps, but in any event, it's hearsay, I
6 would submit, of the worst kind and we would move to have
7 it stricken.
8 COMMISSIONER SMITH: Would you please
9 repeat for me which lines?
10 MR. CREAMER: Yes, Madam Chair, on page
11 14, lines 20 beginning at line 20, Mr. Said has been
12 asked if he can quantify the embedded net plant
13 investment in transformers and he says, unfortunately,
14 there is not an any easy method. However, I've been told
15 by someone else
16 COMMISSIONER SMITH: How far does it go?
17 MR. CREAMER: It continues on to page 15
18 through 18, Madam Chair.
19 COMMISSIONER SMITH: Okay, and was there
20 another one on 16?
21 MR. CREAMER: Yes, at page 16, beginning
22 at line 13, an estimate of the number of undeveloped
23 residential lots, Mr. Said responds, "I am told that the
24 current estimate of vacant, undeveloped lots," and he
25 goes on. We don't know who told him that. We don't know
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86 COLLOQUY
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17
1 what basis there is for that statement and we'd move to
2 have it stricken as hearsay.
3 COMMISSIONER SMITH: Mr. Nordstrom.
4 MS. NORDSTROM: Mr. Said supervises a
5 number of people on his own staff and works with other
6 people in the Company. While he does not specifically
7 have the count of transformers, he received that from the
8 custodian of that information and the person that tracks
9 that. The calculations are his own and is not reliant on
10 any other source for that information.If the numbers
11 are truly in question and if Mr. Said cannot attest to
12 the accuracy of the numbers as they have been provided to
13 him, the Company would be willing to present the people
14 for cross-examination that provided those numbers.
15 COMMISSIONER SMITH: Any response,
16 Mr. Creamer?
MR. CREAMER: Well, the testimony is
18 there's no way to arrive at the answer, but he i s been
19 told by someone what an estimate might be. We don't know
20 who the person is. We would like to conclude the hearing
21 today. They've certainly had time to look at those
22 issues. It goes to the heart of their case of what its
23 embedded costs are, what the cost for a transformer is,
24 how many transformers they have out there, and they
25 haven't provided that information through an appropriate
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87 COLLOQUY
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10
1 wi tness at this point and we would obj ect to any
2 continuation as well.
3 COMMISSIONER SMITH: Well, it's certainly
4 the Commission's intent to finish early today, but I
5 think for the time being, I'm not going to rule on the
6 motion and I want you to have the opportunity to question
7 Mr. Said and determine at that time if you aren't getting
8 satisfactory answers, you should renew your motion.
9 MR. CREAMER: Thank you, Madam Chair.
COMMISSIONER SMITH: You're welcome.
11 Anything else?
12 Ms. Nordstrom.
13
14
MS. NORDSTROM: Thank you. When the
Company filed its application in this docket on October
15 30th, 2008, Idaho Power submitted the prefiled testimony
16 of three witnesses. As the Commission noted in last
17 week's oral argument, some of that direct testimony
18 pertained to Section 10 and that the Company's witnesses
19 would be sworn at today' s technical hearing.
20 The Company is sensi ti ve to the fact that
21 the Commission has limited its reconsideration to the
22 issue of appropriate allowances. With the exception of
23 Gregory Said's responsive testimony, the direct
24 testimonies of the Company's witnesses discuss other Rule
25 H issues in addition to allowances. How does the
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88 COLLOQUY
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.
.
1 Commission wish to proceed regarding the content and
2 order of witnesses' testimony this morning?
3 COMMISSIONER SMITH: Well, without
4 speaking for any of you, it was my intention to start
5 wi th Mr. Creamer's witness because this is a hearing on
6 reconsideration on the issue of allowances, but I did
7 anticipate that the Company would probably want to spread
8 all the testimony that was filed in this case so it could
9 be in the transcript, so that's kind of what's in my
10 mind. What's in your mind?
11 MR. CREAMER: Madam Chair, it is the
12 Company's application to change the Rule H tariff and our
13 expectation was that the Company would put its witnesses
14 on. We would have the opportunity to cross-examine them
15 on all of their testimony.
16 COMMISSIONER SMITH: Well, I think all of
17 their testimony is not relevant to the issue of
18 reconsideration, so if we want to put the three that were
19 filed a year ago on first, that's fine and then we would
20 go into reconsideration testimony of Dr. Slaughter and
21 Mr. Said, but the Commission isn't here to reopen any
22 issues that it didn't specify for reconsideration in its
23 Order and we didn't certainly allot enough time for
24 that.
25 MR. CREAMER: Madam Chair, the premise of
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89 COLLOQUY
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.
1 the Company's application is that they're not recovering
2 enough in line extension charges to cover their costs and
3 that they need to make adjustments to those charges and
4 that premise continues from the application through the
5 testimony on reconsideration. All of it goes to the
6 question of what is an appropriate allowance which the
7 Commission has framed on reconsideration. The facts that
8 lead to the correct conclusions are contained or not in
9 the original testimony and the testimony on
10 reconsideration. We would submit that it's all relevant
11 to the question that the Commission has presented to
12 Building Contractors as what is an appropriate allowance.
13 I don't have an opinion as to whether
14 there should be the initial testimony spread on the
15 record and cross-examination, then come back to the
16 reconsideration testimony, but we would want the right to
1 7 cross~examine the Idaho Power Company witnesses on all
18 the testimony that they've submitted to the extent they
19 go to the Company's basic premise that it needs to reduce
20 or eliminate allowances or refunds in this case.
21 COMMISSIONER SMITH: Well, I think the
22 basis we need to start from is the Commission's Order in
23 the case, which is based on the filings that all the
24 parties made, including your clients and the information
25 in that, so I think we should put their witnesses on, you
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90 COLLOQUY
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1 can ask questions. Ms. Nordstrom will let me know if she
2 thinks it's beyond the scope or into areas that have
3 already been determined based on the evidence that was
4 presented to the Commission earlier and we can see if we
5 can move this along.
6 Anybody have a better idea? Commissioner
7 Redford.
8 COMMISSIONER REDFORD:I view this similar
9 to Commissioner Smith, but I also view it in terms of
10 procedure as more a show cause type of hearing. Going
11 through the procedure, we've issued an Order and we have
12 received obj ections to that Order and granted, based on
13 those obj ections, we have determined that a rehearing or
14 reconsideration is necessary, so why don't we handle it,
15 as Commissioner Smith said, more in the order of an order
16 to show cause which puts the burden back on Idaho Power,
17 then, to overcome the obj ections and I don't know whether
18 higher authority would agree with me, but
19 notwi thstanding, it cleans things up as far as I'm
20 concerned.
21 I'm not very excited about hearing
22 testimony about other matters which were in the Order but
23 which were not the subj ect of the obj ections and the
24 matters that we are here today on; in other words, I'm
25 not suggesting that we open up the whole Rule H
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91 COLLOQUY
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1 controversy, just those areas which we've granted
2 reconsideration on and so I think that's in keeping with
3 Chairman Smith, unless someone convinces us otherwise.
4 Mr. Creamer.
5 MR. CREAMER: Madam Chair, Commissioner
6 Redford, I would like to for the record indicate that our
7 approach to the reconsideration has been that an
8 allowance by Idaho Power Company to be provided in line
9 extensions encompasses all aspects of what investment the
10 Company would be required by the Commission to make
11 towards a line extension and distribution facilities and
12 whether that is an allowance that's recognized as an
13 upfront allowance or through a refund or otherwise,
14 that's how we would approach that and to the extent that
15 testimony in the direct -- the direct testimony bears on
16 that, we would like to be able to inquire without
17 burdening the Commission and completely opening up the
18 case, but there are statements and testimony that are
19 made in the direct that are relevant to the issue of an
20 appropriate allowance that we wanted to inquire about.
21
22
COMMISSIONER SMITH: Ms. Nordstrom.
MS. NORDSTROM: The Company has no
23 obj ection to presenting its direct testimony initially
24 and then following up later with its responsive
25 testimony.
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92 COLLOQUY
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19
20
21
1 COMMISSIONER SMITH: Well, let's proceed
2 on that matter and I have no doubt that the lawyers here
3 will obj ect if they see questions that they believe
4 should not be asked or are inappropriate or beyond the
5 scope of the reconsideration the Commission has ordered,
6 so with that, Ms. Nordstrom, we'll start with your
7 wi tnesses.
8 MS. NORDSTROM: Thank you. Idaho Power
9 calls Gregory Said as its first witness.
10
11 GREGORY W. SAID,
12 produced as a witness at the instance of the Idaho Power
13 Company, having been first duly sworn, was examined and
14 testified as follows:
15
16 DIRECT EXAMINATION
17
18 BY MS. NORDSTROM:
Q Good morning.
A Good morning.
Q Please state your name and spell your last
22 name for the record.
23
24
25
A Gregory W. Said, S-a-i-d.
Q By whom are you employed and in what
capacity?
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93 SAID (Di)
Idaho Power Company
.
.
.
1 A I'm employed by Idaho Power Company as the
2 director of state regulation.
3 Q Are you the same Gregory Said that filed
4 direct testimony on October 30th, 2008 without
5 exhibits?
6 A Yes.
7 Q Do you have any corrections or changes to
8 your testimony?
9 A Having heard the comments this morning, I
10 have only one, I believe, on page 3, line 22. It reads,
11 "appropriately be borne by developers." It should read,
12 "appropriately been borne by developers," "should more
13 appropriately have been borne by developers."
14 COMMISSIONER REDFORD: Where is that
15 again?
16 THE WITNESS: Page 3, line 22.
17 COMMISSIONER REDFORD: Okay, thank you.
18 Q BY MS. NORDSTROM: Do you have any other
19 changes or corrections?
20
21
A No, I don't.
Q If I were to ask you the questions set out
22 in your prefiled testimony, would your answers be the
23 same today?
24
25
A Yes.
MS. NORDSTROM: I would move that the
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94 SAID (Di)
Idaho Power Company
.
.
.
20
21
22
23
24
25
1 prefiled direct testimony of Gregory Said be spread upon
2 the record as if read.
3 COMMISSIONER SMITH: Without obj ection,
4 the prefiled testimony of Gregory Said will be spread
5 upon the record as if read.
6 (The following pre filed direct testimony
7 of Mr. Gregory said is spread upon the record.)
8
9
10
11
12
13
14
15
16
17
18
19
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95 SAID (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is Gregory W. Said and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company as the
6 Director of State Regulation in the Pricing and
7 Regulatory Services Department.
8 Q.Please describe your educational background.
9 A.In May of 1975, I received a Bachelor of
10 Science Degree in Mathematics with honors from Boise
11 State Uni versi ty. In 1999, I attended the Public Utility
12 Executi ves Course at the Uni versi ty of Idaho.
13 Q.Please describe your work experience with Idaho
14 Power Company.
15 A.I became employed by Idaho Power Company in
16 1980 as an analyst in the Resource Planning Department.
17 In 1985, the Company applied for a general revenue
18 requirement increase. I was the Company witness
19 addressing power supply expenses.
20 In August of 1989, after nine years in the
21 Resource Planning Department, I was offered and I
22 accepted a position in the Company's Rate Department.
23 With the Company's application for a temporary rate
24 increase in
25
96 SAID, DI 1
Idaho Power Company
.
.
.
1 1992, my responsibilities as a witness were expanded.
2 While I continued to be the Company witness concerning
3 power supply expenses, I also sponsored the Company's
4 rate computations and proposed tariff schedules in that
5 case.
.
6 Because of my combined Resource Planning and
7 Rate Department experience, I was asked to design a Power
8 Cost Adj ustment (" PCA") which would impact customers'
9 rates based upon changes in the Company's net power
10 supply expenses. I presented my recommendations to the
11 Idaho Public Utilities Commission in 1992, at which time
12 the Commission established the PCA as an annual
13 adj ustment to the Company's rates.
14 In 1994, I was selected to a cross-training
15 position as Manager of the Meridian District. In that
16 role, I oversaw line installation work in the Meridian
17 District.
18 Following my return to the Rate Department in
19 1995, I was promoted to Director of Revenue Requirement
20 in 1996.I have managed the preparation of revenue
21 requirement information for regulatory proceedings since
22 that time.I have also been responsible for overseeing
23 the tariff changes related to Rule H, the Company's line
24 installation rule, and was a witness in Case No.
25 IPC-E-95-18 to update Rule H charges and allowances. The
97 SAID, DI 2
Idaho Power Company
.
.
.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1 IPC-E-95-18 case was the last case where the Company made
2 substantial changes to
3
4 /
5
6 /
7
8 /
9
10
98 SAID, DI 2a
Idaho Power Company
.
.
.
1 Rule H.
2 In August 2008, I was promoted to Director of
3 State Regulation, adding the area of Rate Design to my
4 responsibilities.
5 Q.What is the purpose of your testimony in this
6 proceeding?
7 A.My testimony in this proceeding is intended to
8 describe the instructions that I gave to Mr. Scott Sparks
9 regarding the modifications to Rule H that the Company is
10 requesting. Mr. Sparks will testify to the specifics of
11 those modifications. I will describe the Company's
12 rationale for requesting reduced allowances and refunds.
13
14
Finally, I will address the Company's proposal to clarify
the rules governing the allocation of costs between
15 developers and the Company's customers when real estate
16 development requires relocation of Company facilities
17 located on public rights-of-way. The Company believes
18 that these clarifications will alleviate apparent
19 misunderstandings where certain governmental entities
20 have forced responsibility for funding of line relocation
21 expenses onto Idaho Power customers that should more
22 appropriately have been borne by developers. Mr. David
23 Lowry will testify as to the specifics of some of those
24 instances where governmental entities have incorrectly
25 applied their
99 SAID, DI 3
Idaho Power Company
.
.
.
1 authority to shift relocation costs from developers to
2 Idaho Power customers.
3 Q.Please describe the instructions you gave to
4 Mr. Sparks regarding the improvements that the Company
5 desired be made to Rule H.
6 A.I instructed Mr. Sparks to make a thorough
7 review of the provisions contained in Rule H.I asked
8 him to work closely with the Methods and Materials
9 Department to identify areas of Rule H that could be
10 improved.I identified three primary goals for Mr.
11 Sparks to achieve. First, I wanted Mr. Sparks to improve
12 the readability of Rule H. Mr. Sparks will describe the
13 Company's recommendations to add definitions, add
14 sections, and generally reformat Rule H in order to
15 accomplish this goal of better readability with
16 understandable flow. Second, I wanted Mr. Sparks to
17 update all of the costs contained in the rule. Most of
18 the rates and charges contained in Rule H are a number of
19 years old and, as a result, are not reflective of the
20 costs actually incurred by the Company. Third, I asked
21 Mr. Sparks to take a close look at line installation
22 allowances and refunds with an eye toward reducing both
23 allowances and refunds.
24 Q.Why is the Company desirous of reducing line
25 installation allowances and refunds?
100 SAID, DI 4
Idaho Power Company
.
.
.
1 A. As the Commission is well aware, the Company
2 has filed general rate case proceedings in 2003, 2005,
3 2007, and 2008. In addition, the Company has also filed
4 cases for the inclusion into rate base of the Bennett
5 Mountain gas-fired plant in 2005 and the inclusion of the
6 Danskin gas-fired plant in 2008. With the recent
7 frequency of rate proceedings, a persistent question
8 arises:Is growth paying for itself?
9 The clear answer is no. Additional revenues
10 generated from the addition of new customers and load
11 growth in general is not keeping pace with the additional
12 expenses created and required to provide ongoing safe and
13 reliable service to new and existing customers. While
14 the provisions of Rule H have required some contributions
15 in aid of construction for new distribution facilities,
16 there are no requirements for contributions in aid of
17 construction for new transmission or generation
18 facilities which are also typically required to serve
19 customer growth. Reducing the Company's new
20 customer-related distribution rate base by reducing
21 allowances and refunds will relieve one area of upward
22 pressure on rates and will take a step toward growth
23 paying for itself. Mr. Sparks details the Company's
24 recommendations to reduce line installation allowances
25 and refunds to achieve the Company's goal of
101 SAID, DI 5
Idaho Power Company
.
.
.
1 reducing one aspect of upward pressure on rates.
2 Q. Please describe how certain governmental
3 entities are able to force payment of line installation
4 expenses onto Idaho Power customers that should more
5 appropriately be borne by developers.
6 A.Under Idaho law, governmental agencies charged
7 with constructing, operating, and maintaining roads, such
8 as the Idaho Transportation Department and the Ada County
9 Highway District have the authority to require the
10 relocation of Company-owned transmission and distribution
11 facilities that are sited in road rights-of-way at
12 Company expense. Typically, such relocation is required
13 to accommodate transportation planning for general area
14 growth. Population growth causing the need to add
15 traffic lanes is an example of general area growth.
16 In some instances, relocations have been
17 requested to facilitate specific development by third
18 parties such as residential or commercial subdivisions.
19 In those instances, highway agencies have required
20 developers to pay the costs of related highway
21 improvements.Idaho Power has required the third-party
22 developers to pay for transmission and distribution
23 facili ty relocation caused by their development. Third
24 parties are also responsible for other developmental
25 costs such as curbs, gutters, and landscape.
102 SAID, DI 6
Idaho Power Company
.
.
.
1 Developers have the ability to form local improvement
2 districts ("LIDs") as a means to pay for such costs,
3 including utility costs.
4 Mr. Lowry has informed me of a number of
5 examples where I believe governmental entities have
6 required the relocation of Company-owned transmission and
7 distribution facilities at Company cost instead of
8 seeking payment from third-party developers. Mr. Lowry's
9 testimony in this proceeding provides examples of
10 instances where third-party developers have attempted to
11 avoid Idaho Power's requirement that they make
12 contributions in aid of relocating transmission and
13 distribution facilities for their developments. When
14 governmental entities require Idaho Power to relocate
15 facili ties and incur costs that should be properly paid
16 for by local developers, it results in the inappropriate
17 shifting of costs from local developers to the general
18 rate paying customers of Idaho Power. Mr. Sparks
19 describes in his testimony a newly drafted Rule H
20 provision clarifying the rules governing cost
21 responsibili ty for relocations. Hopefully these
22 clarifications will assist the highway agencies in
23 determining when relocation costs should be borne by
24 developers and avoid further inappropriate cost shifting
25 from local developers to Idaho Power customers.
103 SAID, DI 7
Idaho Power Company
.
.
.
19
20
21
22
23
24
25
1 Q. Ul timately, what is the Company requesting in
2 this proceeding?
3 A.The Company believes that as a result of Mr.
4 Sparks' review and evaluation of the provisions of Rule
5 H, the revisions to Rule H as proposed in this filing are
6 in the best interest of Idaho Power customers. The
7 proposed Rule H language provides a more logical and
8 readable flow, updates costs to current levels, and
9 reduces one aspect of upward pressure on rates. In
10 addition, the new Rule H section addressing relocation of
11 distribution facilities for third-party development will
12 also assist in making sure that growth pays for itself
13 rather than transferring additional costs to Idaho
14 Power's rate paying customers. The Company therefore
15 requests that the Commission approve the proposed Rule H
16 language as filed by the Company.
17 Q.Does that conclude your testimony?
18 A.Yes, it does.
104 SAID, DI 8
Idaho Power Company
.
.
.
1
2 open hearing.)
(The following proceedings were had in
MS. NORDSTROM: This witness is available
4 for cross-examination.
3
5 COMMISSIONER SMITH: Ms. Sasser, do you
6 have any questions?
7
8
9 have questions?
10
11
12
13
MS. SASSER: No, Madam Chairman.
COMMISSIONER SMITH: Mr. Spears, do you
MR. SPEARS: No, Madam Chair.
COMMISSIONER SMITH: Mr. Creamer.
MR. CREAMER: Madam Chair, was I next?
I'm sorry, I didn't hear you.
14 COMMISSIONER SMITH: Yes. I'm sorry if I
15 didn't speak up. Mr. Creamer.
17
18
19
16
20 BY MR. CREAMER:
21
22
23
Q
A
Q
MR. CREAMER: Thank you.
CROSS-EXAMINATION
Good morning, Mr. Said, how are you?
Good morning.
Are you the same Gregory Said who
24 previously filed testimony in the Company's Rule H tariff
25 proceeding in 1995, the IPC-E-95-18?
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105 SAID (X)
Idaho Power Company
.
.
.
1 A I don't recall if I testified in that
2 proceeding or not. If a Gregory Said did testify in that
3 proceeding, it was me.
4 Q Do you recall participating in the
5 Company's proceedings on the Rule H tariff modifications
6 in 1995 and '96?
7 A In 1994 I was given the position as the
8 Meridian district manager and during that period of time
9 Mr. Sam Turner did some cross-training in the department
10 that I now reside in and my recollection is that he
11 prepared most of the recommendations with regard to Rule
12 H changes at that time. If I got involved in the case,
13 it was later on, but I am familiar with what occurred in
14 this case.
15 Q Mr. Said, the premise of the Company's
16 application appears to be that growth needs to pay for
17 itself. Would you agree?
18 A That is a consideration that I included in
19 my testimony, yes.
20 Q And the Company in your statements, you
21 argue that growth is the factor that's affecting, putting
22 upward pressure on your rates?
23 A It's a factor, yes.
24 Q But wouldn't you also agree that the
25 number of line extensions and the number of new customers
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106 SAID (X)
Idaho Power Company
.
.
.
1 added to Idaho Power Company's system since 2006 has been
2 steadily declining?
3 A There has been a downturn in new
4 development, that's correct.
5 Q In fact, from new customers in 2006 of
6 over 12,000 new customers, by 2008 that was down to a
7 little over 3,000; isn't that correct?
8 A I can't verify those numbers.
9 Q And I believe it's the premise of the
10 Company's application and you stated that additional
11 revenues generated from the addition of new customers and
12 load growth in general is not keeping pace with the
13 addi tional expenses created and required to provide
14 ongoing safe and reliable service to new customers; is
15 that correct?
16 A I believe you've read my testimony
17 correctly.
18 Q But the Company hasn't submitted any
19 documentation showing how much of these additional
20 expenses that you testified to are required to provide
21 safe and reliable service that's attributable to line
22 extension costs, has it? Has the Company submitted any
23 documentation in this proceeding showing the extent to
24 which line extension costs themselves are the source of
25 the additional expenses?
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107 SAID (X)
Idaho Power Company
.
.
.
14
1 A No, and it's not my contention that that's
2 the sole driver of rate increases.
3 Q Thank you, but in particular, moving from
4 the in general, in particular, it's the additional costs
5 that the Company is experiencing and/or expects to
6 experience for the construction of new generation and
7 transmission facilities that the Company is concerned
8 with; isn't that correct?
9 A No, that's not correct. The Company is
10 concerned about all aspects of increases in costs
11 regardless of where they are, so in this particular
12 filing, there is nothing that addresses generation or
13 transmission costs.
Q Other than your testimony that those are
15 sources of increased costs and expected increased costs
16 that aren't being covered currently by the rates you
17 charge your customers?
18 A Those are factors that drive increases in
19 rates.
20 Q Mr. Said, would you agree with the
21 statement that when the Company absorbs costs for new
22 distribution facilities greater in extent than it has
23 absorbed for existing customers that that creates upward
24 pressure on rates?
25 A For that component, yes.
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108 SAID (X)
Idaho Power Company
.
.
.
1 Q And if the Company absorbs costs for new
2 distribution facilities that are equal to or less than
3 the costs for existing customers, that upward pressure is
4 eliminated, isn' t it?
5 A For that component.
6 Q Yes. You haven't testified in this case
7 that the revenues generated by these new customers under
8 their existing rates don't cover the actual cost of line
9 extension, have you?
10 A I believe that I've addressed
11 Dr. Slaughter's comments in that regard in my responsive
12 testimony, but not in my direct.
13 Q The Company hasn't offered any independent
14 demonstration of the extent to which its line extension
15 costs aren't covered through existing rates, has it?
16 A Well, I think I can state categorically
17 that none of the costs of the construction are directly
18 included in the Company's rates. What is included in the
19 Company's rates are depreciation expenses associated with
20 that investment and a return on that investment.
21 Q Let me try this a different way. If the
22 Commission were to look at the record that will be before
23 it in this case, will it be able to determine the
24 difference between what the Company's costs are for
25 construction for line extensions versus what the return
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109 SAID (X)
Idaho Power Company
.
.
.
1 is from the ratepayer?
2 A Well, the return on the investment from an
3 actual perspective depends on the net income of the
4 Company.
5 Q I understand that, but I'm curious about
6 how that might be determined from the record the Company
7 has presented in this case.
8 A The net income of the Company?
9 Q The difference between the investment and
10 the recovery of those costs per line extension.
11 A Well, again, the recovery of the costs of
12 investment, the costs of investment are recovered through
13 depreciation expense.
14 Q Well, in fact, the Company doesn't
15 maintain its data in a way that that information could be
16 determined in any event, the difference between its
17 investment and line extension costs, its investment in
18 line extensions and what it receives as contributions
19 from the new customer for those expenses.
20 A Well, if there is a contribution in aid of
21 construction from a customer, then there is zero
22 investment from the perspective of the Company;
23 therefore, it's not entitled to depreciation expense on
24 an asset that it hasn't paid for.
25 Q Mr. Said, do you have copies of Idaho
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110 SAID (X)
Idaho Power Company
.
.
.
1 Power Company's response to discovery production requests
2 submitted by the Building Contractors Association?
3 A I do not.
4 Q Well, let me just ask you if you would
5 disagree with this answer. Building Contractors
6 requested that Idaho Power Company provide for each year
7 from 1995 through 2008 Idaho Power's total distribution
8 plant expense by customer class for Schedules 1, 7 and 9
9 and new distribution plant expenditures. The response
10 was the requested information is not available.
11 COMMISSIONER SMITH: Ms. Nordstrom.
12 MS. NORDSTROM: Excuse me, could you
13 direct me to which particular request you're referring
14 to?
15 MR. CREAMER: Request No. 1 of the
16 Building Contractors to Idaho Power Company, the first
17 set of requests for production.
18 MS. NORDSTROM: Thank you.
19 Q BY MR. CREAMER: Would you disagree with
20 that statement, Mr. Said?
21 A I'm not the person who would maintain such
22 information, so from my perspective, it wouldn't be
23 available, but I don't know who responded to that
24 particular data request.
25 Q Okay, and, again, do you have Idaho Power
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111 SAID (X)
Idaho Power Company
.
.
.
1 Company's supplemental response to the Commission Staff's
2 first production request?
3 A No.
4 MR. CREAMER: And I'm referring,
5 Ms. Nordstrom, now to the responses to Staff's questions,
6 No. 1 and 2, the supplemental responses provided by Idaho
7 Power Company.
8 Q BY MR. CREAMER: Provide a summary --
9 No.2:Please provide a summary of service attachments
10 made for Schedule 1 customers for the years 2006 through
11 2008.In the summary include the number of new line
12 extensions, actual cost for service extensions, the
13 number of underground and overhead service cable
14 installations, average number of customers per
1S transformer. Would you disagree with the response that
16 the information specific to service attachments are
17 collected and input and stored in a passport database?
18 Many of the data requested are not collected or
19 considered incomplete, would you disagree with that?
20 A No.
21 Q Again, in response to request No. 3 by the
22 Commission Staff, please provide a list of service
23 attachments made for Schedules 7, 9 and 24, the actual
24 cost of the service attachments, the connected load,
25 whether the cable was underground or overhead. The
CSB REPORTING
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112 SAID (X)
Idaho Power Company
.
.
.
20
1 information requested -- Response: The information
2 requested is contained in more than 1,300 work orders.
3 Idaho Power does not maintain service attachment
4 information at this level in a computerized database. Do
5 you disagree with that?
6 A No.
7 Q So again, there isn't on the record here
8 an ability to track the costs, the actual costs, that the
9 Company incurs in the line extensions that were requested
10 by the Commission Staff and BCA; is that correct?
11 MS. NORDSTROM: Madam Chair, I would
12 obj ect to this question in that the information and
13 cross-examination that was presented does not lead to the
14 conclusion that counsel is stating.
15 COMMISSIONER SMITH: Mr. Creamer.
16 MR. CREAMER: The Building Contractors and
17 the Staff were interested in knowing what the actual
18 costs per line extension to the Company are and Idaho
19 Power Company's response was consistently that it didn't
know.It didn't keep track of that information.
21 Madam Chair, we believe that's relevant to the extent
22 that the Company has said that its rates are not covering
2 3 its expenses.
24
25
COMMISSIONER SMITH: But perhaps it didn't
lead to the conclusion that there is no ability to track
CSB REPORTING
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113 SAID (X)
Idaho Power Company
.
.
.
20
1 the actual cost of line extensions.
2 MR. CREAMER: What I've asked the witness
3 to -- first, to tell me whether he disagrees with the
4 responses in No.2, whether we have the information in
5 front of us to make that determination.
6 COMMISSIONER SMITH: That's a different
7 question. Do you want to answer that question?
8 THE WITNESS: Could you restate the
9 question, please?
10 Q BY MR. CREAMER: Well, the Company hasn't
11 provided to the parties or to the Commission the numbers
12 that can be used to make those calculations, has it?
13 A Which specific calculations are you
14 referring to?
15 Q Its actual cost for line extension.
16 A Well, a work order is prepared for every
17 line extension that the Company prepares, so on a
18 work-order-by-work-order basis the information would be
19 available.
Q If we were to go outside the record and
21 make that effort; is that correct?
22 A Yes. I guess I don't understand the
23 nature of the question in that the allowances that have
24 been proposed by the Company are based on standard
25 terminal facilities.
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114 SAID (X)
Idaho Power Company
.
.
.
1 Q Well , it's not your position, then, that
2 the Company's line extension costs are not being covered
3 by the charges and the fees i t receives from customers
4 and developers?
5 A The net investment, which is the
6 investment, the total work order cost less any
7 allowances, goes into the Company's rate base and those
8 assets are then depreciated and the Company can recover
9 its depreciation expense and a return on those
10 investments, so the question isn't one of does the
11 Company recover its costs associated with investment,
12 it's who pays that.
13 Q But the Company is asking the Commission
14 to decrease the investment and increase the cost to those
15 customers requesting new service on the premise that
16 existing rates aren't covering its costs; isn't that
17 correct?
18 A No, I think that's a stretch beyond what I
19 say.I say it's a component that helps contribute to
20 increases in rates of customers and that ultimately those
21 costs should be borne by people requesting to connect to
22 the system rather than customers that currently exist on
23 the system.
24 Q Mr. Said, the Company doesn't attempt to
25 reconcile its actual costs in line extension with the
CSB REPORTING
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115 SAID (X)
Idaho Power Company
.
.
.
1 estimated line extension cost that they bill to the new
2 customers, does it?
3 A No, it does not. That reconciliation has
4 not been a part historically of Rule H.
5 Q The Company simply bills on a
6 pre-construction estimate, not on the actual costs and
7 the differences aren't reconciled; is that correct?
8 A They aren't reconciled, but they have been
9 reviewed extensively by the Staff over time to make sure
10 that the work orders are representative of the true
11 costs.
12 Q But no true-up as between the Company and
13 the customer who has advanced the payments?
14 A That's correct. It's like a binding cost
15 quote.
16 Q Have you reviewed the Staff's comments
17 that were filed in this case, Mr. Said?
18 A I read them sometime ago.
19 Q Do you recall a statement that was made by
20 Staff that Idaho Power has done no analysis to prove that
21 growth is not paying for itself, nor has the Company done
22 any analysis to determine specifically what amounts of
23 allowances and refunds can alleviate upward pressure on
24 the rates, do you recall that testimony?
25 A I think you characteri zed it as comments a
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116 SAID (X)
Idaho Power Company
.
.
.
19
1 minute ago.
2 Q I'm sorry, comments, Mr. Said.
3 A I don't recall that, but I don't doubt
4 that they may have said that.
5 Q Staff went on to say that the Company
6 concludes that a reduction in Company investment in new
7 distribution plant is necessary and proposes a reduction
8 in allowances based strictly on a policy without
9 supporting analysis. Do you recall those comments, Mr.
10 Said?
11 A I don't, but I disagree with those
12 comments.
13 Q Well, if so, perhaps then you can point to
14 the documentation and the analysis that the Company has
15 done that demonstrates that its investment, a reduction
16 in the Company's investment in new distribution plant is
17 necessary or show that growth is not paying for itself
18 wi th respect to line extension costs for new customers.
A Well, again, the word "necessary" is the
20 word that, I guess, is the issue that I see. My
21 testimony points to numerous instances in the last five
22 years where the Company has come in and requested
23 increase in its rates to cover upward growth of expenses
24 that exceeds growth in revenues and as a result, there's
25 the need for those periodic rate changes. One of the
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117 SAID (X)
Idaho Power Company
.
.
.
1 factors that contributes to that is a Commission
2 determination of what a reasonable amount of investment
3 that the Company should make on behalf of new customers
4 in distribution facilities that would be appropriate on a
5 going-forward basis, and I believe that, and the Company
6 believes that, it is appropriate to adjust the policy
7 wi th regard to what level of investment should be made
8 specifically in distribution facilities on a
9 going-forward basis to eliminate one aspect of upward
10 pressure on rates or a contributing factor to upward
11 pressure on rates that the Commission can address through
12 Rule H.
13 Q Well, to the extent that the Company
14 attempts to shift the costs to certain customers for
15 certain services or facilities, would you agree that it
16 needs to do so in a fair and equal manner as between
17 customers in the same class?
18 A Yes, and I believe that what the
19 Commission ordered does that.
20 Q Well, and don't you agree that to the
21 extent that a proposed allowance for new distribution
22 facili ties is equal to or less than the Company's
23 embedded cost for those facilities, then new and existing
24 customers would be treated the same; isn't that
25 correct?
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118 SAID (X)
Idaho Power Company
.
.
.
1 A I'm sorry, could you repeat it?
2 Q I confused myself on that question. Let
3 me try again. Would you agree that to the extent a
4 proposed allowance for new distribution facilities is
5 equal to or less than the Company's embedded cost for
6 such facilities, then new and existing customers would be
7 treated the same? In other words, if the Company doesn't
8 spend, invest more for new distribution facilities than
9 it has as embedded costs for existing distribution
10 facilities for existing customers, then the customers are
11 being treated equally, new and existing.
12 A Well, I guess why I' m hesitating is the
13 new, the treatment of new, and existing. All new
14 customers are treated the same. All existing customers
15 are treated the same. Are customers today treated the
16 same way that customers were 10 years ago, that does
17 change over time. Rates don't remain the same. Policy
18 doesn't remain the same, so if it's intergenerational
19 equity that you're talking about, that may change over
20 time, but at the time of the issuance of new policy
21 considering Rule H, all current customers and all new
22 customers as individual groups are treated the same.
23 Q Thank you, Mr. Said. Let me just be more
24 specific, then.I want to ask if you disagree with this
25 statement. To the extent to which similar facilities of
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119 SAID (X)
Idaho Power Company
.
.
.
1 existing customers are included in existing rates is
2 frequently referred to as the embedded cost for similar
3 facili ties. Do you agree with that statement?
4 A Yes.
5 Q And if an allowance or Company investment
6 is established equal to the embedded cost of facilities
7 already included in rates, new customers are treated the
8 same as existing customers in terms of the rates they
9 pay. Do you agree with that statement?
10 A Yes, but again, I don't know that there's
11 a requirement that a new customer today be afforded the
12 same entry fee, if you will, to becoming a customer that
13 they had 10 years ago.
14 Q Well, at least not until the Rule H tariff
15 is approved as requested; right? Currently the existing
16 Rule H tariff does provide for the Company to provide a
17 level of investment equal to embedded cost.
18 A I would say that currently it's probably
19 greater than embedded cost.
20 Q And would you agree that to the extent
21 that the Company's investment in distribution facilities
22 for new customers doesn't exceed its current embedded
23 costs, then the current rates are sufficient to recover
24 the costs of those new distribution facilities?
25 A I'm sorry, once more, please.
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120 SAID (X)
Idaho Power Company
.
.
.
20
1 Q To the extent that the Company's
2 investment in distribution facilities to serve new
3 customers does not exceed its current embedded costs for
4 distribution facilities, then the Company's current rates
5 are sufficient to recover the costs of the new
6 facili ties; do you agree with that?
7 A For that particular element of rates,
8 yes.
9 Q Mr. Said, at page 4, lines 20 through 22
10 in your direct testimony, you stated that you had asked
11 Mr. Sparks to take a close look at line installation
12 allowances and refunds with an eye toward reducing both
13 allowances and refunds. Do you recall that testimony?
14 A Yes.
15 Q Did you give Mr. Sparks any direction as
16 to whether reformulating the residential allowances and
17 refunds for new customers that they should be treated the
18 same as existing customers?
19 A Well --
COMMISSIONER SMITH: Could I have some
21 clarification on the question, because these are one-time
22 charges upfront, so once you've paid it, you're not
23 paying, so I'm confused about existing because nobody who
24 has already been hooked up is going to get charged
25 this.
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121 SAID (X)
Idaho Power Company
.
.
.
1 MR. CREAMER: Madam Chair, the question is
2 intended to go to the issue of whether the allowances
3 that are being considered, proposed and considered, here
4 resul t in customers of the same class paying the same
5 rates, charges as other customers and are treated the
6 same.
7 COMMISSIONER SMITH: Who are paying those
8 rates?
9 MR. CREAMER: Yes.
10 COMMISSIONER SMITH: Okay, so that's not
11 existing, that's new customers.
12 MR. CREAMER: Madam Chair, up to this
13 point the Commission's position has been that new
14 customers are entitled to a level of investment equal to
15 that -- for service equal to that that was provided to
16 existing customers.
17 COMMISSIONER SMITH: And is it your
18 argument that the Commission can't change its position?
19 MR. CREAMER: That would be our argument
20 when we make it, Madam Chair, is that that would be
21 consistent with the Commission's authority to provide for
22 just and reasonable and sufficient charges to be imposed
23 for service and that they not discriminate in those
24 charges as between customers in the same class without
25 some exigent circumstances going to the factors that have
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122 SAID (X)
Idaho Power Company
.
.
.
23
24
25
1 been enumerated by the Supreme Court, such as differences
2 in the type of service, the conditions of service, the
3 amount of energy consumed and such things, so to that
4 extent, Madam Chair, we think this line, I believe this
5 line, of questioning is relevant to confirm whether or
6 not the Company in ~-
7 COMMISSIONER SMITH:If you're trying to
8 make your legal argument through your questions to this
9 witness, I think you're probably spending a lot of time
10 unnecessarily, and my question was just to clarify what
11 you were asking because I didn't understand it, so thank
12 you.
13 MR. CREAMER: Have I clarified that for
14 you, Madam Chair?
15 COMMISSIONER SMITH: You have.
16 MR. CREAMER: Okay, thank you.
17 Q BY MR. CREAMER: Mr. Said, if the revenues
18 that the Company receives for -- from its new customers
19 are sufficient to cover the embedded costs that the
20 Company has for line extension and distribution
21 facilities, then there is no upward pressure on rates, is
22 there?
A Again, for that component.
Q And you are generally aware of the cost of
service for the residential class as compared to other
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123 SAID (X)
Idaho Power Company
.
.
.
1 classes that are covered in the Rule H tariff; is that
2 correct?
3 A I'm familiar with the allowances for the
4 residential class; is that what you asked?
5 Q And the cost of service.
6 A I'm familiar with the drivers of cost of
7 service, yes.
8 Q Are you aware of any significant
9 difference in the cost of service between a new customer
10 and an existing customer?
11 A Well, the cost of service for determining
12 rates is based on average costs across the entire
13 class.
14 Q Are you aware of any significant
15 difference in the quantity of electricity used by a new
16 customer of Idaho Power Company versus its existing
17 customers in the same class?
18 A Wi th regard to the residential class, I
19 believe that new customers are more likely to have air
20 condi tioning than existing customers as a whole and so
21 that would be a factor that would drive consumption per
22 customer up for the class, but there are also a number of
23 energy efficiency and conservation measures that are
24 simul taneously driving the consumption of customers in
25 general down, so there are factors that move class
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124 SAID (X)
Idaho Power Company
.
.
.
1 consumption both directions.
2 Q So we don't have any evidence at this
3 point one way or another whether new customers are any
4 different in total consumption from existing customers?
5 A I'm not aware of specifics.
6 Q Any facts you're aware of that the new
7 customers as compared to existing customers are any
8 different in the time or nature or pattern in their use
9 of power?
10 A No.
11 Q So to make sure that I'm clear on this,
12 Mr. Said, the Company's position, then, would be to the
13 extent that its revenues under its existing rates are
14 insufficient to meet its existing cost, for whatever
15 cost, whether it's for generation or transmission or
16 distribution or public relations or anything else, that
17 the Company is entitled to look to certain customers to
18 have them pay more for their service to offset those
19 costs?
20 A No, and all of your questions suggest that
21 we treat residential customers differently depending on
22 whether they're new or existing and that's not true. All
23 customers within the residential class have rates and
24 charges based on rate class 1, residential service, at
25 the same rates and the only thing that's being addressed
CSB REPORTING
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125 SAID (X)
Idaho Power Company
.
.
.
1 here is the level of investment that the Company should
2 be making on behalf of not current customers but future
3 customers to connect them and allow them to receive the
4 same residential service rates that all other residential
5 customers receive.
6 Q To the extent that the Company can reduce
7 its investment in distribution facilities and receive
8 those payments for those costs from a customer, isn' t it
9 true that that can result in the Company earning more on
10 that investment than it does from the existing customers,
11 the investment for existing customers?
12 MS. NORDSTROM: Madam Chair?
13 COMMISSIONER SMITH: Ms. Nordstrom.
14 MS. NORDSTROM: I believe this question is
15 outside the scope of Mr. Said's direct testimony.
16 COMMISSIONER SMITH: Sustained.
17 Q BY MR. CREAMER: Mr. Said -- let's see.
18 (Pause in proceedings.)
19 MR. CREAMER: Madam Chair, Commissioners,
20 those are all the questions I have for Mr. Said at this
21 point and reserve the opportunity to question him on his
22 reconsideration testimony.
23 COMMISSIONER SMITH: That will be coming
24 up, we hope. Do the Commissioners have any questions?
25 Any redirect, Ms. Nordstrom?
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126 SAID (X)
Idaho Power Company
.
.
.
1 MS. NORDSTROM: Just a few.
2
3 REDIRECT EXAMINATION
4
5 BY MS. NORDSTROM:
6 Q Mr. Said, the Building Contractors
7 Association questioned you with regard to upward pressure
8 on rates stemming from the allowance component of the
9 Rule H tariff. Is the allowance component the only
10 component that Idaho Power considered when setting its
11 Rule H rates and charges?
12 A Its recommendations for rates and charges,
13 no.
14 Q What did the Company consider?
15 A Basically the frequency of rate requests
16 that the Company has had in recent years and a
17 recogni tion that there are all sorts of costs that are
18 required to serve growth, including generation costs,
19 transmission costs , administrative and general costs, all
20 of those factors that go into a general revenue
21 requirement determination. There's really no ability of
22 the Company to control the costs associated with
23 generation and transmission that may be required for new
24 customers. We don't have any provisions through any
25 tariff considerations that allow us to look at those
CSB REPORTING
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127 SAID (Di)
Idaho Power Company
.
.
.
22
1 factors, so we recognize that those will be factors that
2 cause upward pressure on rates.
3 The one area that the Company can have
4 some influence on is the costs of connecting new
5 customers to its system and that's an area that given the
6 current economic conditions that the Company finds itself
7 in, that would be one area of rising costs that could be
8 addressed outside of a general rate case and work to the
9 benefit of existing customers by requiring new customers
10 to pay for those distribution costs that are required
11 specifically to serve their new loads.
12 Q Could you describe for me what the
13 standard facilities allowance number of $1,780 is based
14 on?
15 A It's based on a transformer, a 25 kVA
16 overhead transformer, a service conductor which is the
17 wire from the transformer to a meter, and the meter and
18 it's the installed cost of those three items.
19 Q When you say "installed cost," are those
20 costs that the Company is currently incurring for those
21 facilities?
A Yes, and that's for a typical residential
23 customer. I didn't speak to the other classes.
24 Q And were documents made available to the
25 parties in this case demonstrating that those numbers
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128 SAID (Di)
Idaho Power Company
.
.
.
1 were typical of expenses that the Company currently
2 expends for standard facilities?
3 A Yes, Mr. Sparks provided that
MS. NORDSTROM: Thank you. I have no
6 further questions.
4 information.
5
7 COMMISSIONER SMITH: Thank you, Mr. Said.
8 We'll see you later.
9 (The witness left the stand.)
10
11 Ms. Nordstrom.
12
13 recess?
COMMISSIONER SMITH: Your next witness,
MS. NORDSTROM: May we take a brief
COMMISSIONER SMITH: Five minutes, that's
15 it. We don't have a lot of time.
14
16
17
(Recess. )
COMMISSIONER SMITH: All right, I think
18 we're ready. Ms. Nordstrom.
19 MS. NORDSTROM: Yes, Idaho Power calls
20 Scott Sparks at its next witness.
21
22
23
24
25
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129 SAID (Di)
Idaho Power Company
.
.
.
1
2
SCOTT D. SPARKS,
produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6
7
8 BY MS. NORDSTROM:
9 Q
DIRECT EXAMINATION
Good morning.
Good morning.
Please state your name and spell your last
12 name for the record.
10 A
Scott D. Sparks, S-p-a-r-k-s.
By whom are you employed and in what
Idaho Power Company. I'm a pricing
17 analyst in the pricing and regulatory services
11 Q
Are you the same Scott Sparks that filed
20 direct testimony on October 30th, 2008 without
13 A
14 Q
15 capacity?
16 A
18 department.
19 Q
21 exhibits?
22
23
A
Q
Yes, I am.
Do you have any corrections or changes to
24 your testimony?
25 A I do not.
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130 SPARKS (Di)
Idaho Power Company
.
.
.
20
21
22
23
24
25
1 Q If I were to ask you the questions set out
2 in your prefiled testimony, would your answers be the
3 same today?
4 A Yes, they would.
5 MS. NORDSTROM: I would move that the
6 prefiled direct testimony of Scott Sparks be spread upon
7 the record as if read.
8 COMMISSIONER SMITH: If there's no
9 obj ection, we will spread the prefiled testimony of
10 Mr. Sparks upon the record as if it had been read in
11 fulL.
12 (The following prefiled direct testimony
13 of Mr. Scott Sparks is spread upon the record.)
14
15
16
17
18
19
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131 SPARKS (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is Scott D. Sparks and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company as a
6 Senior Pricing Analyst in the Pricing and Regulatory
7 Services Department.
8 Q.Please describe your educational background.
9 A.In May of 1989, I received a Bachelor of
10 Business Administration degree in Business Management
11 from Boise State Uni versi ty.
12 Q.Please describe your work experience with Idaho
13 Power Company.
14 A.I became employed by Idaho Power Company in
15 1985 as a part-time mail clerk and have held positions as
16 Meter Reader, Customer Service Representative, Economic
17 Analyst, Human Resource/Compensation Analyst, Pricing and
18 Regulatory Services Analyst, and Resource Planning
19 Analyst.I recently rej oined the Company in June 2008
20 after owning and operating a property improvement limited
21 liabili ty company for four years.
22 In January of 1991, after two years in the
23 Customer Service Department, I was offered and I accepted
24 a position
25
132 SPARKS, DI 1
Idaho Power Company
.
.
.
1 in the Company's Energy Services Department. My
2 responsibili ties over six years in the department varied
3 from conservation program evaluation, special studies,
4 and load forecasting and research. In 1995, I was asked
5 to temporarily transfer to the Human Resources Department
6 to assist with implementation of the Company's
7 reorganization, benefit, and compensation plans.
8 In 1998, I applied for and accepted a position
9 in the Pricing and Regulatory Services Department where I
10 was responsible for reviving the Company's resource
11 planning and integrated resource planning processes. As
12 part of reorganization, I was reassigned to the Power
13 Supply Planning Department in 2001 where I acted as the
14 lead analyst for the Integrated Resource Plan. In July
15 2003, I left the Company to pursue self-employment in the
16 real estate and construction sectors. I returned to the
17 Company as a Senior Pricing Analyst in the Pricing and
18 Regulatory Services Department in June 2008.
19 Q.Upon rehire, what duties were you assigned?
20 A.My primary duty upon rehire was to examine and
21 propose revisions to the Company's Rule H tariff dealing
22 with New Service Attachments and Distribution Line
23 Installations or Alterations.
24
25
133 SPARKS, DI 2
Idaho Power Company
.
.
.
1 Q. What were the primary areas of Rule H that Mr.
2 Said asked you to address?
3 A.I was asked to review and propose revisions to
4 the layout and general wording of the tariff in an effort
5 to streamline it and make it easier to read and
6 administer.I was also asked to update all charges and
7 credi ts in an effort to shift more of the costs for
8 service attachments and line installations from the
9 Company's base rates to those customers requesting
10 services under Rule H.
11 Q.How did you go about developing an
12 understanding of the provisions and utilization of Rule
13 H?
14 A.To better understand the provisions and
15 utilization of Rule H, I conducted eight meetings with
16 Company Distribution Designers throughout the Company's
17 service terri tory and consul ted with other Company
18 personnel that have been directly involved with
19 administering the tariff. I have also been responsible
20 for managing the resolution of several customer inquiries
21 submitted to the Commission regarding Rule H and its
22 application.
23 Q.When was the last time Idaho Power made maj or
24 revisions to Rule H?
25 A.The Company last recommended maj or revisions
134 SPARKS, DI 3
Idaho Power Company
.1 to Rule H in 1995,Case No.I PC-E- 95-18.In February
2 1997,
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
135 SPARKS, DI 3a
Idaho Power Company
.
.
.
1 the Commission issued Order No. 26780 implementing
2 revisions to the tariff relating to cost estimates,
3 charges, allowances, refunds, and other miscellaneous
4 provisions.
5 Q.Have there been any updates since that time?
6 A.Yes. The Company has filed several Advice
7 Letters since Order No. 26780 to update various sections
8 related to allowances, refunds, Company betterment, and
9 engineering fees. In June 2008, the Company received
10 Order No. 30558 in Case No. IPC-E-08-02 approving new
11 charges for underground service attachments.
12 Q.Please describe the formatting changes that are
13 being recommended.
14 A.The recommended formatting changes include
15 general line spacing and indentation modifications to
16 make the tariff easier to read and administer.
17 Q.Please describe the recommended layout of
18 sections within the tariff.
19 A.The layout of sections was rearranged to better
20 match how costs are computed for customers. Line
21 Installation and Service Attachment Charges are broken
22 out into separate sections followed by Vested Interest
23 Charges and Other Charges. A section for Line
24 Installation and Service Attachment Allowances is then
25 followed by Refunds,
136 SPARKS, DI 4
Idaho Power Company
.
.
.
1 Local Improvement Districts, Relocations in Public Road
2 Rights-of-Way, and Existing Agreements.
3 Q.Please describe changes to the Definitions
4 section of Rule H.
5 A.Several definitions were added to clarify
6 discrepancies and identify pertinent terms missing from
7 the existing tariff. For example, a definition for
8 Alteration was added to describe requests for changes in
9 distribution facilities related to relocations, upgrades,
10 conversions, and/or removals. This definition clarifies
11 that these requests for services are treated the same
12 wi thin the provisions of Rule H. Other new definitions
13 include: Conversion, Cost Quote, Point of Delivery,
14 Service Attachment, Standard Terminal Facilities, and
15 Upgrade. The Work Order Cost definition was updated to
16 remove the 1.5 percent limitation for recovery of general
17 overheads. The Company instead proposes to recover
18 actual general overheads related to construction under
19 Rule H.
20 Q.What is the most current general overhead rate
21 for construction under Rule H?
22 A.The Company's current general overhead rate is
23 15. 75 percent for new construction.
24 Q.Why is there such a large increase in the
25 general overhead rate?
137 SPARKS, DI 5
Idaho Power Company
.
.
.
1 A. As explained to me by Mr. Said, in Case No.
2 IPC-E-95-18, the Commission decreased the general
3 overhead rate to account for charging engineering fees
4 separately.In turn, the Commission capped the
5 collection rate for general overheads at 1.5 percent.
6 Q.Are engineering fees included in the proposed
7 collection rate for general overheads?
8 A.No. Engineering fees are currently charged
9 directly to work orders and are not included in the
10 Company's calculation of general overheads.
11 Q.What costs are included in general overheads?
12 A.General overheads include costs for
13 construction training, safety meetings, time spent by
14 Company managers supervising construction, and other
15 labor and expenses associated with managing construction.
16 Q.Please explain changes to the General
17 Provisions section of Rule H.
18 A.Changes to the General Provisions section
19 include adding "easements" to the description of
20 Rights-of-Way to better describe the Company's most
21 common means of gaining passage across customers'
22 property."Proof of ownership" was added to the Property
23 Specifications description to identify land ownership
24 prior to the Company
25
138 SPARKS, DI 6
Idaho Power Company
.1 acquiring rights-of-way or easements. The word
2 "Al teration" replaced "Relocation" in both the Conditions
3 for Start of Construction and Interest on Payment
4 descriptions.
5 Please explain the charges being updated inQ.
6 Rule H.
7 All charges were updated to reflect currentA.
8 labor rates. Engineering Charges were updated from $50
9 to $58 per hour to account for increases in Distribution
10 Designer wages. Overhead Temporary Service Attachment
11 Charges increased from $120 to $182, Underground
12 Temporary Service Attachment Charges decreased from $140.13 to $ 41 due to a change in the calculation methodology,
14 Temporary Service Return Trip Charges increased from $35
15 to $41, and the Underground Service Return Trip Charge
16 increased from $50 to $68. The charges and methodologies
17 for calculating Line Installations and overhead Service
18 Attachments did not change. Underground Service
19 Attachment Charges were updated using the same
20 methodology used in Case No. IPC-E-08-02.
21 Q.Please explain the changes to Company-funded
22 Allowances and describe the rationale for making the
23 changes.
.24
25
139 SPARKS, DI 7
Idaho Power Company
.1 The calculation used to determineA.
2 Company-funded allowances was modified to reflect costs
3 associated with providing and installing Standard
4 Terminal Facilities. Standard Terminal Facilities are
5 the overhead terminal facilities the Company considers to
6 be most commonly installed for overhead single phase and
7 three phase services. The Company is proposing to
8 provide one allowance each for single phase or three
9 phase service as credit toward terminal facilities and/or
10 line installations.
11 Company-funded allowances were modified to help
12 shift costs from rate base and to more equitably provide.
.
13 credits to customers requesting new line installations
14 and service attachments. The proposed allowances are
15 applied equally to customers regardless of their specific
16 sizing requirements rather than paying the full cost of
17 terminal facilities regardless of sizing.
18 Please define Standard Terminal Facilities.Q.
19 For single phase line installations and serviceA.
20 attachments, Standard Terminal Facilities include the
21 cost associated with providing and installing one
22 overhead service conductor and one 25 kVA transformer to
23 serve a 200 amperage meter base ($1,780). Three phase
24 line installation and service attachment costs are
25 calculated
140 SPARKS, DI 8
Idaho Power Company
.
.
.
1 based on the cost of providing and installing one
2 overhead service conductor and three 15 kVA transformers
3 to serve a 200 amperage meter base ($3,803). These costs
4 are further detailed in my workpapers.
5 Q.How are allowances determined inside
6 residential and non-residential subdivisions and multiple
7 occupancy proj ects under the Company's proposal?
8 A.Developers of subdivisions and multiple
9 occupancy proj ects will receive a $1, 780 allowance for
10 each single phase transformer installed within a
11 development and a $3,803 allowance for each three phase
12 transformer installed wi thin a development.
13 Q.Please explain the changes to Vested Interest
14 Refunds and describe the rationale for making the
15 changes.
16 A.The Company does not propose that the
17 methodology and calculation of Vested Interest Refunds be
18 changed but does propose that the time limitation to
19 recei ve vested interest refunds be reduced from five
20 years to four years in an effort to reduce the
21 administrative burden on the Company. It has been
22 determined that most refunds are provided during the
23 first four years and less than two percent of customers
24 eligible for Vested Interest Refunds receive them in the
25 fifth year.
141 SPARKS, DI 9
Idaho Power Company
.
.
.
1 Q.Please explain the changes to Subdivision
2 Refunds and describe the rationale for making the
3 changes.
4 A.The Company proposes that subdivision lot
5 refunds be discontinued in an effort to shift a greater
6 portion of the cost for facilities installed inside
7 subdivisions from the general rate base to those
8 customers requesting new facilities.
9 Q.Are any refunds available inside subdivisions?
10 A.Yes. Applicants will be eligible for Vested
11 Interest Refunds for facilities installed inside
12 subdi visions if the construction was NOT part of the
13 ini tial Line Installation. This allows new applicants
14 wi thin subdivisions the opportunity to recover a portion
15 of their cost to construct new line installations and
16 attach to the Company's distribution system.
17 Q.Please explain the purpose of the new section
18 addressing public roadway relocations.
19 A.The purpose of the new section addressing
20 relocations in public road rights-of-way is to ensure
21 that a consistent and defined funding methodology is
22 adhered to when the Company is required to relocate
23 distribution facilities at the request of a public
24 roadway owner. The new language clearly defines when the
25 Company is required
142 SPARKS, DI 10
Idaho Power Company
.
.
.
1 to relocate facilities and the amount of the relocation
2 costs the Company is required to fund under Idaho Code
3 § 62-705.
4 Q.Please explain any other changes and describe
5 the rationale for making the changes.
6 A.The section describing Line Installation
7 Agreements was deleted because the agreements are no
8 longer needed. The word "Alteration" replaced
9 "Conversion" in the Local Improvement Districts section
10 to include relocations, upgrades, conversions, and
11 removals per definition. The section describing Existing
12 Agreements was moved to the last section to improve the
13 layout of the tariff.
14 Q.Does the Company have a proposal that will keep
15 charges and credits current under Rule H?
16 A.Yes. The Company plans to update all charges
17 and allowances annually on March 1 using the
18 methodologies approved as a result of this Application.
19 Q.Please explain why the Company is requesting an
20 effective date 120 days after receiving an Order
21 approving modifications to Rule H.
22 A.The Company has determined that an
23 implementation period of 120 days is needed to update and
24 test computer information systems, train employees, and
25 update internal documents related to the administration
143 SPARKS, DIll
Idaho Power Company
.1 of approved Rule H provisions.
2 this conclude your testimony?Q.Does
3 A.Yes.
4
5
6
7
8
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
144 SPARKS,DI 12
Idaho Power Company
.
.
.
1
2 open hearing.)
3
(The following proceedings were had in
MS. NORDSTROM: This witness is available
4 for cross-examination.
5 COMMISSIONER SMITH: Ms. Sasser, do you
6 have any questions?
7
8
9
10 few questions.
11
12
13
14
15
MS. SASSER: No questions, Madam Chair.
COMMISSIONER SMITH: Mr. Spears.
MR. SPEARS: Yes, Madam Chair, I have a
COMMISSIONER SMITH: Okay.
MR. SPEARS: May I approach the witness?
COMMISSIONER SMITH: Yes, you may.
(Mr. Spears distributing documents.)
MR. SPEARS: Madam Chair, I did not bring
16 enough copies for Mr. Creamer and Ms. Sasser.
17 COMMISSIONER SMITH: I think if we note
18 this is Attachment 7 to Idaho Power's reply comments,
19 they'll probably find it.
22
20
21
23
24
25
MR. SPEARS: Thank you, Madam Chair.
CSB REPORTING
[phone]
145 SPARKS
Idaho Power Company
.1
2
3 BY MR. SPEARS:
4 Q
CROSS-EXAMINATION
Mr. Sparks, were you involved in the
5 writing of Rule H?
6 A Of Rule H, yes, I was.
Thank you. I would like to turn your
8 attention to Section 10 of Rule H and I'll read the
7 Q
9 portion of it that I'm referring. It states, "All
10 payments from third-party beneficiaries to the Company
11 under this section shall be paid in advance of the
12 Company's relocation work, based on the Company's work.13 order cost." Are you familiar with that section of Rule
14 H, Section 10?
15 A I'm familiar with the language, yes.
What in your opinion does that language
That language, I think, is consistent with
19 how we charge for construction services and that we
16 Q
20 prepare a work order cost estimate and we require that
17 mean?
18 A
21 those payments be made before we start construction.
22 Q What would the effect of that language be
23 in relation to a road project?
.24 A I personally don't have experience with
25 road proj ects .
CSB REPORTING
[phone]
146 SPARKS (X)
Idaho Power Company
.
.
.
1 Q Another portion of Rule H states, "This
2 section shall not apply to utility relocations wi thin
3 public road rights of way of public road agencies which
4 have adopted legally binding guidelines for the
5 allocation of utility relocation costs between the
6 utility and third-party beneficiaries that are
7 substantially similar to the rules set out in Rule H --
8 Section 10 of Rule H." Are you familiar with that
9 section, Section 10, Rule H?
10 A I have read it, yes. I did not write
Do you have an understanding of its
Generally.
And what is that?
I think the intent of that language was
17 actually added to account for resolutions such as ACHD
11 it.
12 Q
18 currently has and abides by and recognizing those
13 meaning?
19 resolutions as something the Company would recognize in
14 A
What is your understanding would be the
22 result if a road agency had adopted a legally binding
15 Q
23 standard that was not substantially similar to Rule H,
16 A
MS. NORDSTROM: Madam Chair?
20 this instance.
21 Q
24 Section 10?
25
CSB REPORTING
[phone]
147 SPARKS (X)
Idaho Power Company
.
.
1 COMMISSIONER SMITH: Ms. Nordstrom.
2 MS. NORDSTROM: I am not comfortable with
3 this witness being called upon to interpret sections
4 of -~ this particular section of Rule H. That is
5 something for attorneys and people who put it into
6 practice to do that, not Mr. Sparks.
7 COMMISSIONER SMITH: So I think I will
8 sustain the objection on the fact that you are calling
9 for a legal conclusion from this witness.
10 MR. SPEARS: Madam Chair, may I inquire?
11 COMMISSIONER SMITH: Mr. Spears.
12 MR. SPEARS: Is there a different witness
13 that Idaho Power would be presenting today that is better
14 sui ted to answer that question?
15 COMMISSIONER SMITH: Well, since you're
16 calling for a legal conclusion, I think we hashed this
17 out pretty well last week at the oral argument and if
18 people feel the need to do briefs, there's always that
19 opportunity, but I don't think they're going to bring any
20 witness you can ask for a legal conclusion.
21 MR. SPEARS: Madam Chair, I beg to differ
22 that I was asking for a legal conclusion, but I'll return
23 to the witness.
24.25
Q BY MR. SPEARS: Mr. Sparks, the piece of
information that I handed to you that says "Relocations
CSB REPORTING
[phone]
148 SPARKS (X)
Idaho Power Company
.
.
20
21
1 Flowchart" at the top, at the bottom it says -- it has
2 boxes, I've highlighted in yellow "Dispute resolution."
3 What is your understanding of dispute resolution within
4 the context of Rule H, Section 10 relating to road agency
5 proj ects?
6 A Again, specifically related to Section 10,
7 I was the sponsor of adding this section. I did not
8 wri te this section. I did not create this chart. It was
9 really our legal department that put this together and I
10 don't feel I'm the right person to be asking.
11 MR. SPEARS: Very well, then. I have no
12 more questions.
13 COMMISSIONER SMITH: Mr. Creamer.
14 MR. CREAMER: Thank you, Madam Chair.
15
16 CROSS-EXAMINATION
17
18 BY MR. CREAMER:
19 Q Good morning, Mr. Sparks.
A Hello.
Q You were asked by Mr. Said to rearrange
22 the tariff format for ease of use and understanding; is
23 that correct?
24.25
A That's correct.
Q And you adj usted the definitions to some
CSB REPORTING
[phone]
149 SPARKS (X)
Idaho Power Company
.
.
.
20
1 extent?
2 A Yes.
3 Q Updated general overhead rates based on
4 internal allocation methodologies?
5 A We proposed to update general overhead
6 rates.
7 Q You weren't asked to analyze the actual
8 overall Company cost recovery from new customers for line
9 extensions, were you?
10 A No.
11 Q Under either the original tariff or the
12 new tariff; is that correct?
13 A That's correct.
14 Q You weren't asked to propose an adj ustment
15 in the current line extension allowances to assure that
16 the anticipated revenues from new customers would be
17 sufficient to cover the Company's costs in line
18 extension, were you?
19 A Could you point to where that is stated?
Q I'm asking whether you were instructed to
21 propose an adjustment that ensured that the Company's
22 recovery from new customers for line extension offset its
23 costs.
24
25
A I was instructed to propose adj ustments to
allowances that would reduce the burden on ratepayers for
CSB REPORTING
[phone]
150 SPARKS (X)
Idaho Power Company
.1 construction services.
2 Q On existing ratepayers; isn't that
3 correct?
4 A Yes.
MR. CREAMER: I don't have any other
6 questions, Madam Chair.
5
7 COMMISSIONER SMITH: Are there questions
8 from the Commissioners?
.
9
10
11
12
13
14 Mr. Sparks.
COMMISSIONER REDFORD: No.
COMMISSIONER KEMPTON: No questions.
COMMISSIONER SMITH: Redirect?
MS. NORDSTROM: No redirect.
COMMISSIONER SMITH: Thank you very much,
15 (The witness left the stand.)
16 MS. NORDSTROM: Idaho Power calls David
17 Lowry as its next witness.
.
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
151 SPARKS (X)
Idaho Power Company
.1 DAVID R. LOWRY,
2 produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6
7
8 BY MS. NORDSTROM:
9 Q
DIRECT EXAMINATION
Good morning.
Good morning.
Please state your name and spell your last
12 name for the record..
10 A
David R. Lowry, L-o-w-r-y.
By whom are you employed and in what
I am employed by Idaho Power Company. I'm
17 the proj ect manager for highway relocations.
11 Q
Are you the same David Lowry that filed
19 direct testimony on October 30th, 2008 and prepared
13 A
I am.
Do you have any corrections or changes to
23 your testimony or exhibit?
.
14 Q
I do not.
If I were to ask you the questions set out
15 capacity?
16 A
18 Q
20 Exhibit No.1?
21 A
22 Q
24 A
25 Q
CSB REPORTING
[phone]
152 LOWRY (Di)
Idaho Power Company
.1 in your prefiled testimony, would your answers be the
2 same today?
3 A They would be.
MS. NORDSTROM: I would move that the
5 prefiled direct testimony of David Lowry be spread upon
4
6 the record as if read and Exhibit 1 marked for
7 identification.
8 COMMISSIONER SMITH: If there's no
9 obj ection, it is so ordered.
10 MS. NORDSTROM: I make this witness
11 available for cross-examination.
12 (The following prefiled direct testimony.
.
13 of Mr. David Lowry is spread upon the record.)
14
15
16
17
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
153 LOWRY (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is David R. Lowry and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company as the
6 Proj ect Manager of Highway Relocations.
7 Q.Please describe your educational background.
8 A.In May of 1977, I received my Business
9 Associates Degree in Business Management from Boise State
10 University.
11 Q.Please describe your work experience with Idaho
12 Power Company.
13 A.I became employed by Idaho Power Company in
14 1984 in the Delivery Business Unit as a lineman.
15 In 1997, I was offered and accepted a position
16 as a Facility Representative at the Boise Operations
17 Center. My primary function was to manage requests for
18 new line installations in accordance with Rule H, the
19 Company's line installation tariff.
20 In 2000, I was offered and accepted a position
21 in the Transmission & Distribution Design Group and given
22 the responsibility of overseeing highway relocations. My
23 prior experience with applying Rule H played an important
24 role in
25
154 LOWRY, DI 1
Idaho Power Company
.
.
.
1 this transition.
2 In 2008, I was promoted to Proj ect Manager of
3 Highway Relocations.
4 Q.What is the purpose of your testimony in this
5 proceeding?
6 A.I was asked by Mr. Gregory Said to describe
7 instances where I have observed state and local
8 governmental entities requiring Idaho Power to pay the
9 costs of relocating its electrical distribution
10 facili ties located on public rights-of-way when those
11 relocation costs should have more appropriately been
12 borne by real estate developers.
13 Q.When the Company's distribution facilities must
14 be relocated to accommodate changes in public roadways,
15 how are the costs of those relocations generally
16 assigned?
17 A.Responsibili ty for facility relocation costs is
18 generally assigned according to the entity making the
19 request for the relocation. Such requests generally come
20 from three main sources. First, Idaho Power often
21 receives requests from governmental agencies to relocate
22 distribution facilities to accommodate new road
23 construction or maintenance of the present roadways.
24 These requests may originate from the Idaho Department of
25
155 LOWRY, DI 2
Idaho Power Company
.1 Transportation (" ITD"), a local highway district, county,
2 or city ("Public Road Agency"). If a relocation of
3 facili ties is required due to an identified and budgeted
4 highway proj ect, Idaho Power is legally required to fund
5 the relocation cost.
6 Second, the Company often receives requests
7 from real estate developers, owners of land adj acent to
8 public roads, or other entities that are not a Public
9 Road Agency ("third parties"). These third-party
10 requests seek a utility relocation in conjunction with
11 the third party's request for road improvements not
12 funded by a Public Road Agency. The Company's Rule H.13
14
states that these requesting third parties will be
charged for the cost of relocation.If the roadway work
15 is not an identified and budgeted proj ect of the Public
16 Road Agency, then the requesting third party pays Idaho
17 Power to relocate its facilities. However, the current
18 Rule H tariff does not clearly address cost
19 responsibility for all relocation situations, including
20 relocations requested by a Public Road Agency on behalf
21 of a third party.
22 Third, when a Public Road Agency collects a
23 portion of the cost of roadway work from a third party, a
24 determination of the respective percentages of.25 participation borne by the Public Road Agency and the
156 LOWRY, DI 3
Idaho Power Company
.
.
.
1 third party is determined. Idaho Power bears the
2 percentage of the utility relocation cost commensurate
3 wi th the percentage of the Public Road Agency's funding
4 and the third party pays the remaining percentage of the
5 line relocation cost.
6 Q.How does the Company currently process
7 relocation requests from government agencies?
8 A.When a request is received from a Public Road
9 Agency for relocation of a line in a road right-of-way,
10 the Company makes a good faith effort to determine the
11 primary reason for the relocation. Idaho Power requests
12 a letter from the Public Road Agency stating that the
13 relocation is for public benefit and the primary reason
14 for the relocation is not for a third party. If the
15 Public Road Agency responds in the affirmative, the
16 Company knows it will bear the total cost of the
17 relocation.If the Public Road Agency does not respond
18 affirmatively, further inquiry is required.
19 If the Public Road Agency plans on making
20 improvements for the general public benefit wi thin three
21 years from the day the improvements begin, or from their
22 budgeted period, Idaho Power will fund the cost of such
23 relocation. Exceptions to this occur when Idaho Power
24 has prior rights of occupancy.
25
157 LOWRY, DI 4
Idaho Power Company
.
.
.
1 Q. Please explain how prior rights of occupancy
2 affect responsibility for relocation costs?
3 A.The Public Road Agency requesting the
4 relocation may be responsible for the costs of the
5 relocation if:
6 1.Idaho Power has a prior private easement;
7 or
8 2.Idaho Power can claim prescriptive rights
9 for facilities installed previously on private property.
10 If a line has been relocated once at highway agency
11 expense, future moves at that location will be at the
12 agency's expense.
13 Q.Have you observed problems with some developers
14 trying to avoid paying their share of relocation costs?
15 A.Yes.In some cases, developers have asked a
16 ci ty to make a relocation request to Idaho Power on their
17 behalf and the city has not disclosed that the developer
18 is involved. The discovery of the third-party developer
19 beneficiary usually is made when the development plans
20 are approved and released by the Public Road Agency.
21 Q.Please describe a specific instance where a
22 local developer has shifted the costs of facility
23 relocation to Idaho Power with the assistance of a
24
25
158 LOWRY, DI 5
Idaho Power Company
.
.14
1 gove rnment en tit Y .
2 A. The developers of the Gateway Mall in Nampa
3 submi tted plans to have the intersection of Happy Valley
4 Road and Stamm Lane rebuilt as a new entrance into the
5 Mall. The proj ect was then postponed for a year. Idaho
6 Power, at the developer's request, refunded the collected
7 relocation cost for the proj ect to the developer.
8 Shortly thereafter, a request for relocation was received
9 from the City of Nampa for the same intersection with no
10 disclosure of the interest of a third-party developer.
11 It was only through the communication of Idaho Power
12 employees that the discovery of the third-party developer
13 beneficiary interest in the "city's" project was made.
Q.Have you observed other instances of
15 inappropriate cost shifting from developers to Idaho
16 Power customers?
17 A.Yes. There have been requests made by the ITD
18 for improvements in road rights-of-way where the ITD
19 portion of the improvement does not require a relocation
20 of Company facilities but the construction done for the
21 benefit of a third party does. Here, the city in which
22 the highway improvement is being made formed a Local
23 Improvement District ("LID") to install sidewalks or
24 other improvements which require the relocation of.25 Company
159 LOWRY, DI 6
Idaho Power Company
.
.
.
1 facilities.If the Idaho Transportation Department does
2 not disclose to the Company that the LID has been formed
3 to do additional work in the right-of-way as a third
4 party, the LID will collect funding from nearby property
5 owners only for the improvements and relocation of
6 ci ty-owned utili ties but not for all the utili ties in the
7 right-of-way. ITD then requires Idaho Power and other
8 pri vate utility companies to fund the relocation costs of
9 their utility facilities. Correspondence between Idaho
10 Power, ITD, and the City of Nampa has been included as
11 Exhibi t No. 1 to my testimony to illustrate how this cost
12 shifting occurs.
13 Q. Is this method of avoiding payment of
14 relocation expenses a recent trend?
15 A.Probably not. However, the discovery of the
16 frequency of Public Road Agencies inappropriately
17 facili tating a shift of relocation expenses is recent.
18 The Company's decision to consolidate review of Public
19 Road Agency requests for relocations under one person in
20 2006 has given the Company a better overall knowledge of
21 the proj ects and how they are financed.
22 Q.How frequently does this cost shifting occur?
23
24
25
160 LOWRY, DI 7
Idaho Power Company
.
.
.
20
21
22
23
24
25
1 A. In the last three years I am aware of several
2 occurrences. However, even when the discovery is made
3 and the cities are contacted, there is reluctance on the
4 ci ties' part to share the cost of relocation because the
5 existing language in Rule H does not explicitly set out
6 the rules governing cost recovery in the case of
7 third-party requests affecting utility facilities in
8 public rights-of-way or the relocation responsibilities
9 of the LIDs.
10 Q.How much do facility relocations to accommodate
11 roadway changes for new developments typically cost?
12 A.The cost of facility relocations can vary
13 widely.I am aware of relocations ranging in cost from
14 $1,500 to $350,000.
15 Q.Do you believe the proposed Rule H relocation
16 language, as described in greater detail in Mr. Spark's
17 testimony, will provide Public Road Agencies and the
18 public with needed clarity as to how responsibility for
19 relocation costs is to be apportioned?
A.Yes.
Q.Does this conclude your testimony?
A.Yes.
161 LOWRY, DI 8
Idaho Power Company
.
.
.
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: Ms. Sasser, do you
4 have questions?
5 MS. SASSER: No questions, Madam Chair.
6 COMMISSIONER SMITH: Mr. Spears?
7 MR. SPEARS: Yes, I have questions.
8 COMMISSIONER SMITH: Please proceed.
9
10 CROSS-EXAMINATION
11
12 BY MR. SPEARS:
13 Q For the record, Scott Spears, Ada County
14 Highway District. Mr. Lowry, have you read Rule H,
15 Section 10?
16 A I'm familiar with it, yes.
17 Q I will read a provision and ask your
18 opinion. "All payments from third-party beneficiaries to
19 the Company under this section shall be paid in advance
20 of the Company's relocation work, based on the Company's
21 work order cost." What do you understand that section to
22 mean?
23 A That work order costs will be paid in
24 advance of construction being started on those
25 proj ects.
CSB REPORTING
[phone]
162 LOWRY (X)
Idaho Power Company
.
.
.
1 Q And how would this relate to public road
2 proj ects?
3 A How it relates to public road proj ects is
4 different than it relates to developers. Public road
5 projects we bill actual work order costs upon the
6 completion of the proj ect.
7 Q So could you state that again, please?
8 A Yes, we bill the government agencies, the
9 owners of the right of ways, actual work order costs
10 based upon the completion of the proj ects.
11 Q Okay, but what if the proj ect has
12 percei ved third-party beneficiaries also in addition to
13 the public road agencies?
14 A Then the third-party beneficiaries have to
15 pay the estimated costs before construction begins.
16 Q Okay; so then under this rule if a
17 third-party beneficiary is involved and it is a project
18 that's a public road it's a blend of public road
19 expenses and private third-party expenses perceived, then
20 the relocation would not begin until the private party,
21 the third-party beneficiary, had paid its estimated
22 cost?
23
24
25
A That's correct.
Q Is that different from current
operation?
CSB REPORTING
[phone]
163 LOWRY (X)
Idaho Power Company
.
.
21
1 A No.
2 Q Rule H, Section 10 states in part, "This
3 section shall not apply to utility relocations wi thin the
4 public rights of way of public road agencies which have
5 adopted legally binding guidelines for the allocation of
6 utili ty relocation costs between the utility and
7 third-party beneficiaries that are substantially similar
8 to the rules set out in Section 10 of Rule H." Are you
9 familiar with that section of Rule H, Section 10?
10 A I'm familiar with it, yes.
11 Q What does that section mean?
12 A I believe we already stated that.
13 Q Could you restate your understanding as to
14 what it means?
15 A Well, if you'd repeat your question,
16 please.
17 Q I read the provision and then I asked you
18 for your understanding of what it means, of what that
19 section means.
20 A Read the provision for me again, please.
Q "This section shall not apply to utility
22 relocations within public road rights of way of public
23 road agencies which have adopted legally binding
24 guidelines for the allocation of utility relocation costs.25 between the utility and third-party beneficiaries that
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164 LOWRY (X)
Idaho Power Company
.
.
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1 are substantially similar to the rules set out in Section
2 10 of Rule H."
3 A Well, because with Ada County Highway
4 District we have Ordinance 330 that's preexisting and so
5 wi th Ada County Highway District, we are governed by
6 Ordinance 330.
7 Q And what if Ordinance 330 was not
8 substantially similar to the rules set out in Section 10
9 of Rule H?
10 MS. NORDSTROM: Madam Chair, I would
11 obj ect to this particular question. It does not call for
12 his interpretation, it calls for a legal conclusion.
13 MR. SPEARS: Madam Chair, in Mr. Lowry's
14 direct testimony, he has provided legal conclusions.
15 COMMISSIONER SMITH: Actually, I was going
16 to say that your question actually is a hypothetical that
17 has no basis in fact. Maybe you need to ask him if some
18 other highway district formulated an ordinance that
19 didn't mirror Section 10 of Rule H what does he think the
20 outcome would be.
21 Q BY MR. SPEARS: Mr. Lowry, if some other
22 road agency adopted an ordinance that did not mirror or
23 was not substantially similar to Section 10, Rule H, what
24 would be the result?
25 A When you say -- if they adopted an
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165 LOWRY (X)
Idaho Power Company
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1 ordinance similar to Ordinance 330; is that what you're
2 asking?
3 Q No, sir, an ordinance that was not
4 substantially similar to Section 10, Rule H, what would
5 be the result of that ordinance?
6 A Someone besides me would have to decide
7 how we were going' to respond as a Company to that.
8 Q Would the Company take that issue up to
9 the Idaho Public Utilities Commission?
10 MS. NORDSTROM: Madam Chair, I believe
11 this is purely speculative at this point.
12 COMMISSIONER SMITH: I think the witness
13 has answered to the best of his ability that however the
14 Company policy would be on that, he's not the person who
15 would decide or know.
16 MR. SPEARS: All right, then thank you,
17 Madam Chair.
18 Q BY MR. SPEARS: Mr. Lowry, I just have a
19 couple more questions. Are you familiar with this chart?
20 I handed it out and
21 A I do not have a copy of it here, no.
22 Q I can provide it to you if you'd like.
23 A That's fine.
24 (Mr. Spears approached the witness.)
25 Q BY MR. SPEARS: This Relocations
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166 LOWRY (X)
Idaho Power Company
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1 Flowchart, Attachment 7 to Idaho Power's reply comments,
2 the bottom box highlighted in yellow refers to "Dispute
3 resolution. " Can you tell me where in Rule H, Section 10
4 or other parts of Rule H that dispute resolution is
5 provided for?
6 A No, I can't.
7 Okay, to your understanding, what wouldQ
8 this dispute resolution that this flowchart refers to
9 entail?
10 I can't tell you that either.A
11 Okay. Do you know where this flowchartQ
12 came from?
13 A No, I don't.
14 MR. SPEARS: Okay. I have no further
15 questions for this witness.
16 COMMISSIONER SMITH: Thank you.
17 COMMISSIONER SMITH: Mr. Creamer.
18 MR. CREAMER: I have no questions for
19 Mr. Lowry, Madam Chair.
20 COMMISSIONER SMITH: Do we have any
21 questions from the Commissioners?
22 COMMISSIONER REDFORD: No.
23 COMMISSIONER KEMPTON: No.
24 COMMISSIONER SMITH: Any redirect?
25 MS. NORDSTROM: Just a few. Thank you.
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167 LOWRY (X)
Idaho Power Company
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1 REDIRECT EXAMINATION
2
3 BY MS. NORDSTROM:
4 Q Mr. Lowry, why does Idaho Power require
5 third-party beneficiaries to pay the costs of public road
6 right of way relocations up-front?
7 A Well, the biggest reason is to assure that
8 we will collect those -- that money will be collected
9 before the proj ect begins, because historically, we found
10 that it's harder to collect those monies after the
11 proj ect is completed.
12 Q Now, when a third-party beneficiary hasn't
13 paid in advance, but a public road agency has requested
14 that Idaho Power proceed with construction so as not to
15 delay those time lines, has Idaho Power complied with the
16 public road agency's request?
17 A Yes, we have.
18 MS. NORDSTROM: Thank you. No further
19 questions.
20 COMMISSIONER SMITH: Thank you, Mr. Lowry.
21 (The witness left the stand.)
22 COMMISSIONER SMITH: Mr. Creamer, I think
23 we're ready for your witness.
24.25
MR. CREAMER: Thank you, Madam Chair.
We'd call Dr. Richard Slaughter.
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168 LOWRY (Di)
Idaho Power Company
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1 RICHARD SLAUGHTER,
2 produced as a witness at the instance of the Building
3 Contractors Association of Southwestern Idaho, having
4 been first duly sworn, was examined and testified as
5 follows:
6
7 DIRECT EXAMINATION
8
9 BY MR. CREAMER:
10 Q Dr. Slaughter, would you please state and
11 spell your full name for the record?
12 A Richard Slaughter, S-l-a-u-g-h-t-e-r.
13 Q How are you employed, Dr. Slaughter?
14 A Very good.
15 Q I said --
16 A I'm sorry, I'm going to have to ask
17 Mr. Creamer and the Commissioners to speak more closely
18 to the microphones.
19 Q I apologize, Dr. Slaughter. Could you
20 tell the Commissioners about your employment?
21
.
A Okay, I was -- my firm, Richard Slaughter
22 Associates, was employed by the Idaho Building
23 Contractors Association to do consulting and analysis and
24 prepare testimony in this particular rate case.
25 Q Are you the same Richard Slaughter who
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169 SLAUGHTER (Di)
Building Contractors
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1 prepared and prefiled direct testimony in this case
2 consisting of 31 pages and including Exhibits 201 through
3 204?
4 A I am.
5 MR. CREAMER: Madam Chair, for
6 clarification, we're just putting Dr. Slaughter on for
7 purposes of his direct testimony at this time; is that
8 correct?
9 COMMISSIONER SMITH: You can do both.
10 It's up to you.
11 MR. CREAMER: I'm just going to do his
12 direct. I think that's what Idaho Power Company has done
13 and I think we'll be just as efficient to do it that
14 way.
15 Q BY MR. CREAMER: Dr. Slaughter, at this
16 time are there any corrections or additions you would
17 wish to make to your direct testimony or the exhibits
18 that are included?
19 A Yes, there is one. On page 28, line 4
20 insert the word "standard" between the words "that" and
21 "terminal."
22 COMMISSIONER SMITH: I'm sorry, what page?
23 THE WITNESS: Page 28, line 4.
24 Q BY MR. CREAMER: Are there any other
25 corrections, Dr. Slaughter?
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SLAUGHTER (Di)
Building Contractors
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1 A No.
2 Q If I were to ask you the same questions
3 today that you were asked in your prefiled direct
4 testimony, would your answers be the same?
5 A Yes.
6 MR. CREAMER: Madam Chair, I would move
7 that Dr. Slaughter's prefiled direct testimony and
8 Exhibits 201 through 204 be spread on the record and the
9 exhibi ts be admitted into evidence.
10 COMMISSIONER SMITH: If there's no
11 objection, the prefiled testimony of Dr. Slaughter will
12 be spread upon the record as if read and Exhibits 201
13 through 204 will be admitted.
14 (Building Contractors Association of
15 Southwestern Idaho Exhibit Nos. 201 - 204 were admitted
16 into evidence.)
17 (The following pre filed direct testimony
18 of Dr. Richard Slaughter is spread upon the record.)
19
20
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171 SLAUGHTER (Di)
Building Contractors
.1 Q.Please state your name and business address for
2 the record.
3 My name is Richard Slaughter. My businessA.
4 address is 907 Harrison Blvd, Boise, Idaho 83702.
5 Q.Have you prepared a statement of your
6 qualifications to offer testimony in this proceeding?
7 I have. It is attached to this testimony asA.
8 Attachment A. Expanding on the qualifications detailed
9 in Attachment A, between 1998 and 2001 I consulted in
10 Kazakhstan and Kyrgyzstan on tax policy and revenue
11 estimation. The work in Kyrgyzstan was supported by the
12 Asian Development Bank ("ADB"). My report can be found.13 in ADB Technical Assistance No. 3106-KGZ, Benchmark
14 Report Section V "Economic and Tax Analysis." The
15 implications of that work for third world economic
16 development are presented in the Summer 2002 issue of The
17 National Interest, a public policy journal. My comments
18 on the Former Soviet Union (FSU) and third world economic
19 development are grounded in my academic work in
20 international politics and economics, almost fifty years
21 as a close observer of the Soviet Union and comparative
22 poli tics, my work as Chief Economist for the Idaho
23 Division of Financial Management, and my consulting work
24 in the region..25 Q.Are you offering any exhibits in support of
172 Richard Slaughter 2
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.1 your testimony?
2 A.Yes.I sponsoring Exhibits 201 through 204.am
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173 Richard Slaughter 2a
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1 Q.What is the purpose of your testimony?
2 A.I have been asked by the Building Contractors
3 Association of Southwest Idaho ("BCA") to provide to the
4 Commission my analysis and opinions concerning Idaho
5 Power Company's (" Idaho Power" or "Company") proposed
6 Rule H tariff modifications.
7 Q.Have you previously testified before this
8 Commission?
9 A.Yes.In 1995 I provided testimony to the
10 Commission on behalf of the BCA concerning proposed
11 modifications of the Company's Rule H tariff in Case No.
12 IPC-E-95-18.I also have testified in numerous other
13 cases before this Commission involving avoided cost and
14 cost of capital.
15 Q.Please summarize the scope of your analysis
16 concerning the Company's proposed Rule H tariff
17 revisions.
18 A.I have reviewed the Company's Application and
19 supporting testimony in this proceeding and the Company's
20 responses to Staff and BCA production requests. I also
21 have reviewed the pleadings, testimony and exhibits and
22 Commission Orders in the Company's prior Rule H tariff
23 proceeding, IPC-E-95-18, as well as subsequent Commission
24 orders having relevance to the Company's cost of service,
25 avoided costs and embedded costs and rates, including the
174 Richard Slaughter 3
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1 Commission's recent Order No. 30722 in the Company's 2008
2 rate case, IPC-E-08-10. I also have analyzed available
3 economic data relative to inflation and cost pressures on
4 Idaho Power's rate base.
5
6 /
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9
.175 Richard Slaughter 3a
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1 Sumary
2 Q.Will you also please summarize testimony?
3 A.My testimony addresses four primary areas.
4 First, I will discuss why the Company's proposed tariff
5 modifications are inconsistent with the Commission's
6 existing policy statements and with economic theory.
7 Second, I will testify concerning the fallacy in Idaho
8 Power's assertion that increased distribution costs are
9 driven by growth itself, as opposed to inflation. Third,
10 I will address the adverse economic impacts of adopting
11 the Company's proposed tariff modifications. Fourth I
12 will propose an updated basis for computing the
13 appropriate allowances and administering vested interest
14 refunds.
15 Company rationale and Commission policy
16 Q.What is your understanding of the Company's
17 intent in filing in this case?
18 A.In his testimony on behalf of the Company, Greg
19 Said has made clear that Idaho Power desires ultimately
20 to impose the full marginal cost of growth (including
21 costs of new generation, transmission and distribution)
22 on new development to eliminate the upward pressure that
23 the addition of new facilities imposes on rates. This
24 Rule H filing is merely the opening salvo in the
25 Company's strategy.
176 Richard Slaughter 4
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1 Q. Can you provide support for that conclusion
2 from Mr. Said's testimony?
3 A.Yes. The following colloquy from Mr. Said's
4 testimony describes that intent, and includes Mr. Said's
5 admission that Idaho Power ultimately is as interested in
6 transferring
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177 Richard Slaughter 4a
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1 generation and transmission costs to new customers as it
2 is in transferring line extension costs:
3 "Q. Please describe the instructions you gave to
Mr. Sparks regarding the improvements that the
company desired be made to Rule H.
"A. I identified three primary goals for Mr. Sparks
to achieve. Third, I asked Mr. Sparks to
take a close look at line installation
allowances and refunds with an eye towardreducing both allowances and refunds.
"Q. Why is the Company desirous of reducing line
installation allowances and refunds?
"A. As the Commission is well aware, the Company
has filed general rate case proceedings in
2003, 2005, 2007, and 2008. In addition, the
Company has also filed cases for the inclusion
into rate base of the Bennett Mountain
gas-fired plant in 2005 and the inclusion of
the Danskin gas-fired plant in 2008. With the
recent frequency of rate proceedings, a
persistent question arises: Is growth paying
for itself? The clear answer is no.
Addi tional revenues generated from the addition
of new customers and load growth in general is
not keeping pace with the additional expenses
created and required to provide ongoing safe
and reliable service to new and existing
customers. While the provisions o£ Rule H have
required some contributions in aid of
construction for new distribution facilities,
there are no requirements for contributions in
aid of construction for new transmission or
generation facilities which (sic) are also
typically required to serve customer growth.
Reducing the Company's new customer-related
distribution rate base by reducing allowances
and refunds will relieve one area of upward
pressure on rates and will take a step toward
growth pay"ing for itself." (Said, DI, p. 5, 1
23 to p. 6, line 22) (emphasis added).
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23 This statement, together with Mr. Said's
24 instructions to Mr. Sparks to "take a close look at line.25 installation allowances and refunds with an eye toward
178 Richard Slaughter 5
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1 reducing both allowances and refunds (SAID, DI, p. 4,
2 lines 20-22)," is clear indication that Idaho Power
3 desires that new connections pay the full marginal cost
4 of capital. His language suggests a belief that rates
5 should forever be stable in nominal terms, and declining
6 in real terms, for those customers who are currently on
7 the system and who never move to a new residence.
8
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179 Richard Slaughter 5a
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1 It is also telling that Mr. Said's instructions
2 were for the purpose of arbitrarily "reducing both
3 allowances and refunds." There is no attempt whatsoever
4 to lay a theoretical or empirical base for the Rule H
5 proposal. He does not, except in the most general
6 conventional wisdom sense, tie the proposal to changes in
7 the Company's specific costs, nominal or real.
8 Q.Does Mr. Said suggest that it will be the
9 Company's policy to recover from new customers the
10 marginal costs for expansion of Idaho Power's generation
11 and transmission plant?
12 A.Yes, that would appear to be the case.
13 Q.Please explain.
14 A. Mr. Said complains that "growth does not pay
15 its way." He states that all areas of the Company's
16 costs have been rising, and attributes those increases to
17 growth, citing several Company rate cases over the past
18 decade. He then instructs Mr. Sparks to design proposals
19 that would "take a step toward growth paying for itself."
20 There is no other logical interpretation to make.
21 Q.What has been the Commission's public policy
22 record on this issue?
23 A.Broadly sp~aking, in IPC-E-95-18, the
24 Commission determined that new customers should receive
25 credi t for the embedded costs of providing
180 Richard Slaughter 6
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1 distribution/terminal services. In Order 26780, the
2 Commission found, among other things, that:
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181 Richard Slaughter 6a
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1
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... new customers are entitled to have the
Company provide a level of investment equal to that
made to serve existing customers in the same class;
and
3
4
To the extent that any allowance is
ordered, some portion of distribution cost will
continue to be recovered through rates. (Order
26780, iv (C) Commission Findings, ~ 2.)5
6 Q.What rationale supports this policy?
7 A In part, it is the recognition that unless new
8 customers receive credit for their contributions to the
9 cost of new facilities and some or all of the embedded
10 costs of existing distribution/terminal facilities, then
11 the rates for existing customers are suppressed below the
12 actual cost of service, which in turn suppresses the
13 consumer' s incentive to limit his or her electricity use.
14 Q.Please explain.
A.Embedded distribution costs greatly understate
16 both the replacement cost and the economic value of
17 distribution services.As will be described later in my
18 testimony, the ratepayer pays for current depreciation
19 and for return on capital for the un-depreciated portion
20 of the distribution system. Because the economic life of
21 the system is longer than the depreciation period, much
22 of the existing system costs nothing in rate schedules,
23 even though value continues to be provided to the
24 ratepayer.
25 Q.Is there other rationale supporting the
182 Richard Slaughter 7
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1 Commission's decision in IPC-E-95-18?
2 A.Yes.In the 1995 Rule H case, the BCA
3 provided evidence concerning the adverse economic impacts
4 that would result if new customers were required under
5 the Company's
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183 Richard Slaughter 7a
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1 proposed Rule H Tariff modifications to pay all costs of
2 new distribution facilities in excess of embedded
3 investment. The Commission specifically found that
4 requiring payment of all these costs from new customers
5 could have severe economic effects.
6 Q.Has the Commission' s recognition of the
7 rationale and policy in been carried forward in
8 subsequent orders?
9 A.At least with respect to its policy of sending
10 appropriate market signals to the Company's customers,
11 yes. The Commission has quite recently affirmatively
12 recognized that the need to constrain unbridled demand
13 growth requires that more accurate market signals be
14 provided to customers. For example, average cost
15 pricing, by design, has protected Idaho Power customers
16 from the full effects of inflation and of the costs of
17 fuel switching and other changes in the cost of
18 delivering energy.
19 In IPC-E-08-10, the Commission adopted the
20 Company's proposed "inverted block" rate schedule for
21 residential customers, in which an initial block at
22 lowest price was set at approximately 60% of the average
23 residential monthly use, with a higher price for energy
24 in excess of that monthly amount. The Commission also
25 continued to support higher rates for summer use, in
184 Richard Slaughter 8
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1 recognition of the fact that residential summer demand
2 contributes to the Company's peak demand. The Company
3 proposed, and the Commission approved, an increase in the
4 rate differentials between the Tier 1 and Tier 2 blocks
5 to 20%, to recognize higher summer energy cost, and to
6 "send a stronger price
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185 Richard Slaughter 8a
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1 signal to customers encouraging the efficient use of
2 energy. ..." (IPC-E-08-10 transcript, p. 728).
3 Q.Does the Company's Rule H proposal conform to
4 both the Company's above-described intent concerning its
5 residential rate proposal in IPC-E-08-10 and Commission
6 policy?
7 A.No.In fact Idaho Power's current Rule H
8 modification proposal is diametrically opposed to the
9 Company's IPC-E-08-10 proposal and the Commission's
10 decision.
11 Q.In what way?
12 A.The proposed Rule H seeks to place the full
13 marginal cost of distribution system expansion onto "new"
14 customers. Rather than sending a price signal to
15 existing customers that capital cost inflation exists, it
16 seeks to remove growth entirely from rate base. This
17 would cause rate base to gradually decline over time due
18 to depreciation.
19 The only distribution inflation reflected in
20 rate base under the Company's proposal accrues because of
21 system maintenance and replacement, if, as, and once it
22 occurs.Because the economic life of distribution plant
23 tends to be longer than the depreciated life,
24 un-depreciated distribution plant, and thus rate base,
25 will decline over time. Consequently, rates will not
186 Richard Slaughter 9
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1 reflect the actual (higher) cost of service or the
2 increased (and accruing but not-yet-incurred) cost of
3 maintenance and replacement of the existing distribution
4 system.
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187 Richard Slaughter 9a
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1 Q. What effect would Commission support for the
2 Company's current Rule H proposal have on ratepayers?
3 A.It would undercut the price signal the
4 Commission's decision in IPC-E-08-10 was intended to
5 provide by removing inflation from a maj or component of
6 energy costs. This is a subsidy to existing customers.
7 Causing customers to believe that energy costs less than
8 it actually does will cause overall demand to rise above
9 the level that might be expected from current policy.
10 Rising costs, inflation, and market signals
11 Q.Is there reason to believe that Mr. Said is
12 confusing nominal with real costs, and that the nominal
13 costs for new terminal services do not in fact represent
14 "higher costs of growth?"
15 A.Yes. The conclusion that "growth does not pay
16 its own way" can only be reached by a simple comparison
17 of embedded distribution costs with that of new service.
18 In Mr. Said's view, since new service costs more than the
19 average of the existing rate base, rapid growth results
20 in nominal rate increases.
21 Q. Is Mr. Said's comparison accurate?
22 A. No, because Mr. Said is comparing apples and
23 oranges. First, as mentioned earlier, the Company's
24 existing system contains substantial distribution assets
25 that are fully depreciated. Thus, even if inflation were
188 Richard Slaughter 10
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1 zero, Idaho Power's embedded costs would be below that of
2 new plant, simply because the economic life of new plant
3 is longer than the
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189 Richard Slaughter lOa
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1 depreciation schedules. Second, the Company's existing
2 system is of lower quality and capacity than new plant
3 because of its age. As a result, the additional
4 distribution system provided for new customers is of
5 significantly higher quality, has a higher capacity, a
6 longer expected life, and lower maintenance costs than
7 the aging, depreciated system that existing customers are
8 charged for as part of their rates.
9 Q.Please elaborate.
10 A.For the past quarter century the portion of
11 Idaho served by Idaho Power, particularly the Treasure
12 Valley, has grown rapidly. This growth is consistent
13 with current public policy of the State, the City of
14 Boise and business and public entities in the Treasure
15 Valley.It has caused Idaho Power's overall distribution
16 system to be younger than it otherwise would be. While
17 one result is rising average costs, the reduction in
18 average system age also will cause maintenance costs to
19 be lower than would otherwise be the case - reducing
20 costs down the road. In other words, new customers who
21 generate the need for new distribution plant, in the long
22 run, reduce real costs for all customers.
23 Q.So growth is not a cause of real cost
24 increases?
25 A.No. To quote my prior testimony, "growth,
190 Richard Slaughter 11
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1 especially accelerating growth, will cause the effects of
2 an underlying cost change to be felt more quickly. In
3 itself, however, growth does not cause higher costs. In
4 inflation adj usted terms, if the same facilities are
5 provided at the same real unit cost, then average real
6 cost per customer will not change. This is true
7 regardless of the rate of growth."
8
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/
191 Richard Slaughter 11a
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1 Q.Did you provide an example?
2 A.Yes. Exhibit 203 illustrates four hypothetical
3 customers coming onto the system over four years, each
4 requiring a $100 investment. The investments in the
5 example have a four-year life, depreciated straight line.
6 As the illustration shows, total depreciation
7 cost does indeed grow, until after the fourth year, when
8 the last customer is added. From that time forward,
9 depreciation cost remains constant. Even adding
10 replacement investment does not cause the total cost to
11 rise. Average cost remains constant over the period.
12 Absent inflation, growth cannot cause per customer cost
13 to rise.
14 This example demonstrates that the phrase
15 "growth should pay for itself," while an appealing
16 political slogan, is devoid of analytical insight insofar
1 7 as it relates to costs of service.
18 Q.Is there a reason why Commission policy should
19 discourage the artificial aging of the distribution
20 system?
21 A.Yes, there are several. First, artificially
22 suppressed energy prices encourage excess demand, and
23 resul t in higher costs later, as the Commission
24 recognized in Order No. 30722 when it approved an
25 inverted-block rate structure for the Company.Second,
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1 extending the economic life of distribution assets to
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193 Richard Slaughter 12a
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1 Q.Please give examples:
2 A.Example 1:
3 In the former Soviet Union (FSU) the government
4 used heavily subsidized utili ties as a social safety net,
5 in a centrally-directed economy in which markets and
6 prices as we know them did not exist. Subsequent to
7 independence, it has been politically impossible for
8 governments to charge rates sufficient to support the
9 existing utility infrastructure. The result in the FSU
10 has been a steady deterioration of transmission and
11 distribution plant, with increasing outages and
12 insufficiently reliable service to support economic
13 growth:
14 "Estimates of electrical power consumption show
that a full third is lost to poor quality
transmission and distribution systems .... Much
of the electrical usage is not metered or the
meters not read. Additionally, despite the
extremely low price, much of the power is not
paid for; especially in rural areas. As such,
it amounts to a de facto subsidy to the poorest
in the population. The price paid for the
subsidy is an unreliable and inadequate
supply." (Asian Development Bank Technical
Assistance No. 3106-KGZ Benchmark Report -
Economic and Tax Analysis, Page V-2 5)
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21 "For most consumers, there is li ttle incentive
to conserve electricity and much incentive to
waste gas. Our house in Jalal-Abad had an
electric furnace, while the cookhouse had a gas
stove and a gas-fired heater for washing and
for the sauna. The electricity was metered at
six mills per kilowatt-about a fifth the cost
of its production and deli very. The gas was
metered, too, but because the meter only had
three digits, the monthly bill was negotiated
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wi th the meter reader. Our landlady would
regularly turn the electric furnace off at six
every morning, in freezing weather, to save
'that expensive electricity,' but she cared
less about the gas, even though the
burners are so crude that they waste most of
the energy used. We once fired the sauna for
four hours; because the gas pressure was low,
it would not heat to the required temperature.
From the standpoint of the individual consumer,
such profligate behavior is entirely rational."
(Richard Slaughter, "Poor Kyrgyzstan, ii The
National Interest, Summer 2002)
195 Richard Slaughter 13a
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1 While no one expects Idaho Power's system to
2 deteriorate to anywhere near this extent, real examples
3 exist to validate economic theory regarding subsidies,
4 market signals and demand in the context we are
5 discussing here today.The policy proposed in the
6 current proceeding attempts to hide from ratepayers the
7 true economic value of the services they receive, and in
8 so doing encourages excess consumption. The following
9 example illustrates that while not as acute, the same
10 problem does exist within Idaho Power i s system:
11 Example 2:
12 The distribution system in Boise's North End,
13 like much of the Company's service terri tory, is several
14 decades old. When that system was placed in service, the
15 average home did not have today' s array of computers,
16 ki tchen appliances, saunas, hot tubs, air conditioners,
17 and other electrical consumers. Today, the distribution
18 system built to serve a typical 1940s load can be
19 incapable of handling current demands:
20 "In December 1990 we were living in Boise's
North End on 18th street. It was extremely
cold with periods of lows in the -20 degree
range and some daily highs not exceeding zero.
During the later part of the month we
experienced reoccurring power outages. During
one of the outages I talked with an Idaho Power
lineman who was working to restore power in the
alley behind our house. I asked him why the
system wasn't staying on, even after repair.
He told me in older areas, like the North End,
since the lines were put in, homes now had
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significantly more electronic items - electric
heat, microwaves, computers, television sets,
etc. - that put a load on the system that was
higher than anticipated when the system was
buil t. Therefore, due to the higher loads per
household, during an extremely cold period likewe're having, the system couldn i t keep up."
(Don Reading, former IPUC Policy Administrator,
anecdote from personal experience while living
on 18th street in Boise)
197 Richard Slaughter 14a
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.1 This is anecdotal evidence. But for customers
2 in many of Boise's older neighborhoods, Dr. Reading's
3 description of his experience over 18 years ago could be
4 a fair statement of their own contemporary service
5 experience in cold, or hot, or windy circumstances.
6 Another example occurred in the late 1990s when an Idaho
7 Power transmission line, heated by high load, shorted on
8 a tree in southern Idaho causing multiple hours' power
9 outage in several states.
10 Q.Your first example compares modern utility
11 regulation with the collapse of a centrally-directed
12 economic system. Is that appropriate?.13 A.More than Idaho Power may realize. While Idaho
14 Power enjoys a monopoly-lock on its electrical customers,
15 unlike modern telephone or cable companies , it does not
16 enj oy a lock on all energy customers, and fuel switching
17 is not only possible, it is practiced. Unlike the
18 Soviet-controlled energy supply and distribution system
19 discussed above, Idaho Power does not have control over
20 its own customers' choices. Idaho Power's existing
21 customers can and do shift portions of their overall
22 demand between energy sources in response to changing
23 non-subsidized natural gas and oil prices.
24 Q.Please give an example..25 A.There are three specific areas, each of which
198 Richard Slaughter 15
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1 undercuts the Company's view that new growth is the
2 primary contributor to higher costs. First, most of the
3 Company's existing customers have the capacity to
4 substitute electric heat, through room heaters, for gas
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.1 oil. As gas and oil prices rise relative to electricity,
2 those substitutions can be and are being made.
3 Second, there is a growing national movement to
4 replace gasoline with electricity for short-distance
5 automoti ve commuting. While the proposals generally
6 envision capturing existing off-peak capacity through
7 "smart grids" and nighttime recharging, these emerging
8 energy policies and technologies inevitably will result
9 in requirements from existing customers for more
10 generation and transmission.
11 Third, average electricity consumption is
12 rising, as it has for the past half century. Homes now.13 feature multiple televisions, computers, hot tubs,
14 saunas, laundry equipment, outdoor lighting, air
15 condi tioning, and many other electric consumers - many of
16 them never fully turned off - that did not exist in prior
17 years. These demands come from existing, as well as new,
18 customers, and are a reason for the demand management
19 policies discussed earlier.
20 Q.What does this mean for the Company's
21 underlying thesis?
22 A.There are two effects, which together mean that
23 this attempt to protect existing customers from energy
24 costs is futile and self-defeating. The attempt should.25 be abandoned.
200 Richard Slaughter 16
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1 Q.Please elaborate.
2 A.First, it is the policy of the State and local
3 governments throughout Idaho, and of Idaho Power for all
4 of my memory going back to the 1950s, to encourage demand
5 growth.
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201 Richard Slaughter 16a
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1 From the days of "Reddy Kilowatt" until Idaho Power
2 recently became capacity constrained, growth has been
3 deliberately sought on the basis of low hydro energy
4 costs.
5 How does the Company propose to handle theQ.
6 conflict between the attraction of low energy prices and
7 i ts capacity constraints?
8 As a short-term strategy, the Company recentlyA.
9 completed a customized sales agreement with a new
10 industrial facility, Hoku Materials, whose demand exceeds
11 25 MW, for the purpose of managing the costs of this
12 specific large industrial expansion. (Order No. 30748,
13 Demand up to 25 MW is to beCase No. IPC-E-08-21)
14 supplied through the existing large industrial tariff,
15 while demand in excess of that amount is to be supplied
16 at the existing PURPA avoided cost rate. That rate
17 represents Idaho Power's cost of additional energy and
18 capaci ty in lieu of its marginal energy costs from
19 capacity that is no longer in surplus. For the longer
20 term, the conflict is not resolved.
21 What is the second effect you referred to?Q.
22 The second effect is fuel switching by existingA.
23 customers, as described earlier. Thus, low electricity
24 prices attract growth, both industrial and residential,
25 which results over time in new requirements for capacity
202 Richard Slaughter 17
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1 and transmission. Further, customers can and will
2 substi tute fuels to save money. You cannot have it both
3 ways, as the Company is attempting to do with this
4 proceeding.The attempt should be abandoned.
5 Q.Why is it useful to examine the source of
6 nominally higher distribution costs?
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.1 A. As I explained in my testimony in IPC-E-95-18,
2 rising costs for new distribution plant can be attributed
3 to only three sources: reduced density, inefficiencies,
4 and inflation.The first two of these sources can be
5 dismissed:
6 Densi ty: If new construction is, on
7 average, less dense than existing construction, then for
8 the most part the associated costs are accounted for in
9 installation work orders. For that reason, lower density
10 should not contribute to higher average costs because the
11 developer or new customer capitalizes line extensions.
12 Addi tionally, much residential growth is to be found in.13 high-density development. Thus, while the average
14 single-family residential lot (and associated common area
15 or open space) may be larger than it used to be, the
16 average line and terminal facilities costs may not be.
17 Inefficiencies: If the Company or its
18 contractors have become less efficient, then they, and
19 not new growth, will have caused real, as well as
20 nominal, costs to rise. I am not aware of any facts
21 disclosed in this proceeding that would indicate that the
22 Company or its contractors have become less efficient
23 over time, and for the purpose of this discussion I will
24 assume that Idaho Power and its contractors have not.25 become progressively less efficient over time.
204 Richard Slaughter 18
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1 Inflation: The third potential cause for
2 increased distribution facilities costs is inflation or
3 increases in commodity or labor. In my opinion,
4 inflation is the reason for higher costs of new
5 distribution facilities.
6 Q.Why does this matter for the Company's proposed
7 tariff modifications?
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205 Richard Slaughter 18a
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.1 A. Inflation is a rise in the general price level,
2 or put another way, a depreciation of the currency.
3 Rising commodity or labor prices contribute to higher
4 costs, but in so doing they also raise the nominal value
5 of existing plant in the same way they contribute to
6 increases in the nominal value of other assets, including
7 houses. Since these price changes alone do not change
8 the real economic value of all distribution services, and
9 because, as explained earlier, new facilities present
10 lower ongoing costs to the system than existing plant,
11 there is no rationale for protecting existing ratepayers
12 from those costs..13 Q.In his pre-filed direct testimony, a portion of
14 which you quoted above, Mr. Said poses, and then answers,
15 the question "is growth is paying for itself?I' His
16 answer is that "clearly the answer is no." Do you agree?
17 A.I do not agree. The only way to agree with his
18 statement is to fully discount the facts that: 1)
19 existing customers contribute to the need for new
20 generation, transmission and distribution facilities when
21 their energy consumption rises; 2) the nominal embedded
22 investment in existing plant is far less than both
23 replacement cost and economic value; 3) inflation is the
24 source of higher nominal costs for new plant; and 4) new.25 customers result in the installation of higher quality
206 Richard Slaughter 19
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1 facilities that have lower maintenance costs, which tends
2 to lower average costs for all ratepayers.
3 Contrary to Mr. Said's conventional wisdom,
4 growth DOES pay its own way. Actually, for the reasons
5 discussed above, growth pays more than its own way when
6 it pays costs
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207 Richard Slaughter 19a
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1 above embedded cost. That is because the plant purchased
2 by new development is un-depreciated and higher quality
3 than the plant represented by embedded costs. For
4 existing customers to receive this new plant at zero cost
5 represents a large transfer of capital value from new
6 customers to existing customers. This shift of
7 capitalization from the Company to the customer also
8 represents a maj or change in utility regulatory policy,
9 where normally the customer effectively leases the use of
10 plant from the Company. The Company's continued legal
11 ownership and control of new plant further supports this
12 view.
13 Q. Is this a new revelation?Are these arguments
14 based on new facts?
15 A.No. These facts were before the Commission in
16 1995, and supported the Commission i s findings in Order
17 26780 addressing the question of the level of support to
18 be provided new customers by the Company. The
19 Commission's finding in this regard bears repeating here:
"We find that new customers are entitled to
have the Company provide a level of investment
equal to that made to serve existing customers
in the same class. Recovery of those costs in
excess of embedded costs must also be provided
for and the impact on the rates of existing
customers is an important part of our
consideration. We also recognize that
requiring the payment of all costs above
embedded investment from new customers could
have severe economic effects." (Order 2 67 8 0,
iv. C. Commission Findings, ~ 2)
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1 Economic effects of the proposed rule
2 Q. You have testified that the Company's proposal
3 would further shift the capital cost of new distribution
4 services from rate base to the developer, and by
5 implication, to the home
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1 purchaser. The home purchaser, of course, continues to
2 pay for embedded capital costs through rates. Does this
3 capital shift have economic impacts other than "growth
4 paying its way?"
5 A.Yes. Because assessed valuation for all
6 properties in a taxing district are impacted by the
7 prices of new residences, it has a potential impact on
8 property taxes as well as affecting the overall market
9 and the ability of individuals to purchase houses.
10 Q.Have you an illustration of how this works?
11 Yes.In a colloquy from my IPC-E-95-18A.
12 testimony, I explain the process. Note that much of the
13 problem arises from the fact that a cost formerly
14 capitalized in the Company i s rate base is now (for new
15 customers only) also capitalized in the price - and thus
16 assessed value - of their house:
17 "A. I have shown that the 'cost of new
distribution facilities,' to the extent
they are higher than embedded costs, are higher
because of inflation, not changes in the nature
of the facilities. I have also demonstrated
that growth itself does not cause higher costs.
What the existing customer sees when rates rise
is an adj ustment of his payment to more closely
reflect current market value, NOT a new cost
for which there should be a "new benefit."
Further, there is no benefit delivered to the
new customer (that) the existing customer does
not already enj oy.
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24 "Q. Is there is an offsetting cost reduction for
the ratepayer, such that for all ratepayers
there is a zero impact?25
210 Richard Slaughter 21
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"A. Unfortunately, no. There is prospectively an
offsetting benefit from reduced rates in the
future. Because the fee becomes capitalized in
the price of the house, however, it has other
undesirable consequences.
"Q. Please elaborate.
211 RichardSlaughter 21a
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1 "A. In the longer term, a cost increase of
between $1200 and $3000 to the developer willresul t in a price increase for the finished
house of from $2000 - $4000, since both
developer and builder must mark up their costs
to cover overhead and profit. At the higherranges it. will have a definite effect on the
abili ty of buyers to enter the market, and on
the payments of all home buyers.
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6 "Q. Can i t they just buy an existing home, as
suggested by one witness?
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"A. No, because the price increase for new
properties will be reflected in existing
properties as well. New and existing homes are
economic substitutes for each other. Since
addi tions to the supply of housing must for the
most part be new homes, the cost of development
and construction sets the value of older homes
as well. Aside from differences in physical
condition and location, the value of any
existing house is determined by its replacementcost.
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"Q. That sounds as though the increase would create
new wealth for all existing homeowners, much as
when the price of a stock rises. Why is that
bad?15
16 "A. Because it has occurred for artificial,
non-economic reasons, and because higher values
tend to translate into higher property taxes.
It is quite possible that existing ratepayers
might find themselves paying more in tax thanthey save in rates.
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"Q. Can you roughly calculate the relative effects?
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"A. Yes. Assume that the additional cost is $3000
to the developer, and a total of $3500 to the
homeowner. At 8 % interest, the monthly
mortgage would rise by $23. Since Idaho law
currently allows local government full recovery
of value for new property, his tax bill will
rise by an estimated 1.5% of $3500, or over $4
per month. The increased monthly cost, which
would add about 4% to the average mortgage,
would have a significantly negative impact on
the ability of some individuals to purchase
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acquire financing.
"Q. Please estimate the rate savings.
"A. Initial savings on rates would of course be
zero. By the end of ten years, assuming that
1ç per kwh of current rates is for distribution
and that portion would otherwise grow by 3% per
year, the monthly savings for all customers
would be .35ç per kwh, or $3.50 per month.
"Q. What then is the net savings?
213 Richard Slaughter 22a
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1 "A. The new customer is obviously worse off by $27
per month from the beginning, because he is
paying not only the additional fee but also
interest on amortization of that fee. The
existing customer is also worse off. His
property tax, given whatever lag is necessary
for assessment and services budgets to catch up
with his increase, will have risen an estimated
$4 per month. He must wait for a period in
excess of ten years for the savings on rates to
amount to that much."
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7 Q.Aside from the Company's current intent (as
8 extrapolated from Mr. Said's testimony) to shift the
9 entire marginal cost of growth (including all costs of
10 new generation, transmission and distribution) to new
11 development, what if anything is different from its
12 current tariff modification proposal and its previous
13 proposal in Case No. IPC-E-95-18?
14 A.The most significant differences are the
15 economic climate, its effects on the Company's costs, and
16 the extent of the adverse economic impact that the
17 proposed tariff modification will have.
18 Q.Please explain.
19 A.When the Company proposed its tariff
20 modification in 1995, it was experiencing - and
21 thereafter continued to experience - a period of
22 relatively robust and consistent customer growth. The
23 significant economic downturn being experienced
24 nationally and locally has stunted growth of Idaho
25 Power's commercial and residential customers.In fact,
214 Richard Slaughter 23
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1 as shown in Table 2, the number of new customers in these
2 two classes has been approximately halved in each of the
3 past two years. Consequently, the asserted increasing
4 "burden" of new growth on the Company's assets now is
5 questionable, even if one were to agree with its
6 assumption that growth is not paying its way. Further,
7 the total cost of new facilities above embedded costs
8 reflects only one percent of the Company's
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215 Richard Slaughter 23a
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1 total plant. In other words, it is insignificant in
2 comparison to other factors affecting rates.
3 On the other hand, the serious economic impacts
4 that the Commission found would result from the Company's
5 1995 Rule H tariff modification are only compounded in
6 the face of the current economic conditions.
7 Particularly for southern Idaho home buyers and the BCA' s
8 members who provide the materials and services to build
9 those homes, the increase in the purchase price of a new
10 home that would need to be imposed to recover the
11 cost-shifting proposed by Idaho Power, should be expected
12 to price-out hundreds of potential home buyers.
13 Using a computation methodology endorsed by the
14 National Association of Home Builders ("NAHB'I) and
15 economic data for the Boise City-Nampa, ID Metropolitan
16 Statistical Area, the BCA estimates that for each
17 additional $1,000 of cost in the price of a home, an
18 additional 538 households will be "priced-out" or unable
19 to purchase a home.I have attached the NAHB analysis
20 supporting these estimates as Exhibit 203 to my
21 testimony.
22 Q.Does the Company's proposal constitute
23 discrimination against new customers?
24 A.Definitely. While such a policy mayor may not
25 be judged unconstitutional, it clearly places the two
216 Richard Slaughter 24
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1 groups - existing and new customers - in very different
2 posi tions relative to their cost of energy, without a
3 rational basis for doing so."New" customers will have
4 paid full marginal cost for their distribution service,
5 while "existing" customers
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217 Richard Slaughter 24a
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1 continue to pay depreciated average cost - and, at the
2 same time enj oy the reduced maintenance cost made
3 possible by the newer plant. Put another way, the new
4 customer will be required to fully capitalize his
5 terminal services - without benefit of ownership, while
6 the existing customer leases capital facilities provided
7 by the Company. And of course, the new customer also is
8 required to join the existing customer in paying the cost
9 of the existing system - essentially paying on two fronts
10 for the same service an existing customer receives.
11 Q.Does it matter whether this discrimination is
12 judged constitutional or not?
13 A.Not really. Like the laws of physics, the laws
14 of economics tend to ignore human politics. As shown
15 earlier, customers are not confined to Idaho Power for
16 energy. In making their choices among fuels, they will
17 defeat any attempt to artificially suppress the price of
18 one fuel relative to others. They will move to the
19 cheaper fuel. This fuel swi tching ability makes
20 expansion of supply (i. e., generation, transmission and
21 distribution) inevitable, regardless of growth.
22 Q.Nevertheless, do you believe that certain
23 modifications to the Company's Rule H tariff would be
24 appropriate?
25 A.Yes, I do, although they are in the direction
218 Richard Slaughter 25
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1 of increased refunds and allowances to the new customer
2 rather than their elimination, as proposed by the
3 Company.
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219 Richard Slaughter 25a
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.1 Reconciling allowances and inflated costs
2 Q.Do you have a proposal for calculating an
3 appropriate refund?
4 A.Yes. The reason that allowances and refunds
5 fallout of date over time would appear to be inflation.
6 Certainly the Company, in its application and testimony,
7 has provided no other reason, nor have they quantified
8 the presumed disparity.
9 Thus , it is fully appropriate that these costs
10 be kept in line for periods of time between general rate
11 cases, and adjusted at that point to keep the allowances
12 and refunds in a generally consistent relationship with.13 embedded costs.
14 Q.How do you propose to do that?
15 A.To keep the costs aligned with real costs, and
16 to send the correct price signal to customers, allowances
17 and refunds should be indexed annually to an appropriate
18 inflation measure. This could be done as part of the
19 Power Cost Adjustment mechanism, which keeps rates
20 current with fuel prices.
21 One easily available and conservative index is
22 the implicit price deflator for the Gross Domestic
23 Product. Applying this deflator, PGDP, to the 1995 and
24 prior refund allowances of $800 and $1200, respectively,.25 yields the following information:t
220 Richard Slaughter 26
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.1 Table 1
9
GDP Implicit price deflator
Year PGDP Refund $800 Refund $1200
1995 0.025 800 1,200
1996 0.037 830 1,244
1997 0.045 867 1,300
1998 0.042 903 1,355
1999 0.045 944 1,416
2000 0.037 979 1,468
2001 0.008 987 1,480
2002 0.016 1,003 1,504
2003 0.025 1,028 1,541
2004 0.036 1,065 1,597
2005 0.029 1,095 1,643
2006 0.028 1,126 1,689
2007 0.02 1,149 1,723
2008 0.013 1,164 1,745
Q.What is the current embedded cost?
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11 A.The 2008 cost of service study used in
12 IPC-E-08-10 shows distribution rate base per customer of.13 $1,002 for residential service (Exhibit 204). Thus, the
14 inflation-adj usted refund from IPC-E-95-18 appears to be
15 supported by current embedded costs.
16 Q.How do the per lot costs under the existing
17 Rule H compare with this analysis?
18 A.Gi ven the analysis provided by the Company in
19 response to our production request (Exhibit 202), under
20 the existing Rule H total rate-based costs are $1,964,
21 $1,140, and $1,159 for developments of 3,10, and 32 lots
22 respectively. Under the proposed Rule, those costs fall
23 to $1,187, $178, and $222. The existing Rule shows some
24 consistency as development si ze increases; the proposed.25 Rule is totally inconsistent between very small
221 Richard Slaughter 27
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.1 and larger developments, and attempts to force the new
2 customer to fully capitalize these costs, contrary to
3 long-standing utility costing principles.
4 Q.Wha t do you recommend?
5 A.For reasons stated above, I recommend the
6 Commission require that standard terminal facilities be
7 provided and included in rate base, as they were prior to
8 IPC-E-95-18.I further recommend that the per-lot refund
9 for line extensions be raised to $1000 per lot and
10 indexed to the GDP implicit price deflator, adjusted
11 annually together with the PCA mechanism between general
12 rate cases..13 Following my earlier analysis, it is wholly
14 appropriate that new plant introduced into rate base be
15 costed at a level slightly higher than current embedded
16 cost, as would be accomplished by adoption of my
17 recommendations. This practice will cause additional
18 plant to be priced at a level comparable to replacement
19 plant, appropriately reflect the economic value of new
20 plant to the system and to all rate payers, and avoid the
21 discrimination inherent in the Company's proposal.
22 Q.Does the Company provide quanti tati ve support
23 for its proposal that terminal facilities plus an
24 allowance be replaced by a flat $1780 per transformer?.25 A.No, it does not. For that reason, and the
222 Richard Slaughter 28
Building Contractors
.
10
11
12.
.
1 reasons stated above, this proposal should be rejected,
2 in favor of the practice prior to the IPC-E-95-18 case.
3 What do you recommend for general overhead?Q.
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223 Richard Slaughter 28a
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.1 A. Overhead is an extremely difficult area to
2 analyze without a full audit of the Company's operations.
3 I do not have a specific recommendation. There are many
4 areas of the Company's operations that have very little
5 to do with line extensions: general corporate
6 operations, generating and transmission plant, billing
7 and receivables management, power purchases and sales,
8 and others. Engineering is already included at cost;
9 certainly some management, secretarial, office,
10 inventory, and other costs are appropriate. So while the
11 existing overhead rate of 1.5% may be too low, adopting a
12 company-wide rate on an arbitrary basis would appear to.13 be excessive.It would also, pending the next general
14 rate case, cause double collection of those costs.
15 Q.How important is this issue to Idaho Power's
16 other ratepayers? How much pressure do distribution
17 costs from new construction place on rates?
18 A.Not very much, particularly in today' s economy.
19 Residential growth has been slowing, falling from a high
20 of 4.0% in 2005 to just under 1% in 2008, making this
21 issue something less than urgent. There were 3, 736 new
22 residential customers in 2008. Assuming that each
23 represents a new lot on which an $800 was refunded, plus
24 approximately $3000 per transformer, that totals just.25 under $ 3 million of new distribution cost, out of $ 4 4 5
224 Richard Slaughter 29
Building Contractors
.
10
11 /
.
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1 million of residential distribution plant (0.9%), or of
2 $1.5 billion of total plant (0.27%).In fact, many of
3 the new customers are in high-density apartment blocks,
4 reducing costs significantly. The impact on average
5 retail rates could not be more than $.06 x .01, or
6 six-tenths of one mill, rather smaller than the 3%
7 inflation experienced in the rest of the economy.
8
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225 Richard Slaughter 29a
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.1 Table 2
2 Idaho Power Residential customers, end of yearCustomers ~dded__~% growth3 1995 281,792 8,596 3.1%1996 291,116 9,324 3.3%4 1997 299,696 8,580 2.9%1998 308,432 8,736 2.9%5 1999 318,896 10,464 3.4%2000 326,922 8,026 2.5%6 2001 335,285 8,363 2.6%2002 344,447 9,162 2.7%7 2003 354,704 10,257 3.0%2004 366,218 11,514 3.2%8 2005 380,952 14,734 4.0%2006 393,338 12,386 3.3%9 2007 400,637 7,299 1.9%2008 404,373 3,736 0.9%
10
11 Source: IPCo Response to BCA First Production
12 Request, page 42.13 Q.The Company proposes that to reduce
14 administrative costs the time allowed for vested interest
15 refunds should be reduced from five years to four. Can
16 you support that proposal?
17 A.No. The Company's proposal would appear to be
18 based on the asserted difficulty of maintaining current
19 addresses for developers beyond a very short time period.
20 To further reduce the period for recovery of vested
21 interests is arbitrary and inappropriately designed for
22 the need.
23 Q.Do you propose an al ternati ve method?
24 A.Yes. In today' s economic environment , with.25 growth substantially slowed, the recovery period should
226 Richard Slaughter 30
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.1 not be reduced,but expanded.In my opinion,a ten-year
2 period would
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227 Richard Slaughter 30a
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1 more appropriately track the connection of new customers
2 wi th distribution facilities. There is no reason that
3 the Company's accounting cannot track the accounts for
4 that period of time.
5 How do you propose to handle the problem ofQ.
6 missing addresses or contact information?
7 That burden could be shifted from the CompanyA.
8 to the owner of the vested interest. The contract
9 creating the vested interest might simply require the
10 developer or other owner to maintain current contact
11 information with the Company. The Company could then be
12 relieved of its refunding obligation after a reasonable
13 period during which a vested interest owner did not have
14 valid information on file with the Company.
15 Does this complete your testimony?Q.
16 A.Yes, it does.
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228 Richard Slaughter 31
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.1 (The following proceedings were had in
2 open hear ing . )
3 MR. CREAMER: And we tender Dr. Slaughter
4 for cross.
5 COMMISSIONER SMITH: I have a question for
6 you. This testimony was filed with your comments;
7 correct?
8 MR. CREAMER: Yes.
9 COMMISSIONER SMITH: And then on September
10 11th you filed your testimony on reconsideration.
11 MR. CREAMER: Yes.
12 COMMISSIONER SMITH: And so it seems to me.13 that those two kind òf go together because the testimony,
14 the only other testimony, left is the response testimony
15 of Mr. Said.
16 MR. CREAMER: Why don't I --
17 COMMISSIONER SMITH: So I'm thinking
18 MR. CREAMER: We'll move to admit the
19 other as well.
20
21 DIRECT EXAMINATION
22
23 BY MR. CREAMER: (Continued)
24 Q Dr. Slaughter, you also prefiled testimony.25 on reconsideration consisting of 17 pages on September
CSB REPORTING
[phone]
229 SLAUGHTER (Di)
Building Contractors
5 Yes.
11 th,2009?
A
Q
205?
A
Q
Yes..1
2
3 And had accompanying Exhibit 2005 or
4
7 today that were asked in your prefiled testimony on
8 reconsideration, would your answers be the same?
9 A Yes, they would.
10 MR. CREAMER: Madam Chair, I move that the
11 prefiled testimony on reconsideration also be spread on
12 the record together with Exhibit 205..13 COMMISSIONER SMITH: Okay, if there's no
14 obj ection, it is so ordered.
15 (The following prefiled reconsideration
16 testimony of Dr. Richard Slaughter is spread upon the
17 record. )
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CSB REPORTING
[phone]
230 SLAUGHTER (Di)
Building Contractors
.1 Q. Please state your name and business address for
2 the record.
3 A.My name is Richard Slaughter. My business
4 address is 907 Harrison Blvd, Boise, Idaho 83702.
5 Q.Are you the same Richard Slaughter who has
6 testified previously in this case?
7 A.I am.
8 Q.What is the purpose of your testimony?
9 A.In Interlocutory Order No. 30883 the Commission
10 granted the Building Contractors' request for
11 reconsideration" on the limited issue of the amount of
12 appropriate allowances." Order 30883 at 4. The.13 Commission stated that "Allowances are intended to
14 reflect an appropriate amount of contribution provided by
15 new customers requesting services in an effort to relieve
16 one area of upward pressure on rates. BCA may address
17 what allowance amount is reasonable based on the cost of
18 new distribution facilities." My testimony addresses the
19 allowance issue in that context and wi thin the framework
20 of the existing Commission standard enunciated in Order
21 26780 in 1995 concerning an appropriate amount of Company
22 investment in distribution facilities (and the concurrent
23 amount of contribution provided by new customers) .
24.25
231 Richard Slaughter 2
Building Contractors
.1 Q. What is your understanding of the Order 26780
2 standard regarding distribution cost recovery as it
3 applies to the contribution provided by new Company
4 customers?
5 A.In Order 26780 (1995) the Commission concluded
6 that new customers are entitled to the same company
7 investment in distribution enjoyed by existing customers
8 in the same class, and costs required to extend service
9 to new customers in excess of the embedded cost of
10 distribution are to be recovered from the developer or
11 new customer:
15
We find that new customers are entitled to have
the Company provide a level of investment equal
to that made to serve existing customers in the
same class. Recovery of those costs in excess
of embedded costs must also be provided for and
the impact on the rates of existing customers
is an important part of our consideration.
(Order 26780 at 17).
12.13
14
16
17 Q.What is the significance of focusing on the
18 Company's embedded costs for distribution when
19 establishing an appropriate allowance for extending
20 service to new customers?
21 A.The Company i s per customer embedded cost for
22 distribution is equal to the Company's investment in
23 existing distribution plant less depreciation. Embedded
24 cost represents the Company's current "level of.25 investment made to serve existing customers," and
232 Richard Slaughter 3
Building Contractors
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10 /
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1 depending on how much additional distribution plant has
2 been added since the Company's last rate case, embedded
3 cost approximates the Company
i s per customer level of
4 investment in distribution plant that it can recover
5 through existing rates. To the extent that the
6 Commission desires to
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233 Richard Slaughter 3a
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.1 relieve upward pressure on rates, then limiting the
2 Company's investment in distribution to serve new
3 customers to its current per customer embedded costs for
4 distribution facilities providing the same service to
5 existing customers accomplishes this.
6 Q.Is there a reasonable estimate of what the
7 Company's per customer embedded cost for distribution
8 facilities is?
9 A.Both I, in my earlier pre-filed testimony, and
10 Staff in its Comments, have calculated the Company's
11 embedded distribution costs. In the residential customer
12 class, Staff calculated this to be $1,232 per residential.13 customer. That calculation has not been challenged by
14 any party to this case. For purposes of my testimony I
15 have accepted Staff~s estimate of the Company's per
16 customer embedded cost.
17 Q.How, then, does all of this relate to "what
18 allowance amount is reasonable based on the cost of new
19 distribution facilities?"
20 A.If the Commission's standard for Company
21 investment in distribution continues to be an amount
22 "equal to that made to serve existing customers in the
23 same class," and the Company is entitled to recover from
24 the new customer the costs of new distribution facilities.25 in excess of embedded costs, then the appropriate Company
234 Richard Slaughter 4
Building Contractors
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10
.
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1 per customer allowance for new distribution should be an
2 amount equal to the
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235 Richard Slaughter 4a
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.1 Company's per customer embedded costs to serve existing
2 customers, or $1,232 per new customer.
3 Q.Are you aware that the Company's new tariff
4 treats an "allowance" as an amount equal to the Company's
5 contribution toward the cost of terminal facilities,
6 which the Company, Staff and the Commission each have
7 determined should be $1,780 per transformer as a "maximum
8 allowance" for residential and non-residential single
9 phase service?
10 A.Yes.
11 Q.The $1,780 allowance approved in Order 30853 is
12 over $600 more than the $1,001 embedded cost per customer.13 that you calculated in your Direct Testimony, and over
14 $500 more than the $1,232 embedded cost per customer that
15 Staff calculated from the cost of service studies used in
16 the Company's most recent rate case. Hasn't the
17 Commission actually increased the allowance it now would
18 permit for these new residential class customers?
19 A.I state emphatically that it has not. The
20 $1,001 to $1,232 embedded cost amounts I have testified
21 to above are per customer embedded costs. The $1,780
22 terminal facilities allowance for new service bears no
23 relationship whatsoever to the Company's current per
24 customer investment to serve existing customers in the.25 same class. A $1, 780 allowance could be appropriate and
reasonable if it did, but it simply does not.
236 Richard Slaughter 5
Building Contractors
.
.
.
1 Q.Please explain.
2 A.As the Building Contractors have emphasized in
3 their comments, and I have in my testimony, in a
4 residential subdivision terminal facilities can and do
5 serve up to ten customers per installation.
i
6 Consequently, a single allowance, in whatever amount,
7 that is based solely on the cost of terminal facilities
8 must be apportioned among the total number of new
9 customers who share those terminal facilities. By
10 authorizing only a per transformer allowance of $1,780,
11 the Company investment per new customer can drop to as
12 low as $149 per customer, or nearly $1100 less than the
13 Company's current distribution investment for each of its
14 existing customers.
15 Q.What does this mean in terms of the Company's
16 ability to recover its investment through existing rates?
17 A.For the 60 lot subdivision example in Exhibit
18 204 of my Direct Testimony, this results in the Company
19 recovering through rates up to $1,084 more per new
20 customer than it invested in the distribution facilities
21 serving that customer.
22 Q.So what does that mean for this proceeding?
23 A.In the context of residential customers, in all
24 but the smallest subdivisions, the allowance approved by
25 the Commission in Order 30833 allows the Company to
237 Richard Slaughter 6
Building Contractors
.
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20
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24.25
1 recei ve a contribution for distribution facilities from
2 each new customer that
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238 Richard Slaughter 6a
Building Contractors
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1 exceeds embedded costs. In a large subdivision the new
2 customer contribution exceeds the Company i s embedded cost
3 by approximately $1,050 per customer.
4 Q.How does this compare with the Company's
5 investment versus its recovery through rates using the
6 current allowances in the Order 26780 tariff?
7 A.Again using the residential customer class, the
8 Company's current tariff approved by Order 26780 provides
9 a total per customer allowance that is made up of two
10 components: 1) an up-front allowance for terminal
11 facilities; and 2) a per-lot/customer refund allowance as
12 new customers come on line.
13 Interestingly, as illustrated in Exhibit 202 to
14 my Direct Testimony, which is appended to this testimony
15 as Exhibit 205, the total of these two allowances on a
16 per customer basis under the Order 26780 Rule H tariff
17 are quite close to the approximate $1,100 to $1,200
18 current per customer embedded cost of distribution.
19 Under the tariff approved in Order 30853, however, even
20 after accounting for a $1,780 terminal facilities
21 allowance, the Company's net per customer investment
22 actually becomes negative.
23 Q.Please elaborate.
24 Table 1 below shows how developments ofA.
25 different sizes compare with regard to the Company's
239 Richard Slaughter 7
Building Contractors
.
.
24.
1 capital investment for Rule H costs, including 1.5%
2 overhead. The examples are from Staff Comments,
3 Attachment 9, page 2 of 4.
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240 Richard Slaughter 7 a
Building Contractors
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1 Table 1
Order 30853 Rule H Rate Structure
1 2 3 4 5
61114 67186 60197 24482 27729
3 10 32 60 101
2 1 4 5 10
2
3 Subdivision example
4 Design Number
5 No. of Lots
6 No. of transformers
7 Average embedded cost per
customer (Staff commnts at 5) $ 1,232 $ 1,232 $ 1,232 $ 1,232 $ 1,232
8
9
Total Design Cost $10,572 $15,116 $50,432 $72,528 144,771
Recovery through existing
rates $3,697 $12,324 $39,438 $73,946 $124,476
Order 30853 developer payment
after allowance $7,012 $13,336 $43,312 $63,628 $126,971
Net Company investment per ($46)($1,054)($1,010)($1,084)($1,056)
customer
10
11
12
13
14 Source: Staff Attachment 9, Page 2 of 4; Staff comments at 5.
15 Company investment per customer is total design cost per lot less developer
payment less rate recovery
16
17 Q.Please describe the table.
18 A.The table shows the number of lots and the
19 number of transformers in each development.It also
20 shows the total design/work order cost, the amount
21 recovered through existing rates, and the amount that
22 Order 30853 would require be paid in up front capital by
23 the developer.Finally, it shows the net Company
24 investment per customer in each case..25 In example 5 of Table 1, total design cost is
241 Richard Slaughter 8
Building Contractors
.1 $144,771 of which the Company is entitled to recover
2 $124,476 from the through the existingnewratepayers
3 rate
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12.13
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16
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18
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24.25
242 Richard Slaughter 8a
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1 structure, leaving a shortfall of $20,395, presumably to
2 be collected from the developer. Order 30853, however,
3 entitles the Company to collect almost $127,000 from the
4 developer, for a total recovery of $251,447, having
5 expended only $144,771.
6 Q.How can the Company's net investment be
7 negative if the purpose of Order 30853 is to "relieve
8 upward pressure on rates," and if, as the Commission has
9 observed in Order 30853 (see Testimony at page 11 below),
10 "fees cannot be charged for new plant that cannot be
11 attributed specifically to serving new customers?"
12 A.The conflict between the Order 26780 standards
13 and the outcome of the new Rule H design approved in
14 Order 30853 cannot be reconciled. As Table 1 clearly
15 shows, the new Rule H design does far more than affect
16 "upward pressure on rates" from new distribution, it
17 actually provides a profit on each installation
18 supplemental to the Company's authorized rate of return
19 on the investment.
20 Q.What is the case under Rule H from Order 26780?
21 A.From Staff Attachment 9, page 2 of 4, it is
22 clear that under "Current Rule H" approved by Order
23 26780, the developer's "Net Cost" plus the $800 per lot
24 refund almost exactly equal the "Work Order Cost per
25 lot," which in turn are almost exactly equal to the
243 Richard Slaughter 9
Building Contractors
.1 average embedded cost of $1,232 computed by Staff.
2 Whether as a result of simple coincidence or of
3 thoughtful consideration,under
4
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12.13
14
15
16
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244 Richard Slaughter 9a
Building Contractors
.
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1 the existing Rule H tariff approved in Order 26780,
2 current Company per customer investment in new
3 distribution closely approximates its current embedded
4 cost.It therefore is hard to see how, given today' s
5 costs for new distribution facilities, the authorized
6 allowances under the Rule H tariff approved in Order
7 26780 produce Ilupward pressure on rates," let alone why
8 any significant change in the tariff is warranted.
9 Q.So what rationale does exist for changing the
10 tariff and reducing the Company's distribution investment
11 if the sum of its current per customer allowance in the
12 form of terminal facilities allowances and per lot
13 refunds actually approximates its embedded cost for
14 distribution?
15 A.None that I am aware of.
16 Q Do you have an opinion as to what the economic
17 resul t to the Company would be if only a $1, 780 terminal
18 facili ties allowance is approved and there is no other
19 allowance provided for new distribution?
20 A.In the residential subdivision examples I have
21 been discussing, the Company will be in an excess earning
22 situation with regard to its distribution plant. The
23 difficulty in accounting for this excess earning after
24 the fact and providing necessary refunds or credits to
25 the appropriate new customers will be significant.
245 Richard Slaughter 10
Building Contractors
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1 Q. Absent such an after-the-fact accounting, what
2 happens to this "excess earnings?"
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246 Richard Slaughter lOa
Building Contractors
.1 A. Absent a timely true up that ultimately
2 distributes these excess revenues back to the new
3 customers who paid them, the practical effect quite
4 likely will be that the amount earned on new distribution
5 plant in excess of embedded costs will be applied to help
6 pay the Company's other costs, including non-recoverable
7 costs, generation and/or transmission costs-new customers
8 will be paying an unequal proportion of these costs when
9 compared with existing customers.
10 Q.Is that result consistent with prior Commission
11 decisions?
12 A.No. It would not be consistent with Order.13 30853 or the two Idaho Supreme Court decisions on this
14 subj ect referenced in that Order, which preclude
15 disproportionately recovering the costs of new generation
16 and transmission plant from new customers:
17 Allowances. The capital cost of installing new
generation and transmission plant has always18 generally been recovered through rates paid by
all customers. Indeed, fees cannot be charged19 for new plant that cannot be attributed
specifically to serving new customers. (Idaho
20 State Homebuilders v. Washington Water Power,
107 Idaho 415,690 P.2d 350 (1984); Building21 Contractors Association v. j PUC and Boise Water
Corp., 128 Idaho 534, 916 P.2d 1259 (1996).)
22 (Order 30853, at 9-10) Emphasis added.
23 Q.Aside from the issues you have just described,
24 is the rate structure in Order 30853 an economically.25 efficient result as it applies to residential extensions?
247 Richard Slaughter 11
Building Contractors
.
.
.
1 A. No. An economically efficient result would
2 align costs with recovery from developers, so that the
3 highest developer contributions would come from
4 developments that present the highest per customer cost.
5 In the Table 1 example,
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248 Richard Slaughter 11a
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1 the subdivision with three lots, which has two
2 transformers for three customers , receives the highest
3 allowance, over $1,000 higher per lot (customer) than the
4 larger subdivisions with ten customers per transformer.
5 In other words, the rule approved in Order 30853
6 encourages high cost development. This cannot be
7 desirable.
8 Q.Based on the foregoing testimony, do you have
9 an opinion concerning how to calculate a reasonable and
10 appropriate allowance for line extensions to serve new
11 customers?
12 A.However the allowance is configured, to meet
13 the Commission's stated standard an appropriate per new
14 customer allowance must be approximately equal to the
15 Company's per existing customer embedded costs,
16 calculated in this case by Staff at $1232.44.
17 Q.Do you have a proposed rate structure for
18 residential subdivisions that satisfies this standard?
19 A.Yes. Much of the regulatory difficulty with
20 Rule H, insofar as residential customers are concerned,
21 stems from attempting to match allowances and refunds
22 with defined I'standard service," accounting for
23 transformers, underground vs. overhead, service drops,
24 the size of the pole offset, etc. It would be much
25 simpler for all to understand and administer, if the
249 Richard Slaughter 12
Building Contractors
.
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12.13
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1 tariff simply were to charge a subdivision developer the
2 full work order cost for the installation, and then
3 credit
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250 Richard Slaughter 12a
Building Contractors
.
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1 that charge with the capital value embedded in rate base.
2 In other words, the appropriate allowance would achieve a
3 Company investment for any new service extension request
4 equal to its per customer embedded cost multiplied by the
5 total number of new customers to be served. The
6 developer or new customer contribution towards the new
7 distribution facilities then would be equal to total
8 design cost minus the Company's per customer embedded
9 cost allowance (i. e., those facilities costs in excess
10 of the amount the Company will receive as a return from
11 the new customer through rates).
12 Q.Are there side effects to such a structure?
13 A. Yes. This structure would cause embedded rate
14 base to decline slowly over time, unless the allowance is
15 somehow adj usted for inflation. While such an outcome
16 may be desirable from the Company's standpoint or from a
17 poli tical standpoint, it would over time cause rates to
18 be less truly reflective of energy costs than they are
19 now. To the extent that allowances fall further behind
20 costs, the Rule would shift generation and transmission
21 cost to the new customer. To avoid this outcome, the
22 embedded cost allowance should be indexed to the lesser
23 of a general energy or construction cost index or the
24 increase in installation work order costs. Either
25 approach will work and either cost method can easily be
251 Richard Slaughter 13
Building Contractors
.1 updated annually by the Company and Staff.
2 Q.Can you illustrate your proposal?
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252 Richard Slaughter 13a
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1 A.Yes.Table 2 shows the effect of a simplified
2 Rule H rate structure, wherein the developer pays up
3 front the entire work order or Total Design cost, less
4 the amount expected to be recovered from the new
5 customers through existing rate base.This latter amount
6 can be calculated by Commission staff each year, in
7 conj unction with a filing by the Company of current work
8 order costs.Developer payments would always be $0 or
9 greater. In the examples in the table , subdivision #4 is
10 from 2002, so the costs shown may be understated in
11 today' s dollars.
12
13 Table 2
Simplified Rule H Rate Structure
Subdi vision example 1 2 3 4 5
Design Number 61114 67186 60197 24482 27729
No.of Lots 3 10 32 60 101
Average embedded cost per
customer (Staff comments at 5)$1,232 $1,232 $1,232 $1,232 $1,232
Total Design Cost $10,572 $15,116 $50,432 $72,528 144,771
Recovery through existing
rates $3,697 $12,324 $39,438 $73,946 $124,476
Developer payment (::=$0)$6,875 $2,792 $10,994 $0 $20,295
Developer payment per lot $2,292 $279 $344 $0 $201
Net Company investment per $0 $0 $0 ($24 )$0
customer
14
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253 Richard Slaughter 14
Building Contractors
.
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1 Q.Does this structure have advantages?
2 Subject to the qualifications above, itA.
3 achieves several obj ecti ves: 1 ) it does not contribute
4 additional cost to rate base, which achieves the
5 Company's and
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254 Richard Slaughter 14a
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.
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1 Commission's stated objectives. Residential growth
2 serves only to maintain rates at their current levels
3 insofar as Rule H costs are concerned; 2 ) it satisfies
4 the Supreme Court standard in Water Power and Boise Water
5 by avoiding the need for continual after-the-fact
6 accounting for excess earnings on distribution plant
7 and/ or the potential shift of generation and transmission
8 costs to new customers through the line extension tariff;
9 3)it greatly simplifies the presentation and
10 calculation of Rule H costs for residential development;
11 and 4) it is economically efficient~ because it recovers
12 the highest development payment from the highest cost
13 installations.
14 Q.Does this conclude your testimony?
15 A.Yes.
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25
255 Richard Slaughter 15
Building Contractors
.
.
.
18
1 (The following proceedings were had in
2 open hearing.)
3 MR. CREAMER: And we would tender him for
4 cross.
5 COMMISSIONER SMITH: Ms. Sasser, do you
6 have any questions?
7 MS. SASSER: Thank you, Madam Chair, just
8 a couple.
9
10 CROSS-EXAMINATION
11
12 BY MS. SASSER:
13 Q Mr. Slaughter --
14 COMMISSIONER SMITH: Dr. Slaughter.
15 Q BY MS. SASSER: Excuse me, Dr. Slaughter,
16 to your knowledge, is there any requirement that
17 allowances be based on embedded investment?
A I'm sorry, counselor, I have a severe loss
19 and things are turned up as far as they can, but
20 especially women's voices are difficult to hear, if I
21 could ask you to proj ect into the microphone.
22 Q To your knowledge, is there any
23 requirement that allowances be based on embedded
24 investment?
25 A I'm speaking here from my understanding of
CSB REPORTING
[phone]
256 SLAUGHTER (X)
Building Contractors
.
.
.
1 Commission policy and legal rulings on which that is
2 based and I'm not giving an opinion, but yes, my
3 understanding of both Commission policy, standing
4 Commission policy, unless they change it in this case and
5 on the rulings on which it is based as cited by the
6 Commission in their Order is that costs for growth can be
7 assigned to separately identifiable elements of costs;
8 i. e., distribution, but that general costs, costs that
9 are generally incurred for all ratepayers, may not be
10 shifted to subsets of those ratepayers.
11 Prior to the 1995 line extension case, isQ
12 it wi thin your knowledge, was the line extension policy
13 prior to the 1995 case based on embedded costs?
14 A I don i t know.
15 MS. SASSER: That's all, Madam Chair.
16 COMMISSIONER SMITH: Thank you. Mr.
17 Spears, do you have questions?
18 MR. SPEARS: No, Madam Chair.
19 COMMISSIONER SMITH: Ms. Nordstrom.
20 MS. NORDSTROM: No questions.
21 COMMISSIONER SMITH:Does the Commission
have any questions?
COMMISSIONER REDFORD:No,ma'am.
COMMISSIONER KEMPTON:No questions.
COMMISSIONER SMITH:Oh,that can't be.
22
23
24
25
CSB REPORTING
[phone]
SLAUGHTER (X)
Building Contractors
257
.
.
.25
1 All right, any redirect, Mr. Creamer?
2 MR. CREAMER: Well, I guess I will.
3 COMMISSIONER SMITH: Just remember it has
4 to be wi thin the scope of direct.
5 MR. CREAMER: I was disappointed that
6 there weren't any other questions, but I'm sure Dr.
7 Slaughter isn't. My question is wi thin the scope of the
8 cross and the direct.
9
10 REDIRECT EXAMINATION
11
12 BY MR. CREAMER:
13 Q Dr. Slaughter, you were asked by Ms.
14 Sasser concerning whether you're aware of any allowances
15 being required to be based on embedded investment and you
16 were speaking on your understanding of Commission policy
17 and the rulings on which it is based. Is that policy the
18 statement in the previous Rule H proceeding by this
19 Commission that "new customers are entitled to have the
20 Company provide a level of investment equal to that made
21 to serve existing customers in the same class1l?
22 A That is my understanding, yes.
23 MS. NORDSTROM: Could you please have
24 counsel explain from what he was quoting?
COMMISSIONER SMITH: Yeah, give us your
CSB REPORTING
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258 SLAUGHTER (Di)
Building Contractors
.1 reference. I assume it was a Commission Order.
2 MR. CREAMER: Madam Cha i r , I am quot ing
3 from Order 26780, Commission findings in the prior Rule H
.
4 proceeding.
5
6
7 IPC-E- 95-18.
8
9 Q
COMMISSIONER SMITH: 26780.
MR. CREAMER: 26780, Case No.
COMMISSIONER SMITH: Thank you.
BY MR. CREAMER: And your answer was,
If we go back, short-term memory here, my
MR. CREAMER: Thank you. I don i t have any
14 other questions, Madam Chair.
10 Dr. Slaughter?
11 A
COMMISSIONER SMITH: Thank you,
17 (The witness left the stand.)
12 answer was yes.
13
15
16 Dr. Slaughter.
18
19 Ms. Nordstrom.
20
COMMISSIONER SMITH: We're back to you,
MS. NORDSTROM: Thank you. Idaho Power
21 re-calls Gregory Said.
22 COMMISSIONER SMITH: And you i re still
23 under oath, Mr. Said.
.24
25
CSB REPORTING
[phone]
259 SLAUGHTER (Di)
Building Contractors
.
.
.
1 GREGORY W. SAI D,
2 produced as a witness on reconsideration at the instance
3 of the Idaho Power Company, having been previously duly
4 sworn, resumed the stand and was further examined and
5 testified as follows:
6
7 DIRECT EXAMINATION
8
9 BY MS. NORDSTROM:
10 Q Please state your name and spell your last
11 name for the record again.
12 A My name is Gregory W. Said, S-a-i-d.
13 Q Are you still employed by Idaho Power as
14 the general rates manager?
15 A As the director of state regulation,
16 yes.
17 Q Sorry, got the title wrong. Did you file
18 responsive testimony on September 25th, 2009 without
19 exhibits?
20 A Yes.
21 Q Do you have any changes or corrections to
22 your testimony?
23 A No.
24 Q If I were to ask you the questions set out
25 in your prefiled testimony, would your answers be the
CSB REPORTING
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260 SAID (Di-Resp)
Idaho Power Company
.
.
20
1 same today?
2 A Yes.
3 MS. NORDSTROM: I would move that the
4 prefiled responsive testimony of Gregory Said be spread
5 upon the record as if read.
6 COMMISSIONER SMITH: If there i s no
7 obj ection, it is so ordered.
8 MS. NORDSTROM: And with that --
9 MR. CREAMER: No.
10 COMMISSIONER SMITH: Mr. Creamer.
11 MR. CREAMER: I'll renew my objection on
12 the hearsay obj ections that I raised earlier on the same
13 grounds, Madam Chair.
14 COMMISSIONER SMITH: Ms. Nordstrom, do you
15 have any response?
16 MS. NORDSTROM: With the Commission's
17 indulgence, I'd like to ask a few questions of Mr. Said
18 in that regard.
19 COMMISSIONER SMITH: All right, go ahead.
Q BY MS. NORDSTROM: Mr. Said, if I recall
21 correctly, the obj ection was made to the discussion on
22 page 14 and 15 of your responsive testimony with regard
23 to the numbers upon which you based YOur calculation.
24 Could you tell me where you received the transformer, the.25 number of transformers that you refer to in that
CSB REPORTING
[phone]
261 SAID (Di-Resp)
Idaho Power Company
.
.
1 testimony?
2 A I requested that information from
3 Mr. Clint Mills who is the Company's line design
4 leader.
5 Q And was he the one who told you that the
6 Company has installed approximately 132,662 transformers
7 smaller than 150 kVA as you refer to on lines 22 and 23
8 of page 14?
9 A Yes.
10 Q And on page 15 of your testimony, line 5,
11 you referred to an estimated number of residential
12 transformers as 80,393 transformers; is that correct?
13 A That i S correct.
14 Q And from whom did you get that number?
15 A I calculated that number myself based on
16 the 132,662 transformers that Mr. Mills told me about and
17 applying the 60.6 percent allocation to the residential
18 class based upon customer demands that was provided to me
19 by Mr. Timothy Tatum who is a direct report of mine.
20 Q Is Mr. Mills from whom you received the
21 132,662 number present here in the Hearing Room this
22 morning?
23
24.25
A He is.
MS. NORDSTROM: Thank you. I have no
further questions.
CSB REPORTING
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262 SAID (Di-Resp)
Idaho Power Company
.
.
.
1 COMMISSIONER SMITH: So Mr. Creamer, does
2 that help you out any with your obj ection?
3 MR. CREAMER: I'll maintain the obj ection
4 for the same reasons.
5 COMMISSIONER SMITH: Well, I think
6 Mr. Mills is here. If you want to ask him about the
7 numbers and I think in the ordinary course of business as
8 a supervisor, Mr. Said is probably entitled to rely on
9 information from those that he has supervision of, so I'm
10 going to deny your obj ection.
11 MR. CREAMER: With respect to this
12 statement, Madam Chair?
13 COMMISSIONER SMITH: Yeah, with respect to
14 the testimony on pages 14 and 15. Now, with respect to
15 page 16, do you want to tell me about that again?
16 MR. CREAMER: Madam Chair, page 16, lines
17 13 through 16, Mr. Said is asked whether he has an
18 estimate of the number of undeveloped residential lots
19 wi thin subdivisions that currently have no homes, but for
20 which the Company had backbone and transformers available
21 for service. The answer is simply that he has been told
22 what the current estimate is.
23 COMMISSIONER SMITH: Ms. Nordstrom.
24 MS. NORDSTROM: Well, I would like to ask
25 Mr. Said where he received that particular number.
CSB REPORT ING
[phone]
263 SAID (Di-Resp)
Idaho Power Company
.
.
20
.
1 THE WITNESS: I received that information
2 from Mr. Mills as well.
3 MS. NORDSTROM: Is that the same Mr. Mills
4 that is present here in the Hearing Room today?
5 THE WITNESS: It is.
6 MS. NORDSTROM: Thank you.
7 COMMISSIONER SMITH: I guess for the same
8 reasons I'll try and be consistent and say the source of
9 this information is in the Hearing Room if you choose to
10 call him and ask him about it.
11 MR. CREAMER: Madam Chair, thank you, I'll
12 be consistent as well and maintain my obj ection for the
13 same reasons.
14 COMMISSIONER SMITH: Thank you. with
15 that, we will spread the prefiled testimony of Mr. Said
16 upon -- this is the prefiled response testimony on
17 reconsideration of Mr. Said on the record as if read.
18 (The following prefiled response
19 testimony of Mr. Gregory Said is spread upon the record.)
21
22
23
24
25
CSB REPORTING
(208)' 890-5198
SAID (Di-Resp)
Idaho Power Company
264
.1 Q.Please state your name and business address.
2 A.My name is Gregory W. Said and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.Are you the same Gregory W. Said that
5 previously provided direct testimony in this case?
6 A.Yes, I am.
7 Q.Please describe the events leading up to your
8 preparation of responsive testimony in this case.
9 A.On July 1, 2009, the Idaho Public Utilities
10 Commission ("IPUC") issued Order No. 30853 detailing its
11 findings as to the appropriate changes to be made with
12 regard to Idaho Power Company IS (" Idaho Power" or the.13 "Company") provisions for constructing new service
14 attachments, distribution line installations, or
15 al terations. Those provisions are contained in the
16 Company's Rule H.
17 Subsequent to the filing of petitions for
18 reconsideration of the July 1 Order, the IPUC, on August
19 19, 2009, issued Order No. 30883 granting the Petitions
20 for Reconsideration of Ada County Highway District, City
21 of Nampa, and Association of Canyon Highway Districts
22 regarding jurisdictional authority issues relating to the
23 Order. A briefing schedule was set to address those
24 issues..25
265 SAID, RESP 1
Idaho Power Company
.
.
.
1 Order No. 30883 also granted in part and denied in part
2 the Petition for Reconsideration filed by the Building
3 Contractors Association of Southwestern Idaho ("BCA").
4 Specifically, reconsideration was granted, but limited to
5 the issue of the amount of initial allowances. The Order
6 instructed the BCA to address "what allowance amount is
7 reasonable based upon the cost of new distribution
8 facilities. "
9 On September 11, 2009, Dr. Richard A. Slaughter
10 on behalf of the BCA submitted his testimony on
11 reconsideration. I am presenting the Company's response
12 to the BCA testimony.
13 Q.Please describe the Commission's determination
14 of the appropriate allowances to be provided to new
15 residential customers outside of a residential
16 subdivision as per Order No. 30853.
17 A.The Commission, in Order No. 30853, determined
18 that new residential customers outside a residential
19 subdivision should receive an allowance of up to $1,780.
20 The $1,780 amount was based upon the current installation
21 cost of Standard Terminal Facilities for single phase
22 service to residential customers. The components of this
23 amount were described by Mr. Sparks in his direct
24 testimony and workpapers in this case. Standard
25
266 SAID, RESP 2
Idaho Power Company
.
.
.
1 Terminal Facilities costs include the costs associated
2 wi th providing and installing one overhead service
3 conductor and one 25 kVa transformer to serve a 200
4 amperage meter base. Based upon this allowance,
5 customers that required non-typical, larger than standard
6 transformation or customers that wanted underground
7 service would be required to pay as a contribution in aid
8 of construction ("CIAC") those work order costs that
9 exceeded the Standard Terminal Facilities cost of $1,780.
10 Customers are responsible for the costs of new primary
11 conductor constructed between the existing distribution
12 facili ties and the customers' terminal facilities, as
13 well as any secondary conductor constructed between the
14 transformers and junction boxes.
15 The effect of the allowance is typically that
16 for new residential customers requesting overhead service
17 from existing facilities adj acent to their new home,
18 there is no cost to the customer. However, if the
19 customer wants underground service, or if the customer is
20 building a large home that requires larger than standard
21 transformation, or if the customer is some distance from
22 existing facilities, that customer is responsible for the
23 addi tional costs of providing service.
24 Q.Please describe the Commission's determination
25 of the appropriate allowances provided to
267 SAID, RESP 3
Idaho Power Company
.1 developers of residential properties inside residential
2 subdivisions as per Order No. 30853.
3 A.Similar to its decision as to the appropriate
4 allowance for residential customers outside of
5 residential subdivisions, the Commission determined that
6 allowances within subdivisions should be based upon the
7 same Standard Terminal Facilities costs that were used
8 for residential customers outside of subdivisions.
9 Therefore, the Commission set the allowance at $1,780 per
10 installed transformer wi thin subdivisions.
11 The effect of the allowance inside a
12 subdivision requiring six transformers is that the.13 Company funds the first $10,680 (6 * $1,780) of a
14 developer's work order costs. Work order costs for
15 residential subdivisions typically include:(1) primary
16 conductor necessary to reach new transformers, (2) the
17 transformers, and (3) secondary conductor to junction
18 boxes. Meters and services are not typically installed
19 as part of subdivision work orders. Later, when homes
20 are constructed and new owners request service, Idaho
21 Power installs meters and service conductor but those
22 indi vidual owners are only financially responsible for
23 the overhead/underground differential for services
24 (similar to customers outside subdivisions) and,.25
268 SAID, RESP 4
Idaho Power Company
.1 in the case of large lot subdivisions, any additional
2 secondary line extensions.
3 Q.What is Dr. Slaughter i s recommendation for an
4 allowance?
5 A.Dr. Slaughter's recommendation, as I understand
6 it, is to provide an upfront allowance to developers (not
7 customers) of residential subdivisions equal to $1,232
8 per lot wi thin the subdivision.
9 He equates the number of lots wi thin a
10 residential subdivision to the number of customers that
11 will potentially be served, implying that no development
12 risk exists. He devotes a significant portion of his.13 testimony comparing an embedded cost number of $1,232 per
14 customer to the Commission-ordered allowance within
15 residential subdivisions of $1,780 per installed
16 transformer.I will detail in my testimony why this is
17 not a valid comparison.
18 As the Company has stated in reply comments,
19 there is a difference between lots and customers. Lots
20 represent a possibility of future customers that will
21 receive service from the Company, but are by no means a
22 guarantee of future customers.
23 Q.What is the financial effect of Dr. Slaughter's
24 recommendation?.25
269 SAID, RESP 5
Idaho Power Company
.1 A. Dr. Slaughter's recommended mechanism treats
2 developers of residential subdivisions more favorably
3 than individual customers seeking connections outside of
4 subdi visions. It tends to provide allowances in
5 subdivisions that exceed the costs of Standard Terminal
6 Facili ties with the excess allowances offsetting the
7 costs of primary conductor and secondary conductor. Such
8 treatment is inconsistent with the treatment of
9 residential customers outside of subcti visions who do not
10 recei ve an allowance greater than the cost of Standard
11 Terminal Facilities.
12 Furthermore, as I will discuss later in my.13 testimony, Dr. Slaughter i s allowance recommendation
14 inappropriately includes a component for substations
15 which are excluded from the provisions of Rule H.
16 In my opinion, it would be illogical for the
17 Commission to conclude that the Company should make a
18 greater investment on behalf of a speculative development
19 within a subdivision than the investment the Company
20 makes for an actual new residential customer outside a
21 residential subdivision.
22 Q.As the Commission reconsiders its determination
23 of appropriate residential allowances, what
24.25
270 SAID, RESP 6
Idaho Power Company
.
.
.
20
1 do you see as the primary considerations the Commission
2 must make?
3 A.The determination of appropriate residential
4 allowances is primarily a policy issue of how to
5 apportion the costs and risks associated with extending
6 distribution service to new customers. Current policy
7 decisions regarding allowances to residential customers
8 and residential developers should take into
9 consideration:(1) current economic factors facing the
10 Company and its customers, (2) consistency of allowances
11 wi thin each customer class, and (3) risks associated with
12 the differences between requests made by residential
13 customers and requests made by residential developers.
14 Once the Commission has settled on appropriate
15 policy, the only remaining issue is to determine the
16 appropriate method by which the allowances are to be
17 determined.
18 Q.What policy rationale does Dr. Slaughter give
19 for his recommendation?
A.Dr. Slaughter points to policy the Commission
21 set in 1995 as precedent for policy in 2009. He quotes
22 Commission Order No. 26780 issued in 1995 wherein the
23 Commission stated:
24
25
271 SAID, RESP 7
Idaho Power Company
.
.
.
1 We find that new customers are
enti tled to have the Company provide
a level of investment equal to that
made to serve existing customers in
the same class. Recovery of those
costs in excess of embedded costs
must also be provided for and the
impact on the rates of existing
customers is an important part of
our consideration.
2
3
4
5
6
7 (Order 26780 at 17.)
8 Q.Does the Company agree with Dr. Slaughter that
9 the level of investment that the Company should make on
10 behalf of new customers via allowances for line
11 installations and service attachments should not change
12 over time?
13 A.No. While there is some value in having a
14 consistent policy over time, there is also value in
15 changing policy in light of changing circumstances. As I
16 pointed out in my direct testimony in this proceeding,
17 the Company has filed four general rate cases and two
18 single~issue rate cases since 2003. The Company recently
19 filed a Notice of Intent to file an additional general
20 rate case later this year. In general, additional
21 revenues generated from the addition of new customers and
22 load growth are not keeping pace with the additional
23 expenses created and required to provide ongoing safe and
24 reliable service to new and existing customers. Gi ven
25 the current frequency of
272 SAID, RESP 8
Idaho Power Company
.1 rate case acti vi ty and recognition that the Company will
2 still be making substantial investments in generation and
3 transmission assets in coming years, the Company believes
4 it is reasonable for the Commission to adj ust its policy
5 wi th regard to the level of investment that the Company
6 should make on behalf of new customers via allowances for
7 line installations and service attachments. What worked
8 in 1995 is not working today.
9 In addition, I believe that the Commission must
10 re-examine and update its historical policy regarding
11 residential allowances to ensure consistent treatment
12 wi thin the residential class while at the same time.13 recognizing the differences in risk associated with
14 facili ties constructed for customers or constructed for
15 developers.
16 Q.In your opinion, did Dr. Slaughter follow the
17 Commission instructions to address "what allowance amount
18 is reasonable based upon the cost of new distribution
19 facilities" when making his allowance recommendation for
20 residential subdivisions?
21 A.No. The Commission's instruction to evaluate
22 the cost of 'Inew" distribution facilities is consistent
2 3 wi th the Company's contention that current policy should
24 be based upon current conditions. Dr..25
273 SAID, RESP 9
Idaho Power Company
.1 Slaughter's recommendation is based upon 14 year-old
2 policy and what he calls "the Company's embedded
3 distribution costs." Rather than evaluating the costs of
4 facili ties currently required wi thin a given subdivision,
5 Dr. Slaughter proposes allowances be based upon
6 historical investments of the Company on behalf of
7 customers. In that regard, I believe that Dr. Slaughter
8 includes costs that are unrelated to facilities required
9 as part of residential subdivision requests and therefore
10 should not be considered when determining allowances.
11 Q.What does Dr. Slaughter propose as the
12 allowance to be funded by the Company inside a.13 residential subdivision?
14 A.Dr. Slaughter proposes an allowance of $1,232
15 per lot wi thin a residential subdivision.
16 Q.What methodology did Dr. Slaughter use to derive his
17 $1,232 per lot recommendation?
18 A.Dr. Slaughter has simply re-packaged
19 computations made by the Commission Staff earlier in this
20 case. Those computations included costs related to
21 investments the Company has made in substations, primary
22 lines, secondary lines, transformers, services, and
23 meters that have been allocated to the residential class
24 in rate proceedings. Attachment 4 to Staff Comments in.25 this
274 SAID, RESP 10
Idaho Power Company
.
.
.
1 proceeding quantified total net plant for these six items
2 per residential customer at $1,104. Staff Comments
3 described an adj ustment of this number to arrive at
4 $1,232 per customer, an amount Staff described as a
5 "revenue neutral" level. Staff did not make a proposal
6 based upon its quantifications. Staff ultimately
7 recommended no allowance inside subdivisions but instead
8 proposed refunds equal to the cost of overhead
9 transformers to developers as new homes are built and
10 customers are connected. See Staff Comments at pp. 6-7.
11 Q.Does the Company believe that allowances for
12 residential subdivisions should be based upon what Staff
13 calls "revenue neutral" and Dr. Slaughter calls "embedded
14 costs" that include substations, primary lines, secondary
15 lines, transformers, services, and meters?
16 No. The Company disagrees with both the policyA.
17 underlying the computations and the methodology used
18 based upon that policy. The Commission did not utilize
19 the Staff's computations when it made earlier
20 determinations in this case and it should not accept
21 those computations as re-presented by the BCA.
22 First, with regard to the methodology, the
23 Commission should recognize that residential subdivision
24 work orders typically include only a primary line (or
25
275 SAID, RESP 11
Idaho Power Company
.1 backbone), a number of transformers and secondary line to
2 indi vidual lots. There are no costs associated with
3 substations, services, or meters in residential
4 subdivision work orders. Service conductor and meters
5 are not installed wi thin subdivisions until later when
6 homes are actually constructed and customer load occurs.
7 In my opinion, there is no reason to provide allowances
8 to developers for costs that are not incurred or included
9 in the developer i s work order to construct facilities
10 necessary for the residential subdivision.
11 Second, with regard to consistency of policy,
12 per Order No. 30853, residential customers outside of.13 subdi visions receive allowances based solely on Standard
14 Terminal Facilities. They receive no allowances for the
15 costs of substations, primary lines, or secondary lines.
16 In my opinion, it is not appropriate to base an allowance
17 to developers for lots inside a residential subdivision
18 on facilities that are not considered for allowances to
19 residential customers outside of subdivisions.
20 Third, again with regard to consistency of
21 policy, as pointed out by Dr. Slaughter, transformers
22 often serve more than one ultimate customer. Offering an
23 allowance on a per customer basis rather than on a per
24 transformer basis can lead to the unreasonable result.25 that the allowance is
276 SAID, RESP 12
Idaho Power Company
.1 greater than the cost of terminal facilities (in this
2 case transformers) required to provide service. These
3 excess allowances would theoretically be applied to other
4 work order costs such as primary and secondary line
5 construction, an allowance that is not provided to any
6 other customer group. In my opinion, allowances should
7 consistently be based upon terminal facilities and
8 allowances should not exceed these costs.
9 Q.Further addressing the allowance computation
10 methodology, does the Company believe that the Staff
11 computation adopted by Dr. Slaughter represents a correct
12 I'revenue neutral" level that can be used for quantifying.13 historical per residential lot investments made by the
14 Company in residential subdivision work orders?
15 A.No. As I have discussed, the Staff
16 computations include amounts for substations, meters, and
17 service conductor which are not provided as part of
18 residential subdivision work orders. Of the remaining
19 three cost categories (transformers, primary lines, and
20 secondary lines) only transformers are considered when
21 determining allowances for all other customer classes.
22 Furthermore, Staff included the costs of both primary and
23 secondary transformers that receive allocation to
24 residential class in general rate case proceedings. New.25
277 SAID, RESP 13
Idaho Power Company
.1 residential requests under Rule H provisions rarely, if
2 ever, include primary transformers.In order to remain
3 consistent with the treatment of all other customer
4 classes, the Commission should isolate its review of Dr.
5 Slaughter's computations to the transformer component.
6 Q.Please quantify the embedded net plant
7 investment per customer in transformers per residential
8 customer based upon data contained in Staff Comments in
9 this proceeding.
10 A.Based upon Attachment 4 to Staff's Comments,
11 the embedded net plant investment in transformers for the
12 residential class is $314.80 per residential customer.13 ($123,250,351 / 391,525 customers). As I pointed out
14 previously in my testimony, this amount includes primary
15 transformer costs that should not be included and are
16 unrelated to Rule H requests.
17 Q.Can you quantify the embedded net plant
18 investment in transformers per residential transformer
19 based upon the numbers contained in Staff Comments?
20 A.Unfortunately, there is not an easy method to
21 arrive at such a number. However I am told by the
22 Company's Line Design Leader that the Company has
23 installed approximately 132,662 transformers smaller than
24 150 kVA. These transformers can and do serve a variety.25 of customer
278 SAID, RESP 14
Idaho Power Company
.1 classes. Using an allocation methodology used in rate
2 cases based upon customer demands, my staff tells me that
3 60.6 percent of secondary transformer costs are allocated
4 to the residential class. Using this percentage, the
5 estimated number of residential transformers is 80,393
6 (132,662 x 0.606). Using that value, the embedded net
7 plant per installed residential transformer is $1,533 per
8 installed transformer.($123,250,351 / 80,393
9 transformers. ) Again, please remember that this number
10 includes primary transformers as well as secondary
11 transformers. Even so, the Commission approved allowance
12 of $1, 780 per installed residential transformer based.13 upon current costs is more generous than an allowance of
14 $1,533 per transformer that would result from an isolated
15 look at the embedded cost of both primary and secondary
16 transformation per installed residential transformer. If
17 primary transformers were removed from the computation,
18 the $1,780 allowance would appear even more generous.
19 Q.What rationale does Dr. Slaughter provide in
20 support of his per customer allowance as opposed to a per
21 transformer allowance?
22 A.Dr. Slaughter implies that developers of
23 residential subdivisions should be awarded greater
24 overall allowances via a per lot allowance than the.25 overall
279 SAID, RESP 15
Idaho Power Company
.
.
.
1 allowance provided to residential customers outside of
2 subdi visions because more lots can be served per
3 transformer wi thin subdivisions than the number of
4 customers served per transformer outside of subdivisions.
5 However, Dr. Slaughter fails to consider the financial
6 risk associated with lots that are left undeveloped;
7 i. e., facilities have been installed and there is no
8 connected load.
9 Do you have an estimate of the number ofQ.
10 undeveloped residential lots wi thin subdivisions that
11 currently have no homes, but have backbone and
12 transformers available to provide service?
13 I am told that the current estimate of vacant,A.
14 undeveloped residential lots in residential subdivisions
15 where the Company has installed backbone line and
16 transformers is greater than 20,000 lots.
17 Notwithstanding the risk of non-development ofQ.
18 residential lots wi thin residential subdivisions, is
19 there a difference between the number of potential
20 customers served per transformer wi thin a subdivision and
21 the number of customers that are served per transformer
22 outside of subdivisions?
23 Yes. The typical transformer installed outsideA.
24 a subdivision is a single phase 25 kVA transformer
25
280 SAID, RESP 16
Idaho Power Company
.
.
.
1 that can typically serve 3 customers. The $1,780
2 allowance is based upon the installed cost of that
3 transformer ($ 915) along with service conductor and
4 metering ($865). The typical transformer installed
5 inside a subdivision is a single phase 75 kVA
6 transformer. The Company's and Commission Staff's
7 posi tion is that allowances should be based on the costs
8 associated with overhead Terminal Facilities, which, in a
9 residential subdivision, equates to transformers. The
10 current installed cost of an overhead single phase 75 kVA
11 transformer is $1,667. The Commission-approved allowance
12 provided exceeds the cost of the typically installed
13 transformer inside a subdivision by $113 per transformer,
14 but offers an equivalent benefit to customers, whether
15 located inside or outside a subdivision. As I have
16 testified previously, service conductor and metering are
17 provided to homeowners at a later time and are not costs
18 incurred by developers.
19 A request for service wi thin a residential
20 subdivision has an implied number of ultimate customers
21 per transformer, whereas a request for service to a
22 residential customer outside of a subdivision does not.
23 However, if additional residential customers request
24 service that can be served by an existing transformer,
25 those customers only receive an allowance reflective of
service conductor and
281 SAID, RESP 17
Idaho Power Company
.
.
.
1 metering because the transformer is already there. As a
2 resul t, Dr. Slaughter's conclusion that residential
......
3 allowances outside of residential subdivisions are more
4 generous than allowances wi thin residential subdivisions
5 is erroneous.
6 Q.Based upon your responsive testimony, what
7 recommendation do you now make with regard to the
8 appropriate level of allowances within residential
9 subdivisions?
10 A.I recommend that the Commission reaffirm its
11 original conclusion that an allowance of $1, 780 per
12 installed transformer is the appropriate allowance to be
13 funded by the Company wi thin residential subdivisions.
14 The allowance is appropriate based upon policy that
15 considers current economic conditions, consistent
16 treatment between and within customer classes, and
17 different risk attributes of new residential customers
18 and residential developers. The methodology of
19 determining an appropriate allowance wi thin a residential
20 subdivision based upon the current cost of transformers
21 is appropriate and consistent with a policy that treats
22 residential customers inside and outside subdivisions
23 similarly.
24 Q.Do you have any additional comments on Dr.
25 Slaughter's testimony on reconsideration?
282 SAID, RESP 18
Idaho Power Company
.1 A.Yes. On page 8 of his testimony on
2 reconsideration, Dr. Slaughter includes a table that he
3 attributes to Staff as his source. In fact, only a
4 portion of the table is taken from Staff computations.
5 Dr. Slaughter arrives at an incorrect conclusion that the
6 Company will somehow achieve negative investment per
7 customer by incorrectly equating what he terms "recovery
8 through existing rates" with contributions in aid of
9 construction. Generally speaking, as long as the Company
10 provides any allowance, that allowance is representative
11 of a Company investment on behalf of customers. The
12 Company is entitled to recover depreciation expense as.13 well as other O&M expenses associated with that
14 investment. The Company is also entitled to an
15 opportunity to earn a return on its investments.
16 However, recovery of investment-related expenses should
17 not be confused with contributions in aid of construction
18 (e. g., work order expenses in excess of allowances) which
19 offset rate base.
20 On page 10 of Dr. Slaughter's testimony on
21 reconsideration, he states that as a result of a $1,780
22 per installed transformer allowance within a subdivision,
23 "the Company will be in an excess earning situation with
24 regard to its distribution plant." This conclusion.25 suggests that the Company color codes its revenues and
283 SAID, RESP 19
Idaho Power Company
.1 assesses under- and over-earning of the Company's
2 authorized rate of return by functional category. This
3 is not a historic approach utilized by the Commission. I
4 am confident that the Commission can and will monitor the
5 earnings of the Company over time.In the last decade,
6 the Company has found it difficult to earn its authorized
7 rate of return, much less earn more than its authorized
8 rate of return. The Commission should continue to
9 consider the Company's actual earnings from a global
10 perspecti ve rather than a piecemeal perspective.
.
.
11 Does that conclude your testimony?Q.
12 A.Yes, it does.
13
14
15
16
17
18
19
20
21
22
23
24
25
284 SAID, RESP 20
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: Ms. Sasser, do you
MS. SASSER: Yes, thank you,
CROSS-EXAMINATION
Mr. Said, outside of the policy
12 considerations that Mr. Creamer stated from the 1995 line.
3
4 have a question?
5
6 Madam Chair.
7
8
9
10 BY MS. SASSER:
11 Q
13 extension case, to your knowledge, is there any
16 A
14 requirement that allowances be based on embedded
15 investment of the Company?
17 Q
No.
Do you have any knowledge regarding prior
18 line extension policies and their basis in the
19 calculation of the Company i s embedded costs?
20 A I do.
Would you like to elaborate on those?
Prior to the 1995 determination,
23 allowances for customer classes exceeded embedded costs
21 Q
24 and were not derived based upon embedded costs at all..
22 A
25 They were based upon revenue determinations that were
CSB REPORTING
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285 SAID (X-Resp)
Idaho Power Company
.
.
.
1 anticipated for customers or in some instances based on
2 connected load, so the policy regarding the methodology
3 in determining the allowances has changed at least twice
4 that 11m aware of, once in 1995 and then again with the
5 issuance of the Order in this case.
6 MS. SASSER: Thank you, Mr. Said. That's
7 all that I have, Madam Chair.
8 COMMISSIONER SMITH: Mr. Spears.
9 MR. SPEARS: No questions, Madam Chair.
10 COMMISSIONER SMITH: Mr. Creamer.
11 MR. CREAMER: Thank you, Madam Chair.
12
13 CROSS-EXAMINATION
14
15 BY MR. CREAMER:
16 Q Mr. Said, I was happy to hear that nothing
17 had changed in your status in employment with the Company
18 during the intervening questioning. I want to go back to
19 in your response testimony in this case, you again take
20 an issue with the policy, the current policy, that the
21 Company provide a level of investment for new
22 distribution facilities equal to the embedded costs.
23 That' sa change, sea change, in Company policy as well,
24 isn't it?
25 A It's a change in our recommendation as to
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286 SAID (X-Resp)
Idaho Power Company
.
.
.
1 the appropriate policy, yes.
2 Q In the prior Rule H proceeding it was the
3 Company's policy that if the anticipated revenues from
4 new customers obtained through current rates are
5 sufficient to cover the costs of new distribution
6 facilities that serve them, then there isn i t an upward
7 pressure on rates from that source, is there?
8 A From that component, no.
9 And that was the Company's position atQ
10 that time?
11 Yes, we recommended the move from aboveA
12 embedded to embedded at that time.
13 But the purpose of this filing is, asQ
14 you've said in your testimony, to relieve one area of
15 upward pressure on rates; isn't that correct?
16 Relieve pressure that could occur from oneA
17 area of
18 Q Meaning this area; correct?
19 A Yes.
20 There's no indication in the record orQ
21 your testimony or the exhibits that the revenues received
22 from new customers aren't sufficient to recover the
23 Company's cost for these distribution facilities, is
24 there?
25 Again, I think we have the same semanticsA
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287 SAID (X-Resp)
Idaho Power Company
.
.
.
1 problem that we had before in that customers who request
2 an attachment to the system are not paying according to
3 the rates and charges of the tariff provisions. They're
4 paying for a portion of the costs that are directly
5 incurred to supply those particular customers with the
6 facili ties that will then enable them to be charged the
7 same rates and charges as other customers sharing their
8 consumption characteristics.
9 In your response on reconsideration, youQ
10 stated that the Company's position that because of the
11 substantial investments that are to be made in generation
12 and transmission assets, the Company thinks it's
13 reasonable for the Commission now to adj ust its policy
14 concerning the level of Company investment in line
15 extensions; correct?
16 A Correct.
17 And to require more investment from theQ
18 new customers for those line extension facilities than in
19 the past?
20 A That's correct.
21 As a result, then, the new customers asQ
22 they pay these costs for the line extension for the
23 distribution facilities, that helps offset pressure on
24 existing customers' rates from generation and
25 transmission and other sources; isn i t that correct?
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288 SAID (X-Resp)
Idaho Power Company
.1 Well, it's all customers from that pointA
2 forward in time, yes.
3 To the extent that the new customers areQ
4 paying more than the existing customers have in their
5 rates and other charges for the same services, then as
6 between new and existing customers there's a difference
7 in treatment, isn't there?
8 A I don' taccept the premise of that
9 question. Basically all customers from a point in time
10 forward are treated identically.
.
.
11 Well, up until this time the Company'sQ
12 posi tion was that if an allowance or Company investment
13 equals the embedded costs of facilities already included
14 in rates, then the new customers are treated the same as
15 the existing customers in terms of the rates they pay;
16 would you agree with that?
17 Not in terms of the rates they pay, inA
18 terms of their contribution to become a customer.
19 MR. CREAMER: Madam Chair, may I approach
20 the witness?
21 COMMISSIONER SMITH: You may.
22 (Mr. Creamer approached the witness.)
23 MR. CREAMER: Madam Chair, may I have this
24 marked as an exhibit?
25 I think your nextCOMMISSIONER SMITH:
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289 SAID (X-Resp)
Idaho Power Company
.
.
.
1 number would be 206.
2 (Building Contractors Association of
3 Southwestern Idaho Exhibit No. 206 was marked for
4 identification by the Notary Public.)
5 BY MR. CREAMER: Mr. Said, you've beenQ
6 handed what's been marked as Exhibit No. 206 in Case
7 No. IPC-E-08-22 filed by the Building Contractors. Do
8 you have that in front of you?
9 A I do.
10 Can you describe what Exhibit 206 is?Q
11 It looks like, and this helps refresh myA
12 memory from a number of years ago, that I was indeed a
13 witness on rebuttal in the IPC-E-95-18 case and this
14 exhibit is my -- well, it looks like 10 pages of
15 testimony, but the copy I have only has the even numbered
16 pages.
17 Well, its fortunate that I only want toQ
18 ask you a question, then, about something on the even
19 page.
20 MS. NORDSTROM: May Mr. Said have a few
21 moments to familiarize himself with his testimony before
22 he testifies to it?
23 COMMISSIONER SMITH: I think that would be
24 a good idea and it might also be a good idea if the
25 Commissioners got copies.
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290 SAID (X-Resp)
Idaho Power Company
.
.
.
1 MR. CREAMER: I apologi ze, Commissioner.
2 COMMISSIONER SMITH: So we i II be at ease
3 for about three or four minutes while we make that
4 happen.
5 (Pause in proceedings.)
6 COMMISSIONER SMITH: We'll go back on the
7 record, everyone having received a full copy of what's
8 now been marked as Exhibit 206.
9 MS. NORDSTROM: Commissioner Smith?
10 COMMISSIONER SMITH: Yes, Ms. Nordstrom.
11 MS. NORDSTROM: Could I please have
12 wi tness Lowry excused from the proceedings?
13 COMMISSIONER SMITH: Is there any
14 objection to excusing Mr. Lowry? Seeing none, he's
15 excused.
16 MS. NORDSTROM: Thank you.
17 Q BY MR. CREAMER: Mr. Said, do you have
18 Exhibit 206 in front of you?
19
20
A I do.
Q Could you please identify that for the
21 record, please?
22 A Exhibi t 206 is rebuttal testimony prepared
23 and provided by me in Case No. IPC-E-95-18 consisting of
24 10 pages.
25 Q Thank you. I i d like to ask you to turn to
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291 SAID (X-Resp)
Idaho Power Company
.
.
.
1 pages -- oh, we'll begin with page 3 of Exhibit 206 and
2 the questioning begins at line 24, "Please comment on the
3 contention that a new service customer who advances costs
4 for facilities will pay rates that include the costs for
5 similar facilities for existing customers who may not
6 have been required to prepay for the facilities." Could
7 you read your answer to that question?
8 The answer that I provided at that timeA
9 was, "The extent to which similar facilities of existing
10 customers are included in existing rates is frequently
11 referred to as the 'embedded cost' for similar
12 facilities.I f an allowance or Company investment is
13 established equal to the embedded cost of facilities
14 already included in rates, new customers are treated the
15 same as existing customers in terms of the rates that
16 they pay."
17 Q So it was the Company's policy at that
18 time that to ensure equal treatment for new customers and
19 existing customers the Company would make an investment
20 equal to the embedded cost?
21 A The proposal was to establish allowances
22 based on embedded costs at that point in time. As I
23 reread that answer today and with 13 years of additional
24 experience under my belt, I probably wouldn i t have
25 answered in exactly the same manner.I think the last
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292 SAID (X-Resp)
Idaho Power Company
.1 sentence in that response where it says, Ilnew customers
2 are treated the same as existing customers in terms of
3 the rates they pay," whether or not the allowance is
4 based on embedded costs, new customers will be treated
5 the same. All new customers will be treated identically.
6 I guess I would restate that new applicants are treated
7 in a manner that would have no impact on existing
8 customers in terms of the rates they pay would be the way
9 that I would answer that question today.
10 Q Well, and in your testimony on
11 reconsideration you compare new customer to new customer
12 inside and outside the subdivision in terms of equal.13 treatment, but you don i t compare the new customer with
14 the existing customer as you did in the prior
15 proceedings, isn't that correct, in terms of equal
16 treatment?
17 A I think in terms of equal treatment, all
18 applicants need to be treated similarly and applicants
19 are what are addressed in Rule H. The rates that
20 customers pay are provided for in the individual rate
21 tariffs for the customer classes, so the treatment of
22 applicants in Rule H is difficult to compare to the
23 provisions for customers under the tariff schedule.
24 Q To the extent that new customers pay more.25 for the distribution facilities that provide them the
CSB REPORTING
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293 SAID (X-Resp)
Idaho Power Company
.1 same service, they're not treated the same as existing
2 customers; isn't that correct?
3 A Well, as pointed out by Commissioner
4 Smith, existing customers are not required to pay for new
5 distribution facilities, so it's comparing the provisions
6 to a new applicant to a customer who's not required to
7 pay any of those expenses because they're not incurred,
8 so that comparison doesn't make a lot of sense to me.
9 Q Well, let's follow up on that. If the
10 Company invests less now in distribution rate base than
11 under the existing line extension provisions, then its
12 earnings are going to be higher. That's the intent,.13 isn't it?
14 A Well, the earnings of the Company are
15 ul timately dependent upon all of the costs the Company
16 incurs.
17 Q But that's the intent, isn't it? If the
18 Company invests less in rate base and it maintains the
19 same rate of return and the same revenues from the
20 customers, then it's going to increase its overall
21 earnings, isn't it?
22 MS. NORDSTROM: Perhaps counsel could
23 clarify whose intent.
24 MR. CREAMER: I'm sorry?.25 MS. NORDSTROM: Whose intent is that
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294 SAID (X-Resp)
Idaho Power Company
.
.
.
1 statement you made?
2 MR. CREAMER: The Company. Mr. Said, I
3 believe, is speaking concerning the Company's policy.
4 COMMISSIONER SMITH: Mr. Creamer, I'm very
5 confused by your question, so if you could please restate
6 it, I'd appreciate it.
7 Q BY MR. CREAMER: Well, let me ask you if
8 you disagree with this statement, Mr. Said, that if Idaho
9 Power invests less in distribution rate base than under
10 the existing line extension provisions, its earnings will
11 be higher and thus, under the rate moratorium in the
12 previous case, Idaho jurisdictional customers of Idaho
13 Power will receive immediate benefits whenever the
14 Company's earnings exceeds the allowable rate of return;
15 in other words, to the extent that new customers are
16 required to pay more for the distribution facilities, the
17 benefi ts accrue to the new customers or the existing
18 customers by reduced rates?
19 COMMISSIONER SMITH:I'm still confused.
20 What rate moratorium are you referring to?
21 MR. CREAMER: I am quot ing f rom the
22 statement by Idaho Power Company's counsel concerning the
23 effect of the Company shifting more of the costs of
24 distribution to new customers.
25 COMMISSIONER SMITH: So this is all in a
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295 SAID (X-Resp)
Idaho Power Company
.
.
.
1 theoretical sense?
2 MR. CREAMER: This was the Companyls
3 position, what the effect of shifting the costs of
4 distribution facilities to new customers would do, would
5 be for Idaho Power Company and its existing ratepayers.
6 COMMISSIONER SMITH: In theory.
7 MR. CREAMER: It's not hypothetical. It's
8 a statement and position of the Company.
9 MS. NORDSTROM: Are you referring to
10 statements that Idaho Power counsel has made in this
11 current docket or in the 1995 docket?
12 MR. CREAMER: 1995 docket, Madam Chair.
13 COMMISSIONER SMITH: Are you bringing
14 I'm really confused now. There's no rate moratorium
15 and
16 MR. CREAMER: Well, Madam Chair,
17 disregarding a rate moratorium, the effect of shifting
18 more of the costs -- the purpose of my question is to
19 demonstrate that Idaho Power Company's position and
20 intent--
21
22
COMMISSIONER SMITH: In 1995.
MR. CREAMER:in attempting to do the
23 same thing that it's attempting to do through the Rule H
24 tariff today, the effect of that will be to shift the
25 cost to new customers for the benefit of the rates of
CSB REPORTING
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296 SAID (X-Resp)
Idaho Power Company
.
.
.
1 existing customers. The existing customers are the
2 beneficiaries of the increased investment by new
3 customers.
4 COMMISSIONER SMITH: And then the new
5 customers become existing and they receive the benefit.
6 MR. CREAMER: I III withdraw my question,
7 Madam Chair.
8 COMMISSIONER SMITH: Thank you.
9 Q BY MR. CREAMER: Mr. Said, would you agree
10 to the extent the Company is required to give a per
11 customer allowance as opposed to a per terminal
12 facilities or transformer allowance, then the Company
13 ris k associated with any stranded investment if those
14 lots aren i t developed wi thin a subdivision could be
15 eliminated by charglng an upfront cost to the developer
16 and providing a portion, if not all, of an allowance to
17 the developer as a refund?
18 A Providing for refunds rather than upfront
19 allowances does reduce the investment risk associated
20 with those. That' Sf "1 believe, what the Staff
21 recommended in this case.
22 Finally, Mr. Said, the $1,780 number thatQ
23 is used for the standard terminal facilities allowance is
24 based on the current installation costs of the standard
25 terminal facilities that you've calculated?
CSB REPORTING
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297 SAID (X-Resp)
Idaho Power Company
.
.
20
21
1 A Tha t 's correct.
2 MR. CREAMER: Those are all the questions
3 I have.
4 COMMISSIONER SMITH: Thank you,
5 Mr. Creamer. Do we have questions from the Commission?
6 COMMISSIONER REDFORD: No.
7 COMMISSIONER KEMPTON: No.
8
9 EXAMINATION
10
11 BY COMMISSIONER SMITH:
12 Q I just had one, Mr. Said, now that your
13 memory has been jogged back to 1996 it looks like. Do
14 you think that Mr. Slaughter or Dr. Slaughter referred to
15 in your rebuttal is the same Dr. Slaughter we have
16 today?
17 A Yes.
18 COMMISSIONER SMITH: Oh, okay, thank you.
19 Any redirect, Ms. Nordstrom?
MS. NORDSTROM: None.
COMMISSIONER SMITH: That appears to be
22 the end of the testimony that was prefiled and was
23 intended to be heard by the Commission today. Are there
24 any people who wish to make closing statements or do you.25 think that filing briefs are necessary or appropriate?
CSB REPORTING
[phone]
298 SAID (Com-Resp)
Idaho Power Company
.1 Ms. Nordstrom.
2 MS. NORDSTROM: Commissioner Smith, Idaho
3 Power is prepared to call Clint Mills to the stand if
4 that is the wish of the Building Contractors
5 Association.
6 COMMISSIONER SMITH: And Mr. Creamer, Mr.
7 Mills, the person who got those numbers you had some
8 problems with, is here, do you want to talk to him?
9 MR. CREAMER: We don't need to examine
10 Mr. Mills.
11 COMMISSIONER SMITH: Okay, thank you.
12 COMMISSIONER REDFORD: Madam Chairman?.13 COMMISSIONER SMITH: Commissioner Redford.
14 COMMISSIONER REDFORD:I would like to
15 suggest instead of a summation today that we have a
16 summary provided. You could call ita brief or a
17 summary, and I would suggest 10 or less pages that
18 attempts to sum up what it is you believe that you have
19 proved. This has been a fairly complicated situation, I
20 think, because of all the parties and so on and I would
21 like to have kind of a final position paper if,
22 Madam Chairman, you would agree.
23 COMMISSIONER SMITH: Just look to the
24 parties. Did you want to do briefs?.25 MR. CREAMER: Madam Chair, I believe that
CSB REPORTING
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299 COLLOQUY
.
.
.
1 would be appropriate.
2 COMMISSIONER SMITH: Okay.
3 MR. CREAMER: I'd be happy to file one
4 with the Commission.
5 COMMISSIONER SMITH: Okay, and what's --
6 can we go at ease for a few moments?
7 (Pause in proceedings.)
8 COMMISSIONER SMITH: So we'll go back on
9 the record and the parties have agreed that their
10 posthearing submissions will be filed one week from today
11 and after that time the Commission will consider the case
12 fully submitted and render a decision as quickly as
13 possible, and I want to thank everybody for being here
14 today and helping us unravel this and gain more
15 understanding about their positions and we thank you and
16 we are adj ourned.
17 (All exhibits previously marked for
18 identification were admitted into evidence.)
19 (The Hearing adjourned at 11:40 a.m.)
20
21
22
23
24
25
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300 COLLOQUY
.
.
.
20
21
22
23
24
25
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 for authority to modify its Rule H
7 line extension tariff related to new service attachments
8 and distribution line installations, commencing at 9: 00
9 a.m., on Tuesday, October 20, 2009, at the Commission
10 Hearing Room, 472 West Washington Street, Boise, Idaho,
11 is a true and correct transcript of said proceedings and
12 the original thereof for the file of the Commission.
13 Accuracy of all prefiled testimony as
14 originally submitted to the Reporter and incorporated
15 herein at the direction of the Commission is the sole
16 responsibility of the submitting parties.
17
18
19 C2
CONSTANCECertified
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301 AUTHENTICATION