20090727Vol II Technical Hearing.pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE LANGLEY
GULCH POWER PLANT
)
) CASE
)
)
)
)kåo Public Utilìioi Cgrnmiiiion
Ofl"bt~11 ~11!têry
JUL 27200
8O. li
NO. IPC-E-09-03
BEFORE
COMMISSIONER JIM KEMPTON (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER MACK REDFORD
'.PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:July 14, 2009
VOLUME II - Pages 13 - 141
..
CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb~eritagewifi.com
.
.
.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1 APPEARANCES
2 For the Staff:
3
4
5 For Idaho Power Company:
Scott Woodbury, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Barton L. Kline, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
RICHARDSON & 0' LEARY
by Peter J. Richardson, Esq.
Post Office Box 7218
Boise, Idaho 83702
RACINE, OLSON, NYE, BUDGE
& BAILEY
by Eric L. Olsen, Esq.
Post Office Box 1391
Pocatello, Idaho 83204-1391
Susan K. Ackerman, Esq.
Attorney at Law
9883 NW Nottage Drive
Portland, Oregon 97229
Mr. Ken Miller
5400 West Franklin
Boise, Idaho 83705
Ms. Betsy Bridge, Esq.
Attorney at Law
Idaho Conservation League
Post Office Box 844
Boise, Idaho 83701
6
7
8
For Industrial Customers
of Idaho Power:
9
10 For Idaho Irrigation
Pumpers Association:
For NIPPC:
For Snake River Alliance:
For Idaho Conservation
League:
CSB REPORTING
[phone]
APPEARANCES
1 I N D E X.2
3 WITNESS EXAMINATION BY PAGE
4 Steven Stein Mr.Kline (Direct)21(Idaho Power)Prefiled Direct Testimony 235Mr.Woodbury (Cross)27Commissioner Redford 356Commissioner Smith 46Commissioner Redford 507Mr.Kline (Redirect)52Commissioner Redford 578
Michael Mace Ms.Nordstrom (Direct-Reb)59
9 (Idaho Power)Prefiled Rebuttal Testimony 61
Mr.Richardson (Cross-Reb)8110Mr.Olsen (Cross-Reb)99
Mr.Woodbury (Cross-Reb)11511Commissioner Redford 119
Commissioner Kempton 12812Ms.Nordstrom (Redirect-Reb)135
13.14
15
16
17
18
19
20
21
22
23
24.25
CSB REPORTING INDEX
(208 )890-5198
.
.
.
20
21
22
23
24
25
1 EXHIBITS
PAGE
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
2
3 NUMBER DESCRIPTION
4 FOR I DAHO POWER COMPANY:
5 12. CV of Michael William Mace
6 13. Comparison of Recent DFM total
Non-Ag Employment Forecasts
7
8
14. Idaho Housing Stock Additions -
Various DFM Forecasts
9 15. IPC Residential Customer Forecasts
(12 month change)
10
11
16. Article from the Idaho Statesman,
June 3, 2009
12 17. HOKU Impact on 2010 and 2013
System Load and System Peak
Demand Forecasts13
14 18. System Sales Forecasts - 2006
IRP, August 2007 and August 2008
excluding HOKU Materials15
16 19. Attracting Business to Idaho
17 20. Actual and Weather-adj usted
Irrigation Sales (MWh)
18
19
21. Historical Population Growth
Comparison - 1998 to 2008
22. Boise MSA Housing Starts:
1995-2015
23. Idaho and Boise MSA Real Income
Per Capita
24. Boise MSA Total Non-Ag Employment
2004-2013
25. Real Gross Output - Boise MSA
CSB REPORTING
Wilder, Idaho 83676
EXHIBITS
.
.
.
20
21
22
23
24
25
1 E X H I BIT S (Continued)
2
3 NUMBER DESCRIPTION PAGE
4 FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
5 209. Load Forecasts for 2012 & 2013 Identified 94
6
7 FOR THE IDAHO IRRIGATION PUMPERS ASSOCIATION:
8 401. Confidential exhibit Identified 107
9 402. Articles from the Idaho
State Journal
Marked
Admitted 112
10
11
12
13
14
15
16
17
18
19
CSB REPORTING
Wilder, Idaho 83676
EXHIBITS
.
.
.
1 BOISE, IDAHO, TUESDAY, JULY 14, 2009, 9:30 A. M.
2
3
4 COMMISSIONER KEMPTON: Okay; so we i re at
5 Tuesday on July 14th, 2009 in the PUC Hearing Room, the
6 date, time and place to conduct the technical hearing in
7 the matter of Idaho Power Company i s application for a
8 certificate of public convenience and necessity for the
9 Langley Gulch power plant, further identified as Case
10 No. IPC-E-09-03. The Commissioners present are Jim
11 Kempton who will be the Chair, Mack Redford and
12 Commissioner Marsha Smith. The proceedings in the case
13 are being conducted in accordance with Commission
14 jurisdiction under Title 61 Idaho Code and Commission
15 Rules of Procedure under Idaho Administrative Procedures
16 Act 31.01.01.
17 In the matter of confidential information,
18 11m going to read this into the record verbatim because
19 it i S important that we get this straight. As the parties
20 are aware, four witnesses have prefiled direct or
21 rebuttal testimony allegedly containing trade secret or
22 confidential information. During testimony the
23 Commission will have the court reporter prepare two
24 transcripts. One transcript will be a publicly-available
25 transcript with the confidential information redacted.
CSB REPORTING
[phone]
13 COLLOQUY
.
.
.
1 The other transcript will be sealed and will contain both
2 the public and trade secret information.
3 The sealed record will still contain
4 yellow pages. The proprietary information on the yellow
5 pages will be highlighted or otherwise denoted as
6 confidential pursuant to Rule 67 and 287. The sealed
7 transcript will only be available to counsel and
8 wi tnesses that have entered into the protective agreement
9 in this case. To the extent possible, the Commission
10 urges all parties to minimize trade secret or
11 confidential information in cross-examination questions
12 and/ or in eliciting answers. Whether it is a question or
13 an answer, counsel and the witness will have to indicate
14 to the Commission and the court reporter the point where
15 confidential information begins and where it ends.
16 During the period of time trade secrets or
17 confidential information is being exchanged or discussed,
18 any person or party that has not signed the applicable
19 confidentiality agreement will be asked to leave the
20 Hearing Room. Some of the information in looking at it,
21 and all you have that are participating as parties, there
22 may be some areas where we can with the consent of the
23 originator of the confidentiality material perhaps move
24 on, ask that actually being confidential to the extent
25 that we have to move people out of the room or that
CSB REPORTING
[phone]
14 COLLOQUY
.
.
.
1 questions and answers can i t be phrased so that we can
2 move around the specific issue that i s confidential.
3 When we can i t do that, then the Chair and
4 the reporter both need to know from the person who is
5 supporting the confidential information that it is in
6 fact confidential and then we i II have to go from there as
7 far as clearing the room. It becomes awkward, but
8 necessary, in discussing these, the technical aspects of
9 some of these issues that are before us today and so that
10 will be the procedure that we use.
11 The hearing itself is primarily a
12 technical hearing. It is an open hearing. The public
13 can attend, but the participation is with the parties who
14 are identified as parties to the hearing. In the matter
15 of appearances, what I i d like to do is go around the
16 room, I i II identify the party and if I could have the
17 representation for that party starting with Idaho
18 Power.
19 MR. KLINE: Thank you, Mr. Chairman. My
20 name is Bart Kline. I'm appearing on behalf of Idaho
21 Power today. Also with me is Lisa Nordstrom. Lisa will
22 also be cross-examining and presenting witnesses as well.
23 COMMISSIONER KEMPTON: Industrial
24 Customers of Idaho.
25 MR. RICHARDSON: Good morning,
CSB REPORTING
[phone]
15 COLLOQUY
.
.
.
10
1 Mr. Chairman. Peter Richardson of the firm Richardson &
2 o i Leary appearing on behalf of the Industrial Customers
3 of Idaho Power.
4 COMMISSIONER KEMPTON: And Northwest &
5 Intermountain Power Producers Coalition.
6 MS. ACKERMAN: Good morning,
7 Commissioners. This is Susan Ackerman, attorney on
8 behalf of Northwest & Intermountain Power Producers
9 Coalition.
COMMISSIONER KEMPTON: And Idaho
11 Irrigation Pumpers Association.
12 MR. OLSEN: Good morning, Commissioner.
13 Eric Olsen of the firm Racine, Olson, Nye, Budge & Bailey
14 for the Idaho Irrigation Pumpers Association.
15 COMMISSIONER KEMPTON: Communi ty Action
16 Partnership.
17 MR. PURDY: Brad Purdy on behalf of the
18 Communi ty Action Partnership Association of Idaho.
19 COMMISSIONER KEMPTON: Snake River
20 Alliance.
21 MR. MILLER: Good morning, Chairman. Ken
22 Miller on behalf of Snake River Alliance.
23 COMMISSIONER KEMPTON: Community Action
24 Partnership. I just did that one. Idaho Conservation
25 League.
CSB REPORTING
[phone]
16 COLLOQUY
.
.
.
1 MS. BRIDGE: Thank you, Mr. Chairman. My
2 name is Betsy Bridge and I'm here appearing on behalf of
3 the Idaho Conservation League.
4 COMMISSIONER KEMPTON: And Commission
5 Staff.
6 MR. WOODBURY: Scott Woodbury, Deputy
7 Attorney General.
8 COMMISSIONER KEMPTON: Is there anyone
9 that I have missed, incidentally? It shouldn't have
10 happened. On the hearing proceedings, presentation order
11 will be Idaho Power, followed by Industrial Customers of
12 Idaho Power, Northwest & Intermountain Power Producers,
13 then Idaho Irrigation Pumpers, then Community Action
14 Partnership Association of Idaho, and finally, Commission
15 Staff. Examination of witnesses will be the same order,
16 except that added to that it will be Snake River
17 Alliance, the Idaho Conservation League, well, as I said,
18 in that order.
19 The procedures when the witness is called,
20 if they will take the witness stand, Commissioner Smith
21 will give the oath and then the witness will be turned
22 over to the sponsoring party and the direct presentation
23 can be given. In the area of preliminary matters, are
24 there any motions or petitions?
25 MR. RICHARDSON: Mr. Chairman?
CSB REPORTING
[phone]
17 COLLOQUY
.
.
.
1 COMMISSIONER KEMPTON: Mr. Richardson.
2 MR. RICHARDSON: The Industrial Customers
3 of Idaho Power will at this time renew its motion to stay
4 the proceedings. We do not believe, however, that you
5 need to rule on that motion from the Bench at this time.
6 The testimony that will come before you today and perhaps
7 tomorrow and the next day will instruct you in our
8 rationale for that motion with evidence taken under oath
9 and we believe that after the hearing you can deliberate
10 and rule on that motion at that time, so we will for the
11 record renew that motion.
12 COMMISSIONER KEMPTON: Thank you,
13 Mr. Richardson. That motion will be taken under
14 advisement and it will be taken under advisement for
15 decision at a future date, sometime after the hearing as
16 you suggested.
17 MR. RICHARDSON: Thank you, Mr. Chairman.
18 MR. KLINE: Mr. Chairman, I have one more
19 preliminary matter.
20 COMMISSIONER KEMPTON: Mr. Kline.
21 MR. KLINE: Thank you very much. It has
22 to do with the presentation of the witnesses and the
23 order of the witnesses. Idaho Power is proposing to
24 present all of its both direct and rebuttal testimony
25 wi th each witness as they appear. The reason that we
CSB REPORTING
[phone]
18 COLLOQUY
.
.
.
1 want to do that is we do think that adds continuity to
2 the process and allows for a better cross-examination
3 when you've got both the direct and the rebuttal being
4 presented at the same time. There's only one caveat to
5 that. What I -- because some of the issues that would be
6 presented by both Mr. Bokenkamp and Mr. Gale tend to be
7 very central and core issues to the case, I'd like to
8 reserve the right to call those two witnesses back after
9 all of the other witnesses have presented their testimony
10 so that we can, if there's any misunderstandings or if
11 the record isn't clear on something that we could do
12 that. Mr. Woodbury distributed a memorandum to the
13 parties with that proviso included and I just want to
14 make sure there's no obj ection to that procedure if we go
15 forward.
16 COMMISSIONER KEMPTON: That objection --
17 that procedure will be accepted and the order that is
18 proposed will include both the direct and rebuttal
19 information at the time the witness is called.
20 MR. KLINE: Thank you.
21 COMMISSIONER KEMPTON: So Mr. Kline, if
22 you'd go ahead, then, with the first witness.
23 MR. OLSEN: Mr. Chairman, just one more
24 point. Just Idaho Irrigation Pumpers would like to join
25 in the reconsideration of the motion to stay as we are an
CSB REPORTING
[phone]
19 COLLOQUY
.
.
.
1 ini tial signatory, so I just wanted to make that clear.
2 COMMISSIONER KEMPTON: Okay, thank you,
3 Mr. Olsen.
4 MS. ACKERMN: Mr. Chairman, as does
5 Northwest & Intermountain Power Producers Coalition, we
6 also join in the motion for the same reasons that Mr.
7 Richardson articulated.
8 COMMISSIONER KEMPTON: Okay, let me go
9 back here just a second. Susan Ackerman is to your left;
10 correct? You're Susan Ackerman? Okay, when we had the
11 meeting this morning, I missed which was which, so the
12 clan is all firmly behind Mr. Richardson.
13 MS. ACKERMN: Yes.
14 COMMISSIONER KEMPTON: Got it, very well.
15 Idaho Power.
16 MR. KLINE: Thank you. Idaho Power calls
17 as its first witness Mr. Steven Stein.
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
20 COLLOQUY
.
.
.
1
2
STEVEN STEIN,
produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6
7
8 BY MR. KLINE:
9 Q
DIRECT EXAMINATION
Would you please state your name and spell
10 your last name for the record?
11 A My name is Steven Stein, S-t-e-i-n.
And Mr. Stein, by whom are you employed
13 and in what capacity?
12 Q
I am employed by R. W. Beck, Inc. and I'm
15 a principal and senior director with the company.
14 A
Are you the same Steven Stein whose direct
17 testimony was prefiled in this case on March 6, 2009?
16 Q
I am.
You have no exhibits; is that correct?
That's correct.
Now, do you need to make any additions or
22 corrections to your testimony?
18 A
No.
Mr. Stein, if I were to ask you the same
25 questions that are set out in your prefiled direct
CSB REPORTING
[phone]
19 Q
20 A
21 Q
23 A
24 Q
21 STEIN (Di)
Idaho Power Company
.
.
.
1 testimony today, would your answers to those questions be
2 the same?
Yes, they would.
MR. KLINE: Mr. Chairman, I would request
5 and move that the direct testimony of Mr. Stein be spread
3 A
6 on the record as if it had been read in its entirety.
4
7 COMMISSIONER KEMPTON: So ordered.
8 (The following prefiled direct testimony
9 of Mr. Steven Stein is spread upon the record.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
22 STEIN (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is Steven Stein and my business address
3 is 1000 Legion Place, Suite 1100, Orlando, Florida
4 32801.
5 By whom are you employed and in what capacity?Q.
6 A.I currently am employed with R. W. Beck, Inc.
7 ("R. W. Beck") as a Principal and Senior Director.
8 Please summarize your educational backgroundQ.
9 and work experience.
10 I am a graduate of the Uni versi ty of CentralA.
11 Florida with a B. S. in Electrical Engineering and an M.
12 S. in Industrial Engineering. I received my Master of
13 Business Administration at the Florida Institute of
14 Technology. My Professional Engineer licenses are with
15 the States of Alabama and Florida.
16 Since joining R. W. Beck in 1977, I have
17 directed the preparation of power supply planning,
18 financial and rate-related studies for individual
19 electric utilities, j oint action agencies, industrial
20 clients and other large energy consumers. I have helped
21 clients develop energy strategies and evaluate power
22 supply al ternati ves. I have represented clients in
23 contract evaluation and negotiations
24
25 /
23 STEIN, DI 1
Idaho Power Company
.
.
.
1 to help them achieve the most economical and reliable
2 energy supply.
3 Company witness Karl Bokenkamp included a copy
4 of R. W. Beck's letter report as Exhibit No. 4 to his
5 direct testimony in this proceeding. Exhibit No. 4
6 includes my resume describing my experience in further
7 detail.
8 Q.Have you previously submitted or provided
9 testimony.
10 A.Yes. I have rendered testimony before the
11 Public Utility Commission of Texas in Docket No. 15100
12 pertaining to the request for proposal process and the
13 evaluation of responses to the request for proposals. I
14 have rendered testimony before the Florida Public Service
15 Commission in Docket No. 810346-EU, pertaining to a
16 petition to Determine the Need for Transmission Lines
17 required pursuant to the Transmission Line Siting Act
18 under Florida Statutes. I have also submitted testimony
19 before the FERC in FERC Docket No. ER83-3689 and before a
20 Florida circuit court in regard to a revenue bond
21 validation proceeding.
22 What is the purpose of your testimony in thisQ.
23 matter?
24 A.At the request of Idaho Power Company (" Idaho
25 Power" or the "Company"), I am submitting this
24 STEIN, DI 2
Idaho Power Company
.1 testimony to directly sponsor Exhibit No.4. Exhibit No.
2 4 is an abbreviated letter report that was prepared under
3 my direction and control. The abbreviated letter report
4 describes the Independent Consultant role R. W. Beck
5 performed for Idaho Power in conj unction with the
6 Company's requests for proposals for baseload generation
7 in 2012 and offers certain conclusions regarding the
8 process followed by the Company for conducting the RFP.
9 Is Exhibit No. 4 a true and correct descriptionQ.
10 of R. W. Beck's conclusions regarding Idaho Power's
.
.
11 conduct of its 2012 Request For Proposals for baseload
12 generation?
13 Yes. Exhibit No.4, the letter report, is aA.
14 true and correct statement of R. W. Beck's conclusion
15 that the Idaho Power RFP Evaluation Team conducted the
16 2012 baseload RFP process fairly and properly and that
17 all qualifying offers provided to Idaho Power as a part
18 of the RFP process, including the Benchmark Resource,
19 were treated objectively and consistently as set forth in
20 Section 5 of the Request For Proposals documents.
21 Does this conclude your direct testimony?Q.
22 A.Yes, it does.
23
24
25
25 STEIN, DI 3
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
MR. KLINE: With that, I would tender
4 Mr. Stein for cross-examination.
3
5 COMMISSIONER KEMPTON: Industrial
6 Customers of Idaho.
7
8 Mr. Chairman.
9
MR. RICHARDSON: No questions,
COMMISSIONER KEMPTON: Northwest &
10 Intermountain Power Producers.
11
12
MS. ACKERMAN: No questions.
COMMISSIONER KEMPTON: Idaho Irrigation --
13 for the record, that was a no. Idaho Irrigation Pumpers.
.
14 Association.
MR. OLSEN: No questions, Mr. Chairman.
COMMISSIONER KEMPTON: Communi ty Action
MR. PURDY: No questions. Thank you.
COMMISSIONER KEMPTON: Commission Staff,
21 MR. WOODBURY: Oh, Staff has questions.
CSB REPORTING
[phone]
26 STEIN
Idaho Power Company
15
16
17 Partnership.
18
19
20 no questions?
22
23
24
25
.1
2
3 BY MR. WOODBURY:
4 Q
CROSS-EXAMINATION
Good morning, Mr. Stein.
Good morning.
You're familiar with Exhibit 4?
Yes.
That was Mr. Bokenkamp's exhibit and do
9 you have a copy of that before you?
5 A
10 I do.
13.14
6 Q
Yes, sir.
16 the independent consultant associated with Idaho Power
7 A
17 Company's request for a proposal, 2012 baseload
8 Q
18 generation, and that is the Langley Gulch proposal that
A
Q
letter from R.
Power?
A
Q
19 we're talking about today?
20 A Okay.
Now, that letter contains a summary of the
22 contract services performed as outlined on page I?
.
21 Q
Yes.
Okay, and I believe that you indicate that
25 R. W. Beck was retained to help ensure that the RFP
CSB REPORTING
[phone]
27 STEIN (X)
Idaho Power Company
23 A
24 Q
1 process was conducted fairly and properly and that all.2 offers were treated obj ecti vely and consistently. In
3 addi tion to yourself, were there any members of the R. W.
4 Beck team that worked with Idaho Power on this?
5 A I may have been the main person, but there
6 were several other people who assisted me.
7 Q And was it a multi-discipline team and
8 perhaps you could indicate how they complemented your
10
9 participation?
A Well, there were a couple of other people
11 who helped who had experience with RFP' s that I might
12 have talked to along the way, but I believe that I was
13 probably the primary person that worked on the case with.14 Idaho Power.
And what is your background as far as
Wi th degrees?
Yeah.
My resume, I don't know if you saw that my
20 resume was included --
.
15 Q
I believe it's attached.
Yeah.
Is it financial? Engineering?
I have a bachelor i s degree in electrical
25 engineering with an industrial engineering degree -- I'm
CSB REPORTING
[phone]
28 STEIN (X)
Idaho Power Company
16 degrees?
17 A
18 Q
19 A
21 Q
22 A
23 Q
24 A
.1 sorry, an industrial engineering degree and then I also
2 have an MBA.
3 Q Now, the contract with Idaho Power, was
4 that pursuant to a competitive process, R. W. Beck's
5 contract for services?
6 A I don't recall that. It was a contract
7 that was done several years ago and I don't believe that
8 it was a competi ti ve process.
9 Q And R. W. Beck has performed services for
10 Idaho Power previously?
12
.
.
11 A Yes.
Q Now, with respect to the services
13 identified on page 1, does performance of each of the
14 tasks 1 to 4 provide R. W. Beck with a foundation for its
15 conclusions that the RFP was conducted fairly and
16 properly and that all offers were treated objectively and
17 consistently, was that your intention up front?
18 A I think that the letter says that we
19 performed tasks --
20 Q One and two.
21 A -- one, two and five.
22 Q Yes. With respect to three and four, your
23 rationale for not performing those was that you
24 participated in developing the scoring criteria and that
25 you believe going through that three and four steps would
CSB REPORTING
[phone]
29 STEIN (X)
Idaho Power Company
.
.
1 be repetitive or duplicative to the Company's efforts in
2 scoring?
3 A Mr. Bokenkamp, Karl Bokenkamp, and I
4 talked about an independent evaluation on at least one
5 occasion, maybe a couple of occasions, and we -- I think
6 I came to the conclusion based on discussions with him
7 that, you know, if we were to conduct an independent
8 evaluation, it would most likely be conducted similar to
9 the methodologies that the Company used in conducting
10 their analysis and that we would -- had no reason to
11 believe that we wouldn't have come to the same
12 conclusions that they did in their analysis.
13 Q If you prepare evaluation criteria, are
14 those steps always unnecessary?
15 A Are they always unnecessary that R. W.
16 Beck performs the evaluation?
17 Q If you perform -- not if you perform, if
18 you develop the criteria for scoring, are steps 3 and 4
19 always unnecessary?
20 A Well, I think an analysis was conducted.
21 I'm not sure I understand, you know, what you're asking.
.
22 Are you asking was it necessary for R. W. Beck to do
23 that?
24 Q Yeah, I understand that step 3 is sort of
25 an independent sampling of the proposals and I looked at
CSB REPORTING
[phone]
30 STEIN (X)
Idaho Power Company
.
.
.
1 it as a check on the Company to determine whether they
2 were scoring in the manner that you intended, you know,
3 as far as applying the criteria.
4 I did look over some of the analysis. IA
5 did look over some of the summary spreadsheets and based
6 on that review, I felt like they were doing it in the
7 manner that was consistent with the evaluation process.
8 Did you participate in the Company'sQ
9 decision to not include a build and transfer option in
10 the RFP?
11 A I gave some, I did give some comments,
12 R. W. Beck gave some comments, that supported that
13 process, but I really didn't participate in the up-front
14 decision.
15 Q When you say that R. W. Beck gave
16 comments,was it somebody other than yourself?
A Yes.
Q And who was that?
A It was a gentleman in our Denver office.
His name is Ivan Clark.
17
18
19
20
21 Q Okay. You participated, R. W. Beck
22 participated, in previous RFP' s for Idaho Power?
23 A Yes.
24 And it's my understanding -- were thoseQ
25 for build and transfer ultimately?
CSB REPORTING
[phone]
31 STEIN (X)
Idaho Power Company
.1 A I don't think they were.
You don't, okay. Were they the -- were
3 those the Danskin or Evander Andrews plant and the
2 Q
4 Bennett Mountain plant?
5 A I think I'm going to need some help from
6 Bart on that one. I'm not positive. I think I helped on
7 two other RFP' s. I think those were the ones.
8 Q And did you perform similar services to
9 those outlined on page 1 of Exhibit 4 in those cases?
10
11
A
Q
12 No. 3 --
.13
14
15
A
A
Q
Yes.
And do you recall whether you performed
Can I clarify that?
Sure.
We performed similar services to what we
16 did in this RFP.
17
18 those either?
19
20
Q
A
Q
So you didn't perform tas ks 3 and 4 in
That's correct.
You would agree that performing both tasks
21 1 and 2 would be necessary for you to reach the
22 conclusions that you did in your letter?
.
23
24
25
A
Q
Yes.
Okay. On page 2 of the letter you state
based on the work with Idaho Power's RFP evaluation team,
CSB REPORTING
[phone]
32 STEIN (X)
Idaho Power Company
1 we believe -- I guess, yeah, that's on page 3 of the.2 letter. Is that a qualification indicating your work was
3 perhaps -- you weren't present at all stages?
4 A I don't think I intended it that way. I
5 think I intended it -- no, I didn't intend it to be a
6 limitation.
7 Q And at the bottom of the page it seems to
8 be a general disclaimer. Is that what you use on all of
9 your letters?
10 A Yes, all of our letters and all of our
11 reports.
12 Q And to the extent that statements,
13 information and opinions provided by the client or others.14 have been used in the preparation of the report, you're
15 taking them at face value; is that correct?
16 A That's correct.
17 Q You did no independent verification of
18 information?
19 A Pardon me?
20 Q No independent verification of
21 information?
22 A I think that's what it says.
23 Q Okay, I'm just clarifying that. Did you
24 participate in discussions to extend the commercial.25 operation date six months?
CSB REPORTING
[phone]
33 STEIN (X)
Idaho Power Company
.1 A No.
2 Did you participate in developing the RFPQ
3 time line?
4 Yes, the schedule that's at the front ofA
5 the RFP.
6 And I understand the factors that go intoQ
7 developing that time line are the date of the resource
8 need, the lead time required for development, you know,
9 planning, construction of the proj ect, and is there a
10 factor included in there for regulatory review? Do you
11 include a period of time in there for that?
12 A I don't know if I helped on the whole
13 schedule. I did help on the schedule in preparing the.14 RFP with respect to the dates when the RFP was issued and
15 allowing enough time for bidders to respond, that portion
.
16 of the schedule I did assist with.
17 MR. WOODBURY: Thank you, Mr. Stein.
18 COMMISSIONER KEMPTON: Commissioner
19 Redford.
20
21
22
23
24
25
CSB REPORTING
[phone]
34 STEIN (X)
Idaho Power Company
.1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 I believe you stated that -- my name isQ
5 Mack Redford, by the way. I understand that you've
6 testified that you have on previous occasions done
7 similar type of work for Idaho Power and others.
8 A Yes.
9 Okay, and I'm looking at Exhibit No. 4Q
10 which contains some things, did you help in preparation
11 of the RFP?
12
13.14
15
A Yes, sir, I did.
Q Did you -- were you the only one that did
the RFP, R. W. Beck?
A We have several people at R. W. Beck that
16 participate in helping me on RFP' s and I was the primary
17 lead in helping to -- on the RFP.
.
18 Did you help in preparation of theQ
19 specifications?
20 I'm not sure which specifications you'reA
21 referring to.
22 Well, the bid specifications and theQ
23 construction specifications.
24 No, sir, I did not.A
25 Do you know who prepared thoseQ
CSB REPORTING
[phone]
35 STEIN (Com)
Idaho Power Company
.
.
.
1 documents?
2 A I'm not sure who did that.
Did you read those documents?
No, I didn't.
So you really don't know what was
6 contained in the RFP?
3 Q
Well, in the RFP for power supply
8 proposals that -- I guess I'm a little confused. The
4 A
9 request for proposals, their RFP dated April 1, 2008, I
5 Q
10 did help with that. Is that what you were referring to?
7 A
11 I thought maybe you were --
12
13
Q
A
14 Q
Well, that's one element.
Okay.
How much input did you have on the RFP?
On this RFP I had quite a bit of input.
And we don't have the RFP in front of us,
17 but did that RFP state how the criteria or the evaluation
15 A
18 criteria was going to be handled?
20
16 Q
Yes, sir, it did.
And do you recall, did it say anything
21 about how the points were to be given for the price and
19 A
Yes, sir, and it did state that in the
Did it also state in the RFP how the bids
Q
22 the non-price?
23 A
24 RFP.
25 Q
CSB REPORTING
[phone]
36 STEIN (Com)
Idaho Power Company
.1 would be evaluated?
2 A Yes, sir.
3 I take it that all bids, including IdahoQ
4 Power's bid, the Benchmark bid, would be evaluated
5 equally?
6 Yes, sir.A
7 Was there anything in the RFP that wouldQ
8 have stated that Idaho Power after the bidding was done
9 could make its evaluation on other criteria, like net
10 present value, types of things like that?
11 A Those types of descriptions were in the
12 RFP, that they would be evaluated using those
.
.
13 techniques.
14 COMMISSIONER REDFORD: Mr. Kline, do you
15 suppose maybe tomorrow you could bring the RFP with
16 you?
17 MR. KLINE: Absolutely. There's probably
18 a copy here.
19 COMMISSIONER REDFORD:Also, sir, did youQ
20 have any duty in preparing the bid specifications?
21 I'm a little bit confused about "bidA
22 specifications. "
23 Well, as far as the generalQ
24 specifications.
25 For the power plant itself?A
CSB REPORTING
[phone]
37 STEIN (Com)
Idaho Power Company
.
.
.
1 Q Well, for the whole proj ect.
2 A I'm not sure --
3 Q Well, the bid specifications that I 1m
4 talking about is a document sometimes called the
5 construction manual which lays out general conditions.
6 It lays out all the trades and that it will be
7 expected that the contractor is expected to follow.
8 Have you seen those kinds of documents?
9 A I have seen those, but I did not
10 participate in this case as I assume that those types of
11 contracts you're talking about are having to do with the
12 power plant itself.
13 Q Well, generally, and that is in my
14 understanding, the general specifications include the
15 entirety of the proj ect. They go through plumbing,
16 electrical, concrete, all those things. Did you prepare
17 anything that would be similar to that?
18 A I didn't participate in those
19 preparations.
20 Q Did you ever review that --
21 A No, sir.
22 Q -- those specifications? Did you say
23 no?
24 A That's correct, I'm sorry.
25 Q Okay, what part of the RFP did you
CSB REPORTING
[phone]
38 STEIN (Com)
Idaho Power Company
.
.
20
1 prepare?
2 A Well, I worked with the Idaho Power staff
3 in preparing the RFP document and requesting people to
4 bid on the proj ect that was to come on-line in 2012.
5 Q Okay, but you don't recall any specific
6 item that you did yourself?
7 A Well, I assisted in the writing of the
8 document that you just requested a copy from from Karl
9 I'm sorry, from --
10 Q Bart?
11 A -- Bart.
12 Q Okay, and you consul ted with Idaho Power
13 on the evaluation of all proposals?
14 A Yes, sir.
15 Q To what extent?
16 A A fairly limited extent. I looked at some
17 of the -- I participated in a lot of the discussions that
18 they had and I reviewed some of the summaries that they
19 had prepared.
Q So you didn't actually prepare any
21 evaluation criteria or anything else with regard to the
.
22 RFP?
23 A I did assist in writing the evaluation
24 manual which was a high'level document describing how the
25 different proposals and bids would be evaluated.
CSB REPORTING
[phone]
39 STEIN (Com)
Idaho Power Company
.
.
.
1 Q Were they -- was the evaluation document
2 that you assisted, were they given to the pre-bid, to the
3 contractors on a pre-bid basis?
4 A No, they weren't. I'm not aware that they
5 were. I don't think they were.
6 Q Don't you think it's appropriate that the
7 contractors know what criteria they're going to be
8 evaluated on?
9 A In most RFP i s that I have participated, on
10 power supply RFP' s as opposed to bidding equipment, I'd
11 like to make that distinction, but on most power supply,
12 it's like a power purchase contract arrangement, those
13 types of RFP' s, that information based on my experience
14 is not given out ahead of time.
15 Q How does the bidder know what, how he's
16 going to be evaluated?
17 A Well, the RFP document was pretty general
18 and it tried to explain how he would be evaluated. Like
19 you mentioned to me before, it explained or the question
20 you asked me before, it did explain, you know, the
21 scoring methodology and how the scoring would be done by
22 Idaho Power.
23 Q How about on non-price and price, was the
24 evaluation done simply on the price and non-price?
25 A Yes, sir.
CSB REPORTING
[phone]
40 STEIN (Com)
Idaho Power Company
.
.
.
1 Q But in fact, the evaluation criteria
2 prepared by Idaho Power extended to other factors that
3 might be used in the evaluation?
4 A I'm a little bit confused by --
5 Q Well, you have price and non-price and
6 those -- the contractors can expect to be evaluated on
7 that basis. If there are other criteria in your
8 evaluation book that the contractors don't know about,
9 how would they gain that knowledge?
10 A I think that the evaluations were done
11 primarily based on what was in the evaluation manual.
12 Q Okay. Did you do a pre-bid schedule?
13 A We had a pre-bid meeting.
14 Q When you hand out your, the request for
15 proposal, doesn't it have a schedule in it?
16 A Yes, sir, it did.
17 Q Did you prepare that schedule?
18 A I assisted Idaho Power in preparing that
19 document.
20 Q Now, getting back to the specifications,
21 you didn't have anything to do with the specs?
22 A Well, I'm a little bit confused about
23 MR. KLINE: I'm sorry, Commissioner
24 Redford, perhaps it would make sense for us to get you a
25 copy of the RFP document so that you could see what was
CSB REPORTING
[phone]
41 STEIN (Com)
Idaho Power Company
.
.
.
1 presented at that time. In this particular situation
2 there was no detailed design spec that was distributed as
3 a part of the RFP. We were looking for tolling
4 agreements, for power purchase agreements. Those were
5 the things that we were looking for. We did provide
6 copies of the draft contracts, but not a design spec for
7 the power plant itself.
8 Q BY COMMISSIONER REDFORD: You've heard
9 what Mr. Kline has stated, is that your general
10 understanding?
11 A Yes, sir, it is.
12 Q Okay. If the specifications were just
13 general and the RFP was very general, how did the
14 bidder -- how was a bidder to know what he was bidding
15 on?
16 A The RFP asked for people to offer purchase
17 power agreements or tolling agreements in which they
18 would supply the equipment and those agreements were made
19 available. The tolling agreement and the purchase power
20 agreement were made available on the website so the
21 bidders would be able to see their arrangement with Idaho
22 Power, what it would be based on those contractual
23 arrangements.
24 Q Well, how do they determine the various
25 elements of a construction proj ect if they don't have
CSB REPORTING
[phone]
42 STEIN (Com)
Idaho Power Company
.
.
.
1 detailed specs?
2 A In an RFP process of this nature, the way
3 we did this, which is a common practice in the industry,
4 you negotiate terms and conditions as part of that power
5 supply contract and the bidder who is building that power
6 plant builds the power plant in such a manner so that
7 they can live by the terms of the contract wi thin the
8 power supply agreement.
9 Q So when they made their bid, they would
10 say we know how many megawatts the plant is going to have
11 to provide, we know when it has to be to be put on-line
12 and so we're just going to bid what we think would be an
13 adequate power plant for Idaho Power to achieve the
14 megawatts they require?
15 A Yes, plus they would have to be -- they
16 would have to live with that contract for the term of the
17 contract and they would have to build it in such a manner
18 so that they could honor the terms and conditions of that
19 power supply agreement.
20 Q So there was no set design criteria on
21 what they were to bid?
22 A Correct.
23 Q Was there any design completed prior to
24 the bids going out?
25 A I'm not aware.
CSB REPORTING
[phone]
43 STEIN (Com)
Idaho Power Company
.
.
.
1 Q R. W. Beck didn i t prepare any design?
2 A Correct.
3 Q And to the best of your knowledge, has any
4 design, preliminary design, been done at this time?
5 A By R. W. Beck?
6 Q Yes.
7 A No, not by R. W. Beck.
8 Q By anyone, if you know.
9 A That wasn i t my area and I wouldn i t be the
10 right witness to talk about that.
11 Q Okay. It says that you would compare the
12 result of the independent consultant i s scoring with Idaho
13 Power i s scoring and work with Idaho Power to attempt to
14 reconcile and resolve scoring differences. Did you
15 participate in that undertaking?
16 A I believe that i s one of the tasks that we
17 did not do.
18 Q But it i s listed in your letter.
19 A Yeah, if you read further on, it states in
20 the paragraph under that which tasks we did and which
21 tasks we did not do. Task 4, tasks 3 and 4, we did not
22 perform.
23 Q And that would be a review of the -- on
24 the second page of Exhibit 4, there's a list of items,
25 are these the items you did not do or you did?
CSB REPORTING
[phone]
44 STEIN (Com)
Idaho Power Company
.
.
1 A These are the items that we did do.
2 Q Okay; so you prepared the evaluation
3 cri teria?
4 A We assisted Idaho Power in doing that.
5 Q Okay, and did you assist in the evaluation
6 process or did you assist in the evaluation of the
7 proposals?
8 A We looked at the results that, some of the
9 resul ts that, Idaho Power had performed.
10 Q So you didn i t review all the proposals?
11 A No.
12 Q Okay. How about review of the cost of
13 service methodology?
14 A We had some discussions about the cost of
15 service methodology.
16 Q And did you participate in the Company's
17 conduct of the non-price scoring sessions?
18 A Yes, I was in attendance.
19 Q I guess it would be simpler for me to ask
20 you once you received a proposal, what did R. W. Beck do?
21 Is it all these things or --
22 A It i S everything that we listed in this
23 list. Essentially we were -- we provided advice and
24 counsel to them as they were doing the process..25 Q So you didn i t do any specific tasks, you
CSB REPORTING
[phone]
45 STEIN (Com)
Idaho Power Company
.
.
20
1 advised them based upon what they wanted to show you?
2 A We advised them on, you know, how to
3 evaluate, you know, the methodology, to evaluate the bids
4 fairly and equitably.
5 Q I don i t mean to belabor this, but you were
6 in on the evaluation of all proposals?
7 A Yes, sir.
8 Q And during your evaluation of these
9 proposals, did any evaluation take place that wasn't in
10 the proposal book, the bid book?
11 A I think the evaluations were consistent
12 with the bid evaluation document.
13 COMMISSIONER REDFORD: I have nothing
14 further.
15 COMMISSIONER KEMPTON: Commissioner Smith.
16 COMMISSIONER SMITH: Just one question.
17 It may seem small, but these things drive me crazy.
18
19 EXAMINATION
21 BY COMMISSIONER SMITH:
22
.
Q When your counsel introduced you, he said
23 your testimony was filed on March 6th, but I believe it
24 was actually filed on April 28th.
25 A When I said yes to that, I looked at the
CSB REPORTING
[phone]
46 STEIN (Com)
Idaho Power Company
.
.
.
1 front of it and there was no date and I appreciate you
2 clarifying that.
3 Q Like I say, these little discrepancies
4 dri ve me crazy.
5 A I agree.
6 MR. KLINE: I apologize. Mr. Stein 's
7 testimony was presented after the other Idaho Power
8 wi tnesses i testimony was presented and I wrote down the
9 wrong date in my notes.
10 COMMISSIONER SMITH: So April 28th?
11 MR. KLINE: That i s correct.
12 COMMISSIONER SMITH: All right, thank you.
13 That i s my only question.
14 THE WITNESS: Thank you very much.
15 COMMISSIONER REDFORD:May I address
16 Mr. Kline?
17 COMMISSIONER KEMPTON: Commissioner
18 Redford.
19 COMMISSIONER REDFORD: Mr. Kline, while
20 you i re bringing the RFP, I wo~der if you would bring the
21 notice to bidders, the general evaluation book, those
22 specifications that went to the bidders and for that
23 matter, all other documents that went to the bidders.
24
25
MR. KLINE: I would be glad to do that.
COMMISSIONER REDFORD:Incl uding the
CSB REPORTING
[phone]
47 STEIN (Com)
Idaho Power Company
.1 pre-bid and post-bid minutes of any meeting.
2 MR. KLINE: I can do that. That i s a
3 pretty substantial group of documents, Commissioner
4 Redford, but be glad to do it.
5 COMMISSIONER REDFORD: Well, we don i t have
6 to have them all, but we could just have maybe a sample
7 of one of the bidders.
8 MR. KLINE: Okay, I think we can put
9 together a package that will give you a sense of how they
10 were evaluated.
11
.
.
MR. RICHARDSON: Mr. Chairman?
12 COMMISSIONER KEMPTON: Mr. Richardson.
13 MR. RI CHARDSON : Than k you, Mr. Cha i rman .
14 I would like to ask that the parties be provided with
15 copies as well.
16 COMMISSIONER KEMPTON: Mr. Kline?
17 MR. KLINE: I'll be glad to do that. This
18 is all material that has been made available to all of
19 the parties as a part of the discovery process.
20 COMMISSIONER REDFORD: Well, we don i t have
21 it. I don i t have it.
22 MR. KLINE: I understand. You i II have a
23 CD that will have a lot of that material on it, but yes,
24 we can provide exactly what you i re looking for.
25 COMMISSIONER KEMPTON: And did the
CSB REPORTING
[phone]
48 STEIN (Com)
Idaho Power Company
.
.
.
1 recorder pick up the direction from the Chair that the
2 request of Mr. Richardson will be honored by the Chair?
3 COMMISSIONER REDFORD: Just so long as
4 we i re clear, it i s the notice of intention to issue an
5 RFP, it would be the RFP or the pre-bid meeting minutes,
6 the RFP, any specifications on the proj ect that went to
7 the bidders, including the evaluation book, and also any
8 documents that provide for the individual evaluation,
9 kind of the overview.
10 MR. KLINE: Okay.
11 COMMISSIONER REDFORD: And I believe those
12 would probably include the marks that the contractor got
13 for his bid.
14 MR. KLINE: Right, right, and that one
15 might be a sample.
16 COMMISSIONER REDFORD: Which is fine.
17 MR. KLINE: Right.
18 COMMISSIONER REDFORD: No further
19 questions. Oh, I have one further question if you don 't
20 mind.
21 COMMISSIONER KEMPTON: Commissioner
22 Redford.
23
24
25
CSB REPORTING
[phone]
49 STEIN (Com)
Idaho Power Company
.
.
.
20
1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 Q I i m sorry to belabor it, but you mentioned
5 build and transfer. That term is foreign to me. Does it
6 recognize that the contractor at his own expense will
7 build the project and then transfer it to Idaho Power or
8 what does that denote?
9 A I believe that i s the process. I'm not
10 this is not my area of expertise, but I'm pretty what
11 happens is a developer would develop the project and then
12 he would essentially sell it to the ultimate purchaser
13 like Idaho Power.
14 Q So when would that transfer take place?
15 A It would be provided for in a contract
16 between the parties exactly how that would be handled.
17 Q Well, generally, would it be at the end of
18 the construction, at the time the plant was commissioned
19 or some future date?
A I'm going to -- I'm not sure. I can 't
21 answer that.
22 Q That i S not a design/build contract, is it,
23 where one party designs and builds, procures and builds
24 the proj ect?
25 A I 'm just not the best person to ask that.
CSB REPORTING
[phone]
so STEIN (Com)
Idaho Power Company
.
.
.
1 1'm going to give you misleading information.
2 COMMISSIONER REDFORD: No further
3 questions.
4 COMMISSIONER KEMPTON: No questions from
5 the Chair. Mr. Kline, can you give the Chair some
6 indication of the volume of material that we i re talking
7 about for distribution to the established parties and
8 also the approximate time line on that?
9 MR. KLINE: I think it i S maybe that much
10 (indicating) for the materials that were sent out that
11 everybody had access to. The actual evaluations of the
12 individual bidders would be, you know, a couple of file
13 drawers, but if we can just use a sample of one of them
14 to show you how it was done, that will be a smaller
15 volume.
16 COMMISSIONER KEMPTON: The recorder has a
17 really hard time writing in "this much."
18 MR. KLINE: I'm sorry. Approximately two
19 inches or so. I mean, I would guess one -- I would guess
20 maybe 3 or 400 pages of material.
21 COMMI S S IONER KEMPTON: 0 ka y, and time
22 line?
23 MR. KLINE: That's a guess. I think we
24 can assemble those fairly quickly. I think we could have
25 those to you tomorrow morning.
CSB REPORTING
[phone]
51 STEIN (Com)
Idaho Power Company
.
.
.
1 COMMISSIONER REDFORD: Thank you.
2 COMMISSIONER KEMPTON: And Mr. Kline,
3 redirect?
4 MR. KLINE: I do have a few redirect
5 questions.
6
7 REDIRECT EXAMINATION
8
9 BY MR. KLINE:
10 Q Mr. Stein, one of the questions that Staff
11 counsel Woodbury asked you had to do with how R. W. Beck
12 was selected as the independent consultant for this
13 project and he asked whether or not that selection had
14 taken place by a competitive process. In fact, in the
15 and your answer was no, there was no competitive process;
16 is that correct?
17 A I think that was my answer.
18 Q Right. Now, you have also worked with
19 Idaho Power on other RFP i s that it has conducted, have
20 you not?
21 A Yes, I have.
22 Q And did you work with Idaho Power when it
23 did the competitive bidding process that resulted in the
24 Bennett Mountain power plant being constructed?
25 A I believe I did.
CSB REPORTING
[phone]
52 STEIN (Di)
Idaho Power Company
.
.
.
1 Q And did you also work with Idaho Power
2 when it did its RFP that resulted in the Danskin project
3 or the Evander Andrews unit No. 1 proj ect?
4 A I believe I did, that i s correct.
5 Q And as a result of your work with Idaho
6 Power, do you feel like you i re pretty familiar with how
7 the Company operates its system, some of the things that
8 you don i t have to learn each time as you go through the
9 process?
10 A Yes, I think that i s definitely true.
11 Q And as a result because of your prior
12 experience with Idaho Power, would you expect that i s the
13 reason that Idaho Power selected you to work with them on
14 this proj ect?
15 A I think that had a big factor in it.
16 Q Now, couns,el for Staff also highlighted in
17 your letter, March 5th, the letter which is Exhibit 4 in
18 this case, there's a block there that is kind of the
19 boilerplate limitation of liability. Do you recall that
20 question?
21 A Yes, I do.
22 Q And isn i t it true, though, that even
23 though that boilerplate language is there, during the
24 course of working with Idaho Power, at any time that you
25 saw things that Idaho Power was doing that you did not
CSB REPORTING
[phone]
53 STEIN (Di)
Idaho Power Company
.
.
.
1 believe were the right way to do it, you would certainly
2 bring that to the Company's attention, would you not?
3 A Yes, I would.
4 Q That's what consultants do, don't they?
5 A That i s where we get the name
6 independent.
7 Q In spite of the boilerplate?
8 A Yes, sir.
9 Q Now, Commissioner Redford asked you a
10 number of questions regarding the actual bidding process
11 and particularly the evaluation manual and in response to
12 that question, he asked you a question did the bidders
13 have all the material or was the evaluation done in
14 accordance with the evaluation manual and I think you
15 said primarily. Is that what you meant?
16 A No, I meant that it was done consistent
17 wi th the evaluation manual.
18 Okay. Does have you discussed thisQ
19 question of whether or not it i S a good idea to give the
20 evaluation manual to the bidders as a part of the bidding
21 process with Idaho Power?
22 A I don i t really recall any conversations.
23 Q Well, it seems like -- well, okay. In
24 most instances do you recommend that clients give the
25 evaluation manual out as a part of the RFP package?
CSB REPORTING
[phone]
STEIN (Di)
Idaho Power Company
54
.
.
.
1 A No.
2 Q And why is that?
3 A In most cases I think the evaluation
4 manual sort of shows a general procedure on how the RFP
5 will be evaluated, and my theory is that bidders should
6 focus on making their proposal the very best proposal
7 that they can come up with and if they focus on that,
8 then they have a much better chance at being selected as
9 opposed to trying to game what the process might be.
10 Q And did you give this advice to Idaho
11 Power?
12 A I probably did.
13 Q Now, there was quite a bit of discussion
14 about, going back to Exhibit 4 and the list of five items
15 on the first page of Exhibit 4, the material or the
16 potential services that R. W. Beck could provide to Idaho
17 Power, do you recall that discussion?
18 A Yes, sir.
19 Q And in particular, the focus was on the
20 fact that Idaho Power did not ask you to perform items 3
21 and 4. Do you recall that?
22 A Yes, sir.
23 Q And do you also recall the discussion
24 between Idaho Power and yourself regarding the need for
25 items 3 and 4 to be performed?
CSB REPORTING
[phone]
55 STEIN (Di)
Idaho Power Company
.
10
.
.
1 A Yes.
2 Q And in your letter on page, again, Exhibit
3 4, page 1, you stated that the decision not to have R. W.
4 Beck independently score the proposals was made in
5 consultation with Idaho Power considering the cost and
6 likely value of duplicating the evaluation process
7 considering the advisory role R. W. Beck had played in
8 setting up the scoring and evaluation process; is that
9 still your testimony today?
A Yes, sir.
11 Q And the fact that you 've worked with Idaho
12 Power on at least two other RFP 's, has that been the
13 practice consistently in the other RFP's as well, that
14 you didn i t perform an independent evaluation?
15 A That's correct.
16 Q And is one of the reasons that you feel
17 confident in following that procedure is you know how
18 Idaho Power evaluates bids?
19 A Yes, sir.
20 Q And it is your opinion that this bid
21 process was done fairly; is that correct?
22 A Yes, sir, it is.
23 Q Any idea how many RFP i s you i ve worked on
24 over the years?
25 A I've prepared a list as part of my resume.
CSB REPORTING
[phone]
56 STEIN (Di)
Idaho Power Company
1 Probably 10 or 15 in the last several years..2 Q For a broad array of clients?
Yes, sir.
And in your opinion, was Idaho Power's
5 evaluation in this case as good as the other ones that
3 A
6 you i ve participated in?
.
4 Q
I believe so.
MR. KLINE: That i s all I have.
COMMISSIONER REDFORD: I have one more
COMMISSIONER KEMPTON: Commissioner
EXAINATION
16 BY COMMISSIONER REDFORD:
7 A
It just seems remarkable to me, sir, that
18 in these RFP i s that the bidders don i t have any idea on
8
9
10 question.
11
12 Redford.
13
14
15
17 Q
19 what criteria their bid is going to be evaluated, so just
20 do the best you can. Is that the attitude?
21 A No, I think once you see the RFP that Bart
22 is going to give you, I think that will give you a better
.
23 understanding.
24 Q It's got an evaluation procedure in it?
It describes the evaluation procedure.
57 STEIN (Com)
Idaho Power Company
25 A
CSB REPORTING
[phone]
.
.
.
1 Q So it i s identical to the evaluation
2 book?
3 A It i S not identical, but it does describe
4 how the process will be done.
5 COMMISSIONER REDFORD: Okay. No further
6 questions.
7 COMMISSIONER KEMPTON: Mr. Kline.
8 MR. KLINE: I think I i II just leave it
9 along and give you an opportunity to look at it before I
10 try and extract more on redirect.
11 COMMISSIONER REDFORD: I just have one
12 comment. The Rules of Procedure here are pretty loose,
13 but you appear to be leading the witness completely and I
14 think you ought to stick to some traditional evidentiary
15 rules.
16 MR. KLINE: Thank you.
17 COMMISSIONER KEMPTON: You may step
18 down.
19 THE WITNESS: Thank you.
20 (The witness left the stand.)
21 COMMISSIONER KEMPTON: Mr. Kline.
22 MR. KLINE: Yes, our next witness
23 Ms. Nordstrom will spread his testimony. It's Mr. Mike
24 Mace.
25
CSB REPORTING
[phone]
58 STEIN (Com)
Idaho Power Company
.1 MICHAEL MACE,
2 produced as a witness at the instance of the Idaho Power
3 Company, having been first duly sworn, was examined and
4 testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MS. NORDSTROM:
9 Q Good morning. Please state your name and
10 spell your last name for the record.
11
.
.
A My name is Michael Mace. Last name is
12 spelled M-a-c-e.
13 Q By whom are you employed and in what
14 capacity?
15 A I am an independent consultant for Idaho
16 Power Company.
17 Are you the same Michael Mace that filedQ
18 rebuttal testimony on July 2nd, 2009 and prepared Exhibit
19 Nos. 12 through 25?
20 A Yes, I am.
21 Q Do you have any corrections or changes to
22 your testimony or exhibits?
23 A No, I don 't.
24 Q If I were to ask you the questions set out
25 in your prefiled rebuttal testimony, would your answers
CSB REPORTING
[phone]
59 MACE (Di-Reb)
Idaho Power Company
.
.
.
16
17
18
19
20
21
22
23
24
25
1 be the same today?
2 A Yes, they would.
3 MS. NORDSTROM: I move that the prefiled
4 rebuttal testimony of Michael Mace be spread upon the
5 record as if read and Exhibits 12 through 25 be marked
6 for identification.
7 COMMISSIONER KEMPTON: So ordered.
8 MR. KLINE: Can I interrupt at this point?
9 Could Mr. Stein be excused so he can go catch an
10 airplane?
11 COMMISSIONER KEMPTON: Without objection,
12 he may be excused.
13 MR. KLINE: Thank you.
14 (The following pre filed rebuttal testimony
15 of Mr. Michael Mace is spread upon the record.)
CSB REPORTING
[phone]
60 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 Q.Please state your name, address, and
2 employment.
3 A.My name is Michael Mace. I am an independent
4 consultant. My address is 3416 Leland Street, Rocklin,
5 California 95765. I have over thirty years experience in
6 the electric utility industry, working for both public
7 and private electric utilities as well as the California
8 iso. My resume is attached as Exhibit No. 12.
9 Q. On whose behalf are you testifying?
10 A. i am testifying on behalf of Idaho Power
11 Company. I have been engaged by the Company since
12 February 2009 to assist in their economic and load
13 forecasting process.
14 Q.What is the purpose of your testimony?
15 A.The purpose of my testimony is to comment and
16 correct some of the assertions made by witnesses Yankel
17 and Mitchell with regards to economic conditions and
18 economic growth in the Idaho Power Company ("Idaho Power"
19 or "Company") service area as well as recent Company load
20 forecasts. I will also evaluate some of their assertions
2 1 by referencing Idaho Power i s recently acquired
22 macroeconomic forecast from Moody i s Inc.
23
24 /
25
61 MACE, DI REB 1
Idaho Power Company
.
.
.
1 Q.What is your response to Mr. Yankel i s claim on
2 page 2 of his testimony that the Company i s decision to
3 build Langley Gulch is based upon outdated information?
4 A.Mr. Yankel goes to great lengths to criticize
5 Idaho Power i s forecasting process without addressing one
6 of the central issues: The timing of these forecasts
7 wi th regard to lead time requirements of the planning
8 process. It is quite easy to criticize forecasts that do
9 not include the very most recent information, given that
10 hindsight is an exact science. The issue here is that
11 Idaho Power, like any other utility with significant lead
12 time requirements for power plant construction, is
13 engaged in decision making under uncertainty.
14 The construction of power plants requires
15 forecasts based on reasonable assumptions and practices.
16 Load forecasts must accommodate the necessary lead times
17 required for the siting and construction of new
18 generation. As per the testimony of Company witness Vern
19 Porter, Idaho Power was required to reserve and pay
20 reservation fees for critical equipment well in advance
21 of when the Company would otherwise choose to commit
22 itself in order to bring Langley Gulch on-line in time to
23 meet the resource requirements that were forecast at that
24 point in time~
25
62 MACE, DI REB 2
Idaho Power Company
.1 My review of the Company i s August 2007, August
2 2008, and May 2009 load forecasts leads me to conclude
3 that these forecasts were reasonable, especially in light
4 of the rapid economic growth experienced in the Idaho
5 Power service area over the last decade. Since the
6 August 2008 load forecast, economic conditions have
7 worsened considerably, but last fall i s credit crisis and
8 subsequent shock to the "real" economy were outside the
9 boundaries of "reasonable forecasts," i. e., it was an
10 event that could not have been forecast to occur, not
11 even in a worst case planning scenario. The few
12 economists who did forecast last fall i s events were
13 considered extremist or delusional..14 Q.Shouldn i t Idaho Power have anticipated the
15 economic downturn that occurred last fall?
16 A.The financial panic that occurred during the
17 fall of 2008 changed everyone's assessment of the
18 short-term economic performance for Idaho, the U. S., as
19 well as most every other country worldwide. Very few
20 professional economists, including the macroeconomic
21 forecasting services such as Global Insight and Moody i s,
22 nor the Idaho State Division of Financial Management
23 ("DFM") had forecast the severity of the economic
24 downturn that began last fall. This is demonstrated in.25 Mr. Yankel i s testimony in his discussion of the
ratcheting down of the DFM economic
63 MACE, DI REB 3
Idaho Power Company
.
.
.
1 forecast for the state of Idaho. To illustrate how
2 recently the DFM forecast has changed, I have prepared
3 Exhibi ts Nos. 13 and 14, which compare recent DFM
4 forecasts of employment and housing stock additions for
5 the state of Idaho.
6 Q.What about the assertion that Idaho Power 's
7 forecasts did not incorporate the worsening economic
8 conditions?
9 A.Idaho Power i s load forecasts progressively
10 reflected a slowing economy in the Idaho Power service
11 area. Exhibit No. 15 shows a comparison of the different
12 Company forecasts of residential customers over the
13 period of August 2005 through December 2008. Clearly,
14 the Company forecasts were incorporating the most recent
15 information available with regards to the slowing housing
16 market, but do not reflect the severity of the crash that
17 occurred last fall. In fact, the graph demonstrates that
18 the 2006 IRP forecast initially under-forecast the
19 residential customers being added to the system.
20 Q.What changes were made to the Company i s recent
21 May 2009 load forecast revision?
22 A.The May 2009 forecast revision was based on the
23 December 2008 forecast, which substantially reduced
24 customer growth for both the residential and commercial
25
64 MACE, DI REB 4
Idaho Power Company
.
.
.
1 classes. In fact, the May 2009 residential customer
2 forecast is currently under-predicting the residential
3 customers recently added to the Idaho Power system. The
4 May 2009 forecast also incorporates the latest changes to
5 Idaho Power i s special contract industrial customers and
6 is about 555,000 MWh lower for 2009 than the forecast
7 made in August 2008. It is my understanding that the May
8 2009 forecast revision is the basis for the load/resource
9 balance presented by Company witness Bokenkamp in this
10 proceeding.
11 Q.Do you think that the May 2009 load forecast
12 does a better job of representing the impact of the
13 recession on forecasted loads for Idaho Power?
14 A.Compared to both the August 2008 forecast and
15 the December 2008 forecast, the May 2009 revision more
16 accurately reflects the short-term impacts of the current
17 recession.
18 Q.Does the current recession mean that rapid
19 economic growth will no longer occur in southern Idaho?
20 A.No. There is no doubt that economic conditions
21 are slow right now, but even the most recent DFM
22 forecast, referenced by Mr. Yankel in his testimony,
23 shows a recovery beginning later this year and continuing
24 through 2010, 2011, and 2012.
25
65 MACE, DI REB 5
Idaho Power Company
.1 Q.What is the basis for the expectation of
2 renewed economic growth in southern Idaho?
3 A.Southern Idaho has many economic advantages
4 compared to many other areas. First and foremost, Idaho
5 has relatively low costs for both consumers and
6 businesses. There are a lot of other amenities in the
7 Idaho Power service area that attract people from all
8 over the country. Boise is regularly feted in national
9 magazines as one of the best places to live. It may be
10 the case that the traditional "people-follow-jobs"
11 thinking is more the case of "jobs-following-people" for
12 Idaho. The result of these differences is that Idaho
13 Power's service area population growth rate has grown at.14 two and one-half times the national average rate over the
15 last twenty years, much of that due to in-migration from
16 other states.
17 Considering the current economic and
18 legislative troubles in California, there could be a
19 significant increase in out-migration from California.
20 While in-migration has played a significant role in
21 Idaho i s growth, the near term could see ever higher
22 in-migration to Idaho, higher than that forecast by the
23 most recent Global Insight forecast cited in Mr. Yanke 1 iS
24 and Ms. Mitchell's testimonies..25
66 MACE, DI REB 6
Idaho Power Company
1 While Idaho i s economy more closely resembles.2 the national economy now as opposed to twenty-five years
3 ago, it is certainly not immune from recession. It is
4 qui te possible that the Idaho Power service area could
5 grow rapidly even if the rest of the country is not doing
6 well. Attached as Exhibit No. 16 is a recent article
7 from the Idaho Statesman. The article quotes Addison
8 Franz, a Moody i s economist, stating that Idaho may lead
9 the country out of the current recession. Both myself
10 and other Idaho Power personnel have had discussions with
11 Ms. Franz about the Boise MSA and Idaho economic
12 forecasts.
13 Q.Both Ms. Mitchell and Mr. Yankel criticize the.14 Company i S load forecasts for failing to reflect the
15 worsening economic conditions as a result of the national
16 recession. Do their criticisms have merit?
17 A. In Ms. Mitchell i s direct testimony on page 5
18 she states:
19 Without reviewing the underlying key
demographic and economic indicators that drive20 IPCs i PR 84 2009 IRP, it is not possible to
determine the extent to which the more current21 load forecast reasonably reflects the near- and
possibly longer-term effects of the current22 recession. However, on the face of it certainly
does not appear that the Company has
23
24.25
67 MACE, DI REB 7
Idaho Power Company
.
.
.
1 not adjusted its 2009 IRP load forecast per
Staff Production Request #84 or any other
previous load forecasts to reflect the currentrecession.
2
3
4 Not only does witness Mitchell admit that she
5 has not reviewed "the underlying key demographic and
6 economic indicators" that drive the 2009 IRP forecast,
7 she has also failed to review and understand some of the
8 key drivers of the individual load forecasts. The
9 conclusions she attempts to develop in her Exhibit No.
10 207 are misleading and misrepresent facts.
11 In Exhibit No. 207, Ms. Mitchell tabulates
12 Idaho Power' s system average load (70th percentile) and
13 system peak demand (95 percentile) forecasts for the 2006
14 IRP, August 2007, and August 2008. She also reports the
15 monthly differences between the more recent August 2008
16 forecast and the August 2007 and August 2006 forecasts.
17 The point she is attempting to make is that Idaho Power
18 has not sufficiently adjusted its load forecasts downward
19 as much as she thinks they should have been due to the
20 economic conditions that have changed over the past
21 several years. What she has failed to consider are the
22 load impacts that one customer, Hoku Materials, Inc., has
23 had on the forecasts of system load and system peak
24 demand that she is reporting in Exhibit No. 207. Prior
25 to making her
68 MACE, DI REB 8
Idaho Power Company
.
.
.
1 supposi tions and drawing misleading conclusions
2 concerning the load forecasts, she should have made an
3 effort to understand the composition of the load forecast
4 figures being reported.
5 Mr. Yankel, in his testimony, makes the same
6 mistakes as witness Mitchell. In his table on page 19 of
7 his testimony labeled "Ave MW Forecasted at Different
8 Times," Mr. Yankel reports the monthly differences in
9 2009 between the 2006 IRP, 2008 IRP Update, 2009 IRP, and
10 December 2008 forecasts and compares the difference
11 between the December 2008 and 2006 IRP forecasts. The
12 conclusions he attempts to develop in his table are also
13 misleading and misrepresent facts.
14 Like Ms. Mitchell, Mr. Yankel does not include
15 the loads of Hoku Materials, Inc., in the 2006 IRP load
16 forecast; however, in the August 2007 forecast, Hoku 's
17 forecast for 2013 was 40 aMW and 46 MW peak demand. In
18 the August 2008 forecast, Hoku i s average load and peak
19 demand forecast nearly doubled from the August 2007
20 forecast and for 2013 was 77 aMW and 87 MW peak demand.
21 Hoku' s impact on the consecutive load forecasts is
22 significant, representing approximately one and one-half
23 years of typical Idaho Power system load and peak demand
24 growth.
25
69 MACE, DI REB 9
Idaho Power Company
.1 I have prepared Exhibit No. 17 which is a table
2 showing how the Hoku forecast has changed over successive
3 load forecasts.This table illustrates how the
4 inclusion of Hoku energy sales (in aMW) and peak demand
5 (MW) figures impacted the consecutive system forecasts.
6 When the Hoku figures are subtracted from the sales
7 forecasts, it is evident that each of the consecutive
8 load forecasts is lower than the previous forecast (see
9 Exhibit No. 18).
10 Exhibit No. 18 illustrates another point - that
11 the August 2008 load forecast did incorporate a near-term
12 recession. The load forecast that was prepared in August
.13 2008 forecasts that 2009 system electricity sales (in
14 MWh), excluding Hoku, would only be 0.3 percent higher
15 than 2008.
16 Q. You described the load impact of Hoku as a new
17 customer. Are there other new customers that influence
18 the forecast?
19 A.Generally speaking, new potential customers
20 contact Idaho Power as part of a larger site location
21 process, whereby many locations, including locations
22 outside of the Idaho Power service territory are under
23 consideration. This process can take many years and can
24 be influenced by many intervening factors, including.25 market conditions and operational requirements which are
70 MACE, DI REB 10
Idaho Power Company
.
.
.
1 the drivers of microeconomic forecasting. Thus, while
2 representing significant potential load increase, it is
3 uncertain load.
4 A key determinant for significant large-load
5 customers is power availability and reliability. This is
6 illustrated in Exhibit No. 19, which is a presentation
7 made on September 10, 2008, by Mr. Don Dietrich,
8 Director, Idaho Department of Commerce, to the Integrated
9 Resource Planning (" IRP") Advisory Council. A key issue
10 salient to economic development and power supply made by
11 Mr. Dietrich was as follows:
12 Adequate power is not always available in the
company 's timelines.
13
14 The "company" referred to by Mr. Dietrich is a
15 prospective new large load customer for Idaho Power.
16 This "Catch-22 ii of power availability represents
17 uncertainty not only to prospective customers but to
18 Idaho Power forecasts of future load. The ironic nature
19 of such a "Catch-22" is inherent in Ms. Mitchell i sand
20 Mr. Yankel i s testimonies. Through the misapplication via
21 a broad brush of macro-economic doom and gloom they have
22 concluded that future growth is negative, yet, by
23 constraining the obvious impacts of the microeconomic
24 elements such as the need for adequate new power supply,
25 their forecast becomes a self-
71 MACE, DI REB 11
Idaho Power Company
.
.
.
1 fulfilling prophecy by driving new customers to locations
2 outside of southern Idaho.
3 Gi ven the uncertainty of new power supply,
4 Idaho Power forecasters have excluded over 700 MW of
5 active new customers i potential load inquiries in its
6 forecast.
7 Q.Have all classes of Idaho Power customers
8 experienced declines over the recent past?
9 While most customer classes have declined inA.
10 either customer growth and/or energy use, weather
11 adjusted electricity sales to the irrigation class have
12 surged over the last two years. I have prepared Exhibit
13 No. 20 which presents the historical and weather-adjusted
14 sales as well as the May 2009 forecast for 2009
15 irrigation sales. As can be seen from the table, sales
16 for the 2009 forecast year are substantially lower than
17 2008 actual sales and may need to be revised considerably
18 upwards.
19 Q.Please respond to Ms. Mitchell i s argument that
20 recent economic conditions have worsened in the Idaho
21 Power service area.
22 I have no disagreement with Ms. Mitchell'sA.
23 short-term observations. But I believe that she needs to
24 be careful in the manner in which she cites the types of
25 statistics she uses in her testimony. Ms. Mitchell also
72 MACE, DI REB 12
Idaho Power Company
.
.
.
1 makes some questionable assumptions for the economic
2 recovery of the Idaho Power service area and continued
3 load growth therein.
4 Both Ms. Mitchell and Mr. Yankel use the April
5 2009 DFM State of Idaho forecast as a proxy for economic
6 condi tions in the Idaho Power service area. This is not
7 an" apples-to-apples" comparison. The significant
8 majority of economic growth in Idaho over the last twenty
9 years took place within the Idaho Power service area and,
10 in particular, in the Boise Metropolitan Statistical Area
11 ("MSA"). The DFM analysis is for the entire state, which
12 includes many slow-growing rural areas outside the Idaho
13 Power service area which have significantly different
14 economic characteristics.
15 I have included Exhibit No. 21 which
16 demonstrates this growth differential as well as various
17 population statistics. It shows various geographic
18 aggregations as well as population totals. Most
19 importantly, it shows that the Boise MSA has doubled over
20 the 1988-2008 time period and represents nearly 80
21 percent of the Idaho population growth for that period.
22 This has resulted in very rapid load growth. Energy use
23 for the Idaho Power service area averaged over 2.5
24 percent per year for the 1988-2008 period, well above the
25 national average of 1.8 percent per
73 MACE, DI REB 13
Idaho Power Company
.1 year for energy for the same period according to the
2 Energy Information Administration ("EIA").
3 Q.Does Idaho Power have an economic forecast
4 comparable to the April 2009 DFM forecast cited in both
5 Mr. Yankel i sand Ms. Mitchell i s testimonies?
6 A.Yes. Idaho Power contracted with Moody i s in
7 April 2009 to provide macroeconomic forecast data for
8 Idaho counties as well as the two maj or MSAs in the Idaho
9 Power service area - Boise and Pocatello. The Boise MSA
10 is responsible for a significant portion of the
11 population growth in the Idaho Power service area and,
12 excluding the irrigation sector, represents SO percent of
13 the Company energy sales. I will therefore focus on the.14 results of the May 2009 Moody i s forecast for the Boise
15 MSA and compare that to the assertions of a slow economic
16 recovery made by Ms. Mitchell and Mr. Yankel.
17 Q.How does the Moody i s forecast for the Boise MSA
18 compare to Ms. Mitchell i s claims of a very slow economic
19 recovery?
20 A.Ms. Mitchell chooses her economic statistics
21 very carefully to paint a very slow recovery for the
22 Idaho Power service area economy. For example, she
23 states on page 14 of her testimony that the construction
24 sector is the "greatest contributor to Idaho's stagnant.25 GSP (Gross
74 MACE, DI REB 14
Idaho Power Company
.
.
.
1 State Product)" without mentioning that this sector
2 represents only 5-6 percent of the entire Idaho GSP in
3 2007-08. She goes on to state that housing starts
4 contribute to load growth without connecting the
5 relationship between housing starts, housing stock,
6 residential customers, households, and residential energy
7 sales. Many of these housing starts during recent years
8 became, in fact, unoccupied houses, which Idaho Power
9 still counts as residential customers. Empty housing
10 uni ts generally use considerably less electricity than
11 occupied ones.
12 As far as the forecast of housing starts, she
13 states on page 12 of her testimony "the levels (of
14 housing starts) recorded in 2006 are not expected to
15 return by the end of 2011." Besides my earlier comments
16 on unoccupied housing units, the problem here is that she
17 uses one of the years considered to be part of the
18 "housing bubble," a year where the housing market was
19 characterized by rampant speculation and over-building.
20 I have attached Exhibit No. 22 that shows a graph of
21 housing starts for the Boise MSA that clearly
22 demonstrates the "housing bubble." It is unlikely that
23 the Idaho Power service area will see a return to
24 speculative building of large numbers of unoccupied
25 housing units for quite some time. Yet the graph, based
75 MACE, DI REB 15
Idaho Power Company
.1 on the Moody i s forecast for the Boise MSA, shows a return
2 to a robust level of residential customer growth similar
3 to that which existed before the "bubble" years of this
4 decade.
5 Q.Does this mean that there will not be increases
6 in residential energy sales over the next few years
7 because there will be many fewer housing starts?
8 A.Not necessarily. Idaho Power estimates that
9 there are a substantial number of residential customer
10 accounts which are actually unoccupied housing units with
11 very little energy use. As a result, the
12 weather-adjusted residential use per customer has
13 declined recently. However , it is likely that.14 residential energy use will increase over the near term
15 even without new houses being built. Due to occupation
16 by native and in-migration household growth, the present
17 vacant housing units will shift from minimal maintenance
18 level of use to occupied consumption levels and the
19 average residential use per customer will increase. This
20 will increase residential energy sales over the next few
21 years without an equivalent increase in housing
22 stock/starts, all of this the result of over-building
23 from the housing bubble.
.24
25
Q.What about the income per capita graph shown on
page 13 of Ms. Mitchell i s testimony that shows a rather
flat economic recovery for Idaho?
76 MACE, DI REB 16
Idaho Power Company
.1 A.Once again, Ms. Mitchell uses a number for the
2 entire state of Idaho as a proxy for the Idaho Power
3 service area. A more representative number for the Idaho
4 Power Service area would be the Moody i s forecast of
5 income per capita growth for the Boise MSA. My Exhibit
6 No. 23 shows the May 2009 Moody's forecast of income per
7 capi ta for the Boise MSA and Idaho. The Moody i s forecast
8 for the state of Idaho shows a pattern similar to Ms.
9 Mi tchell 's exhibit. However, the Boise MSA shows a
10 robust recovery that significantly exceeds the state
.
.
11 growth rate conveyed by Ms. Mitchell's exhibits (1.5
12 percent growth for the state of Idaho vs. 4.4 percent for
13 the Boise MSA). I might also add that there is a
14 noticeable difference between the level of income per
15 capita for the Boise MSA versus the level for Idaho as a
16 whole. If one were to remove the contribution of the
17 higher Boise MSA income per capita to the state of Idaho
18 numbers, the difference would be even more pronounced.
19 Here I agree with Ms. Mitchell i s testimony; energy use is
20 clearly correlated with incomes and is something to be
21 considered in load forecasts.
22 Q.Are there other relevant economic variable
23 comparisons from the recent Moody i s forecast?
24 A.Yes. Ms. Mitchell discusses the slow recovery
25 from this recession to previous employment levels
77 MACE, DI REB 17
Idaho Power Company
.1 as per the DFM forecast. On page 16 of her testimony,
2 the graph shows Idaho employment in 2011 substantially
3 below the levels of 2007. It is common knowledge that
4 employment is a lagging indicator in the business cycle.
5 Once again, there is a significant difference between the
6 state of Idaho numbers and the Idaho Power service area.
7 My Exhibit No. 24 shows the Moody i s forecast of total
8 non-agricultural employment for the Boise MSA. While
9 there are certainly lingering effects on employment from
10 this recession, the forecast for the Boise MSA once again
11 is much more robust than that for the state of Idaho as
12 per the DFM forecast.
.13 A better indicator of economic recovery and
14 associated growth in demand for energy would be the Gross
15 Output measure or what is referred to as Gross State
16 Product ("GSP") on page 14 of Ms. Mitchell i s testimony.
17 I have attached as Exhibit No. 25 a graph of the Moody 's
18 forecast of Gross Output for the Boise MSA. This
19 demonstrates an earlier recovery to the current recession
20 followed by a continuation of the growth trend prior to
21 the current recession.
22 Q.Does the Moody i s forecast fall wi thin the
23 reasonable consensus of economic forecasters?
.24
25
A.Yes. In many ways the Moody i s and the DFM
forecasts for Idaho as a whole are very similar. Many
78 MACE, DI REB 18
Idaho Power Company
.
.
.
1 economists expect a recovery to begin in the latter half
2 of 2009. Moody i s is not forecasting anything radically
3 different for the state of Idaho compared to the DFM
4 forecast. However, broad generalizations for the entire
5 state can lead to faulty conclusions when looking at the
6 Idaho Power service area economy.
7 Q.How do you respond to Ms. Mitchell i s concerns
8 regarding Idaho Power i s winter peak?
9 A.It is my understanding that Idaho Power is
10 capaci ty constrained in the summer and is not adding
11 resources to meet winter peak. This is exemplified in
12 the fact that in 2008, Idaho Power i s all-time system
13 winter peak was exactly 7 SO MW lower, roughly 25 percent,
14 than its all-time summer peak. Idaho Power had a much
15 more pronounced winter peak 20-30 years ago when a much
16 larger share of the service area housing stock relied on
17 electric space heating. In fact, Idaho Power had annual
18 system peaks in the winter for both 1989 and 1993. With
19 the increasing share of natural gas space heating and
20 water heating in homes, it is doubtful that Idaho Power
21 will experience a winter peaking problem in the future.
22 Q.Why will natural gas space heating continue to
23 dominate the Idaho Power service area in the future?
24
25
79 MACE, DI REB 19
Idaho Power Company
.
.
.
1 A.It appears that the predominance of gas space
2 heating in the Idaho Power service area will continue for
3 the foreseeable future. Gi ven the significant additions
4 to domestic natural gas reserves over the last few years,
5 natural gas should maintain the cost advantage that it
6 currently enj oys over electric space heating. When
7 natural gas prices reached $IS/MMbtu in the forward gas
8 markets in late 2005, many people assumed that this
9 indicated "peak gas" and that these types of prices would
10 continue into the indefinite future due to the lack of
11 reserves. This now appears unlikely.
12 The Idaho Power service area cannot be compared
13 to most utili ties in the Pacific Northwest. Those
14 utili ties located west of the Cascades have a
15 significantly different climate that results in winter
16 peaks. These winter peaks are the result of high
17 saturations of electric space heating and much less use
18 of summer air conditioning. Since Idaho Power is not
19 building capacity to satisfy winter peak and natural gas
20 space heating is likely to dominate the Idaho Power
21 service area for the foreseeable future, it is very
22 likely that programs targeted at winter peak would not be
23 cost-effective for Idaho Power.
24 Q.Does this conclude your testimony?
25 A.Yes it does.
80 MACE, DI REB 20
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
MS. NORDSTROM: I tender this witness for
4 cross-examination.
3
5 COMMISSIONER KEMPTON: Every once in
6 awhile I have to take myself out of what I i m looking at
7 here as the Chair. Industrial Customers of Idaho
10
11
12
8 Power.
9 MR. RICHARDSON: Thank you, Mr. Chairman.
CROSS-EXAMINATION
13 BY MR. RICHARDSON:.14 Q
15 A
Good morning, Mr. Mace.
Good morning.
You state you i re an independent consultant
17 for Idaho Power Company?
16 Q
Yes, I am.
And how long have you been employed by
20 Idaho Power as an independent consultant?
18 A
I believe since the end of February.
And do you engage in independent
23 consul ting for a living; is that what you do?
.
19 Q
Not normally. This is the only work I'm
25 performing right now.
CSB REPORTING
[phone]
21 A
22 Q
24 A
81 MACE (X-Reb)
Idaho Power Company
.
.
.
20
1 Q And what do you do when you are not
2 independently consulting with Idaho Power?
3 A I teach economics at a local college.
4 Q And you i re a former employee of Idaho
5 Power; is that correct?
6 A Yes, I am.
7 Q And you came to work for Idaho Power in
8 this capacity for what reason?
9 A You i re talking about my previous
10 employment?
11 Q No, your current independent consulting
12 wi th Idaho Power.
13 A Oh, I i m sorry, could you repeat?
14 Q Yes. For what reason are you consulting
15 Idaho Power?
16 A I was contacted by Idaho Power. I i ve
17 maintained professional contacts with Idaho Power and
18 they requested that I come in and assist them in their
19 forecasting process.
Q Did Idaho Power give you any indication of
21 the work product, the end result it wanted from you?
22
23
A Not an end result, no.
Q Okay. Turn to page 3 of your rebuttal
24 testimony beginning at line 5 and there you discuss the
25 recent economic meltdown, if you will, and you conclude
CSB REPORTING
[phone]
82 MACE (X-Reb)
Idaho Power Company
.
.
.
1 on line 11 that only delusional or extremist economists
2 would have predicted this meltdown.
3 A Not would have. The ones that did were
4 considered delusional or extremist. There were several,
5 but not many.
6 Q So your opinion is that this economic
7 meltdown is beyond normal expectations?
8 A We had a very severe credit crisis.
9 Q And it was so severe that those who were
10 predicting it were considered by the mainstream
11 economists to be extremist or delusional?
12 A Well, you had the chairman of the Federal
13 Reserve basically not believing there was any problem
14 coming for quite some time, so people who contradicted
15 his beliefs were considered extreme.
16 Q And did you contradict his beliefs?
17 A I did not foresee the severity of the
18 downturn like many others.
19 Q On page 8 of your rebuttal testimony --
20 well, before I get to that, Mr. Chairman, may I approach
21 the witness?
22 COMMISSIONER KEMPTON: You may.
23 (Mr. Richardson approached the witness.)
24 MR. RICHARDSON: Mr. Chairman, I'm handing
25 the witness a document which I will ask to be marked
CSB REPORTING
[phone]
83 MACE (X-Reb)
Idaho Power Company
.
.
.
1 Exhibit 209.
2 Q BY MR. RICHARDSON: Mr. Mace, would you
3 take a moment to look at this document? I would
4 represent to you that it i S a compilation of Idaho Power 's
5 four most recent load forecasts. On the far left column
6 you will see a date, May '09, August '08, August '07,
7 August 106, and then reading across the row, you will see
8 the load forecast that Idaho Power published for 2012
9 average megawatts, 2012 peak megawatts, 2013 average
10 megawatts, and 2013 peak megawatts. If you would just
11 take a moment and if you could agree with me that this
12 is--
13 MS. NORDSTROM: Mr. Chairman, I obj ect to
14 this question and to this exhibit. This is the first
15 that we've seen it. There's no foundation laid for it.
16 We can i t be sure that the numbers that are in these, in
17 this exhibit are correct and I believe that Mr.
18 Richardson is going to ask him to draw a conclusion based
19 upon information that has no foundation and that he
20 hasn i t reviewed previously.
21 MR. RICHARDSON: Mr. Chairman?
22 COMMISSIONER KEMPTON: Mr. Richardson.
23 MR. RICHARDSON: First of all, I haven i t
24 asked a question yet and I i m in the process of laying a
25 foundation. If you i II give me an opportunity to lay a
CSB REPORTING
[phone]
MACE (X-Reb)
Idaho Power Company
84
.
.
.
1 foundation, then I will stand for an objection, but I
2 would like the opportunity to lay the foundation and ask
3 a question.
4 COMMISSIONER KEMPTON: The obj ection is
5 overruled.
6 MR. RICHARDSON: Thank you, Mr. Chairman.
7 Q BY MR. RICHARDSON: So Mr. Mace, if you
8 would take a moment to look at this data on this document
9 and would you agree with me that it is representative of
10 the four most recent load forecasts that Idaho Power has
11 published?
12 Is it representative? You i re asking me ifA
13 it's representative?
14 Q Yes, 1'm asking you if --
15 I have no way of verifying that it'sA
16 representati ve of our forecasts.
17 Q Have you not looked at Idaho Power i s most
18 recent four load forecasts?
19 Yes, but I have no way of memorizing allA
20 those numbers.
21 Q Do you not have access to those numbers?
22 A It i S not in my exhibits.
23 Q It i S in exhibits filed in this docket and
24 you are here criticizing load forecasts published by my
25 witness and I'm wondering if you --
CSB REPORTING
[phone]
85 MACE (X-Reb)
Idaho Power Company
.
.
.
1 A I i m not aware of any load forecast
2 published by your witness.
3 COMMISSIONER KEMPTON: Mr. Richardson?
4 Q BY MR. RICHARDSON: Okay, at line 6 on
5 page 8 of your rebuttal testimony
6 COMMISSIONER KEMPTON: Okay; so in laying
7 the foundation, you i re going to take the numbers that
8 have been presented here and tie them directly to
9 information that is provided in rebuttal testimony or in
10 the filing, is that what I understand, because you are
11 asking for conclusions?
12 MR. RICHARDSON: What I'm trying to do,
13 Mr. Chairman, is to lay the foundation that this is
14 simply a compilation of Idaho Power i s load forecasts
15 that i s in the record. This is an economic witness
16 talking about load forecasts and criticizing other
17 wi tnesses i critique of Idaho Power i s load forecasts and I
18 think it i s that -- I assume that this witness would have
19 looked at Idaho Power i s load forecasts in preparation of
20 his testimony and would be able to verify that -- I mean,
21 if he wants to take a moment off the record to look at
22 Idaho Power i s load forecasts, I have them all right here,
23 all the published load forecasts that are synopsized in
24 this one sheet and this is just simply to economically
25 present the information.
CSB REPORTING
[phone]
86 MACE (X-Reb)
Idaho Power Company
.
10
1 MS. NORDSTROM: Mr. Chairman?
2 COMMISSIONER KEMPTON: Ms. Nordstrom,
3 would you agree to a recess to review that or do you want
4 to maintain your obj ection that this is information that
5 this witness couldn i t have reasonably memorized, so to
6 speak?
7 MR. RICHARDSON: I don't think he has to
8 have memorized them. His Exhibit 18 actually compares
9 the results of these load forecasts.
MS. NORDSTROM: I i m not sure that there i s
11 an easy way to verify the accuracy of these numbers in a
12 relati vely short time period. This exhibit, you know,
.13 could be introduced and supported by his own witness or
14 whomever prepared the information and can attest to its
15 voraci ty. This witness really isn i t prepared to do that
16 without more time to check each number that i s on this
17 sheet.
18 MR. RICHARDSON: Mr. Chairman, if you i d
19 look at his Exhibit No. 18, he uses the results of these
20 load forecasts to present a critique of other economic
21 forecasting witnesses. This data had to have been used
22 by him at some point in the preparation of his Exhibit 18
23 and if he doesn i t have it in his workpapers, then I would
24 question whether or not he prepared Exhibit 18..25 COMMISSIONER KEMPTON: Mr. Reading, do you
CSB REPORTING
[phone]
87 MACE (X-Reb)
Idaho Power Company
.
.
.
1 have a response to that statement?
2 THE WITNESS: I i m sorry, was that a
3 question of me?
4 COMMISSIONER KEMPTON: I i m sorry, Mr.
5 Mace. Mr. Mace, do you have a response to the point that
6 Mr. Richardson is making?
7 THE WITNESS: Which specific point? I
8 think he made several.
9 COMMISSIONER KEMPTON: Mr. Richardson,
10 would you phrase your question again?
11 MR. RICHARDSON: Mr. Chairman, maybe I can
12 short circuit this if I can use the convention of asking
13 the witness to accept, subj ect to check, that this data
14 represents the results of the most recent four load
15 forecasts of the Company.
16 COMMISSIONER KEMPTON: Mr. Mace?
17 THE WITNESS: Okay.
18 COMMISSIONER KEMPTON: Go ahead, Mr.
19 Richardson.
20 MR. RICHARDSON: Thank you, Mr. Chairman.
21 MS. NORDSTROM: Mr. Chairman, 1'm really
22 not comfortable with this line of questioning. It's not
23 really obvious, I guess, just looking at the labels what
24 information this is being drawn from and, you know, given
25 the complexity of the forecasting that I s involved, I
CSB REPORTING
[phone]
88 MACE (X-Reb)
Idaho Power Company
.
.
.
1 really think this exhibit should be, the foundation
2 attested to by his witness, not mine. He can i t verify
3 this without having spent some time to verify that these
4 numbers are in fact representative of what is in the
5 forecasts.
6 MR. KLINE: We i re going to have a mess on
7 the record if
8 COMMISSIONER KEMPTON: Well, Mr.
9 Richardson, you know, there i s a lot of latitude in
10 evidentiary evidence in these kinds of hearings, but when
11 you're presenting this kind of detailed material, the
12 Chair agrees that all the parties need to have the
13 opportunity to look at this information before it i s
14 presented to the witness and that these questions are
15 that your questions are formulated on the evidence that
16 everybody has seen. If you want to bring this back in
17 tomorrow and to call the witness back, we can arrange for
18 that, but I do agree you know, I've stumbled around
19 this thing and tried to develop latitude, but I just
20 don i t think it i s there, so subject to this information
21 being disseminated to other parties and being presented
22 at a later point in the hearing, your request to present
23 this information as Exhibit 209 is overruled.
24 MS. NORDSTROM: Mr. Chairman, this witness
25 has a flight out this afternoon, so his availability is
CSB REPORTING
[phone]
MACE (X-Reb)
Idaho Power Company
89
.
.
.
1 limited. I'm not sure how much time it would take for
2 him to review the material, but again, I do believe that
3 the appropriate witness to support this exhibit is
4 whoever created the document.
5 MR. RICHARDSON: Mr. Chairman, may I
6 respond?
7 COMMISSIONER KEMPTON: Yes.
8 MR. RICHARDSON: Thank you. The heart of
9 this case or one of the hearts of this case is whether or
10 not the lights are going to go out if we delay by ten
11 months the decision to build this plant and during the
12 quasi oral argument at your decision meeting, I was asked
13 by Commissioner Smith if I could guarantee to her that
14 the lights wouldn i t go out; therefore, load forecasts are
15 a critical element in your decision, A, to grant our
16 motion just to delay until we can get more reliable
17 information on what Idaho Power i s loads and resources
18 will be in 2012, and, B, whether or not to grant a
19 certificate of convenience and necessity that will tie
20 the hands of all future Commissioners from ever again
21 reviewing the prudency of this decision.
22 Load forecasts are a critical element in
23 this case. They are central to whether or not you can
24 make your decision with a full and complete record and I
25 asked if I could inquire of this witness based on a
CSB REPORTING
[phone]
90 MACE (X-Reb)
Idaho Power Company
.
.
.
1 subject to check and now I am told that this witness is
2 out of town this afternoon and will not have an
3 opportunity to check, so I think if that i s the case, if I
4 cannot cross-examine this witness, then I would move to
5 strike his testimony.
6 COMMISSIONER KEMPTON: Mr. Richardson, I
7 agree that this is critical testimony in terms of what
8 the Commission is looking for in terms of load forecasts.
9 Where I find a problem here is that if this is so central
10 and if it's such a turning point in your position, why it
11 is just now being introduced in the blind to all of the
12 other parties without giving them the opportunity to have
13 it in advance of the time that you i re asking the
14
15
questions in hearing?
MR. RICHARDSON: Mr. Chairman, the reason
16 for that is Idaho Power i s compressed schedule in this
17 case. You are asked to issue an order by the end of
18 August. We didn't have an opportunity to file
19 surrebuttal testimony. It wasn i t allowed for in the
20 process in this case and the only way I can cross-examine
21 a rebuttal witness whose testimony was just filed last
22 week is by presenting him with evidence and
23 cross-examination.
24
25
That i s the hand I was dealt with. It i s
the hand we've all been dealt with. This is a very
CSB REPORTING
[phone]
91 MACE (X-Reb)
Idaho Power Company
.
.
.
1 compressed time schedule, so I i m not surprising, I i m not
2 shooting out of the dark with an exhibit. These are
3 Idaho Power i s numbers. They come from their load
4 forecasts, their published load forecasts. This witness
5 even references those published load forecasts in his
6 Exhibit 18. It's incredible to me if he doesn't know
7 what is in their load forecasts.
8 MS. NORDSTROM: Mr. Chairman?
9 COMMISSIONER KEMPTON: Ms. Nordstrom.
10 MS. NORDSTROM: I'd like to request that
11 we take a brief recess. Let me ask the witness, you
12 know, how long it might take to verify some of the
13 numbers and see how cpmfortable he is responding to this
14 and it may be that we can resolve this relatively
15 briefly.
16 COMMISSIONER KEMPTON: I was on the point
17 of having a recess. That can also be one of the actions
18 that take place, but I want to consult with the other
19 Commissioners on this.
20 MR. RICHARDSON: Mr. Chairman?
21 COMMISSIONER KEMPTON: Mr. Richardson.
22 MR. RICHARDSON: If it would be helpful,
23 my expert witness helped prepare this document and she
24 could probably walk Mr. Mace through the numbers in five
25 minutes and identify the Idaho Power documents from which
CSB REPORTING
[phone]
92 MACE (X-Reb)
Idaho Power Company
.
.
.
1 they came to get him comfortable with the document and I
2 think that could happen fairly quickly and easily.
3 COMMISSIONER KEMPTON: There will be a
4 five-minute recess.
5 (Recess. )
6 COMMISSIONER KEMPTON: The hearing will
7 come to order. Mr. Richardson.
8 MR. RI CHARDSON : Than k you, Mr. Cha i rman,
9 and I would renew my request that Exhibit 209 be marked
10 for identification purposes and I be allowed to examine
11 the witness on the basis of that exhibit after he has had
12 an opportunity to sit down with the author of Exhibit 209
13 and understand that the numbers are reasonable and he has
14 an opportunity to correct them if after checking them
15 they i re in error.
16 COMMISSIONER KEMPTON: Fine, and then
17 without objection, the Commission will order that Exhibit
18 209 be entered into the record.
19 MR. RICHARDSON: Thank you,
20 Mr. Chairman.
21 MS. NORDSTROM: Subject to check, if we
22 could do that.
23 COMMISSIONER KEMPTON: Subject to review?
24 MS. NORDSTROM: Yes, we're comfortable on
25 a preliminary basis and I think we're satisfied enough
CSB REPORTING
[phone]
93 MACE (X-Reb)
Idaho Power Company
.
.
.
1 that Mr. Mace can respond to questions on it, but we
2 would like to again verify the numbers with a little bit
3 more time.
4 COMMISSIONER KEMPTON: So ordered.
5 (ICIP Exhibit No. 209 was marked for
6 identification. )
7 COMMISSIONER KEMPTON: Mr. Richardson.
8 MR. RICHARDSON: Thank you,
9 Mr. Chairman.
10 Q BY MR. RICHARDSON: Mr. Mace, have you had
11 an opportunity to review Exhibit No. 209?
12 A Yes.
13 Q And looking at the top four rows on
14 Exhibit 209, we i re looking at the 2012 forecasts that
15 Idaho Power has published respectively in August of '06,
16 August of '07, August of i 08 and May of '09. Do you see
17 that?
18 A Yes.
19 Q And this is for average energy which is
20 apparently a critical factor for Idaho Power keeping the
21 lights on; wouldn't you agree?
22 A I am not a power supply witness.
23 Q Does this series of forecasts actually
24 indicate that Idaho Power is predicting in 2012 as of May
25 of this year more load than it predicted in 2012 back in
CSB REPORTING
[phone]
94 MACE (X-Reb)
Idaho Power Company
.
.
.
1 August of 10 6?
2 A That i s what the numbers indicate.
3 Q And in light of your earlier testimony
4 that only a delusional or extremist economist would
5 believe that load -- that the economy would have tanked
6 as seriously as it did, would you agree that only an
7 extremist economist in light of what the economy did
8 would predict that load would go up?
9 A No.
10 Q At page 8 --
11 A May I add?
12 Q Certainly.
13 A You i re looking at the forecast in
14 aggregate. You i re ignoring a lot of the changes that
15 have taken place over the years and my position or my
16 work with the, Company is to assess the reasonableness of
17 this forecast. I did not put any of these forecasts
18 together and in light of a lot of information that I have
19 become aware of in the last few months, I do not find
20 this to be inconsistent as you are suggesting.
21 Q Do you know if these forecasts actually
22 incorporate the economic impact of the recent Micron
23 layoffs?
24 A I believe so. I believe the May 2009 has
25 adjustments to special contracts that include Micron.
CSB REPORTING
[phone]
95 MACE (X-Reb)
Idaho Power Company
.
.
.
1 Q In July of 2009 Micron announced another
2 2,000 job losses.
3 A They announced it this month?
4 Q Uh-huh. Were you aware of that?
5 A That i S probably not incorporated in the
6 forecast, but I don i t know. I i d be very surprised if I
7 missed that announcement.
8 Q Turning to page 8 of your rebuttal
9 testimony
10 A Okay.
11 Q -- on line 6 you criticize Ms. Mitchell
12 for, as you say, not reviewing the underlying key
13 demographic and economic indicators that drive the 2009
14 forecast. Do you see that?
15 A Yes.
16 Q Are you aware that Idaho Power has not
17 published the key demographic and economic indicators
18 underlying its forecasts since the 2006 IRP?
19 A I do not know that.
20 Q You i re not aware of that?
21 A 1'm not aware of that.
22 Q So assuming that that i s a fact that the
23 Company hasn i t published its underlying demographic and
24 economic indicators for any of its forecasts since the
25 2006 IRP was published, in your opinion, is it possible
CSB REPORTING
[phone]
96 MACE (X-Reb)
Idaho Power Company
1 for an independent review of those studies to be done if.2 they i re not published?
3 A Well, I was under the impression that
4 there were a number of production requests in this case
5 and that some of that information was provided. I think
6 that i s my understanding.
7 Q Do you know if Idaho Power's economist
8 Mr. John Church who they used to study the published
9 demographic and economic underpinnings for its forecasts
10 has been retained by Idaho Power since 2006 to publish
11 those documents?
12 A I believe he i s no longer retained by the
13 Company..14 Q So isn i t it true that all this Commission
15 has to go on are the end results of Idaho Power i s updates
16 of its forecasts and not a new forecast?
17 A Well, the new forecast is the May 2009
18 forecast.
19 Q But it i S not based upon a comprehensive
20 demographic and economic study, is it?
21 A I believe it i S based on the last economic
22 forecast that was done, I think, in summer of 2008,
23 but--
24 Q Can you point to me where that is?.25 A -- with some adjustments.
CSB REPORTING
[phone]
97 MACE (X-Reb)
Idaho Power Company
.1 Q Can you give me a copy of that? Can you
2 show me where that is?
3 A I would have to check with the Company to
4 find that information.
5 Q So you don i t know that there i s a
6 comprehensi ve demographic and economic forecast
7 supporting the May 2009 forecast, do you?
8 A Only to the extent of what was provided
9 last summer, I believe, but Idaho Power did make
10 adjustments to their economic drivers.
11 Q Right, but the adjustments are just end
12 adj ustments. They i re not comprehensive adj ustments based
.
20
.
13 upon a full demographic and economic study, are they?
14 A Well, no, I think there were economic and
15 demographic studies done in those adjustments.
16 Q I guess it depends on what you define as
17 an economic study, doesn't it?
18 A I think the forecasts have -- I think the
19 assumptions on the forecasts were reasonable.
MR. RICHARDSON: That i s all I have,
21 Mr. Chairman.
22 MS. ACKERMAN: Mr. Chairman, NIPPC has no
23 cross.
24 COMMISSIONER KEMPTON: Mr. Olsen.
25 MR. OLSEN: Thank you, Mr. Chairman.
CSB REPORTING
[phone]
98 MACE (X-Reb)
Idaho Power Company
.
.
.
1 CROSS-EXAMINATION
2
3 BY MR. OLSEN:
4 Q How are you doing, Mr. Mace?
5 A Fine.
6 Q I would just like you to have your
7 testimony in front of you.
8 A Uh-huh.
9 Q Could you turn to page 2?
10 A Two?
11 Q Yes, uh-huh, and specifically looking at
12 lines 10 through 13, and you talk about that the issue
13 here is that Idaho Power, like any other utility with
14 significant lead time requirements, is engaged in
15 decision making under uncertainty. You focus on that
16 issue. Isn i t the issue before the Commission a little
17 bi t broader than that?
18 A Well, I think I was referring to load
19 forecasts here and so I i m not sure I understand your
20 question.
21 Q Well, you say, you know, this is the
22 principal issue, planning under uncertainty.
23 A Uh-huh.
24 Q Okay. Now, as we see it, we i re here today
25 before the Commission, we've just had a little exchange
CSB REPORTING
[phone]
99 MACE (X-Reb)
Idaho Power Company
.1 dealing with the importance of load forecasting and so
2 that i s what we i re going to be talking about, but you i ve
3 also just testified that you were engaged to consider the
4 reasonableness of Idaho Power i s load forecasts; is that
5 right?
6 A Assist and evaluate, right.
7 Q Assist and evaluate, okay. If you could
8 turn over to page 3 of your testimony, you i ve made the
9 statement there at lines 2 and 3 that Idaho Power 's
10 forecasts were reasonable; is that correct?
11
.
.
A Uh-huh.
12 Q Okay; so even though they were considered
13 reasonable at the time, you i ve previously testified that
14 the rapid change in the economy last fall was unexpected
15 and couldn i t be wi thin the bounds of what someone could
16 anticipate; is that a fair statement?
17 A There was a great deal of uncertainty.
18 Q A great deal of uncertainty, but yet,
19 we i re here today and there i s still additional
20 uncertainty; correct?
21 A Uh-huh.
22 Q Okay; so are you saying that it i S not
23 reasonable to look at that uncertainty as we sit right
24 now?
25 A I don't believe I testified to that, no.
CSB REPORTING
[phone]
100 MACE (X-Reb)
Idaho Power Company
.
.
.
1 Q Well, that i s what you seem to be stating
2 here, this is reasonable and --
3 A Yeah, and I have reasons why I consider
4 the current May '09 forecast to be reasonable.
5 Q Okay. Wouldn i t you think it would be
6 reasonable to look at subsequent events that are going on
7 here?
8 A Well, the problem is if one decides that
9 one must wait to see some of this uncertainty unravel or
10 become known and let i s say we wait a number of months to
11 do that, then we are then confronted at that point in
12 time in the future with additional uncertainty that
13 doesn i t even exist now. That i s what I mean by planning
14 under uncertainty. There's always going to be unknown
15 factors and the logical extension of that process would
16 be having the lights go out before we decide to build a
17 power plant.
18 Q But if the economic data in the future
19 shows a worsening economy, that wouldn i t be the case,
20 would it?
2.1 A And I address that in my testimony and my
22 various exhibits and referrals to the Moody 's
23 macroeconomic forecast for not only the State of Idaho,
24 but the Boise MSA and the various Idaho counties and they
25 show a significant recovery beginning and that the Boise
CSB REPORTING
[phone]
101 MACE (X-Reb)
Idaho Power Company
.1 MSA economy is quite dynamic and quite -- well, has the
2 potential for large increases in economic acti vi ty.
3 But you use the term "might"; isn i t thatQ
4 correct?
5 Okay, that i s what Moody i s isA
6 forecasting
7 Q Okay.
8 -- and we base the reasonableness of theA
9 May i 09 forecast on Moody' s evaluation. One of my
10 exhibits is an article from the Idaho Statesman that
11 quotes Addison Franz, a Moody i s economist, who talks
.
.
12 about Idaho leading the country out of recession and, of
13 course, this area, the Treasure Valley, is the economic
14 engine of Idaho, the principal economic engine, and,
15 therefore, that bodes well for a return to economic
16 growth and load growth.
17 Okay, but that's something we i II addressQ
18 later. That wasn't exactly what I asked.
19 A Okay.
20 But let i s go back to your statement hereQ
21 that you believe that these forecasts are reasonable.
22 Isn i t it possible for a forecast to be "reasonable," but
23 yet, be completely wrong in what actually developed?
24 It happens all the time --A
25 Q Okay.
CSB REPORTING
[phone]
102 MACE (X-Reb)
Idaho Power Company
.1 A -- but at some point you have to make a
2 decision as to how you i re going to go about doing your
3 forecast and rather than not doing anything, we have done
4 a forecast based on the best information possible and
5 including economic forecasts and things like adj ustments
6 to large industrial customers.
7 Q Okay.
8 A In other words, we have to have a forecast
9 to do planning. If you say that there i s so much
10 uncertainty we can't do a forecast, then we can't plan.
11
.
.
Q Moving on, if you could turn to page 4 of
12 your testimony, lines 9 -- 6 through 19 is what I will be
13 focusing on here, and specifically, you have Exhibit 16,
14 if you could also put your finger on that one.
15 A Fifteen?
16 Q Fifteen, sorry.
17 A Okay.
18 Now, if we can turn to Exhibit 15, we haveQ
19 laid out here the customer forecasts, 12-month change and
20 we have the various IRP forecasts and updates that we
21 were discussing earlier with Mr. Richardson; is that
22 correct?
23 A Uh-huh.
24 Okay; so with respect to that, we have theQ
25 various distinctions between the forecasts here, but what
CSB REPORTING
[phone]
103 MACE (X-Reb)
Idaho Power Company
.
.
.
1 kind of faith should the Commission put in the Company 's
2 forecasts that a quick end to the recession and a rapid
3 rise in load loss when each of these are proj ecting a
4 grossly overestimate of the time of recovery, let alone
5 the magnitude of the recovery?
6 A 1'm sorry, could you repeat that? I
7 didn i t catch the last part.
8 Q What kind of faith should the Commission
9 put into the Company i s forecasts when we have these
10 varying forecasts that all have disparate future
11 predictions of what i s going to happen with respect to
12 residential load and we can extrapolate that to other
13 areas of Idaho Power i s load as well?
14 A Well, I think any good forecaster takes
15 advantage of whatever the most recent information is and
16 if you look at these changes, it clearly reflects a
17 worsening economy and then finally the world falling off
18 a cliff last fall, so I may point out that on Exhibit 13
19 of my testimony, we show basically the same thing
20 happening with the Division of Financial Management
21 forecast where their forecast of total non-agricultural
22 employment changes radically over the last two years.
23 The same thing you might point out on Exhibit 14 where,
24 again, we look at the Division of Financial Management
25 forecasts when they i re talking about housing stock
CSB REPORTING
[phone]
104 MACE (X-Reb)
Idaho Power Company
.
.
.
1 addi tions. I see significant parallels between what DFM
2 has forecast in Exhibit 14 and what we have in Exhibit
3 15.
4 Q But yet, there i s lots of uncertainty,
5 isn i t there?
6 A Yes.
7 Q And you don i t know when that i s going to
8 bottom out for sure, do you?
9 A Me personally, no. If I did, I could make
10 a lot of money, but we are basing our forecasts on the
11 best available economic forecasts and when I describe the
12 May i 09 forecast as being reasonable, 1'm basing it on
13 changes with some of our customer classes, our special
14 contracts and the fact that Moody i s is calling for a
15 recovery the second half of this year and continuing on
16 into the future.
17 Q Okay. Well, could you look at the bottom
18 of page 5 and -- sorry, top of page 5, lines 1 through 3.
19 You make the statement, "In fact, the May 2009
20 residential customer forecast is currently
21 under-predicting the residential customers recently added
22 to the Idaho Power system." What information do you base
23 that assertion on?
24 A I think we did a comparison of what the
25 May '09 forecast was for residential customer growth this
CSB REPORTING
[phone]
105 MACE (X-Reb)
Idaho Power Company
.
10
1 year compared to what actually has happened.
2 Q And do you have that information with you
3 of what the prediction was?
4 A I don i t have it with me. It's something
5 I i ve seen in the Company documents.
6 Q So the Company provided that document?
7 A Have they provided that document?
8 Q Yes.
9 A That I don't know. I can i t recall.
MR. OLSEN: Commissioner Kempton, could I
11 have a short recess just to confer with Idaho Power
12 counsel on a proposed exhibit so maybe we can avoid some
.
.
13 arduous questions about it and it also has some
14 confidential information in it that might be in the
15 Company i s latest quarterly filing with the FCC.
16 COMMISSIONER KEMPTON: Wi thout obj ection,
17 Ms. Nordstrom?
18 MS. NORDSTROM: We're happy to listen to
19 whatever he has to say.
20 COMMISSIONER KEMPTON: We i II take a short
21 recess.22 (Recess. )
23 COMMISSIONER KEMPTON: The hearing will
24 come to order. Mr. Olsen.
25 MR. OLSEN: Thank you, Mr. Chairman. May
CSB REPORTING
[phone]
106 MACE (X-Reb)
Idaho Power Company
.1 I approach the witness, please?
2 COMMISSIONER KEMPTON: You may.
3 (Mr. Olsen approached the witness.)
4 Q BY MR. OLSEN: Mr. Mace, I i m handing you
5 what I have marked as Irrigator Exhibit No. 401 and this
6 does contain at the bottom part confidential information
7 which is highlighted there and I i m going to try to direct
8 my questions not to refer to that directly.
9 COMMISSIONER KEMPTON: Without obj ection,
10 Exhibit 401 will be entered into the record.
11 (Idaho Irrigation Pumpers Association
12 Exhibit No. 401 was marked for identification.)
.
.
13 MS. NORDSTROM: Mr. Chairman, I would like
14 to note that the two lines at the very bottom have not
15 yet been publicly released and so we have a disclosure
16 issue and so we would just ask that that remain
17 confidential and treated that way for the time being.
18 COMMISSIONER KEMPTON: So ordered.
19 MR. OLSEN: Okay, thank you.
20 Q BY MR. OLSEN: Mr. Mace, subj ect to check
21 here, I i ve handed you what has been marked as Exhibit 401
22 and what it shows is the change in the residential and
23 commercial customer count by category and if you could
just look in the far -- to your right there,it shows the
change,the actual change,from the previous month in the
CSB REPORTING 107 MACE (X-Reb)
(208 )890-5198 Idaho Power Company
24
25
.
.
.
1 customer count and it has a history of January through
2 March of 2009, and what observation can you make with
3 respect to the customer counts?
4 A Just for 2009?
5 Q No, since January of 2006 where it peaks
6 there to current.
7 A Yeah, customer growth has certainly
8 slowed.
9 Q It certainly has slowed down, hasn 't it?
10 Okay. Now, with a forecasting issue, I i d like to go back
11 to Exhibit 209 that was offered by the Industrial
12 Customers, we have growth slowing at this point in time,
13 doesn i t that call into the question the forward-looking
14 forecasts of what the demand is going to be in the
15 future?
16 A No.
17 Q Why not?
18 A Well, because, again, my testimony, I did
19 not prepare any of these four forecasts. My testimony
20 says that I find these forecasts to be reasonable and I
21 find them reasonable for a number of reasons.
22 Q But with respect to -- wouldn i t that cause
23 you as a man to determine its reasonableness if the trend
24 was showing it i s going down, wouldn i t you try to look
25 into that issue further?
CSB REPORTING
[phone]
108 MACE (X-Reb)
Idaho Power Company
.
.
.
20
21
1 A And we certainly have and as I i ve stated
2 before and in my testimony, we have acquired the services
3 of Moody iS, a macroeconomic forecasting service, that
4 says this is not going to stay down permanently
5 forever.
6 Q Well, we can always say that, can i t we?
7 A Well, when I read some of the testimony of
8 people in this case, I i m not assured of that.
9 Q Okay. Well, you talked a lot about the
10 reasonableness of the forecast, why you think it i s
11 reasonable, but isn i t it true that at this point in time
12 the Commission does not so much need to pick between
13 competing forecasts, but it needs to assess where we are
14 at today and if we can wait a little bit longer to build
15 Langley Gulch, isn i t that the real issue in front of
16 us?
17 A I think the real issue is the
18 load-resource balance.
19 Q But that i s
A It i S not --
Q -- just a point to an end result, isn't
22 it, do we build Langley Gulch or not?
23 A And again, I i II repeat my previous answer.
24 If we wait thinking we're going to reduce uncertainty, we
25 may find ourselves with even more uncertainty later on.
CSB REPORTING
[phone]
109 MACE (X-Reb)
Idaho Power Company
.
.
.
1 Q I i d like you to turn to page 8 of your
2 testimony.
3 A 11m sorry, 1'm having a hard time hearing
4 you.
5 Q I I d like to have you turn to page 8 of
6 your testimony, Mr. Mace.
7 A Okay.
8 Q And here you criticize Ms. Mitchell with
9 regard to the load forecast criticisms and saying that we
10 have not reviewed the underlying key demographic data for
11 the 2009 IRP and one of the key things you talk about is
12 the Hoku Materials contract; is that a fair statement?
20
21
13 A Yes.
14 Q Okay.
15 A i believe that was the main point of my
16 testimony in lines 6 through 12.
17 MR. OLSEN: Mr. Chairman, may i approach
18 the witness, please?
19 COMMISSIONER KEMPTON: You may.
(Mr. Olsen approached the witness.)
MR. OLSEN: 1'm handing you what I s marked
22 as Irrigator 402 and this is a compilation of some recent
23 Idaho State Journal articles from Pocatello. It deals
24 with the financial difficulties Hoku Materials has run
25 into recently.
CSB REPORTING
[phone]
110 MACE (X-Reb)
Idaho Power Company
.
.
.
1 Q BY MR. OLSEN: Now, in your testimony
2 there at page 8 and continuing over to page 9, you talk
3 about the Hoku contract and how that expected load was
4 equi valent of a significant growth on the system for
5 Idaho Power, but I i d like you to look at the first page
6 here and
7 A Of your exhibit?
8 Q Of the exhibit, yes.
9 A Okay.
10 Q Okay, and maybe you could look it over
11 here shortly, but the gist of this is that Hoku is facing
12 tough economic times like a lot of other businesses and
13 it calls into question whether they can even build or
14 finish building the plant there in Pocatello. Were you
15 aware of this?
16 A Yes, I am.
17 Q Okay, and how is that captured in the May
18 2009 forecast?
19 A Well, in the May 2009 forecast, we had
20 assumptions for Hoku i s loads based on the Company i s
21 negotiations and contracts with Hoku.
22 Q But in here and, you know, you can look at
23 this later, but I -- I would also move for the admission
24 of Exhibit 402 into the record.
25 COMMISSIONER KEMPTON: So ordered.
CSB REPORTING
[phone]
111 MACE (X-Reb)
Idaho Power Company
.
.
.
1 (Idaho Irrigation Pumpers Association
2 Exhibit No. 402 was admitted into evidence.)
3 Q BY MR. OLSEN: Those are changes that
4 happened in real time, aren i t they?
5 A Yeah, and I would also say that I don 't
6 believe that this necessarily means that Hoku will no
7 longer be a customer of Idaho Power. We don i t know at
8 this point in time exactly what i s going to happen.
9 Q But it does create uncertainty whether
10 that load will be realized?
11 A There is lots of uncertainty in any
12 forecast.
13 Q But how do you deal with that
14 uncertainty?
15 A We make our forecast based on the best
16 possible information and wé use reasonable assumptions .
17 Q Would you turn to Exhibit 18 in your
18 testimony, Mr. Mace?
19 COMMISSIONER KEMPTON: Mr. Olsen, what is
20 the exhibit number?
21 MR. OLSEN: Exhibit No. 18 of Mr. Mace's
22 testimony, sorry.
23 COMMISSIONER KEMPTON: Thank you.
24 Q BY MR. OLSEN: This is a graph here that
25 shows the different sales forecasts, I think, based on
CSB REPORTING
[phone]
112 MACE (X-Reb)
Idaho Power Company
.
.
.
1 the IRPs with the Hoku adj ustments; is that correct?
2 A Yes, it is.
3 Q Okay. Now, the bottom line there is the
4 one based on the 2008 August IRP that I believe you
5 assert in your testimony is the most reasonable or best
6 represents the forecast at this point in time.
7 A My evaluation was of the May 2009
8 forecast, but at the time each of those forecasts
9 appeared reasonable.
10 Q Okay. Well, looking at that, this one at
11 least shows a dip in the economy and a dip in the sales
12 forecasts here. How reasonable do you think that is in
13 predicting a significant straight increase?
14 A A significant what now?
15 Q Increase, because you can see the line
16 2009 and then it continues to grow from that point on
17 A Right.
18 Q -- and that appears to be the Company iS
19 assumption it i s just going to keep growing based on that
20 forecast.
21 A What exactly are you referring to when you
22 say something keeping on growing?
23 Q It i s the bottom line, August 2008 less
24 Hoku, that i s what I'm focusing on.
25 A I i m confused by your question.
CSB REPORTING
[phone]
113 MACE (X-Reb)
Idaho Power Company
.1 Q Okay. What does that bottom line show as
2 it goes out in the future?
3 A It shows load growth increasing.
4 Q Okay. How reasonable is that in light of
5 the current events that it i s going to happen in 2009?
6 A Which current events are you referring to?
7 Q The current economic events, pardon me.
8 A Again, when you're in the bottom of a
9 recession, which we seem to be, it seems unreasonable to
10 many people. The point I i m trying to make is that
11 because of changes in some of our special contracts, like
12 Hoku, and because of things like increases in certain
13 customer classes, plus, you know, the assessment of.14
.
Moody i S as far as the Idaho and Boise MSA economies,
15 growth seems reasonable to me. Look, we have had 20
16 years of very significant growth in southern Idaho. This
17 does not seem to be diverging from that trend in terms of
18 a forecast of additional economic growth and energy
19 use.
20 MR. OLSEN: Okay. No further questions,
21 Mr. Chairman.
22 COMMI S S IONER KEMPTON: Mr. Purdy.
23 MR. PURDY: Mine have been more than
24 exhausted. Thank you.
25 COMMISSIONER KEMPTON: Mr. Miller.
CSB REPORTING
[phone]
114 MACE (X-Reb)
Idaho Power Company
.
.
.
1 MR. MILLER: I have no questions. Thank
2 you, Mr. Chairman.
3 COMMISSIONER KEMPTON: Ms. Bridge.
4 MS. BRIDGE: I have no questions. Thank
5 you, Mr. Chairman.
6 COMMISSIONER KEMPTON: Commission Staff,
7 Mr. Woodbury.
8 MR. WOODBURY: Thank you, Mr. Chairman.
9
10 CROSS-EXAMINATION
11
12 BY MR. WOODBURY:
13 Q Mr. Mace, you were, in looking at your
14 Exhibit 12 you were, a senior economic analyst for Idaho
15 Power from '79 to '86?
16 A Yes.
17 Q In that you role were you engaged in load
18 forecasting for the Company?
19 A Yes, I was.
20 Q You state on page 2, line 6 that in the
21 forecasting process, a critical issue is the timing of
22 the forecasts with regard to lead time requirements of
23 the planning process. Regarding lead time, I understood
24 you to say earlier that you're not a system supply
25 analyst.
CSB REPORTING
[phone]
115 MACE (X-Reb)
Idaho Power Company
.
.
.
10
1 A Right.
2 Q And so this statement is not from, I
3 guess, that discipline and so
4 A No, but when I worked at NCPA, I worked in
5 the power supply department and I was keenly aware of
what sort of lead times were required.
Q What is NCPA?
A Oh,that i s Northern California Power
Agency.It i S on my resume exhibit.
6
7
8
9
Q Did you participate in developing the May
11 2009 load forecast?
12 A No, I did not.
13 Q You indicate, I believe, that it i S your
14 understanding that the May 2009 forecast revision was the
15 basis for Mr. Bokenkamp i s load-resource balance
16 testimony.
17 A Yes.
18 Q Have you reviewed Mr. Bokenkamp' s
19 testimony?
20 A I i ve read it.
21 Q And having read it, do you understand that
22 is the basis for his testimony?
23 A The May 2009 forecast, yes, I do.
24 Q Okay, and is it your understanding that
25 updated information was, I think you indicated was,
CSB REPORTING
[phone]
116 MACE (X-Reb)
Idaho Power Company
.
.
.
1 provided and made available to parties in production in
2 this case?
3 That i S my understanding.A
4 And were the production requestsQ
5 continuing such that if there were additional information
6 that was provided the Company would have provided that to
7 parties?
8 I can't answer that question. I don'tA
9 work for the Company.
10 Q Okay.
11 I'm not an employee of the Company, let 'sA
12 put it that way.
13 Q Yeah. You indicate on page 12, you speak,
14 "Given the uncertainty of new power supply, Idaho Power
15 forecasters have excluded over 700 megawatts of active
16 new customers i potential load inquiries in its forecast."
1 7 A Uh-huh.
18 Was this reflected in the 2008 updateQ
19 forecast or are you speaking of the May 2009 forecast?
20 I believe it's the May 2009. The CompanyA
21 is always being contacted by various businesses and
22 corporations as far as the availability of power, so I
23 believe that i s the most recent number, but I'm not
24 certain.
25 Is it your belief that the 2009 forecastQ
CSB REPORTING
[phone]
117 MACE (X-Reb)
Idaho Power Company
.
.
.
1 includes the most recent forecast adjustments to account
2 for changes in industrial load?
3 A We are reexamining those assumptions right
4 now in terms of the forecast that we i re currently working
5 on.
6 Q And are there any significant identified
7 adjustments that would change that forecast?
8 A Nothing definitive, but we have had
9 interest from a number of large loads.
10 Q Okay. In defining active new customers,
11 essentially they remain active until they advise you that
12 they i re locating elsewhere?
13 A You know, in the case, for example, in the
14 case of Hoku, they' re included in the forecast because
15 Idaho Power has a contract and we have expended, my
16 understanding is we've expended, a significant amount of
17 money in terms of transmission and substation upgrades.
18 I seem to remember hearing that, so rather than put
19 anybody who has an interest into the forecast, we
20 carefully evaluate the likelihood of that customer
21 showing up. Usually it involves a significant commitment
22 before it shows up.
23 Q You state on page 10 that initial contact
24 to commitment can take many years with new customers. Do
25 you know when the first contact with Hoku took place?
CSB REPORTING
[phone]
118 MACE (X-Reb)
Idaho Power Company
.
10
1 A I have the impression, and I could be
2 wrong, that it was a couple of years ago, at least.
3 MR. WOODBURY: Thank you, Mr. Mace.
4 Mr. Chairman, Staff has no further questions.
5 COMMISSIONER KEMPTON: Thank you,
6 Mr. Woodbury. Mr. Miller, I apologize, I went out of
7 sequence a little bit here. You i re up.
8 MR. MILLER: Once again, I have no
9 questions of this witness.
COMMISSIONER KEMPTON: Commissioner
11 Redford.
.
.
12 COMMISSIONER REDFORD: Yes, thank you,
13 Mr. Chairman.
14
15 EXAMINATION
16
17 BY COMMISSIONER REDFORD:
18 Q Mr. Mace, you have stated that not
19 wi thstanding Hoku i s delay of their proj ect, you continue
20 to include in the forecast all the elements and the
21 requirements for power as if it had been built; is that
22 correct?
23 The May 2009 forecast assumes Hoku is aA
24 customer with a certain amount of load being phased in.
25 Q Well, you talk about all the
CSB REPORTING
[phone]
119 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 uncertainties, wouldn i t that dissuade you from
2 wouldn i t the announcement by Hoku dissuade you from
3 continuing to believe that the power requirements to Hoku
4 are going to be as they had been envisioned when the
5 contract was written?
6 A Well, the news reports I've read say that
7 Hoku is looking for a buyer and that it i s quite possible
8 they could find a buyer and then have that plant finished
9 wi th the inj ection of new capital by a new owner, so I
10 think it's still quite possible for Hoku to operate. We
11 don i t know at this point in time if it necessarily means
12 that Hoku i s future load will go away.
13 Q Well, all the parties to these, to the
14 Hoku agreement understand that the construction has
15 slowed.
16 A Right.
17 Q If you know what it i s slowed to, why don i t
18 you use the slowed-to number?
19 A Well, again, when we put this forecast
20 together in 2009, we had no reason to assume that, so
21 it's possible that if there is going to be a delay in the
22 construction that their load may come on later, some
23 months later, than what it i S currently forecast to do.
24
25
Q You testified that your sources other than
your expertise have been from Moody 's.
CSB REPORTING
[phone]
120 MACE (Com-Reb)
Idaho Power Company
.1 A We are looking at the Moody i s forecast
2 very carefully for the economic -- the turnaround from
3 this economic cycle.
4 Q Anything else?
5 A Well, we i re also looking at new large
6 loads. We have had interest expressed by a number of our
7 existing customers and we also have what we consider to
8 be likely customers that could very well show up. We 're
9 also looking at each of the customer classes and as I
10 note in my testimony, we i ve had an increase in irrigation
.
.
11 sales over the last two years. It's quite possible we 'll
12 have to raise their forecast.
13 Q And I assume that these people that have
14 contacted you is confidential?
15 A Yes.
16 Q But you plug those people into the
17 forecast as well?
18 A No.
19 Q When do you?
20 A When we have determined that there i s a
21 sufficient financial commitment on their part to go ahead
22 and build a facility. In the case of Hoku, it required a
23 contract and significant
24 Q But there are no contracts or memorandums
25 of understanding between Idaho Power and other
CSB REPORTING
[phone]
MACE (Com- Reb)
Idaho Power Company
121
.1 ventures?
2 A Not that 1'm aware of at this point in
3 time.
4 On page 8 in criticizing Ms. MitchelllsQ
5 testimony, you say that the conclusion she attempts to
6 develop in her Exhibit No. 207 are misleading and
7 misrepresenting facts. Could you be more specific?
8 A Well, as I say later on that page, she
9 seems to have ignored the load impacts of Hoku, but to be
10 quite honest, to go back to the 2006 IRP, the August 2007
.
.
11 forecast, we have more up-to-date forecasts than that. I
12 don i t really see how it's even relevant.
13 Q Well, it i s obviously relevant to the
14 extent that Hoku is slowing down.
15 A That i S true, and like 'I say, we don i t know
16 exactly what i s going to happen with Hoku at this point..
17 Q What about Micron?
18 A I believe we i ve made adj ustments for
19 Micron. I believe Company witness Ric Gale can talk more
20 specifically about the special contracts.
21 How did you include Micron i s contract inQ
22 your testimony?
23 A In my testimony?
24 Q Yes, your testimony.
25 A Okay, I don i t believe I talked about
CSB REPORTING
[phone]
122 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 Micron in the -- in my testimony; however, the May 2009
2 forecast reflects the most recent or the best estimates
3 of Micron i s changes in loads.
4 Q What is it you understand will be the load
5 for Micron?
6 A I i d have to look that up, I'm sorry.
7 Q But you believe Micron is going to be
8 fairly reliable or layoff people down the line?
9 A Well, clearly, they i re reducing some of
10 their personnel out there and I know that the May '09
11 forecast has some reduction due to lower Micron use. I
12 don i t remember the exact numbers.
13 Q In your conclusions and so on, you again
14 cri ticize Ms. Mitchell and you say not only does witness
15 Mitchell admit that she has not reviewed "the underlying
16 key demographic and economic indicators" that drive the
17 2009 forecast, she has failed to review, et cetera, et
18 cetera. Isn't it also the case that you don't have
19 up-to-date demographic and economic indicators?
20 A Well, you have to ask yourself a question,
21 how frequently do you want to update your load forecast.
22 Concei vably one could justify doing a load forecast every
23 day since there i s always a very dynamic situation out
24 there, so
25 Q Well, don't -- go ahead.
CSB REPORTING
[phone]
123 MACE (Com- Reb)
Idaho Power Company
.
.
.
1 A I'm sorry, so, you know, the May 2009
2 forecast is in my evaluation a reasonable forecast based
3 on what we know today.
4 Q Wi thout demographic and economic
5 indicators?
6 A We have our demographic and economic
7 indicators from Moody 's. We i re in the process of working
8 on those and those seem consistent to me for the May 2009
9 forecast.
10 Q Well, until you have an accurate or more
11 information and you don't have the key demographic and
12 economic indicators, it suggests that you failed to
13 review and understand some of the key drivers of the
14 individual load forecasts.
15 A Well, on the contrary. I believe that
16 given my task here was to review the Company i s May 2009
17 forecast, what I see in terms of loads there seems
18 consistent with me what Moody i s is forecasting for the
19 economic recovery in southern Idaho.
20 Q One last question, don i t you think that
21 the presentation in this proceeding should have all of
22 the or most of the information as far as economic
23 forecasts that is current today?
24 A Yeah, to the extent that that hasn i t been
25 provided, I think parties had the opportunity to ask for
CSB REPORTING
[phone]
124 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 that during the production requests and I think some of
2 that information is in the production requests.
3 Q And don i t you also believe that the IRP
4 forecast should be current?
5 A Well, again, that i s a policy decision made
6 by Idaho Power management.
7 Q I i m talking about you as an economist.
8 A Well, again, we face this problem of we
9 have had some very rapidly changing economic conditions
10 over the last year and at what point do we draw a line
11 and say all right, we i re now going to do an IRP with the
12 risk of it being out of date when we complete it.
13 Q Well, if it i s out of date when the project
14 is completed and the economic condition isn't as rosy as
15 you think it is, it might well be that the Langley plant
16 wasn i t needed.
17 A There i S always the possibility of that.
18 In my judgment for you to use a load forecast to -- for a
19 load forecast to be such that the Langley plant isn't
20 needed, that would contradict what we are seeing in the
21 current Moody's forecast for southern Idaho.
22 Q Moody's solely?
23 A Well, yeah, I mean -- well, actually we
24 have access to some Global Insight data which is used for
25 the Division of Financial Management and they 're
CSB REPORTING
[phone]
125 MACE (Com-Reb)
Idaho Power Company
.1 basically saying the same story.
2 Q Are you aware of the current status of the
3 most recent Idaho Power IRP?
4 A No, 11m not.
5 Q Wouldn i t you think that a current IRP was
6 necessary to sustain your testimony?
7 A Well, again, my testimony is to assess the
8 reasonableness of the May 2009 forecast. Would a new
9 forecast shed more light? Perhaps, perhaps not. Would a
10 new forecast be a lower forecast? Perhaps. It could
11 also be a higher forecast. At some point you have to
.
.
12 draw a line and say all right, we're going to plan on
13 this basis.
14 Q Well, I'll represent to you that we don't
15 have a current IRP.
16 A Okay.
17 And we from the testimony of Idaho PowerQ
18 probably won't have a complete 2009 IRP until December of
19 2009.
20 A Uh-huh.
21 Q Taking that into consideration and the
22 possibility that it could either be higher or lower,
23 don i t you think this Commission should wait until we have
24 some better data?
25 Again, the problem with waiting to reduceA
CSB REPORTING
[phone]
126 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 uncertainty is that you may be faced with additional
2 uncertainty in the process; in other words, we wait six
3 months and we could be asking some of the very same
4 questions we're asking today, so I i m not sure how it
5 reduces it.
6 Q But at least you would have current
7 information.
8 A I would consider the May 2009 to be a load
9 forecast based on current information.
10 Q I think your testimony has included
11 statements that most everything is uncertain.
12 A Yeah, I think --
13 Q And that we should make a decision based
14 upon the most current information to take away the
15 uncertainty.
16 A No, I don i t think I ever said that in my
17 testimony about taking away uncertainty. I don i t think
18 that i s possible. We have to make our best judgments. We
19 have to make our best forecasts.
20 Q I mean a lesser uncertainty.
21 A It's possible, but it i S not necessarily
22 true.
23 COMMISSIONER REDFORD: Well, I have no
24 further questions, Mr. Chairman.
25 COMMISSIONER KEMPTON: Commissioner
CSB REPORTING
[phone]
MACE (Com-Reb)
Idaho Power Company
127
.
.
.
19
20
1 Smith.
2 COMMISSIONER SMITH: No questions.
3
4 EXAMINATION
5
6 BY COMMISSIONER KEMPTON:
7 Q Mr. Mace, on page 4 of your testimony, you
8 mentioned that the May i 09 forecast revision was based on
9 the December 2008 forecast
10 A Uh-huh.
11 Q -- which substantially reduced customer
12 growth for both the residential and commercial classes.
13 Now, the way I read that statement and the way I
14 understand documents related to the December 2008
15 forecast and the May 2009 forecast is that the 2008
16 forecast was associated with residential and commercial
17 growth forecasts and that the May 2009 update was
18 primarily a special contract --
A Yes.
Q -- update. Then you state in May -- and
21 this is reiterating a point that was made previously. In
22 fact, the May 2009 residential customer -- it i S page 4,
23 continuing to page s.
24
25
A Okay.
Q In fact, the May 2009 residential customer
CSB REPORTING
[phone]
128 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 forecast is currently under-predicting the residential
2 customers recently added to the Idaho Power system.
3 First of all, recently added is not a net count.
4 Recently added means it i S a number that has been added to
5 the power system, but it doesn i t necessarily consider the
6 number that may have left the power system and it may
7 not -- and so that i s one question. Did you
8 A I believe it i S a net number, yeah.
9 Q You didn i t say net, you said customers
10 recently added to the Idaho Power system. 1'm just
11 reading directly from your testimony.
12 A Okay.
13 Q The statement as you i ve provided on page 5
14 as I just read and as you may review indicates that you
15 may be under-forecasting customers recently added to the
16 system, but that does not necessarily mean that that
17 information is accurate in terms of total customers on
18 the system, whether it's increasing or decreasing or at
19 what rate.
20 A 1'm not sure I understand your question.
21 When we talk about customer additions, let i s say, in the
22 residential class, that would be net new meters, I
23 believe, so I believe we i re taking into account both
24 customers being added and customers leaving. Keep in
25 mind as I state in my testimony elsewhere that there i s a
CSB REPORTING
[phone]
129 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 fair number of empty houses out there in southern Idaho.
2 They i re counted as meters, they i re counted as customers,
3 but they don i t necessarily have anybody living in them
4 and so in a sense they have much lower electric use than
5 an occupied house. I don i t know if that gets to what
6 you i re asking for or not.
7 Q Thank you, it gets to the second part of
8 the question I was going to ask. I i m only reading your
9 testimony as you have it here --
10 A Sure.
11 Q -- and you say you i re under-predicting the
12 residential customers recently added to the Idaho Power
13 system. It may be usual that you i re talking about net
14 customers, but it doesn i t specifically state that.
15 A Okay, I believe we i re talking about net
16 customers.
17 Q So your testimony, then, is that the
18 residential customer forecast is currently
19 under-predicting the residential customer net
20 A Yeah, we i re talking about a relatively
21 small number, yeah.
22 Q Right. When the update, the May 2009
23 update, came in, there wasn i t a lot of emphasis that I
24 saw on customer counts on the residential customer. It
25 was primarily associated with what Idaho Power maintains
CSB REPORTING
[phone]
130 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 that the May 2009 update was for and that was for special
2 contracts, so are you telling me, then, that there was
3 also an adjustment to the residential and commercial load
4 forecast?
5 A Not in May of 2009. In the December
6 update, yes.
7 Q Okay, and so in May 2009, the next
8 statement down says it incorporates the latest changes to
9 the Idaho Power special contract industrial customers,
10 which is what we just said a minute ago, so would you say
11 in conclusion, then, that the last, the last maj or
12 forecast of the Idaho Power load was in the December 2008
13 update?
14 A Actually, I think the changes in the
15 industrial customers may wind up actually being larger in
16 terms of their impact. I'm not sure. I i m not certain,
17 but customers were updated in December '08. We updated
18 the special contracts in May of '09.
19 Q And when was the information for this
20 update gathered?
21 A The May 2009?
22 Q Yes.
23 A I believe it was probably in April. That
24 would be my guess.
25 Q April of 2009?
CSB REPORTING
[phone]
131 MACE (Com-Reb)
Idaho Power Company
.
.
.
1 A Yes.
2 Q In the discussion that you had about the
3 significance of recovery being more focused on the
4 metropoli tan areas, the metropolitan regional statistical
5 areas or whatever, I'm not sure exactly what that is
6 A MSA.
7 Q -- right, is that a viable indicator of
8 need for electrical power in both terms of capacity and
9 energy when the capacity issue is more associated with
10 things like irrigation and heavy industry where capacity
11 is the driver? I recognize that I'm talking now about
12 air conditioners and stuff on the residential side, but
13 is it really fair to focus that heavily on the Treasure
14 Valley and maybe the Magic Valley? Magic Valley would be
15 more rural, so Treasure Valley.
16 A Well, again, I have an exhibit that
17 discusses the changes in population of the Boise MSA over
18 the last 20 years. It shows Canyon County and Ada County
19 basically doubling. They have driven Idaho Power's
20 loads. I believe it's responsible for something like 78
21 percent of the population growth inside the Idaho Power
22 service area. New homes, my understanding is new homes,
23 are probably more likely to have air conditioning, so
24 that i s also contributed to summer loads. I do not know
25 offhand the load research as far as which customer class
CSB REPORTING
[phone]
132 MACE (Com-Reb)
Idaho Power Company
.
.
.
20
21
22
23
1 is contributing to the summer peak. I don i t have those
2 numbers in front of me, but, you know, again, as I i ve
3 pointed out before, we have seen a surge in irrigation
4 sales in the last couple of years and for all we know,
5 that trend will continue this summer as well, so that 's
6 something we i re looking at right now.
7 Q I would submit, and you can correct me if
8 I i m wrong, that irrigation sales don i t necessarily
9 correlate with irrigation use. The water doesn i t change,
10 the land doesn i t change, but the power rates go up for
11 sales; is that correct or incorrect?
12 A The power rates?
13 Q Well, yes, the rate charged to the -- the
14 power sales are indicative of the amount of money that 's
15 coming in on power generation.
16 A 1'm talking about megawatt-hours for
17 irrigation sales, I i m sorry.
18 Q And they' re going up?
A Yes.
Q Based on what?
A Why are they going up?
Q Uh-huh.
A My understanding is that there have been
19
24 changes in some of the irrigation techniques. Maybe we
25 have more irrigators going from gravity systems to pivot
CSB REPORTING
[phone]
133 MACE ( Com- Reb)
Idaho Power Company
.
.
.
1 symptoms, that will certainly be more electric intensive,
2 and I have to believe that as an economist that the
3 increase in ethanol, the ethanol requirement as passed by
4 Congress has had a significant impact on crop prices.
5 One would assume that that will change the balance of how
6 certain crops are grown and encourage additional
7 production by farmers.
8 Q In your -- at one point in here you
9 mention it may be the case that the traditional
10 people-follow-jobs thinking is more the case of
11 j obs-following-people.
12 A Right.
13 Q Do you believe that that i s the case for
14 the recovery?
15 A I think that i s the case for why southern
16 Idaho has done well economically over the last 10, 20
17 years. I think people have realized that this is a great
18 place to live and it has attracted a lot of in-migration.
19 Traditional theory says that you're only going to have
20 growth when you have jobs. People may be bringing their
21 jobs with them. We're in a different kind of society now
22 where people can basically work out of their house or do
23 entrepreneurial things here that have markets
24 elsewhere.
25 Q I have one last question. It i S sort of a
CSB REPORTING
[phone]
134 MACE (Com-Reb)
Idaho Power Company
.1 tongue-in-cheek question. It i S from your statement
2 considering the current economic and legislative troubles
3 in California, there could be a significant increase in
4 out-migration from California. I wouldn i t wish that on
5 anybody, but 1'm just wondering if that i s what you really
6 think is going to be a factor.
7 A Well, consider ita warning. Since I live
8 there and watch the zoo every night on the local news,
9 it's looking grimmer and grimmer.
10 COMMISSIONER KEMPTON: Mr. Kline?
11 Ms. Nordstrom, 1'm sorry.
12 MS. NORDSTROM: I do have some redirect
13 questions.
. 14
15 REDIRECT EXAMINATION
16
1 7 BY MS. NORDSTROM:
18 Q Mr. Mace, in your testimony you were
19 critical of Ms. Mitchell I s review of key drivers and
20 is it me or am I echoing?
21 COMMISSIONER KEMPTON: We I ve got the mics
22 turned up about as high as we can get them. I think it I s
23 probably mine.
24.25
MS. NORDSTROM: 1'm sorry, I'm distracted.
Thank you.
CSB REPORTING
[phone]
135 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 Q BY MS. NORDSTROM: Mr. Mace, you said you
2 were critical of her review of some of the key economic
3 indicators and demographics that affect Idaho Power.
4 What have you reviewed in your testimony that gives you
5 confidence in your analysis?
6 A Well, again, my role here is to evaluate
7 the reasonableness of the May 2009 forecast, and I base
8 that on an assessment of the customer classes, the
9 special contracts and so forth. In looking at the
10 Moody i s forecast for southern Idaho and the Boise MSA in
11 particular, that contains a lot of demographic and
12 economic assumptions which is in several of my exhibits
13 and my testimony, I i d say that the growth prospects for
14 southern Idaho look very good, even though it doesn i t
15 feel that way to a lot of people right now.
16 Q You said that you consulted the Moody i s
17 forecasts. Why is it that any of us should put our faith
18 in Moody i s?
19 A Well, most businesses that do planning for
20 future needs or requirements, particularly in the case of
21 electric utilities, have to have some assessment of where
22 economic growth is going to go. There are several maj or
23 economic forecasting firms in the United States, Moody' s
24 is one of them. We have spent a lot of time on the phone
25 with Moody' s talking to them about the assessments and
CSB REPORTING
[phone]
136 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 then we decided to go with them.
2 Q You indicated that there were a number of
3 reasons why you believed that loads are increasing
4 despi te the economy. Could you explain what those
5 reasons are?
6 A Southern Idaho has, is a low-cost region.
7 It has low labor costs. It has very low electric rates.
8 Idaho Power has the lowest industrial electric rates of
9 any investor-owned utility in the country. This is going
10 to attract electrici ty-intensi ve industries and so even
11 though the recovery may be slow, we could have
12 significant additions to the Idaho Power system with
13 electric-intensive industries, things like server farms
14 and so forth. You know, anywhere from 10 to 100
15 megawatts can show up fairly easily.
16 Q There was quite a bit of discussion about
17 the layoffs at Micron and, you know, there have been
18 numerous announcements and is it possible that the reason
i 9 you weren i t aware of the supposed second announcement is
20 because there was only one announcement of layoffs and
21 the media picked it up a second time when the layoffs
22 actually were occurring?
23 A Yeah, I think I became aware of the August
24 '09, the planned August '09, layoffs, I believe that's
25 the case, I became aware of that several months ago, so I
CSB REPORTING
[phone]
137 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 was confused when it was referred to as a July '09
2 announcement.
Q So did Idaho Power incorporate the layoffs
4 of the 200 millimeter fab once or twice?
3
5
6
7 A
A
Q
Q
Q
Oh, once.
Once?
Yeah.
So they i ve already been accounted for in
Exactly.
-- May 2009 forecast?
That is my understanding.
To your knowledge, is Idaho Power
14 obligated to serve Hoku under a contract currently?
Q
A
22 optional.
8
9 Idaho Power i s
10 A
11
12 A
I know there i s a signed contract. I i m not
16 sure of the specific terms, but I would assume the
13 Q
17 Company is obligated.
18
15 A
So service to Hoku regardless of whatever
19 uncertainty is currently surrounding them isn't optional
20 at this point, is it?
21
23 Q
I believe that i s the case, it's not
Are you aware that Idaho Power 's ability
24 to serve Hoku is currently restricted in the summer
25 months due to limited capacity and energy?
CSB REPORTING
[phone]
138 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 A Yes.
And is that also incorporated into the
I believe that i s in Mr. Bokenkamp 's
Are you currently working -- well, let me
7 go back. It's a little confusing understanding how Idaho
2 Q
8 Power does its forecasts. How often does Idaho Power do
3 forecasts?
4 A
9 a big full-blown load forecast?
5 testimony.
6 Q
I believe once a year in August.
Okay; so this is something that it does
12 routinely year after year?
10 A
Uh-huh.
So why are there these other December and
Well, because we ran into a very unusual
17 situation last fall when we had this financial crisis and
11 Q
18 subsequent meltdown of the real economy. Conditions were
20
13 A
And these were updates that reflected
21 those rapidly changing conditions?
22
23
14 Q
Yes.
Okay. Are you currently working on the
24 August forecast for 2009?
25
15 May forecasts?
16 A
Yes, we are.
19 changing rapidly.
Q
A
Q
A
CSB REPORTING
[phone]
139 MACE (Di-Reb)
Idaho Power Company
.
.
.
10
1 Q And I realize it i S not, you know, final or
2 fully complete at this point, but do you have a general
3 sense of what that forecast will indicate?
4 A Not really. As I believe I said before,
5 there are some things that lead me to believe that
6 certain areas may be lower and there are some areas where
7 the forecast might be higher, so the net balance I do not
8 know at this point. We i re not finished, so this is
9 premature.
Q Is there anything that you i ve reviewed
11 thus far that would make you think that the forecast will
12 be dramatically different than the May 2009 forecast?
13
14
A Well, this is unfair, but I know that
we've heard from one customer who's interested who has a
15 240 megawatt load and that would raise the forecast
16 significantly.
17 MS. NORDSTROM: Thank you. I have no
1S further questions.
19 COMMISSIONER KEMPTON: The witness can be
20 excused.
21 MS. NORDSTROM: And may be he be excused
22 from the proceeding?
23
24
25
COMMISSIONER KEMPTON: Yes.
MS. NORDSTROM: Thank you.
(The witness left the stand.)
CSB REPORTING
[phone]
140 MACE (Di-Reb)
Idaho Power Company
.
.
.
1 COMMISSIONER KEMPTON: Would everybody
2 check, by the way, just to see -- when Ms. Nordstrom was
3 speaking, there was some feedback and I just want to make
4 sure that all the red lights are off because we can
5 adjust that slightly to cut that, but then we get in
6 trouble with the volume based on the air conditioning, so
7 let i s plan to be back here a little earlier that 1: 30.
8 Let i s try and be back here at 1: 20 and I think we should
9 plan to go on through 5: 30 this afternoon, plan on that,
10 so we i re in recess now.
11 (Lunch recess.)
12
13
14
15
20
21
22
23
16
17
18
19
24
25
CSB REPORTING
[phone]
141 COLLOQUY