20090727Vol VII Technical Hearing.pdf

ORIGll'JAL
e.. .
eo',
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
)
)
)
)
BEFORE
NO. IPC-E-09-03
Idao Public Utilti$ Commission
Oftl08 of the Secretary
RECEIVED
JUL 27200
Boe.ida
COMMISSIONER JIM KEMPTON (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER MACK REDFORD
.PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:July 16, 2009
VOLUME VII - Pages 1156 - 1247
,.
CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb~heritagewifi.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 i 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. Acker.an, 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:
(Telephonically)
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 Patricia Harms Mr.Woodbury ( Direct)1157(Staff)Prefiled Direct Testimony 1159
5 Ms.Nordstrom (Cross)1182
6 Terri Carlock Mr.Woodbury (Direct)1185(Staff)Prefiled Direct Testimony 1187
7 Mr.Richardson (Cross)1195
8 John R.Gale Mr.Kline (Direct-Reb)1199(Idaho Power)Mr.Richardson (Cross-Reb)1221
9 Mr.Olsen (Cross-Reb)1225
Mr.Purdy (Cross-Reb)122710Mr.Miller (Cross-Reb)1228
Ms.Bridge (Cross-Reb)122911Commissioner Smith 1231Commissioner Redford 123512Commissioner Kempton 1237
13.14
15
16
17
18
19
20
2l
22
23
24.2
CSB REPORTING INDEX
(208 )890-5198
.
.
.
1 EXHIBITS
2
3 NUMBER DESCRIPTION PAGE
4 FOR I DAHO POWER COMPANY:
5 1. - 26.Admitted 1246
6
7
27. Order No. IPC-E-06-24 in Case
No. 30281 Identified 1211
Admitted 1246
8
9 FOR THE STAFF:
10 101. - 116.Admitted 1246
11
12 FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
13 201. - 210.Admitted 1246
14
15 FOR THE IDAHO IRRIGATION PUMPERS ASSOCIATION:
16 401. & 403.Admitted 1246
17
18 FOR NORTHWEST & INDEPENDENT POWER PRODUCERS COALITION:
19
20
21
22
23
24
25
701. - 703.Admitted 1246
CSB REPORTING
Wilder, Idaho 83676 EXHIBITS
.
.
.
17
1 BOISE, IDAHO, THURSDAY, JULY 16, 2009, 9: 00 A. M.
2
3
4 COMMISSIONER KEMPTON: Good morning, it's
5 July 16th. This is the PUC Hearing Room and it is the
6 third day of hearings on Langley Gulch application by
7 Idaho Power, Case No. IPC-E-09-03. Present are
8 Commissioners Kempton, Smith and Redford. The procedures
9 and protocols that have been standard for the last two
10 days are in place for today as well. We finished off
11 yesterday with testimony from Staff and Mr. Woodbury, if
12 you would present your next witness.
13 MR. WOODBURY: Yes.
14 COMMISSIONER KEMPTON: Excuse me just a
15 minute. Mr. Olsen?
16 MR. OLSEN: Yes.
COMMISSIONER KEMPTON: Okay, if you have
18 an opportunity to speak, you'll be called in roughly the
19 same order that you were yesterday for your opportunity,
20 but be sure that you i re close to the microphone so that
21 it i s loud for the rest of the Hearing Room to
22 understand.
23
24
25
MR. OLSEN: So noted.
COMMISSIONER KEMPTON: Mr. Woodbury.
MR. WOODBURY: Thank you, Mr. Chairman.
CSB REPORTING
[phone]
1156 COLLOQUY
.
.
.
1 At the conclusion of yesterday, we finished up with Staff
2 wi tness Rick Sterling. Staff i s second witness that we
3 would call this morning is Patricia Harms.
4
5 PATRICIA HARMS,
6 produced as a witness at the instance of the Staff,
7 having been first duly sworn, was examined and testified
8 as follows:
9
10 DIRECT EXAMINATION
11
12 BY MR. WOODBURY:
13 Q Ms. Harms, will you please state your full
14 name,spell your last name?
15 A Patricia Harms, H-a-r-m-s.
16 Q And for whom do you work and in what
17 capaci ty?
18 A I work for the Idaho Public Utilities
19 Commission as a principal financial specialist/senior
20 auditor.
21 Q And in that capacity did you have occasion
22 to prepare pre filed testimony in this case consisting of
23 23 pages and no exhibits?
24
25
A Yes.
Q And have you had the opportunity to review
CSB REPORTING
[phone]
1157 HARMS (Di)Staff
.
.
.
16
17
18
19
20
21
22
23
24
25
1 that testimony prior to today i shearing?
2 A Yes.
3 Q And if I were to ask you the questions set
4 forth in your testimony, would your answers be the
5 same?
6 A Yes.
7 MR. WOODBURY: Mr. Chairman, I would ask
8 that Ms. Harms i testimony be spread and I would present
9 her for cross-examination.
10 COMMISSIONER KEMPTON: Without obj ection,
11 it is so ordered.
12 (The following prefiled direct testimony
13 of Ms. Patricia Harms is spread upon the record.)
14
15
CSB REPORTING
[phone]
1158 HARMS (Di)
Staff
.
.
.
1 Q.Please state your name and address for the
2 record.
3 A.My name is Patricia Harms. My business address
4 is 472 West Washington Street, Boise, Idaho.
5 Q.By whom are you employed and in what capacity?
6 A.I am employed by the Idaho Public Utili ties
7 Commission (Commission) as a Principal Financial
8 Specialist/Senior Auditor.
9 Q.Please give a brief description of your
10 educational background and experience.
11 A.I graduated from Boise State University, Boise,
12 Idaho in 1981 with a B.A. degree in Business
13 Administration, emphasis in Accounting. I am a Certified
14 Public Accountant licensed by the State of Idaho. Prior
15 to joining the Commission Staff in 2000, I was employed
16 by the State of Alaska as an In Charge Auditor and
17 performed both financial and performance audits of
18 governmental agencies. I have attended many seminars and
19 classes involving auditing and accounting. While at the
20 Commission I have audited a number of utilities including
21 water, electric, gas and telephone utilities and provided
22 comments and testimony in a number of cases that dealt
23 wi th general rates, hook-up fees, accounting issues, and
24 other regulatory issues. I have also completed the
25 National Association of Regulatory Utility Commissioners i
CASE NO. IPC-E-09-3
06/19/09 1159 HARMS, P. ( Di ) 1
STAFF
.
.
.
1 (NARUC) annual regulatory studies program at Michigan
2 State Uni versi ty. I also regularly attend meetings of
3 NARUC i s Staff Subcommittee on Accounting and Finance and
4 at selected meetings serve as secretary for the
5 Subcommi ttee.
6 Q.What is the purpose of your testimony?
7 A.The purpose of my testimony is to present
8 Staff i s recommendations regarding the treatment of
9 depreciation for the Langley Gulch Proj ect.
10 My testimony in this case also describes
11 Staff i s position regarding the Allowance for Funds Used
12 During Construction (AFUDC) and Construction Work in
13 Progress (CWIP) as it relates to projects in general and
14 Langley Gulch specifically. Staff witness Sterling 's
15 testimony recommends that the actual amount of AFUDC
16 incurred be recoverable, but that it be considered an
17 addi tion to both the Soft Cap and Hard Cap amounts for
18 the Langley Gulch Proj ect.
19 My testimony also describes capitalized taxes
20 and Staff i s recommended treatment of those costs. Staff
21 recommends that the actual amount of taxes relating to
22 proj ect costs be capitalized and recovered based upon
23 Staff i s proposed Langley Gulch Proj ect amount.
24 DEPRECIATION
25 Q.What is Staff i s recommendation regarding the
CASE NO. IPC-E-09-3
06/19/09 1160 HARMS, P. (Di) 2
STAFF
.
.
.
1 treatment of depreciation for the Langley Gulch Proj ect?
2 A.Staff recommends that the Langley Gulch Proj ect
3 be depreciated in accordance with the depreciation rates
4 that are in effect at the time the Project is placed into
5 service. This recommendation is similar to the return on
6 equity treatment that the Company is requesting for the
7 Proj ect.(Gale, Supplemental Direct, page 4, lines 1-4).
8 Staff also recommends that a new depreciation study that
9 includes the Proj ect with economic lives no shorter than
10 35 years for the production plant and 45 years for the
11 related transmission plant be completed and filed when,
12 or shortly after, the Proj ect is placed into service
13 (likely during 2013). This timeframe is consistent with
14 the historical periodic depreciation filings of the
15 Company.
16 Q.How were the depreciation rates currently used
17 by the Company approved by the Commission?
18 A.The depreciation rates currently in use by the
19 Company were approved by the Commission in Case No.
20 IPC-E-08-6 (08-6 case) in Order No. 30639 dated
21 September 12, 2008. The depreciation rates were based on
22 the results of a detailed depreciation study of the
23 Company i s electric plant in service as of December 31,
24 2006. The depreciation rates were based on a straight
25 line, average service life procedure for all electric
CASE NO. IPC-E-09-3
06/19/09
1161 HARMS, P. (Di) 3
STAFF
.
.
.
1 plant. In that case, the proposed changes in
2 depreciation rates resulted in a decrease of the
3 Company i s total annual depreciation expense. The parties
4 to the 08-6 Case filed a Stipulation setting forth
5 agreed-upon depreciation rates. The Stipulation
6 identified changes to the Company i s proposal agreed to by
7 the parties, primarily increases in the service life and
8 life span of a steam generation plant and hydraulic
9 production plants. The parties also agreed to a detailed
10 review in the next depreciation case of accrual rates for
11 several plant assets, including Bridger Assets, Bennett
12 Mountain, Clear Lake Hydraulic Production Plant, Meters,
13 Computers and Corporate Aircraft.
14 Q. What depreciation rates were approved in Case
15 No. IPC-E-08-6 for production plant and how do those
16 rates compare to the depreciable life of 35 years (2.86%)
17 requested by the Company for the Langley Gulch production
18 plant?
19 A.The Commission-approved accrual rates for
20 selected production plant accounts according to the
21 Attachment to Order No. 30639 are stated in the following
22 table (Table No.1).
23
24 /
25
CASE NO. IPC-E-09-3
06/19/09 1162 HARMS, P. (Di) 4
STAFF
.
.
.
1 Table No. 1
2 Account and Description Accrual
3 340.00
341.00
342.00
343.00
344.00
345.00
346.00
Land
Structures & Improvements
Fuel Holders
Prime Movers
Generators
Accessory Electric Equipment
Misc. Power Plant Equipment
Non-depreciable
2.75-3.16%
2.75-2.80%
2.76-3.25%
1.93-3.30%
2.75-7.22%
2.52-7.17%
4
5
6
7 Q.Why do the listed accrual amounts vary so
8 greatly by account?
9 A.In the Attachment to Order No. 30639, accrual
10 rates and composite remaining life for production plant
11 are listed by Federal Energy Regulatory Commission (FERC)
12 account and wi thin that account by plant. For example,
13 the accrual rates for Account 344.00 Generators range
14 from a low of 1.93% and a composite remaining life of
15 29.5 years for Evander Andrews to a high of 3.30% and a
16 composite remaining life of 34.5 years for Bennett
17 Mountain. Similarly, the accrual rates for Account
18 345.00 Accessory Electric Equipment range from a low of
19 2. 75% and a composite remaining life of 34.5 years for
20 Bennett Mountain to a high of 7.22% and a composite
21 remaining life of 10.5 years for Salmon Diesel.
22 Q.Was Langley Gulch part of the depreciation
23 study filed in Case No. IPC-E-08-6?
24
25
A.No. The depreciation study only relates to
plant in service at the time of the study.
CASE NO. IPC-E-09-3
06/19/09 1163 HARMS, P. (Di) 5
STAFF
1 Q.What Commitment Estimate dollars for the.2 Langley Gulch production plant relate to the above
3 accounts and what is its related depreciable life?
4 A.Staff asked the Company in the discovery
5 process to provide all studies, life cycle analyses and
6 other information used to derive a depreciable life of 35
7 years for the production plant and 45 years for the
8 transmission plant. The Company was asked to include
9 wi thin its response the Commitment Estimate dollars as it
10 relates to production and transmission plant by electric
11 plant in service account number (3XX.xx) and the related
12 depreciable life. The Company i s response to Production.13 Request No. 83 referred Staff to the depreciation study
14 that was the basis of Case No. IPC-E-08-6 and stated the
15 following:
16 "While Idaho Power believes that its Commitment
Estimate is reasonable, it cannot predict with17 precision the specific Commitment Estimate
amounts that will close to each FERC electric18 plant account upon placing the proj ect
in-service. The requested allocation of
19 Commitment Estimate dollars will be made upon
final unitization of the work order (s) .20 However, there are portions of the power plant
Commitment Estimate that will likely close to21 specific accounts. The property and water
rights acquired for the plant will close to22 plant account 340. The amounts for the gas
turbine, steam turbine, and heat recovery steam23 generator ("HRSG") will close to plant accounts
343 and 344. The remainder of
24.25 /
CASE NO. IPC-E-09-3
06/19/09 1164 HARMS, P. (Di) 6
STAFF
.
10
1 the power plant investment will close to plant
accounts 341, 342, 345, and 346. Accounts
340-346 currently all have approximately the
same overall depreciable life. The current
Idaho Power investment in these accounts has a
composite remaining life of approximately 30
years. "
2
3
4
5 Q.What depreciation rates were approved in Case
6 No. IPC-E-OS-6 for transmission plant and how do those
7 rates compare to the depreciable life of 45 years (2.22%)
S requested by the Company for Langley Gulch transmission
9 plant?
A.The Commission-approved accrual rates for
11 selected transmission accounts according to the
12 Attachment to Order No. 30639 are stated in the following.13
.
table (Table No.2) .
14 Table No. 2
15 AccrualAccount and Description
16 Land Rights and Easements
Rights of Way
Structures & Improvements
Station Equipment
Towers and Fixtures
Poles and Fixtures
Overhead Conductors and Devices
1. 51%
1. 50%
1. 6S%
2.06%
1. 96%
2. S1%
1. 92%
350.20
350.21
352.00
353.00
354.00
355.00
356.00
17
1S
19
20 Q.What are the composite remaining lives for the
21 above accounts as stated in the Attachment to Order No.
22 30639?
23 A.The composite remaining lives for the above
24 accounts according to the Attachment to Order No. 30639
25
CASE NO. IPC-E-09-3
06/19/09
HARMS, P. (Di) 7
STAFF
1165
.
.
.
1 are stated in the following table (Table No.3) .
2 Table No. 3
3 Account and Description Remaining Life
4 350.20
350.21
352.00
353.00
354.00
355.00
356.00
Land Rights and Easements
Rights of Way
Structures & Improvements
Station Equipment
Towers and Fixtures
Poles and Fixtures
Overhead Conductors and Devices
54.2 Years
63. 7 Years
47.3 Years
35.4 Years
48.6 Years
36.7 Years
48.3 Years
5
6
7
8 Q.What Commitment Estimate dollars for the
9 Langley Gulch transmission plant relate to the above
10 accounts and what is its related depreciable life?
11 A.As noted previously, Staff asked the Company in
12 the discovery process to provide all studies, life cycle
13 analyses and other information used to derive a
14 depreciable life of 35 years for the production plant and
15 45 years for the transmission plant. The Company was
16 asked to include within its response the Commitment
17 Estimate dollars as it relates to production and
18 transmission plant by electric plant in service account
19 number (3XX.xx) and the related depreciable life. The
20 Company's response to Production Request No. 83 referred
21 Staff to the depreciation study that was the basis of
22 Case No. IPC-E-08-6 and stated the following:
23 "While Idaho Power believes that its Commitment
Estimate is reasonable, it cannot predict with24 precision the specific Commitment Estimate
amounts that will close to each FERC electric
25
CASE NO. IPC-E-09-3
06/19/09
1166 HARMS, P. (Di) 8
STAFF
.
.
.
1 plant account upon placing the proj ect
in-service. The requested allocation of
Commi tment Estimate dollars will be made upon
final unitization of the work order (s) ... Thetransmission lines portion of the proj ect will
close to plant accounts 354-356 and the
transmission station portion will close to
accounts 350,352, and 353."
2
3
4
5
6 Q.Do you have a schedule of the Langley Gulch
7 Commitment Estimate dollars by account and its related
S depreciable life?
9 A.No, the Company did not provide such a schedule
10 in support of its request for the depreciable life of 35
11 years for production plant and 45 years for transmission
12 plant.
13 Q.How frequently has the Company filed cases
14 requesting approval of its depreciation rates?
15 A.The Company filed its most recent depreciation
16 case in 200S (Case No. IPC-E-OS-6). The previous
17 depreciation case was filed in October 2003 (Case No.
1S IPC-E-03-7).
19
20
21
22
23
24
Q.Is this timing the basis of your recommendation
that the Company file a depreciation case during 2013
when,or shortly after,the Project is placed into
service?
A.Yes.However,another consideration is the
size ( in dollars)of the plant and the other issues
25 identified in Case No. IPC-E-OS-6 that were identified
CASE NO. IPC-E-09-3
06/19/09 1167 HARMS, P. ( Di ) 9
STAFF
.
.
.
1 for further review by the parties to the Stipulation.
2 This leads to Staff's expectation that another
3 depreciation study will be forthcoming wi thin five years
4 of the last filed depreciation case.
5 Q.Is there anything else that might influence
6 depreciation in 2013 when the plant is expected to close
7 to plant in service?
8 A.Yes. The Securities and Exchange Commission
9 (SEC) has published a roadmap associated with
10 implementation of International Financial Reporting
11 Standards (IFRS). This roadmap sets forth several
12 milestones that, if achieved, could lead to the required
13 use of IFRS by U. S. issuers in 2014 if the SEC believes
14 it to be in the public interest. Current international
15 standards treat depreciation differently than most u. S.
1 6 utilities.
17 Q.How are assets depreciated under current
18 International Accounting Standards (IAS)?
19 A.While there are many different aspects of
20 depreciation under IAS, the most significant one that the
21 Company can currently prepare the Langley Gulch Project
22 for is componentization.
23 IAS 16, paragraph 43 states:
24 "Each part of an item of property, plant and
equipment with a cost that is significant in25 relation to the total
CASE NO. IPC-E-09-3
06/19/09 1168 HARMS, P. (Di) 10
STAFF
.
.
.
1 cost of the item shall be depreciated
separately. "
2
3 This may be a physical component or a
4 non-physical component such as an inspection or an
5 overhaul. Q.How does this differ from current
6 depreciation methods?
7 A.~tili ties currently use mass/group asset
8 depreciation. It has been recognized that mass/group
9 asset depreciation cannot be accommodated under IFRS.
10 Q.What is Staff's recommendation to the Company
11 regarding IAS 16?
12 A.Staff recommends that the Company create and
13 retain documentation associated with the Langley Gulch
14 Proj ect that would allow the Company to comply with
15 component depreciation when IFRS are adopted. Staff
16 expects this detail will also be utilized in the next
17 depreciation study.
18 AFC ANCWIP
19 Q.What is Staff's recommendation for the recovery
20 of AFUDC in this case?
21 A.Staff recommends that the Company accrue actual
22 AFUDC based upon the monthly cash balance of actual
23 expenditures as the production and transmission plant is
24 under construction. The monthly expenditures would be
25 subj ected to a prudency review of the amounts to which
CASE NO. IPC-E-09-3
06/19/09
1169 HARMS, P. (Di) 11
STAFF
.
.
.
1 the AFUDC rate is applied except for those plant amounts
2 approved in this proceeding. Absent specific ratemaking
3 authori ty, AFUDC will cease when the plant is placed in
4 service.
5 Q.What is Staff's recommendation regarding CWIP
6 in this case?
7 A.Based upon the evidence at this time, Staff
8 does not believe that including CWIP in rate base before
9 the related plant is used and useful is appropriate. The
10 Company has not made a CWIP request in this case.
11 Q.What has the Company included for AFUDC in this
12 case?
13 A.The Company's Commitment Estimate includes an
14 estimated AFUDC of $49 million associated with the
15 production plant and almost $1 million for the
16 transmission portion of the proj ect.
17 Q.How has the Company calculated those amounts?
18 A.According to the Company's responses to
19 discovery, it used a 7 % AFUDC rate and applied it to
20 estimated monthly cash flows for the production plant to
21 deri ve the $ 49 million. The 7 percent rate used to
22 estimate AFUDC on the power plant portion of the project
23 was not based on an exact capital structure or exact
24 financing cost (s) at a particular point in time. It was
25 a high level estimate derived from the average annual
CASE NO. IPC-E-09-3
06/19/09 1170 HARMS, P. (Di) 12
STAFF
.
.
.
20
21
22
23
24
25
1 AFUDC rates the Company applied to construction work in
2 progress over the last four years according to the
3 Company.
4 The $1 million included wi thin the Commitment
5 Estimate for transmission was not calculated in the same
6 manner. Instead it was an estimate from the bid process
7 and does not have a supporting schedule. The Company's
8 response to Production Request Nos. 80 and 64 explained
9 the AFUDC amounts as follows:
10 "The monthly cash flow estimates for the
Langley Gulch power plant were derived from
preliminary payment schedules/estimates for the
gas turbine, steam turbine, and EPC
(Engineering, Procurement and Construction)
contract. The cash flow amounts for the
remainder of the proj ect were based on Idaho
Power's proj ected timing of construction and
planned work acti vi ties. "
11
12
13
14
15 "Payment schedules for the construction of the
gas turbine, steam turbine, and overall
construction of the Langley Gulch plant are not
available at this time because contract terms
have not been finalized. Idaho Power estimated
monthly cash construction expenditures for the
power plant portion of the proj ect for purposes
of proj ecting AFUDC... The proj ected
transmission cost of $31. 5M includes a high
level AFUDC estimate of approximately $991,000.
A proj ected cash flow and AFUDC schedule is not
available at this time for the transmission
portion of the proj ect due to the preliminary
nature and scope of the overall design and cost
estimate. "
16
17
18
19
Q.What are the historical AFUDC percentages that
/
CASE NO. IPC-E-09-3
06/19/09 1171 HARMS, P. (Di) 13
STAFF
.
.
.
20
21
1 have been applied to plant?
2 A.According to the last general rate case for
3 Idaho Power (Case No. IPC-E-08-10), the monthly AFUDC
4 rates January 2008 through October 2008 ranged from
5 3.016% to 6.585%. (Case No. IPC-E-08-10, Miller Direct
6 Rebuttal, page 5). According to the Company's responses
7 to discovery, the monthly AFUDC rates for January through
8 April 2009 have ranged from 3.27% to 8.26% (response to
9 Production Request No. 82).
10 Table No. 4
11 Month and Year Rate in Effect
12 January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
6.352%
5.592%
4.111%
4.136%
3.696%
3.016%
4.894 %
6.271%
6.240%
6.585%
6.660%
6.793%
5.24%
4.11%
3.27%
8.26%
13
14
15
16
17
18
19
Q.How do the rates above compare to that used to
22 calculate the $49 million estimated AFUDC for the Langley
23 Gulch production plant?
24
25
A.As can be seen above, the historical rates vary
widely compared to the 7% used for the production plant
CASE NO. IPC-E-09-3
06/19/09 1172 HARMS, P. (Di) 14
STAFF
1 AFUDC included in the Langley Gulch Commitment Estimate..2 Q.How does Idaho Power calculate the AFUDC rate?
3 A.On a monthly basis the Company's AFUDC rate is
4 calculated consistent with the AFUDC formula established
5 in the FERC Uniform System of Accounts/General
6 Instructions (18 CFR 1.101). Idaho Power uses
7 semi-annual compounding as allowed in FERC Order 561.
8 Q.What are AFUDC and CWIP?
9 A.AFUDC is an accounting mechanism which
10 recognizes capital costs associated with financing
11 construction. Generally, the capital costs recognized by
12 AFUDC include interest charges on borrowed funds and the
13 cost of equity funds used by a utility for purposes of.14 construction. The main purposes of AFUDC are to
15 capi talize with each proj ect the costs of financing that
16 construction; separate the effects of the construction
17 program from current operations; and to allocate current
18 capi tal costs to future periods when these capital
19 facilities are in service, useful and producing revenue.
20 AFUDC represents the cost of funds used during the
21 construction period before plant goes into service. When
22 it is placed in service, the entire cost of the plant,
23 including AFUDC, is added to rate base, where it earns a
24 rate of return and is depreciated over the life of the.25 plant.
CASE NO. IPC-E-09-3
06/19/09 1173 HARMS, P. (Di) 15
STAFF
.
.
.
1 CWIP is the accumulation of all costs
2 associated with the construction of an asset, including
3 the cost of financing construction (AFUDC) expenditures.
4 Utili ties record these costs in Account 107. This
5 account includes the total of the balances of work orders
6 for electric plant in process of construction. Work
7 orders are to be cleared from this account and closed to
8 plant in service as soon as practicable after completion
9 of the proj ect. CWIP has not been included in rate base
10 on a current basis (before a proj ect is complete and its
11 costs closed to plant in service) historically in Idaho.
12 ALTERNATIVES PROPOSED BY THE COMPANY
13 Q.What two al ternati ves to a plant filing with
14 the assurances described in the Company's testimony does
15 Company witness Smith describe in her testimony?
16 A.Company witness Smith describes "CWIP in Rate
17 Base" and "AFUDC: Pay Currently" in her testimony and
18 compares this to the ratemaking assurances described in
19 Company witness Gale's direct testimony. "CWIP in Rate
20 Base" is described as the Company recovering CWIP
21 expenditures (including AFUDC) the Company incurs as it
22 constructs the Proj ect in current rates on an annual
23 basis. "AFUDC: Pay Currently" is similar to Hells Canyon
24 Relicensing AFUDC granted in Order No. 30722 where
25 customers would pay AFUDC in annual rate increases from
CASE NO. IPC-E-09-3
06/19/09 1174 HARMS, P. (Di) 16
STAFF
.
.
.
1 2010 through 2013.
2 Q.Do the percentages shown in Company witness
3 Smi th 's Exhibit No. 7 for the two al ternati ves to
4 tradi tional ratemaking and the third al ternati ve of
5 placing in service at the end of the construction period
6 the entire CWIP balance including AFUDC represent the
7 rate increases that could be expected using those
8 methods?
9 A.No. According to the Company's response to
10 Production Request No. 102, the spreadsheet that was used
11 to develop this Exhibit was:
12 "...to demonstrate the potential to reduce rate
shock by employing either AFUDC Pay Currently
or CWIP in Rate Base versus the third
alternative to place in service at the end of
construction the entire CWIP balance, including
AFUDC of the Langley Gulch Power Plant. The
analysis is for illustrative purposes only and
does not predict the future impact of thesealternatives. "
13
14
15
16
17 And,
18 "The assumption in the illustrative example
that revenues would grow 1 percent each year19 was not intended to portray any expectation by
Idaho Power. This was a simplifying assumption20 for the hypothetical illustration of the annual
differences between the regulatory treatments
21 of AFUDC Pay Currently, CWIP in Rate Base and
Tradi tional Ratemaking." (Emphasis Added.)
22
23
24
25
Q.What is Staff i s position regarding AFUDC and
/
CASE NO. IPC-E-09-3
06/19/09 1175 HARMS, P. (Di ) 1 7
STAFF
.
.
.
1 CWIP?
2 A.Staff's position regarding AFUDC was most
3 recently presented by Staff witness Vaughn in Idaho
4 Power's last General Rate Case, Case No. IPC-E-08-10 and
5 remains largely the same today.
6 In Case No. IPC-E-OS-I0 the Company requested
7 recovery of the currently accruing AFUDC for the Hells
S Canyon relicensing project (AFUDC component of CWIP).
9 Staff agreed in large part with the Company's proposal
10 because the amount of AFUDC expected at the end of 2012
11 would be larger than the actual direct relicensing costs
12 assuming no additional expenses were incurred during the
13 relicensing proj ect. Staff stated that this enormous
14 growth in AFUDC for the Hells Canyon relicensing proj ect
15 provided the basis for an explicit finding that it was in
16 the public interest to include AFUDC in base rates before
17 the proj ect was closed to plant in service.
1S Although there are limited situations where the
19 public is served by placing CWIP in rate base according
20 to Staff's testimony in Case No. IPC-E-OS-10, the Hells
21 Canyon relicensing proj ect is different from other
22 construction proj ects for several reasons. First,
23 "proj ect completion" is determined when the FERC grants a
24 permanent license. Because of the large number of
25 stakeholders involved in relicensing and because of the
CASE NO. IPC-E-09-3
06/19/09 1176 HARMS, P. (Di) 1S
STAFF
.
.
.
20
21
22
23
24
25
1 ever-shifting political environment, project completion
2 is largely beyond the Company's direct control. A
3 permanent license could be granted as early as January
4 2009 or it could be delayed for many years. Second, it
5 is unlikely that the permanent license will not be
6 granted. At the present time, Idaho Power is operating
7 the Hells Canyon dam complex under annual licensing.
S Because the Hells Canyon complex is fully operational and
9 power generation is not curtailed, Staff argued that the
10 relicensing investment is essentially used and useful.
11 Q.What did the Commission find in Case No.
12 IPC-E-OS-I0?
13 A.The Commission found in Order No. 30722, pages
14 13 and 14, as follows:
15 "... that the Hells Canyon relicensing project is
unlike a typical construction project, and
establishes circumstances that support a
finding that including AFUDC in rates will
serve the public interest. The unique
circumstances include: (1) the project process
has already been under way for nearly ten
years, and Idaho Power has little control over
the completion date; (2) the Company is able to
use the generating facilities during the
relicensing process, and they currently provide
a significant amount of the Company's total
generating capacity and energy; (3) the lengthy
duration of the proj ect, and an as yet unknown
completion date, mean that AFUDC is already
significant and will continue to accumulate to
alarming levels. Other considerations, not
unique to the
16
17
18
19
/
CASE NO. IPC-E-09-3
06/19/09 1177 HARMS, P. (Di) 19
STAFF
.
.
1 Hells Canyon proj ect, also support a finding
the public interest is served by including a
portion of AFUDC in rates. The amount of AFUDC
included in rates now will reduce the total
proj ect costs that ultimately will be included
in rate base, thereby reducing future rate
increases. Idaho Power's cash flow will
improve, which will help maintain i ts credit
strength and ability to access funds forongoing construction proj ects. "
2
3
4
5
6
7 Q.Do any of the three attributes described in the
8 Commission's finding in Case No. IPC-E-08-10 apply to the
9 Langley Gulch Proj ect?
10 A.No. The proj ect has not been under way for
11 nearly ten years and Idaho Power has substantial control
12 over the completion date as the Proj ect is a self-build
13 Proj ect. The Proj ect is not currently used and useful
14 nor is AFUDC growing at "an alarming rate" as described
15 in Case No. IPC-E-08-10 for the Hells Canyon relicensing
16 proj ect. The Company' s ability to obtain financing for
17 the Langley Gulch Proj ect and cash flow is described in
18 Staff witness Carlock's testimony.
19 Q.What authorizes the inclusion of CWIP and/or
20 AFUDC in base rates?
21 A.The potential inclusion of CWIP/AFUDC in base
22 rates is an option the Commission may utilize based on a
23 2006 change in Idaho Code.
24 In 1984 the Idaho Legislature enacted Idaho.25
CASE NO. IPC-E-09-3
06/19/09 1178 HARMS, P. (Di) 20
STAFF
.
.
1 Code § 61-502A to read
2 "Except upon its finding of an extreme
emergency, the (Public Utili ties) Commission is
hereby prohibited in any order issued after theeffecti ve date of this act, from setting rates
for any utility that grants a return onconstruction work in progress... or property held
for future use and which is not currently used
and useful in providing utility service."
3
4
5
6
7 However, in 2006 this section was amended to read
8 "Except upon its explicit finding that the
public interest will be served thereby, the
Commission is hereby prohibited in order issued
after the effective date of this act, from
setting rates for any utility that grants a
return on construction work in progress or
property held for future use and which is not
currently used and useful in providing utility
service." (Emphasis indicates amended
language. )
9
10
11
12
13
14 CWIP including AFUDC may be considered in the
15 determination of rates upon a finding that the public
16 interest will be served.
17 Q.Has the Company stated as its preferred
18 ratemaking treatment that CWIP and/or AFUDC should be
19 included in rates before the plant is used and useful and
20 closed to plant in service?
21 A.No. Company witness Gale states that the
22 Company prefers that the Commission issue an Order under
23 the provisions of Senate Bill 1123 (Gale Supplemental
24 page 6, line 20-22)..25
CASE NO. IPC-E-09-3
06/19/09
1179 HARMS, P. (Di ) 21
STAFF
.
.
.
20
1 CAPITALIZED TAXS
2 Q.What are the capitalized taxes the Company has
3 included in its Commitment Estimate for the Langley Gulch
4 Project?
5 A.The Company has included an estimate of
6 capi tali zed property taxes in its Commitment Estimate.
7 The Company has estimated the year-end plant balance
8 (exclusi ve of AFUDC) for each year during construction,
9 deri ved on estimated assessed value and multiplied that
10 estimated assessed value by the levy rate estimate for
11 each year including 2009 through 2012.
12 Q.Is it appropriate for the Company to include
13 capitalized property taxes in its Project costs?
14 A.Yes. Property taxes are a cost that the
15 Company will incur during the period the Langley Gulch
16 plant is under construction and should be included within
17 the cost of the Proj ect. Once the Proj ect is completed
18 and closed to plant in service property tax becomes an
19 annual expense of operating the plant.
Q.What amount does Staff recommend be included
21 within the Project's cost?
22 A.Staff witness Sterling recommends that actual
23 property taxes capitalized for this Project be included
24 in its costs. For those plant amounts not approved by
25 this Commission, any related capitalized property taxes
CASE NO. IPC-E-09-3
06/19/09 1180 HARMS, P. (Di) 22
STAFF
1 would also be excluded pending a prudency review..2 Q.Does this conclude your direct testimony in
3 this proceeding?
4 A.Yes,it does.
5
6
7
8
9
10
11
12
13.14
15
16
17
18
19
20
21
22
23
24.25
CASE NO.IPC-E-09-3 1181 HARMS,P.(Di)23
06/19/09 STAFF
.
.
.
1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER KEMPTON: Mr. Kline, cross?
4 Ms. Nordstrom, cross.
3
5
6
7
8 BY MS. NORDSTROM:
9 Q
CROSS-EXAMINATION
Good morning.
Good morning.
Are you familiar with Mr. Gale and Ms.
12 Smith's testimony concerning their discussion of CWIP?
16
17
18
19
10 A
Yes.
Can I direct you to page 12 of your direct
COMMISSIONER REDFORD: What page was that?
MS. NORDSTROM: Page 12.
THE WITNESS: I'm there.
BY MS. NORDSTROM: On lines 9 and 10, you
20 state that the Company has not made a CWIP request in
11 Q
13 A
14 Q
15 testimony?
Q
21 this case.
22
23
A
Q
Correct, that's my understanding.
So it's your understanding that the
24 Company has not made a CWIP request despite your
25 discussion of CWIP in your testimony?
CSB REPORTING
[phone]
1182 HARMS (X)
Staff
.
.
.
1 A Correct.
2 Q Can I direct -- do you have Mr. Gale's
3 testimony with you?
4 A Yes, I do.
5 Q Can I direct you to his supplemental
6 testimony, page 5 and 6?
7 A I'm there.
8 Q Do you see his discussion of where the
9 Company was asked to indicate a preference for which
10 alternative could be used?
11 A Yes.
12 Q And the discussion at the bottom of the
13 page about how the al ternati ves could work together?
14 A Yes.
15 Q Okay, and on page 7, lines 4 and 5 where
16 he says that including CWIP in rate base must remain an
17 option for the future?
18
19
A Yes, I see that.
Q So did you gather from that testimony that
20 the Company wasn i t asking for CWIP to be considered as an
21 option to improve its ability to finance the plant?
22 A My testimony was to indicate that my
23 understanding is that the Company wasn't requesting CWIP
24 at this time and based upon my understanding that the
25 preferred al ternati ve was ratemaking assurance underneath
CSB REPORTING
[phone]
1183 HARMS (X)Staff
.
.
.
1 the new legislation.
2
3 questions.
4
5
MS. NORDSTROM: Thank you, no further
COMMISSIONER KEMPTON: Mr. Richardson.
6 I have no questions.
MR. RICHARDSON: Thank you, Mr. Chairman,
7
8
9
10
11
12
13
14
15 any questions?
16
COMMISSIONER KEMPTON: Mr. Purdy.
MR. PURDY: No questions.
COMMISSIONER KEMPTON: Mr. Miller.
MR. MILLER: No questions. Thank you.
COMMISSIONER KEMPTON: Ms. Bridge.
MS. BRIDGE: No questions, thank you.
COMMISSIONER KEMPTON: Mr. Woodbury.
MR. WOODBURY: Did the Commissioners have
COMMISSIONER KEMPTON: Thank you for
17 putting me back on track again. Mr. Redford.
18
19
20
21
COMMISSIONER REDFORD: No questions.
COMMISSIONER KEMPTON: Ms. Smith.
COMMISSIONER SMITH: None for me.
COMMISSIONER KEMPTON: And I have no
22 questions. Mr. Woodbury.
23
24
25
MR. WOODBURY: No redirect.
COMMISSIONER SMITH: How about Mr. Olsen?
COMMISSIONER KEMPTON: Mr. Olsen.
CSB REPORTING
[phone]
1184 HARMS (X)Staff
.
.
.
18
1 MR. OLSEN: No questions, Mr. Chairman.
2 COMMISSIONER KEMPTON: Thank you,
3 Mr. Olsen. I'm really off to a slow start this morning,
4 and no redirect, obviously.
5 MR. WOODBURY: No redirect.
6 COMMISSIONER KEMPTON: Ms. Harms, you're
7 free to step down if there's no obj ection.
8 (The witness left the stand.)
9 MR. WOODBURY: Staff would call as its
10 next witness Terri Carlock.
11
12 TERRI CARLOCK,
13 produced as a witness at the instance of the Staff,
14 having been first duly sworn, was examined and testified
15 as follows:
16
17 DIRECT EXAMINATION
19 BY MR. WOODBURY:
20 Q Ms. Carlock, will you please state your
21 name and spell your last name?
22
23
A Terri Carlock, C-a-r-l-o-c-k.
Q And for whom do you work and in what
24 capacity?
25 A Idaho Public Utili ties Commission, deputy
CSB REPORTING
[phone]
1185 CARLOCK (Di )
Staff
.
.
.
14
1 administrator , utilities division.
2 Q And in that capacity did you have occasion
3 in this case to prepare prefiled testimony consisting of
4 eight pages?
5 A I did.
6 Q And have you had the opportunity to review
7 that testimony prior to this time?
8 A Yes.
9 Q And if I were to ask you the questions set
10 forth in your testimony, would your answers be the
11 same?
12 A They would.
13 MR. WOODBURY: Mr. Chairman, I would ask
that Ms. Carlock's testimony be spread on the record and
15 I'd present her for cross-examination.
16 COMMISSIONER KEMPTON: Without objection,
17 it's so ordered.
18 (The following prefiled direct testimony
19 of Ms. Terri Carlock is spread upon the record.)
20
21
22
23
24
25
CSB REPORTING
[phone]
1186 CARLOCK ( Di )Staff
.1 Q.Please state your name and address for the
2 record.
3 A.My name is Terri Carlock. My business address
4 is 472 West Washington Street, Boise, Idaho.
5 Q.By whom are you employed and in what
6 capaci ty?
7 A.I am the Deputy Administrator of the Utilities
8 Division at the Idaho Public Utilities Commission. I am
9 responsible for the Accounting/Audit Section and
10 coordinating Staff i s policy positions with Staff
11 Administrator Randy Lobb.
12 Q.Please outline your educational background and
13 experience..14 A.I graduated from Boise State Uni versi ty in
15 1980, with B.B.A. Degrees in Accounting and Finance. I
16 have at tended various regulatory, accounting, rate of
17 return, economics, finance, and ratings programs. I am
18 currently the Chair of the National Association of
19 Regulatory Utilities Commissioners (NARUC) Staff
20 Subcommi ttee on Accounting and Finance. I also Co-chair
21 the Task Force on International Financial Reporting
22 Standards. I previously chaired the NARUC Staff
23 Subcommittee on Economics and Finance for more than 3
24 years. Under this subcommittee, I also chaired the Ad.25 Hoc Committee on Diversification. I have been a
CASE NO. IPC-E-09-3
06/19/09 1187 CARLOCK, T (Di) 1
STAFF
.1 presenter for the Institute of Public Utili ties at
2 Michigan State Uni versi ty and for many other conferences.
3 Since joining the Commission Staff in May 1980, I have
4 participated in audits, performed financial analysis on
5 various companies, and have presented testimony before
6 this Commission on numerous occasions.
7 Q.What is the purpose of your testimony in this
8 proceeding?
9 A.The purpose of my testimony is to provide the
10 Staff's position and overview on the return on equity,
11 accounting issues and financing considerations for this
12 case.
.13
14
15
Q.Please explain Staff's recommendation for the
return on equity in this case.
A.The ratemaking treatment requested by Idaho
16 Power for the Langley Gulch Power Plant (Langley Gulch or
17 Project) under Idaho Code § 61-541 (Senate Bill No. 1123)
18 includes a determination of the method or the actual
19 return on common equity for the project in section
20 (2) (b) (i) "The return on common equity investment or
21 method of determining the return on common equity
22 investment" . Staff supports Company witness Gale's
23 proposal related to the return on equity. Adopting the
24 methodology where the return on equity for Langley Gulch.25 is the same as authorized for other rate base items is
CASE NO. IPC-E-09-3
06/19/09 1188 CARLOCK, T (Di) 2
STAFF
.
.
.
1 consistent with normal rate base treatment and is
2 appropriate. Staff recommends the Order for a
3 Certificate of Public Convenience and Necessity (CPCN)
4 and ratemaking treatment, if approved, adopt a return on
5 equity methodology with language similar to that proposed
6 by Company witness Gale in Supplemental Direct, page 4,
7 lines 1-6 as follows:
8 The return on equity (ROE) authorized for
Langley Gulch will be the same as the ROE
9 authorized for the rest of the Company's
rate base when Langley Gulch achieves
10 commercial operation and that the ROE for
Langley Gulch will change with Commission-
11 authorized changes to the Company's ROE
over the life of the Proj ect.
12
13 Q.Please provide the accounting overview.
14 A.Staff witness Harms provides testimony on the
15 accounting issues. Since we have discussed these
16 positions and are in agreement, at this time I will
17 simply provide an overview of the depreciation
18 recommendation to comply with Idaho Code § 61-541 section
19 (2) (b) (ii) "The depreciation life or schedule". The
20 depreciation life or schedules should begin at the
21 requested life of 35 years for the production plant and
22 45 years for the transmission plant. As discussed by
23 Staff witness Harms, these lives should be reviewed along
24 with the components in the appropriate depreciation
25 studies. This is consistent with the Company's beginning
CASE NO. IPC-E-09-3
06/19/09 1189 CARLOCK, T (Di) 3
STAFF
.
.
.
1 recommendation and current depreciation practice for
2 Idaho Power.
3 Q.Company witnesses Smith and Gale discuss cash
4 flow, capital markets and the ability to raise capital.
5 What is Staff's recommendation at this time related to
6 these issues?
7 A.Staff is always concerned about these issues
8 for Idaho Power and other utili ties. For this case,
9 Staff believes its recommendation with advanced
10 ratemaking treatment under Idaho Code § 61-541 is the
11 best way to recognize these issues considering the
12 current economic environment. Some of the pieces of
13 Staff's recommendation differ from the Company's request
14 but advance treatment with the CPCN is the focal point.
15 Staff recommends the Commission state the methodology to
16 be used for return on equity and depreciation. Staff
17 witness Sterling is the primary witness addressing the
18 proj ect and recommends a Soft Cap and a Hard Cap to
19 evaluate prudency and future cost recovery for the
20 project.
21 Q.Company witness Smith discussed the shortage of
22 cash flow (Smith Di, pg 5) on average as $ 60 million per
23 year. Can you comment on the cash flow issue?
24 A.Yes, cash flow can be measured and discussed
25 in several ways. For ease of comparison and ready access
CASE NO. IPC-E-09-3
06/19/09 1190 CARLOCK, T (Di) 4
STAFF
.
.
.
1 to the data by all parties, I have used the Value Line
2 report on IDACORP, Inc. dated May 6, 2009. Since Idaho
3 Power is currently the primary driving entity for
4 IDACORP' s operations, I believe this comparison is
5 representative for this higher level evaluation. At the
6 time further ratemaking is being considered, the data for
7 Idaho Power will need to be used. Again on a higher
8 level of comparison, Cash Flow to Capital Spending can be
9 compared on a per share basis to evaluate their
10 relationship and indicate if the level of expected
11 financing will change. This evaluation shows cash flow
12 that to capital spending as follows:
13 2006 2007 2008 2009E 2010E ' 12-14E
Cash Flow/share 4.58 4.11 4.27 4.35 4.4 4.6
Capital Spendg/5.16 6.39 5.19 5.75 5.6 5.3share
Cash Flow/88.8%64.3%82.3%75.7%78.6%6.8%Capital Spendg
14
15
16
17
18 One interpretation of this information is that greater.
19 financing needs have been experienced since 2006 and will
20 be reduced after Langley Gulch is in operation. I
21 believe this supports Idaho Power i s characterizations on
22 financing requirements.
23
24
25
Q.How is cash flow improved?
A.Like with all individuals or companies, cash
flow is improved by increasing revenues or by reducing
CASE NO. IPC-E-09-3
06/19/09 1191 CARLOCK, T (Di) 5
STAFF
.
.
.
14
1 required expenditures. For utili ties, increased revenues
2 of course are seen primarily through general rate cases.
3 Alternative ratemaking treatment, if approved, such as
4 including Allowance for Funds Used During Construction
5 (AFUDC) or Construction Work in Progress (CWIP) in rates
6 will provide additional cash flow. This additional cash
7 flow would fund operations and construction, strengthen
8 the balance sheet and income statement to improve
9 financial ratios supporting ratings and improving the
10 abili ty to borrow funds at a reasonable rate. Depending
11 on the approach utilized, AFUDC or CWIP in rates could
12 also result in a lower overall level of rate increases
13 for customers even though the increase would be sooner
and probably with more frequent increases to smooth the
15 rate changes and allow for audit verification of costs.
16 At this time the inclusion of AFUDC or CWIP in rates is
17 not recommended for Langley Gulch.
18 Q.How do changes in current ratings and financing
19 opportuni ties impact Idaho Power?
20 A.Idaho Power's ratings are stable with the
21 outlook being neutral as reported by many Institutional
22 and Investor Research Reports. However, posi ti ve and
23 negative recommendations are also seen. For the most
24 part this doesn't change Idaho Power's ability to
25 finance.
CASE NO. IPC-E-09-3
06/19/09 1192 CARLOCK, T (Di) 6
STAFF
.
.
.
1 Capi tal markets continue to be unsettled and
2 raising capital at a reasonable cost continues to be
3 challenging. Views that the Idaho Public Utili ties
4 Commission regulatory climate is above average should
5 continue to be supported with the Staff's recommendations
6 in this case. If the Commission issues a CPCN and
7 accepts Staff i s recommended Soft Cap with preapproval of
8 costs under Idaho Code § 61-541, a level of ratemaking
9 certainty related to prudence and cost recovery should
10 enhance the Company's ability to obtain financing at a
11 reasonable rate. Staff's recommendation should be viewed
12 as posi ti ve with the advanced ratemaking components
13 including the equity return, depreciation and preapproval
14 of a soft cap.
15 Equi ty issuances will be difficult if not
16 currently impossible with the stock price remaining below
17 book value. E~uity funds will primarily be from retained
18 earnings and dividend reinvestment plans.
19 Q.Do you agree with Company witness Bokenkamp' s
20 discussion of imputed debt?
21 A.I agree that the Request for Proposal (RFP)
22 evaluation process did not assign any additional cost to
23 the Purchase Power Agreement (PPA) or Tolling Agreement
24 (TA) costs. I also agree that the impact from rating
25 agencies reflecting imputed debt for its analysis would
CASE NO. IPC-E-09-3
06/19/09 1193 CARLOCK, T (Di) 7
STAFF
.
13
. 14
20
21
22
23
24.25
1 need to be considered in the ratemaking process. What I
2 would like to expand upon is that the cost impact on
3 Idaho Power from imputed debt is not known. Estimates
4 could be made based upon assumptions but I don't believe
5 the assumptions would be readily acceptable to make such
6 a calculation. However, I do not believe this
7 calculation is necessary for this Commission to review
8 the current request. It is sufficient to know that there
9 would likely be additional costs incurred by Idaho Power
10 associated with imputed debt if a PPA or TA was utilized.
11 Q.Does this conclude your direct testimony in
12 this proceeding?
A.Yes, it does.
15
16
17
18
19
CASE NO. IPC-E-09-3
06/19/09 1194 CARLOCK, T (Di) 8
STAFF
.
.
.
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER KEMPTON: Ms. Nordstrom.
4 MS. NORDSTROM:Idaho Power has no
5 questions for this witness.
6 COMMISSIONER KEMPTON: Mr. Richardson.
7 MR. RICHARDSON: Thank you, Mr. Chairman.
8
9 CROSS-EXAMINATION
10
11 BY MR. RICHARDSON:
12 Q Good morning, Ms. Car loc k.
13 A Good morning.
14 Q On page 6 of your testimony at line 16,
15 you state that at this time the inclusion of AFUDC or
16 CWIP in rates is not recommended for Langley Gulch, so
17 it's your position that given the current economic
18 conditions, Idaho Power does not need CWIP or AFUDC in
19 rates?
20 A At this point the Staff's position is that
21 AFUDC and CWIP in rates would be better evaluated at a
22 later date and not for this particular case consistent
23 with what I thought Mr. Gale's testimony was associated
24 with economic conditions and impacts on customers at this
25 particular time.
CSB REPORTING
[phone]
1195 CARLOCK (X)Staff
.
.
.
1 Q So given current economic conditions, it i s
2 not appropriate for CWIP or AFUDC to be in rates?
5
7
9
10
11
12
13
14
15
17 Redford.
3 A
4 indicate a later review for those two items.
I would say that the timing of it would
6 That's all I had, Mr. Chairman.
MR. RICHARDSON: Thank you, Ms. Carlock.
8 Richardson. Mr. Olsen.
COMMISSIONER KEMPTON: Thank you, Mr.
16
18
19
20
21
22 no questions.
23
24 redirect.
25
MR. OLSEN: No questions.
COMMISSIONER KEMPTON: Mr. Purdy.
MR. PURDY: I have none.
COMMISSIONER KEMPTON: Mr. Miller.
MR. MILLER: No questions. Thank you.
COMMISSIONER KEMPTON: Ms. Bridge.
MS. BRIDGE: No questions.
COMMISSIONER KEMPTON: Commissioner
COMMISSIONER REDFORD: No questions.
COMMISSIONER KEMPTON: Commissioner Smith.
COMMISSIONER SMITH: No questions.
COMMISSIONER KEMPTON: And the Chair has
MR. WOODBURY: And Staff has no
COMMISSIONER KEMPTON: If there is no
CSB REPORTING
[phone]
1196 CARLOCK (X)Staff
.
.
.
1 obj ection, then the witness may step down.
2 (The witness left the stand.)
3 COMMISSIONER KEMPTON: Mr. Woodbury.
4 MR. WOODBURY: Staff has no further
5 wi tnesses and I would indicate and I'm not sure how we
6 handle that, but there is a Staff Exhibit 116 which was
7 materials put together at Commissioner Redford i s request
8 by Idaho Power and those are RFP materials. I would just
9 indicate Staff is not sponsoring that exhibit, but it is
10 included in our exhibit sequence.
11 COMMISSIONER KEMPTON: And the inclusion
12 of the exhibit is so noted and remarks related to that
13 exhibit.
14 Mr. Kline.
15 MR. KLINE: Thank you, Commissioner
16 Kempton. First of all, there is one, I guess,
17 housekeeping matter that Ms. Nordstrom would like to
18 address.
19 COMMISSIONER KEMPTON: Ms. Nordstrom.
20 MS. NORDSTROM:Yes, yesterday when
21 Ms . Smith testified, on page 3 of her direct rebuttal
22 there was a chart that had numbers in it that were
23 incorrect and for the ease of the record, we prepared a
24 new clean version of that page, page 3, and I passed it
25 out to the parties and I would like to give it to the
CSB REPORTING
[phone]
1197 COLLOQUY
.
.
.
20
21
22
24
25
1 Commissioners as well, if I may.
2 COMMISSIONER KEMPTON: Okay.
3 (Ms. Nordstrom distributing documents.)
4 COMMISSIONER KEMPTON: And this is just a
5 correction to the page, page 3 of Ms. Smith's rebuttal
6 testimony?
7 MS. NORDSTROM: That's correct.
8 COMMISSIONER KEMPTON: And let the record
9 reflect that that correction has been entered into the
10 record.
11 MS. NORDSTROM: Thank you.
12 MR. KLINE: With the Chair's permission, I
13 would like to re-call Mr. Gale to the stand to address as
14 we i ve discussed previously some of the materials that Mr.
15 Heckler produced and also to provide some clarifying
16 testimony to make sure the record is accurate.
17 COMMISSIONER KEMPTON: Mr. Gale.
18
19
23
CSB REPORTING
[phone]
1198 COLLOQUY
.
.
.
1 JOHN R. GALE,
2 produced as a rebuttal witness at the instance of the
3 Idaho Power Company, having been previously duly sworn,
4 resumed the stand and was further examined and testified
5 as follows:
6 COMMISSIONER KEMPTON: Mr. Kline.
7
8 DIRECT EXAMINATION
9
10 BY MR. KLINE:
11 Q Mr. Gale, you're the same Ric Gale that
12 previously provided testimony in this proceeding; is that
13 correct?
14 A Yes, it is.
15 Q All right, and at the public meeting that
16 was held on Tuesday evening, Mr. Heckler presented some
17 comments regarding, well, regarding this case and the
18 Commission has given us the opportunity to respond to
19 those comments at this time. Do you have Exhibit 901
20 which is Mr. Heckler's comments with you?
21 A Yes, I do.
22 Q Rather than trying to go through line item
23 by line item, I would just simply request that would you
24 please provide a response to those portions of
25 Mr. Heckler's testimony or Mr. Heckler's exhibit that you
CSB REPORTING
[phone]
1199 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 believe are appropriate?
2 A Yes, and just as an overview, my comments
3 will pertain mainly to his comments regarding energy
4 efficiency, demand response programs and how they impact
5 the Company's view on resources and then some comments
6 related to Hoku, other special contracts, the price
7 signal, comments that he has at the end, and then his
8 final recommendation, so that will be the scope of it.
9 Q Okay.
10 MR. RICHARDSON: Mr. Chairman?
11 COMMISSIONER KEMPTON: Mr. Richardson.
12 MR. RICHARDSON: I would just like to note
13 for the record, Mr. Chairman, that Mr. Heckler was a
14 public witness and he is not here in the room today to
15 respond to Idaho Power's critique of his exhibit.
16 COMMISSIONER KEMPTON: Thank you,
17 Mr. Richardson, and let the record reflect that comment
18 of Mr. Richardson. I would also point out that Mr.
19 Heckler was encouraged to attend the hearing at his own
20 voli tion and he indicated specifically that he did not
21 want to be a party, that was accepted by the Chair at the
22 time that the discussion was going on and the Chair
23 assumes that it's Mr. Heckler's choice that he not be
24 here at this point in time.
25 MR. RICHARDSON: Thank you,
CSB REPORTING
[phone]
1200 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 Mr. Chairman.
2 THE WITNESS: Probably not my place, but
3 as a participant in hearings for 25 years, it would have
4 been my preference to have Mr. Heckler as a technical
5 wi tness. This is the best we can do. Probably the first
6 thing that catches my attention as the regulatory leader
7 for Idaho Power is the statement made about how seriously
8 we take Commission orders. We take Commission orders
9 seriously. I would hope that we've demonstrated that,
10 but I'll assert as an officer of the Company that what
11 you say matters to us.
12 Second, along those lines, energy
13 efficiency and demand response is our first resource. We
14 have said it often and repeatedly. The senior management
15 team endorses that and we are pursuing energy efficiency
16 and demand response diligently. I think that we have a
17 good record on that. We started from a cold start after
18 the energy crisis. We were out of that business and for
19 a little historical color, we were out of that business
20 because the market was going to supply all those things
21 up until the energy crisis and we found out it wasn't and
22 then we cycled back to integrated resource planning and
23 energy efficiency became part of the Company's resource
24 planning process at that point.
25 Since that, we are now operating, I think
CSB REPORTING
[phone]
1201 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 you're aware from the recent filings we made this spring,
2 at expenditures in the neighborhood of five percent of
3 our operating revenues for energy efficiency. That
4 stacks up in the region as well as anyone and we now
5 offer programs for all our customer groups, energy
6 efficiency and demand response for all customer groups,
7 so we take it seriously and I will leave it at that.
8 One illustration I'd like to make having
9 to do with a question that Commissioner Smith was asking
10 of Mr. Pengilly on the same matter, is the energy
11 efficiency causing changes to our planning, particularly
12 related to supply side. We have in place now demand
13 response equivalent to a small peaker and in Mr.
14 Bokenkamp' s exhibits, you can see the planned demand
15 response on the immediate horizon would get us up to
16 about 244 megawatts of capacity related to demand
17 response programs, so I would argue maybe that's not
18 Langley Gulch, but it's certainly a peaker or two that
19 energy efficiency and primarily demand response programs
20 are providing us as an alternative supply side option,
21 and then lastly, and Mr. Pengilly said this well, but I
22 can say as a member of the advisory group to the energy
23 efficiency team, they have never been restricted in their
24 pursui t of any programs by the funding in the rider.
25 It is cost-effective -- I mean cost
CSB REPORTING
[phone]
1202 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 effecti ve is the only constraint that they have and you
2 guys have part of a say in that, so we've actually
3 brought programs that haven't proven to be cost effective
4 yet, so I would represent to you from the top of the
5 Company that is the only constraint in our efforts in
6 that area.
7 I think I'm going to shift now and go to
8 the special contract discussion, and I have a number of
9 thoughts because special contracts have proliferated the
10 two days, particularly Hoku, some Micron, but Mr. Heckler
11 speaks about the Hoku contract as muting the price signal
12 that we currently have. Backtracking, our industrial
13 rates among IOUs are the lowest. I never hesitate to say
14 that, but let me take a quick moment to say there are
15 PUDs that have lower rates, public utility districts,
16 potentially Bonneville Power Supply where they're right
17 on the Columbia River, that they just have some assets
18 that they -- there are some lower rates that aren't IOUs,
19 but among investor-owned utili ties, we do have the lowest
20 rates. We can quickly estimate it at about three cents
21 for an industrial rate for our specials.
22 Mr. Richardson correctly says they are
23 getting hit hard this year. They are getting hit hard
24 primarily because of the PCA effect. PCA effect goes up,
25 and I can represent to you, usually I'm more cautious,
CSB REPORTING
[phone]
1203 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 but the PCA effect for all expectations should go down
2 next year. It is riding way above base and the full
3 expectation is at least a drop in the PCA next year. The
4 only point I'm making there is it is a condition of last
5 from this year to next and we i II reevaluate it with water
6 condi tions and power supply costs.
7 The other thing I would say about that is
8 regarding our current prices and the issue of rate shock
9 is we are sympathetic. We're sympathetic to our
10 customers regarding rate shock. We can deal with rate
11 shock wi thin our capabilities. We investigated this year
12 the possibility of securitizing that large PCA amount.
13 Didn't have the dollars necessary, couldn't cover the
14 financing costs and with the markets the way they were,
15 it just wasn't an option, but we have brought
16 securi ti zation to you in the past as a way to mitigate
17 rate shock and ultimately, with the other proposals, I
18 mean, our basic position is financing that difference or
19 that rate deferral comes with a cost to us, so I think we
20 said in the PCA case that if the carrying costs were
21 something equivalent to our real carrying costs that we
22 would be -- that wasn't our position, but we would be
23 accepting of that.
24 The Hoku contract is the one contract that
25 has some marginal cost pricing in it and it was done in
CSB REPORTING
[phone]
GALE (Di-Reb)
Idaho Power Company
1204
.
.
.
1 part to reflect some of the issues we're dealing with
2 right now. A big load coming on, what is their
3 expectation. Can any size load come on and get three
4 cents right off the bat or should there be some bridge to
5 a large load getting to be part of the regular student
6 body I call it, and we worked through those issues with
7 Hoku and I think in a good middle ground position. They
8 pay some marginal cost, they pay their upfront
9 facili ties. The Company and its customers are pretty
10 well protected in case that customer ultimately doesn't
11 come to fruition.
12 At the same time it is a bridge that at
13 some point we envision that it would be a regular
14 customer and they could enj oy the lower embedded rates
15 that the rest of them do, so I would represent that
16 marginal cost pricing didn't stop Hoku from coming to the
17 system. There i s another large load that we've been
18 talking about throughout this that it's not stopping
19 their interest in it and to the extent that special
20 contract customers are smaller, meaning just a little bit
21 above 25 in that rate design, then the piece that's
22 marginal may not be a significant factor at all, so I
23 think it's a good tool. I think it's an appropriate
24 tool. I just don't think that's going to stop the
25 interest in large loads coming to Idaho.
CSB REPORTING
[phone]
1205 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 The last comment on that is if the economy
2 stays dire, public policy may dictate that that type of
3 pricing may not be desired. You may want a more
4 favorable rate design.
5 (Pause in proceedings.)
6 THE WITNESS: I was suggesting that the
7 Commission may as a public policy matter change its view
8 on the appropriate rate design for large customers,
9 particularly if the general public policy is we need
10 industry into the state.
11 COMMISSIONER KEMPTON: Mr. Gale, if you
12 could, I don't know what the mobility of that microphone
13 is, but with the fan on and you pointing 90 degrees to
14 the mics, sometimes that just doesn't carry very well, if
15 you could adjust one or the other a little, perhaps,
16 either your position or the mic.
17 THE WITNESS: Thank you, I will. Okay,
18 finishing up on the comments regarding the special
19 contracts and Mr. Heckler's thoughts about our ability to
20 reach the capacity levels envisioned in 2012, we're at a
21 capacity rounded to about 3,200 right now, 3,200
22 megawatts peak load. Mr. Heckler talks about 3,600 in
23 2012 as being a stretch and I think one in 20. There's
24 some words he used to describe that as a remote
25 possibili ty. I don't necessarily think that is a remote
CSB REPORTING
[phone]
1206 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 possibili ty. A rebound to normal, maybe that doesn't
2 happen immediately, but a rebound to normal will start to
3 bring us -- we were at a clip at 40 average and 80 on
4 peak. The Hoku, the contract load for Hoku gets to 82.
5 They have interest in potentially going larger and the
6 other specials are waiting in the wings, so I think the
7 3,600, I wouldn i t view that as remote as Mr. Heckler.
8 There were two other comments. One is
9 Mr. Heckler draws a conclusion similar to others in this
10 case that we need more information to act. We don't have
11 adequate information now. There are things in play that
12 can keep the system going in 2012 and keep the lights on
13 and it's worth getting more information before making the
14 decision. I want to use that to frame up probably a big
15 question in this big case and that is we have represented
16 to you that Langley Gulch is our recommendation for it
17 being on-line in the summer of 2012 if at all possible
18 for all the reasons already stated. That's our
19 recommendation.
20 I believe Staff's -- that's similar to
21 Staff's recommendation regarding that plant being
22 available in the summer of 2012 and not relying on
23 running our peaker plants as baseload and not relying in
24 the degree for our non-firm transmission purchases.
25 That's our recommendation. I won't restate that. We
CSB REPORTING
[phone]
1207 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 think it's valuable. The tension is the timing of
2 information can preclude that from happening. One of the
3 key pieces of information as I detect the Commissioner
4 questions is what's this August load forecast going to
5 show and what is the resource balance resulting from it,
6 and I would represent to you if it's the Commission's
7 desire that we would provide that to you during the
8 process of your deliberations, to the other parties as
9 well, so it would be at least one additional piece of
.10 information when you're trying to make a decision on 2012
11 or not and I think that's the implication it has.
12 Anticipating that new load information
13 provided during August would want to be vetted and
14 debated and so forth, I understand that. The load
15 forecast is an important foundation in our integrated
16 resource plan. The load and resource balance is an
17 important foundation in our load and resource planning.
18 All we can do in this instance is offer the information.
19 Should the Commission decide to wait until we go through
20 the IRP process, my observation there is the IRP process
21 will become different than it's been ever since it's been
22 implemented. The IRP process will become very
23 contentious and somewhat political and the arguments made
24 now in this room will resurface in the IRP process all
25 the way through, so I see an IRP process that is
CSB REPORTING
[phone]
1208 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 remarkably or dramatically different if that's the
2 Commission's decision.
3 And to finish with Mr. Heckler on his last
4 page, he makes some recommendations in bullets or not in
5 bullets, in numbers and these recommendations have to do
6 if you choose to accept the CPCN as proposed and he makes
7 statements regarding energy efficiency, regarding
8 interaction between rates groups and planning groups and
9 energy efficiency groups and then lastly, or that is the
10 last one, a feedback in the pricing.
11 I would say I appreciate those
12 recommendations. Those recommendations are at least
13 partially implemented in every instance already. The
14 pricing, the interaction between the pricing and demand,
15 the interaction between the energy efficiency planning
16 and regulatory and rate groups, all that is happening. I
17 would hope that you would see in our collective filings,
18 whether they are rate or whether they are programs, that
19 there is constant and consistent themes in our approach
20 to dealing with issues.
21 I think with that, I conclude my comments
22 on Mr. Heckler's exhibit.
23 Q By MR. KLINE: I think there's one more.
24 A Okay, could you help me, please?
25 Q I'll be glad to. Mr. Heckler in his
CSB REPORTING
[phone]
1209 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 Exhibit 901 was pretty critical of the Company's planning
2 process and I'LL have to admit, I don't know whether it
3 was Mr. Heckler or whether it was in a question posed by
4 Mr. Richardson, but the question was raised, is the
5 Company even capable of proper planning in this
6 si tuation. Do you recall that discussion in
7 Mr. Heckler's testimony?
8 A There is a statement made about, and I'm
9 not sure whether it's Heckler or another witness, about
10 is the Company capable of proper planning. I would say
11 we are capable of proper planning. We've got a great
12 process, a great team. The plant targeted in this
13 instance has been in the planning process for a number of
14 IRPs. It just took the form of a coal plant. Two things
15 have happened in the time period. One has been a switch
16 from coal to gas, but still a baseload plant in the same
17 time period, and the other thing is this economic
18 circumstance that I haven't seen in my career, and those
19 are the two pieces, but we are as capable of planning as
20 any utility that I'm aware of and Karl and his team have
21 been recogni zed as a capable utility resource planner.
22 COMMISSIONER KEMPTON: Mr. Kline.
23 MR. KLINE: Thank you. At this stage I
24 would like the leeway to ask Mr. Gale a couple of other
25 clarifying questions because I think there are some
CSB REPORTING
[phone]
1210 GALE (Di-Reb)
Idaho Power Company
.1 things that we can present to the Commission that will
2 correct some information and add some information I think
3 you'll find to be valuable with your indulgence.
4 COMMISSIONER KEMPTON: Are you speaking
5 about doing that now?
6 MR. KLINE: Yes, please.
7 COMMISSIONER KEMPTON: If there is no
8 obj ection, you may proceed.
9 MR. KLINE: Thank you. If Ms. Nordstrom
10 could approach, we have an exhibit we would like to
11 present to the Commission. It will be a non-confidential
12 exhibi t since it is a copy of a prior Commission Order.
.13 (Ms. Nordstrom distributing documents.)
14 COMMISSIONER KEMPTON: You say this is
15 going to be an exhibit?
16 MR. KLINE: I would like to have it
17 identified as Exhibit No. 27, Mr. Chairman.
20
21
22
23
.
18 (Idaho Power Company Exhibit No. 27 was
19 marked for identification.)
COMMISSIONER KEMPTON: Go ahead.
Q BY MR. KLINE: Mr. Gale?
A Yes.
Q And also for purposes of Mr. Olsen who
24 doesn i t have a copy of the exhibit in front of him, could
25 you please tell us what Exhibit No. 27 is?
CSB REPORTING
[phone]
1211 GALE (Di-Reb)
Idaho Power Company
.
.
1 A Yes, it's the Commission Order related to
2 the 2006 integrated resource plan.
3 Q That's Order No. 30281?
4 A Yes, it is.
5 Q All right.
6 A Case IPC-E-06-24.
7 Q Now, at kind of the close of the
8 proceeding yesterday, there was some discussion regarding
9 the terminology that's used in the new statute Idaho Code
10 61-541 and the question of acknowledged versus accepted
11 was discussed, and I'd like to direct your attention to
12 the Ordering provisions on page 12 of Exhibit 27, bottom
13 of page 12 where it says "Order."
14 A Yes.
15 Q And could you just read that Ordering
16 paragraph
17 A Yes.
18 Q -- for Mr. Olsen's benefit?
19 A "It is hereby ordered that Idaho Power
20 Company's 2006 integrated resource plan is accepted for
21 filing. " Should I continue?
22
23
Q Yes, next sentence.
A "Acceptance of the 2006 IRP should not be
24 interpreted as an endorsement of any particular element.25 of the plan, nor does it constitute approval of any
CSB REPORTING
[phone]
1212 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 resource acquisition or proposed action contained in the
2 plan. "
3 Q Mr. Gale, you, I think, had previously
4 indicated in your testimony in this proceeding that you
5 worked with various people in the preparation of what
6 eventually became Idaho Code Section 61-541; is that
7 correct?
8 A That's correct.
9 Q And not trying to make anything more of
10 this than is necessary, did you folks focus on any big
11 difference between accepted and acknowledged in putting
12 together that Bill?
13 A I can make two statements. The first
14 statement is, and I think I said it the first time on the
15 stand, in my mind, the acceptance verb and the
16 acknowledged verb are more similar than accepted and
17 approved. That's the world that I live in. In the
18 preparation of the legislation, it was not thought that
19 the legislation would envision a higher Commission
20 standard for the IRPs than what is currently in place.
21 Q All right. One other section that I'd
22 like to ask, were you present in the Hearing Room
23 yesterday when Mr. Yankel testified?
24 A Yes.
25 Q And at the close of my cross-examination
CSB REPORTING
[phone]
1213 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 of Mr. Yankel, I believe he said that Idaho Power
2 Company's loads were decreasing. Do you recall that
3 testimony?
4 A Yes.
5 Q Do you think he meant that Idaho Power
6 Company's loads are decreasing?
7 A Yeah, I would certainly give Mr. Yankel
8 the benefit of the doubt that he really meant the load
9 growth was decreasing, not loads decreasing.
10 Q Because loads are not decreasing?
11 A Loads are not decreasing.
12 Q You recently -- you were here, of course,
13 when Staff witness Harms testified, were you not?
14 A Yes.
15 Q And could you clarify what the Company's
16 position is on CWIP in this case?
17 A Yes, and I would refer back to my direct
18 testimony. Just one minute. I thought I had marked it,
19 but I can find it fairly quickly. Okay, I'm ready, what
20 was the question?
21 Q The question was could you clarify what
22 the Company's position in this case is on the use of
23 construction work in progress?
24
25
A Thank you. We propose the CWI P
application as a tool. On page 7 of my testimony, I
CSB REPORTING
[phone]
1214 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 discuss how it might be applied and I think the important
2 thing for the Company is that if the Commission desires
3 to use CWIP as a tool in this case to help with financing
4 that they express that in the Order and then much like my
5 description on page 7, we could implement it in that
6 manner, but the Company would very much like to have that
7 tool if it's the Commission's desire.
8 Q Okay. Then one other area where I believe
9 we need some clarification, yesterday when Mr. Sterling
10 testified, it seemed to me that you and Mr. Sterling
11 perhaps reached a better understanding of Mr. Sterling's
12 soft and hard cap proposal. Are there still any -- does
13 the Company still have concerns about any other portions
14 of the soft and hard cap proposal after yesterday's
15 cross-examination?
16 A Well, I appreciate that discussion, that
17 clarification and probably in this instance a discussion
18 wi th Mr. Sterling would have cleared things up to begin
19 wi th, but on the soft cap line item, I think that we are
20 in agreement with its potential application, and maybe
21 even on the hard cap, but I need to express the Company's
22 concern with the hard cap as clearly as I can. Our sense
23 if the hard cap is implemented where there is no recourse
24 to bring additional information, we're just precluded
25 from bringing anything that might happen, including
CSB REPORTING
[phone]
1215 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 things that would qualify as force maj eure under other
2 contracts, that just seems to be a strict and severe
3 approach.
4 We would very much prefer the Commission
5 come to what they believe is a reasonable commitment
6 estimate, set it at a soft cap and at least give us the
7 option to argue it later.
8 Q Yesterday there was a fair amount of
9 discussion regarding the comparison of this proceeding to
10 the Valmy certificate and also the Pioneer power plant
11 certificate case. In your judgment, are there things
12 that are similar between this case and those cases if you
13 would, please?
14 A Well, I i d like to thank Commissioner Smith
15 for a lesson. I did have a chance to review Pioneer
16 since yesterday and there are issues that are similar. I
17 would freely admit there are issues that are similar, but
18 I think there is context there as well and I would like
19 to endeavor maybe for the group of folks that weren't
20 here in the '70s what that issue was about.
21 The Company filed a certificate for the
22 Pioneer plant, I believe, in the fall of 1974 and in that
23 case, it was a case regarding a certificate, a case
24 regarding a new resource. During the case the economy
25 became part of the debate. During the case load
CSB REPORTING
[phone]
1216 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 forecasts were part of the debate and a number of similar
2 type of issues and ultimately, there were some payments
3 made by the Company that became in question on
4 appropriateness for recovery, many similarities as far as
5 issues.
6 The distinctions that I would like to make
7 is Pioneer was a 1,000 megawatt coal-fired plant to be
8 located in Ada County. Now, just try and even fathom
9 that today is beyond a stretch, but it was 1,000
10 megawatts of coal in Ada County and it was to come in
11 in two phases, I believe in '80 and '81, at 500 each and
12 the debate over Pioneer was on all the issues I already
13 mentioned, but the biggest debate was the location of the
14 plant and I think it's fair, and I would stand to be
15 corrected, in the ultimate Order, there was language in
16 the Order that indicated that the Commission viewed that
17 there was some need, but ultimately location was just
18 denied.
19 A couple of things that, although the
20 issues are similar, I'd like to point out just for
21 context. The growth rates used to predict a 1,000
22 megawatt plant were between 6 and 7 percent growth rates.
23 The cost of the plant was between 800 and 900 million in
24 1974 dollars. The rate impact would have doubled
25 customer rates. There was an issue other than
CSB REPORTING
[phone]
1217 GALE (Di-Reb)
Idaho Power Company
.
.
.
1 environmental issues, there was extensive discussion
2 about where the economy sat, whether it was beneficial to
3 have plants in Idaho, outside Idaho, and there was a
4 discussion about prepayments made by the Company and how
5 they would be treated, and probably the most important
6 distinction that I neglected to say is the Company
7 brought that resource to the Commission absent an IRP
8 process.
9 I think the IRP process both for Pioneer
10 first and later for Valmy is a big distinction. We go
11 through much more in our resource planning than we did at
12 that time. I'd also note, you know, 1,000 megawatts at a
13 time when we had a 1,500 peak versus a 300 megawatt plant
14 at the time we have a 3,200 peak.I mean, there is
15 magnitude differences. The siting, I can represent to
16 you the siting in this plant is not even on the same
17 dimension as the siting was with Pioneer, so I appreciate
18 that.
19 I think upon reading the history of
20 Pioneer, I think Commissioner Smith is right, there are a
21 number of similar issues, but to finish the story, this
22 will just take a second, Pioneer was denied. The
23 Company came -- in November of '76, so that was a
24 two-year process just to get through Pioneer, and then
25 the Company put forth a certificate for a coal-fired
CSB REPORTING
[phone]
1218 GALE (Di-Reb)
Idaho Power Company
.
.
.
14
1 plant actually near American Falls which I think only
2 stayed in place for months because in the interim we had
3 worked out the Valmy agreement with Sierra Pacific, so
4 ul timately we filed a certificate for Valmy and Valmy was
5 at 500 and not 1,000.
6 Q Do you recall, was there an RFP used in
7 Valmy?
8 A To my understanding in both instances it
9 was the Company bringing a proposal forward, a
10 Company-buil t proposal.
11 Q Finally, Mr. Gale, last question that I
12 would have, there's been a lot of discussion in this
13 proceeding about perceived bias, that the Company had a
preconcei ved idea that it was going to build Langley
15 Gulch and it did a lot of things to discourage other
16 folks from participating. Regardless of that, the
17 accuracy of that or not, do you have any sense of how
18 that should play out in this proceeding?
19 A A couple of thoughts. I think that in the
20 discussion regarding the process the big picture was lost
21 and I believe we're offering a good resource and I
22 believe there were good al ternati ves offered to that
23 resource in the other bids and a distinction in the
24 economics as best as we can represent to you, but
25 regarding the bias, there's a couple of things that are
CSB REPORTING
[phone]
1219 GALE (Di-Reb)
Idaho Power Company
.1 factual about the Company's choice of resources.
2 In the last 10 years we have selected a
3 third party in an RFP when we had a self-build in the
4 mix. We have actually selected a third party. That's
5 the Bennett Mountain situation. In another RFP we
6 selected an affiliate. That's not our favorite part of
7 the past, but we selected an affiliate and the
8 distinction we were making on the affiliate versus the
9 utility is that it's a different entity within the
10 corporate organization and they are an unregulated
11 entity, so the distinction that we're making between a
12 utility and an affiliate, a utility is a regulated asset
13.14
.
and the affiliate is non-regulated, just like another
independent power producer, so we have selected an
15 affiliate that ultimately couldn't finance the Garnett
16 Mountain proj ect and we've selected the self-build, so we
17 have made selections from all three possibilities.
18 MR. KLINE: That's all I have. Thank you
19 very much. Mr. Richardson, cross.
20 MR. RICHARDSON: Thank you, Mr. Chairman.
21
22
23
24
25
CSB REPORTING
[phone]
1220 GALE (Di-Reb)
Idaho Power Company
.
.
.
20
1 CROSS-EXAMINATION
2
3 BY MR. RICHARDSON:
4 Q Good morning, Mr. Gale.
5 A Good morning, Mr. Richardson.
6 Q Were you here yesterday when Ms. Smith
7 testified that a 7 percent rate increase is equivalent to
8 rate shock?
9 A I heard Ms. Smith i s testimony, yes.
10 Q And do you recall that when the industrial
11 customers asked this Commission to spread the PCA rate
12 increase this year over three years, did the Company
13 support that position?
14 A As I stated just a little earlier, Mr.
15 Richardson, had we been able to securitize, meaning were
16 we able to do what you had wanted to do without a
17 financial impact, we would have been interested in
18 bringing that proposal to the Commission and we have in
19 the past.
Q And you would agree that the rates for the
21 industrial class this year have increased by 25
22 percent?
23
24
25
A In that magnitude, yes.
Q I've been meaning to ask this question for
a long time and I'm going to take this opportunity to do
CSB REPORTING
[phone]
1221 GALE (X-Reb)
Idaho Power Company
.
.
.
1 it, you testified that you take Commission orders
2 seriously and that energy efficiency and demand response
3 is your number one resource. Do you think in a general
4 sense that it makes sense for this Commission to ask a
5 company that is in the business of selling electric
6 energy and capacity to tell its customers not to purchase
7 electric energy and capacity?
8 A I think that the Company, the customers
9 and the Commission should all be sending messages, which
10 may be very close to what you just said, we should be
11 talking about energy efficiency, conservation when
12 appropriate. We should be sending correct price signals.
13 I mean, the whole set of resources that we have and the
14 Commission has and you have to work with customers should
15 be used to manage load as best we can because it is
16 precious and new resources are expensive.
17 Q So if I'm a shareholder of Idaho Power
18 Company, my goal is for you to sell as much electric
19 energy and capacity as possible, isn't it?
20 A I will debate you on that.I think that
21 shareholders of Idaho Power should be interested in Idaho
22 Power providing services to its customers that they value
23 and to finish that sentence, services do not necessarily
24 equate to commodity.
25 Q You were asked by Mr. Kline if Mr. Yankel
CSB REPORTING
[phone]
1222 GALE (X-Reb)
Idaho Power Company
.
.
.
1 was in error when he said that the load was declining and
2 you said, I believe, that no, load is not declining.
3 Maybe the rate of increase is declining, but load is not
4 declining. Do you have Mr. Yankel' s testimony available
5 to you?
6 A Yes.
7 Q Would you please turn to page 24 of
8 Mr. Yankel' s direct testimony?
9 A Yes.
10 Q Beginning on line 9 on page 24 of
11 Mr. Yankel' s direct testimony, Mr. Yankel testified, "As
12 can be seen from the graph below, growth in the total
13 annual load has not just slowed as the growth in the
14 number of residential and commercial customers has, but
15 the overall consumption has actually decreased since June
16 of 2008." He goes on to state that this is a permanent
1 7 shift from the historic trends which will take time not
18 only to come up to previous levels, but take years to go
19 past the previous levels and up to the previous
20 proj ections, so would you want to correct your statement
21 that load growth has not in fact declined?
22 A No. I'll tell you my statement is based
23 upon a senior review of load forecasts under a variety of
24 scenarios prepared by Mr. Mace who was our forecast
25 wi tness in this case and even the most extreme does not
CSB REPORTING
[phone]
1223 GALE (X-Reb)
Idaho Power Company
.
.
.
1 have a declining load in it.
2 looking at the chart on page 24QDo you
3 of Mr. Yankel' s testimony, do you dispute that that's
4 accurate?
5 I'm not going to contest his exhibit. I'mA
6 just telling you that our Company through its hired
7 consul tant does not have a load forecast that is
8 declining.
9 And I wasn't talking about a forecast, IQ
10 was talking about actual load.
11 I'm not prepared to testify on actualA
12 load, so you had a witness earlier who was capable of
13 doing that.
14 But you were testifying to that just a fewQ
15 moments ago when your attorney asked you about load
16 growth.
17 Well, I'm very happy to clarify that inA
18 the context of those load forecasts provided to us by our
19 expert.
20 MR. RICHARDSON: So your testimony earlier
21 on load growth should be colored by the fact that you Ire
22 not an expert on this and you're referring now to experts
23 in essentially a hearsay kind of a testimony. That's all
24 I have, Mr. Chairman.
25 COMMISSIONER KEMPTON: Thank you,
CSB REPORTING
[phone]
1224 GALE (X-Reb)
Idaho Power Company
.
.
20
21
1 Mr. Richardson. Mr. Olsen.
2 MR. OLSEN: Yes, just a couple of
3 questions Mr. Chair.
4
5 CROSS-EXAMINATION
6
7 BY MR. OLSEN:
8 Q Hi, Ric, how are you doing?
9 A I'm good, thank you.
10 Q I just have a couple of questions. Back
11 in the, I guess, spring, early summer of 2008, didn1t you
12 participate or Mr. Pengilly's team participate with
13 irrigators to come up with a new demand response
14 program?
15 A I mean, definitely Mr. Pengilly did and we
16 had individuals, I believe Mr. Tatum, in our department
17 participate in that as well. I did not participate.
18 Q So you don i t have a whole lot of knowledge
19 on that collaborative effort, then?
A Second hand.
Q Second hand, okay; so I won't go on that
22 point. The other question, you had given the Commission
23 a little more history on Pioneer and just one, a couple
24 quick questions on that note. Back in 1974 when Pioneer.25 was proposed, the amount of hydro that we had on the
CSB REPORTING
[phone]
1225 GALE (X-Reb)
Idaho Power Company
.
.
.
16
17
1 Idaho Power system, subj ect to check, isn't that about
2 what we have today?
3 A It would be very close. What i s happened
4 is we've had some smaller upgrades, really small
5 facilities since then, but not anything of any real
6 consequence. Let me pause for a second. I i m trying to
7 think of the completion. I would think all of Hells
8 Canyon complex facilities would have been completed.
9 Once that was done, we really haven i t added substantial
10 hydro since and some of our hydro capability has been
11 diminished because of operating constraints, so long way
12 to say I agree with you.
13 Q Okay; so that's generally about the same
14 absent some upgrades and some other issues, I guess, with
15 maybe water release or whatnot?
A Yeah.
Q Now, you testified that Pioneer was
18 proposed as 1,000 megawatts, 500, two 500 units. Now, if
19 we for context purposes, and I1m just referring back to
20 Mr. Bokenkamp' s Exhibit No. 10 that's been corrected and
21 was handed out yesterday in the Hearing Room, if we just
22 look at the average energy and it looks like, you know,
23 right around 200 or 2,000 average megawatts, it would
24 appear that if you looked at the hydro that was in place
25 then and if you added Pioneer which they were predicting
CSB REPORTING
[phone]
1226 GALE (X-Reb)
Idaho Power Company
.
.
.
1 the load growth and had the similar issues that you
2 pointed out in your testimony , it looks like it's taken
3 about 30 years to get back up to where you would have
4 used the Pioneer capacity; is that a fair statement?
5 A I can't speak to your exact statement. I
6 would say it would have taken -- had we built Pioneer at
7 1,000 , it would have taken awhile to consume that
8 capaci ty, I would agree with that.
9 MR. OLSEN: I have no further questions.
10 COMMISSIONER KEMPTON: Thank you, Mr.
11 Olsen. Mr. Purdy.
12
13 CROSS-EXAMINATION
14
15 BY MR. PURDY:
16 Q Just one to go back to an earlier line of
17 questioning, Mr. Gale, about the selection of contractors
18 for various proj ects that Idaho Power has completed over
19 the years. I just wanted to make sure that I understood
20 your testimony correctly, and so my question is in any --
21 with respect to any proj ect where Idaho Power or one of
22 its affiliates or subsidiaries participated as a bidder
23 in the proj ect, did the Company select an independent
24 bidder over its own affiliate or subsidiary? Can you
25 point to any proj ect where that occurred?
CSB REPORTING
[phone]
1227 GALE (X-Reb)
Idaho Power Company
.
.
.
1 A I thought I did. Bennett Mountain, we
2 selected Bennett Mountain over a Company.
6 Q
3 Q Okay.
Did I understand your question? Did you
5 say affiliate or utility? I apologize.
4 A
I said in any case where Idaho Power or
7 one of its affiliates was a bidder to a proj ect, did the
8 Company select an independent in lieu of its own or its
18
19
9 affiliate's bid?
10 A
11 Q
12 A
13
14 further.
15
16
17
20 BY MR. MILLER:
21
22
23
Q
A
Q
Bennett Mountain.
Bennett Mountain and that i sit?
Yes.
MR. PURDY: All right, I have nothing
COMMISSIONER KEMPTON: Mr. Miller.
MR. MILLER: Just one question.
CROSS-EXAMINATION
Good morning, Mr. Gale.
Good morning.
We i ve heard that the consideration of
24 this -- that the IRP is the proper forum really to
25 discuss consideration of this plant. When we began the
CSB REPORTING
[phone]
1228 GALE (X-Reb)
Idaho Power Company
.
.
.
1 2009 IRP process last year, Langley Gulch and
2 Boardman-Hemingway were both viewed as committed
3 resources for purposes of developing the IRP.
4 Boardman-Hemingway no longer is, as I understand it.
5 Langley still is. Do you think that when the IRP process
6 resumes that Langley should continue to be viewed as a
7 committed resource?
8 A My view and the Company's view is yes.
9 MR. MILLER: Thank you. That's all I
10 have.
11 COMMISSIONER KEMPTON: Ms. Bridge.
12
13 CROSS-EXAMINATION
14
15 BY MS. BRIDGE:
16 Q Good morning, Mr. Gale.
17 A Good morning.
18 Q Were you present in the room yesterday
19 when I asked Mr. Pengilly if the Company was pursuing all
20 energy efficiency and DSM opportunities that would be
21 cheaper than building a new power plant?
22
23
24
25
A Yes.
Q And he stated no. Do you recall that?
A Well, I heard that exchange. I would say
if the answer is no, it's only because of some practical
CSB REPORTING
[phone]
1229 GALE (X-Reb)
Idaho Power Company
.
.
.
1 limi tations in wrapping up, not because of any direction
2 he's getting from management.
3 Q Okay, and that kind of goes to my question
4 is what are the obstacles to pursuing efficiency and DSM
5 first before building new generation and are there ways
6 to overcome those obstacles? I i m trying to understand
7 why we wouldn't pursue, you know, efficiency and DSM
8 opportuni ties if there are options that are cheaper than
9 new generation.
10 A And Ms. Bridge, I don i t know that we
11 aren't. I think a lot of the obstacles have already been
12 cleared just in putting together the organization and the
13 resources and the team to go after it and I think they're
14 fully functional now and Mr. Pengilly is the expert, but
15 when he was talking about, you know, getting the customer
16 on board, that's a challenge. That's a challenge for all
17 of us. Penetration is something I would echo, but as far
18 as corporate obstacles, I can cite none. I would state
19 they have a free hand to do what they can at a speed that
20 makes sense and that statement is just you can i t go at a
21 speed where you're imprudent and I don i t think that they
22 are. I think they're going at a great pace.
23 MS. BRIDGE: Thank you. I have no further
24 questions.
25 COMMISSIONER KEMPTON: Mr. Woodbury.
CSB REPORTING
[phone]
1230 GALE (X-Reb)
Idaho Power Company
.
.
1 MR. WOODBURY: Staff has no questions.
2 Thank you, Mr. Gale.
3 COMMISSIONER KEMPTON: Commissioner
4 Redford.
5 COMMISSIONER REDFORD: No questions.
6 COMMISSIONER KEMPTON: Commissioner Smith.
7
8 EXAMINATION
9
10 BY COMMISSIONER SMITH:
11 Q Mr. Gale, regarding your offer to provide
12 this load and resource data in August, would that be
13 August 1st or August 30th?
14 A I can i t tell you today. The thought came
15 through our discussions during the hearings this week.
16 We have -- some of the folks involved in the forecast
17 were involved in the hearing, so we would expedite it.
18 We understand, it is just another piece of information you
19 could have to factor into your decision.
20 Q Right; so does the Commission when it
21 receives this usually do something with it, like put it
.
22 out for comment, because the only thing we know about
23 forecasts and models and stuff is that nobody agrees how
24 they're put together and nobody agrees what the inputs
25 should be and so everybody disputes the outcome, so do we
CSB REPORTING
[phone]
1231 GALE (Com-Reb)
Idaho Power Company
.
.
.
16
1 usually go through a process of getting feedback on the
2 Company's calculations?
3 A Commissioner , it is what it is. It is an
4 effort to provide that load update
5 Q I understand that. Do you know what we
6 usually do with them, because my concern is if we usually
7 put them out for comment and then we don i t have time to
8 do that, that's something different, so I don't know what
9 we usually do with these. We just get them, look at them
10 and say oh, that's interesting?
11 A No, this is that first, and pardon me if
12 I'm not coming across well, this is that first
13 foundational step in putting the IRP -- what the IRP team
14 would start with when they resume, that's the piece you
15 would get.
Q All right. With regard to the
17 construction work in progress, did I miss something?
18 There are no real numbers in here that I think you're
19 asking the Commission to approve as the CWIP that would
20 go into rates.
21
22
A Correct.
Q So from that point of view, personally I
23 don't think that I can just say CWIP would be great
24 wi thout knowing a number. I mean, practicably the most
25 you could do is express a willingness to consider that
CSB REPORTING
[phone]
1232 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 when the numbers are actually presented to you. Did you
2 want more than that?
3 A No, here is the thought behind that, that
4 if the CWIP was the preferred tool by the Commission as
5 opposed to the legislation ability, if they chose to use
6 CWiP that they could express that in the Order and
7 potentially even put a limit on it. We talk in there
8 about CWIP can be all, it can be partial. I mean, it's
9 just a tool that can be used in degrees.
10 Q I guess I thought maybe you wanted both.
11 A We do want both. We understand that you
12 don't always get what you want.
13 Q Really? A new concept. Finally,
14 Mr. Richardson asked you some questions about the anomaly
15 or apparent anomaly of an entity whose business it is to
16 sell electricity to discourage its customers from using
17 electrici ty and I guess I wonder if you see a difference
18 between using something you have in the wisest, most
19 efficient way and actually engaging in demand
20 destruction, which is in my mind the availability of
21 electrici ty for people who need to use it and want to be
22 in business and want to function.
23 A There is nothing in my comments I hope
24 that would lead you to believe that we want demand
25 destruction. I think there are places for conservation,
CSB REPORTING
[phone]
1233 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 places for energy efficiency, places for pricing, places
2 for many issues. It's just the whole suite. My key
3 point is it is not -- our Company is not in the commodity
4 business. We don't view it that way.
5 Q Well, I don't know if customers view it
6 that way or not.
7 A Yeah.
8 Q And do you see anything in the orders of
9 the Commission or the attitude of the Commission that
10 would lead someone to believe that we want demand
11 destruction?
12 A I'm only pausing to think through recent
13 orders, but nothing at all comes to mind.
14 COMMISSIONER SMITH: Thank you. That's
15 it.
16 COMMISSIONER REDFORD: Can I ask another
17 question?
18
19 Commissioner Redford.
COMMISSIONER KEMPTON: Certainly,
20
21
22
23
24
25
CSB REPORTING
[phone]
1234 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 Q Mr. Gale, this has to do with the soft
5 cap--
6 A Yes, sir.
7 Q -- is one of the reasons that you're
8 asking for the soft cap, is it because the numbers you
9 have on the bids are really not firm bids, they're
10 estimates, and you want the opportunity in the event the
11 Company blew the estimate and it really costs more, is
12 that the reason for the soft cap?
13 A As a, I'm overusing the word, tool, but as
14 an element in the transaction. The soft cap and hard
15 cap, I'm making the distinction there not because whether
16 the estimates are good or bad, it's just the application
17 of a soft or hard cap, so should you become convinced
18 that the commitment estimate should be lower, I mean,
19 that's part of your decision making. The thing that we'd
20 like to preserve is the right that once that commitment
21 estimate is set that we at least have the opportunity to
22 reargue. That is the sole distinction I'm trying to make
23 wi th the soft and hard.
24 Q But you talk about estimates and in my
25 estimation given the information that the bidders had and
CSB REPORTING
[phone]
1235 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 so on, that's really all they' ve given you is a best
2 estimate before pricing out all the design components and
3 so on and, therefore, if the true number comes up higher
4 than the estimate, you want the ability to come back and
5 argue that the plant cost more and, therefore, we should
6 grant you further authority to raise that estimate, it
7 becomes a firm number; is that a fair statement?
8 A I'm going to say it back just in case
9 there's a difference between us. We believe our estimate
10 is a good estimate and we believe and it's our testimony
11 that it is dramatically more economic than the other
12 bids.It's our expectation that that's going to be the
13 dollar value that's going to come in at this time. It
14 may come in lower.If it comes in lower, the way it
15 works is the lower costs accrue to the benefit of the
16 customer, so it is a one-way dimension in our bid that
17 isn't there in others, and then lastly, it's not our
18 expectation to come back and reargue for additional cost.
19 We just want to have that ability.
20 COMMISSIONER REDFORD:I have no further
21 questions. Thank you, Mr. Gale.
22 THE WITNESS: Thank you.
23
24
25
CSB REPORTING
[phone]
1236 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 EXAMINATION
2
3 BY COMMISSIONER KEMPTON:
4 Q Mr. Gale, I had just a couple of
5 questions. One of them paralleled very closely what
6 Commissioner Smith asked and that is if there's a full
7 court press on trying to get information downloaded
8 that's typically associated with the August data
9 collection process that is standard with Idaho Power
10 Company in preparing for the IRP, 2009 IRP, if that can
11 come in so it isn't on the very last day before September
12 1st so that there's a little bit of working room for
13 decisions to be reasonably made after looking at data
14 that may be in many cases raw data, are you suggesting
15 that this roughly six-week time frame can be used to
16 practical advantage to identify things like Mr.
17 Richardson brought out which clearly shows a reduction in
18 load with the last date being March 2009.
19 A, I don't know if that's correct. I'm
20 assuming just based on the testimony that there's
21 factuali ty to the data that was put in here. It came
22 from someplace. I don't think it was just a figment of
23 somebody's imagination and the last date was March 2009,
24 so there i s almost, there's five or six months in here of
25 different data that will show trend lines perhaps
CSB REPORTING
[phone]
1237 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 different than what's indicated here. Perhaps they will
2 enforce what's indicated here, so it's extremely critical
3 given the 1 September drop dead date associated with
4 contract provisions that this kind of information be
5 provided; otherwise, I think there's a very good
6 possibili ty that in consideration of this that there
7 would be some weight, perhaps heavy weight, put on a
8 slippage that would be past the contract date of
9 September 1st. Do you believe that that full court
10 process can be effective in the decision that the
11 Commission has to make?
12 A First thing I'd like to say is my
13 representation on Mr. Yankel' s exhibit is I just -- I
14 didn't review it to confirm, so I'm not discrediting
15 Mr. Yankel. I just want to make that clear. It's his
16 exhibi t and I haven't validated it. Regarding the load
17 forecast, the logic is this: It is evident in your
18 questioning that if we have a load forecast coming up in
19 August, wouldn i t that be a useful piece of information
20 and maybe you could incorporate it in your decision and
21 still keep the ability to get the plant on-line in June
22 of' 12, and that is the whole tension, because if you
23 decided we need the IRP to be completed, then 2012 is off
24 the table, so it's all a debate in my -- that I'm
25 debating right now is can we keep to the summer of 2012
CSB REPORTING
[phone]
1238 GALE (Com-Reb)
Idaho Power Company
.
.
.
1 and get you the information you need and the best thing
2 we can say is we can get you the first step in the load
3 forecast as expeditiously as possible, realizing you have
4 to evaluate it and if you don't have time to evaluate it,
5 it's our peril.
6 Q Is there a possibili ty given the
7 contractual language that you have that you could have a
8 CPCN authorized, but that in fact preapproval wouldn't
9 happen until some point, say, 30 days, 45 days later,
10 wi thin a two-month period, there would be additional
11 approval time for the preapproval process; is that a
12 player?
13 A I had not thought about that. I don't
14 know what implications -- I had not thought about that,
15 have not thought about what that would mean to financing,
16 what that would mean to the senior team's decisions. You
17 are the Commission.
18 Q The information associated with the
19 Siemens contract indicates that it's the CPCN that's the
20 dri ver and then there's a provision, also, I think
21 perhaps on the EPC and maybe Siemens as well that other
22 financial commitments be made at that point in time and I
23 guess the question is can certain financial commitments
24 be made that would carry you over, say, a two-month
25 period, no more than that, in the preapproval process if
CSB REPORTING
[phone]
1239 GALE (Com-Reb)
Idaho Power Company
.
.
.
14
15
1 the CPCN itself can be issued prior to the September 1st
2 date?
3 A The CPCN will be helpful. To the extent
4 that you can address the regulatory questions as best you
5 can in the first order would be helpful. Ultimately I
6 think the vision of the legislation was the Commission
7 would issue its order and then the Company would then
8 evaluate whether that would be able to work or not.
9 Q I think the language in the order says
10 that the Commission has several options, to issue it, to
11 not issue it or to be unique, effectively unique, in how
12 it would combine the two and yes, the Company would
13 certainly have the first right of refusal, so to speak.
They could rej ect it.
A I guess to finish that, I recognize as
16 Commissioner Smith said yesterday and the day before,
17 it's a big case. We brought a lot of issues and we
18 brought extra issues as a result of the economic crisis
19 which we may not have brought absent that and that is the
20 new legislation and the CWIP on the front end. I
21 understand that we presented you with some tools that
22 you're going to have to deliberate on whether you're
23 going to want to use them or not.
24
25
COMMISSIONER KEMPTON: I have no more
questions. Mr. Kline.
CSB REPORTING
[phone]
1240 GALE (Com-Reb)
Idaho Power Company
.
.
.
20
1 MR. KLINE: I have no redirect questions.
2 COMMISSIONER KEMPTON: If there's no
3 objection, the witness may step down.
4 (The witness left the stand.)
5 COMMISSIONER KEMPTON: Mr. Kline, do you
6 have additional wi tnes ses?
7 MR. KLINE: No, Mr. Chairman.
8 COMMISSIONER KEMPTON: Is there any other
9 matter to be brought before the Commission at this time?
10 Mr. Richardson.
11 MR. RICHARDSON: Thank you, Mr. Chairman.
12 I have just a couple of housekeeping matters. My notes
13 from the prehearing conference suggests that we have a
14 posthearing brief scheduled for July 31st and I just want
15 to confirm whether that is accurate, and the second
16 housekeeping matter is, is Exhibit 1001 available to the
17 parties to review still? It was brought in and it was
18 Idaho Power's
19 MR. WOODBURY: It's Exhibit 116.
MR. RICHARDSON: 116, excuse me, is that
21 available in the file room for parties to review?
22 MR. KLINE: Yes, we hid the copies because
23 they're confidential, but yes, they are if you have
24 signed the agreement.
25 MR. RICHARDSON: At the Commission?
CSB REPORTING
[phone]
1241 COLLOQUY
.
.
.
1 MR. KLINE: Right here we've got those
2 copies.
3 COMMISSIONER KEMPTON: So let the record
4 reflect that Mr. Kline answered in the affirmative.
5 MR. RICHARDSON: Thank you,
6 Mr. Chairman.
7 COMMISSIONER KEMPTON: And Mr. Richardson,
8 thank you for bringing that up. That was something I was
9 going to address after I made one pass around to see if
10 there was anything else to be brought up.
11 MR. WOODBURY: Mr. Chairman, if I could
12 speak to those procedural matters, Mr. Richardson is
13 correct. There was an April 15th prehearing conference
14 and the Commission following that on April 20th issued a
15 notice establishing a July 31st brief, posthearing brief,
16 deadline. It's my recollection that that was included in
17 the schedule at the request of Mr. Miller who was then
18 representing Invenergy Thermal Development, a party that
19 has withdrawn, but certainly, the parties may still wish
20 to use that date.
21 In my conversations with Connie Bucy, the
22 reporter, it's my belief on a best efforts of her that
23 she will attempt to file the confidential transcript by
24 Monday, July 27th in advance of that posthearing brief
25 deadline. I believe also that with respect to my
CSB REPORTING
[phone]
1242 COLLOQUY
.
.
.
1 understanding with respect to the motion for stay that
2 the Commission has taken that motion under advisement and
3 will consider it in its deliberations. We have not
4 established any scheduling for intervenor funding. I
5 would suggest that the deadline for filing that be also
6 July 31st.
7 COMMISSIONER KEMPTON: Are there any
8 comments? Mr. Kline.
9 MR. KLINE: Yes, I'd like to add one
10 comment on the posthearing brief. At the prehearing
11 conference, Mr. Miller brought up the idea of a
12 posthearing brief and we established that date more or
13 less as a placeholder. There wasn't any agreement that
14 everybody was going to file posthearing briefs. In my
15 experience, typically we utilize the posthearing brief
16 here if there are legal issues that have come up during
17 the course of the proceeding that need to be presented to
18 the Commission.
19 At this point I'm not seeing any that I
20 think we need to do. I think doing a posthearing brief
21 just rehashing the testimony and arguing the same things
22 that we argued during the proceeding isn't very
23 producti ve, so I would unless the Commission sees some
24 legal issues that need to be addressed, I don't think
25 there's a need for a posthearing brief.
CSB REPORTING
[phone]
1243 COLLOQUY
.
.
.
1 COMMISSIONER KEMPTON: Mr. Purdy?
2 MR. PURDY: Well, now my point might have
3 been rendered moot. I was going to point out that
4 wi thout having the Commission's procedural rules in front
5 of me regarding intervenor funding in Mr. Woodbury's
6 comment, I believe that the rules say that the time
7 period for filing your petition for funding commences
8 after the last required filing in. the case. That would
9 be a posthearing brief if we had one. The trouble that
10 coinciding the time for filing the petition for funding
11 and that of the posthearing brief creates is that that
12 doesn't allow the intervenors who might seek funding to
13 review the other parties' briefs and then include that in
14 their attorney expenses when they do file their petition,
15 so a little bit of time difference between those two
16 dates would be helpful. A week would be more than
17 adequate, if we have a brief.
18 COMMISSIONER REDFORD: Mr. Chairman?
19 COMMISSIONER KEMPTON: Commissioner
20 Redford.
21 COMMISSIONER REDFORD: May I make a
22 comment?
23
24
25
COMMISSIONER KEMPTON: Absolutely.
COMMISSIONER REDFORD: Personally myself,
I would like to have a posthearing brief. There's been a
CSB REPORTING
[phone]
1244 COLLOQUY
.
.
20
21
22
23
24.25
1 lot of factual issues that the parties have squabbled
2 over and I think it's a good opportunity to clarify and
3 put kind of in bold print what the various positions are
4 and I would think you would want it from the standpoint
5 you may be commenting upon the issues raised by another
6 party or something. I know that it will really help me.
7 COMMISSIONER KEMPTON: Are there other
8 comments? Based on the comments of Commissioner Redford
9 and his position that it will help in the decision
10 process, the posthearing date that was postulated will
11 be -- Mr. Woodbury.
12 MR. WOODBURY: Yes, in light of
13 Mr. Purdy's comments, it would be August 7th for filing
14 of intervenor funding requests.
15 COMMISSIONER KEMPTON: August 7th? So
16 there will be a posthearing brief date. The one that has
17 been established on the 27th of July will be maintained
18 and the date for filing on intervenor funding will be
19 August 7th.
MR. WOODBURY: It's July 31st.
COMMISSIONER KEMPTON: July 31st?
MR. WOODBURY: Yes.
COMMISSIONER KEMPTON: For the briefs?
MR. WOODBURY: Posthearing brief.
COMMISSIONER KEMPTON: Right, July 31st
CSB REPORTING
[phone]
1245 COLLOQUY
.
.
20
21
22
23
24.25
1 for the briefs, August 7th for intervenor funding.
2 MR. WOODBURY: Yes.
3 COMMISSIONER KEMPTON: Are there any
4 issues to bring before the Commission? Let me just say
5 one thing before I close the shop here and that is that I
6 appreciate your indulgence in some of the faux pas I've
7 made and some of the probably unique methods that are not
8 necessarily tightly confined in an ALJ environment. It
9 is my first full case hearing. It's been an interesting
10 hearing. I've learned a lot. I have a couple of mentors
11 up here that can pass me notes any time they want, so
12 with that, this hearing is adjourned.
13 (All exhibits previously marked for
14 identification were admitted into evidence.)
15 (The Hearing adj ourned at 10: 30 a. m. )
16
17
18
19
CSB REPORTING
[phone]
1246 COLLOQUY
.
.
.
17
18
19
20
21
22
23
24
25
1 AUTHENTICATION
2
3
4 This is to certify that the foregoing
5 proceedings held in the matter of Idaho Power Company's
6 application for a certificate of public convenience and
7 necessi ty for the Langley Gulch power plant, commencing
8 at 9: 30 a.m., on Tuesday, July 14, and continuing through
9 Thursday, July 16, 2009, at the Commission Hearing Room,
10 472 West Washington Street, Boise, Idaho, is a true and
11 correct transcript of said proceedings and the original
12 thereof for the file of the Commission.
13 Accuracy of all prefiled testimony as
14 originally submitted to the Reporter and incorporated
15 herein at the direction of the Commission is the sole
16 responsibili ty of the submitting parties.
\ \ \ \ \ 11111///"~I IIN III....\\. c,"\," Ci- i1i" ~J ç.n "..~' :' ,,\'I1HI"/~,1 U' "'"", 0. '''''0 T "',. ,
:- () ..,,~. A "'-: ~ ~~.: ~"c-::! y~% 0 ~
~ \~ J~~:: ~\ lJi\C $' ~~ #l 'l11l/1 .. .."........ .2/// Y Ji~ '1,/,111\\\\\\\ 0 ..,..
//11 OF 10 ~V\ ,....'I'I \"1/111111\\\\\
CONSTANCE S. BUCY
Certified Shorthand Reporter
CSB REPORTING
[phone]
1247 AUTHENTICATION