20101126IPC to Staff 1-20.pdf

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An IDACORP Company
23
LISA D. NORDSTROM
Lead Counsel
Inordstromcmidahopower.com
November 24, 2010
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-10-25
IN THE MATTER OF THE APPLICA TlON OF IDAHO POWER COMPANY
FOR ACCEPTANCE OF ITS 2011 RETIREMENT BENEFITS PACKAGE
Dear Ms. Jewell:
Enclosed for filng please find an original and three (3) copies of Idaho Power
Company's Response to the First Production Request of the Commission Staff to Idaho
Power Company in the above matter.
In addition, enclosed in a separate envelope are an original and three (3) copies of
Idaho Power Company's Confidential Response to the First Production Request of the
Commission Staff to Idaho Power Company in the above matter.
Finally, enclosed are four (4) copies each of non-confidential and confidential
(included in the confidential envelope) disks containing documents being produced in
response to Staffs Production Request. Please note, the confidential information should
be handled in accordance with the Protective Agreement executed in this matter.
Very truly yours,~1/'1~
Lisa D. Nordstrom
LDN:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise. ID 83707
LISA D. NORDSTROM (ISB No. 5733)
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
InordstromCâidahopower.com
dwalker(ëidahopower.com
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iOUI NOV 24 PM 4: 23
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
ACCEPTANCE OF ITS 2011 )
RETIREMENT BENEFITS PACKAGE. )
)
)
)
)
)
CASE NO. IPC-E-10-25
IDAHO POWER COMPANY'S
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF TO IDAHO
POWER COMPANY
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company"), and in
response to the First Production Request of the Commission Staff to Idaho Power
Company dated November 4,2010, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 1
REQUEST NO.1: The Application states that "the current retirement benefits
package represents approximately 9.1 percent of a new salaried employee's base pay.
Of that amount, approximately 33 percent is associated with the 401 (k) benefit plan,
approximately 65 percent is associated with the defined benefit plan, and approximately
two percent is associated with the retiree medical benefit plan." Please provide the
calculations used to determine (a) the representation that the current retirement benefits
package represents approximately 9.1 % of a new salaried employee's base pay, and
(b) the allocation between the three different benefit plans. Please show all
assumptions used in determining the represented figures in the statements above.
Please also provide the schedules in Excel format with all links and formulas
operationaL.
RESPONSE TO REQUEST NO.1: As indicated on pages 4 and 5 of the Direct
Testimony of Ms. Gerschultz, Idaho Power contracts with Towers Watson, a third-party
consultant, to provide a comparison of the value of Idaho Powets retirement benefits to
the corresponding values associated with retirement benefits for a peer group of
companies. The methodology and assumptions used by Towers Watson to perform
these comparisons are as follows:
· Plan design specifics are gathered for each company responding to
the Towers Watson survey request and compiled in their Employee Benefits Information
Center ("EBIC") proprietary database - information is purged or updated within 24
months to keep current.
· Information gathered is based on salaried plan provisions from
2009/2010 available to a new employee.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 2
· EBIC data is loaded into a proprietary Towers Watson model that
values each retirement benefit program using a generic workforce to ensure
consistency in valuation methodology and avoid variations due to demographic
differences.
. Calculated values are used for comparisons.
The value of Idaho Powets current retirement programs was estimated at 9.1
percent of pay as calculated by the Towers Watson model, comprised of 5.9 percent
defined benefit pension, 3.0 percent defined contribution 401 (k), and 0.2 percent retiree
medicaL. The 92-company energy industry companies average was 9.9 percent of pay,
comprised of 3.5 percent defined benefit pension, 4.6 percent defined contribution
401 (k), and 1.8 percent retiree medicaL.
While Idaho Power recognizes that the value of the current retirement programs
is already below the industry average, the Company understands the importance of
being proactive in recognition of plan design trends. Based on this information, Idaho
Power has further reduced the defined benefit pension plan, resulting in total program
values well below the energy industry figures.
Although the Towers Watson data and valuation models are proprietary, it has
agreed to share all assumptions. Please see the confidential document provided on the
enclosed CD. Since this data is confidential, Idaho Power is providing this information
only to parties that have executed the Protective Agreement. Towers Watson is unable
to provide specific client data or models.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 3
REQUEST NO.2: Please provide schedules showing the same information as in
Request NO.1 with the changes to the pension plan, including the overall retirement
benefits package representing approximately 7.9 percent of a new salaried employee's
base pay and the new allocation between plans. Please also provide the schedules in
Excel format with all links and formulas operationaL.
RESPONSE TO REQUEST NO.2: The same Towers Watson assumptions
outlined in the Company's Response to Staffs Production Request NO.1 were used to
derive the 7.9 percent total retirement program value. This figure is comprised of 4.7
percent defined benefit pension, 3.0 percent defined contribution 401 (k), and 0.2
percent retiree medicaL.
As indicated in the Company's Response to Staffs Production Request No.1, the
Towers Watson valuation model is confidential and proprietary.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 4
REQUEST NO.3: The Application states that "additional weight is placed on the
defined benefit plan because it rewards and incents longevity, which in turn faciltates
the development and retention of knowledge and expertise. As a result, the Company
maintains a skiled workforce with less time and expense incurred for training and
developing new employees." Please provide (a) any and all analyses done to
determine the cost to train and develop new employees, (b) any and all cost/benefit
analysis done andlor used to determine the appropriate level of retirement benefits
needed to retain employees, and (c) any studies done andlor used to determine the
level of employee retention as it relates to the retirement benefit package offering.
RESPONSE TO REQUEST NO.3:
a. Idaho Power spends a significant amount of time, resources, and
materials training its workforce. Journey line workers comprise the largest job
classification at Idaho Power, which provides a relevant example of why maintaining a
skiled workforce is important to the Company. Following graduation from an accredited
college program, an employee enters an apprenticeship program that combines formal
classroom, field skills, and on-the-job ("OJT") training. This apprenticeship program,
training, and employment records are certified through the Bureau of Apprenticeship
and Training, who regularly audits Idaho Power's program and processes. Costs to
Idaho Power include both training and administration of the apprenticeship programs.
Linemen, as the largest single common job group, provide a good area to analyze
training costs. Additionally, documentation of experience requirement is readily seen in
WorkfilelJob Posting documents.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 5
Typically, training of a Lineman from initial hire to lowest level Journeyman takes
4~ years for most well-diversified apprenticeship programs of medium-large utilties
who require Journeymen to respond to system-wide construction, redevelopment,
maintenance, and emergency response. Idaho Power also requires the abilty to build
and sustain transmission systems. (Idaho Power maintains registration with the Federal
Department of Labor Bureau of Apprenticeship.)
An additional 18 months wil take the "new" Journeyman to a level of training and
experience which wil allow himlher to operate independently for emergencylroutine
troubleshooting response. (i.e., can respond to "call-out" on hislher own to determine
the source of outages, define materials and resources needed to respond, or conduct
protective operations until help arrives.)
Approximately 6 years is required to train a new hire to the point of proficient
independent Journeyman Lineman.
Since Apprentice Lineman can be hired at varying levels of prior experience, a
three-year average picture is provided below (2008-2010):
New Apprentice
. Average number of Apprentice Linemen in training at all times - 24
. Average number of years to attain lowest level Journeyman - 3
. Minimum number of training hours per year - 144
. Required documented paid on-the-Job training hours per year -
2,080
. Annual cost of 1 Apprentice training (does not include annual costs
of training yard/facilties) - $15,300 + OJT wage only $56,160 =
$71,460
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 6
New Journeymen
. Average annual number "New Journeymen" in training - 15
. Average time to attain Trouble Response level-18 months
. Minimum number of training hours per year - 60
. Required documented OJT in first 18 months - 240
. Average Cost per "New Journeyman" per year (does not include
annual costs of training yard/facilties) - $8,660 + OJTlclassroom
wage only $9,720 = $18,380
In addition to the above, there are cost savings attributable to having fully
proficient journey-level employees. For example, these benefits include the abilty to
have these skiled workers respond to an outage or potential outage individually,
resulting in faster restoration of customer power, as is the case with our trouble-worker
lines positions. Journey positions also are able to perform much of the OJT training and
assessment of apprentices, saving dedicated training resources.
Idaho Power must have a competitive retirement program in the aggregate in
order to recruit and retain employees. As reported in a 2005 survey, "Work Force
Planning for Public Power Utilties" conducted by The American Public Power
Association, the national service organization representing the nation's more than 2,000
community- and state-owned public power utilties, "the loss of critical knowledge and
the inabilty to find replacements with utilty specific skils are the two biggest challenges
that public power utilties face as a result of the aging work force."
b&c. At this time, Idaho Powets employee retention is approximately equivalent
to that of industry peers. The Company understands that a competitive retirement
package is necessary to retain its workforce, as these benefits are a valued component
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 7
of Idaho Power's total rewards program. The determination of the appropriate balance
between retirement benefits levels and employee retention was done on a
comprehensive basis using both quantitative and qualitative methodologies. The
Company has provided all quantitative analyses that supported its determination
through its original filng and responses to the Staffs First Production Request in this
case. Further, the Company has thoroughly described the qualiative logic behind its
determination through the testimonies of Mr. Anderson and Ms. Gerschultz.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefis, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8
REQUEST NO.4: Please define the positions that the Company asserts are
classified as "critical operations roles". Please identify all positions that are classified as
"critical operations roles". For each position classified as a "critical operations role",
please provide the current salary, amount of last annual incentive payment, date of last
annual incentive payment, date of birth, date of hire, years of experience in that role
with the Company, and years of experience in a similar position outside of the
Company.
RESPONSE TO REQUEST NO.4: Critical operations roles are defined as
positions that plan, design, build, maintain, and support the plant and systems that
generate and reliably deliver energy to Idaho Power customers.
Please see the confidential Excel file provided on the enclosed CD that includes
current salary, last incentive payment amount and date, date of birth, and date of hire.
Since this data is confidential, Idaho Power is providing this information only to parties
that have executed the Protective Agreement. If the position has less than three
incumbents, Idaho Power has labeled the position "Othet' so as to protect specific
employee information. Idaho Power is unable to provide years of experience in the role
with the Company or years of experience in a similar position outside of Idaho Power as
the human resources information system currently does not track this information.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9
REQUEST NO.5: The Application states that "the Company's three component
approach to an overall retirement benefits package was specifically developed to
balance market risk between the Company and its retirees." Given Commission Order
No. 31003 that allows for a regulatory balancing account for cash contributions and
provides for the amortization of the balance in such account, including carrying charges,
does the Company agree that any market risk included in its retirement benefit package
that is allocated to the Company is ultimately borne by its ratepayers? If not, why not?
RESPONSE TO REQUEST NO.5: Yes. While customers do not bear all of the
market risk included in the Company's Retirement Benefits Package structure, the
market risk associated with the defined benefit portion of the package is ultimately
borne by customers. The level of overall market risk that customers experienced has
not changed since 2004. However, beginning in 2011, the Company's 2011 Retirement
Benefits Package reduces the level of market risk borne by the Company and ultimately
its customers. It should be noted that the level of risk borne by customers between
2004 and 2010 resulted in significant customer benefits during those years in that no
customer costs related to the defined benefit plan occurred until the spring of 2010. It is
also important to recognize that avoidance of risk may also mean avoidance of any
associated reward.
The Company believes that when it seeks recovery of prudently incurred defined
benefit plan costs in the future, the Commission should not ignore the benefis that
customers received by assuming some risk. In addition, the Company is not aware of
any fundamental market changes that would suggest that market risk today is any
different than it was when no customer costs were being incurred. Further, while the
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 10
Company plans to seek recovery of prudently incurred retirement benefits costs from
customers, customers wil also continue to benefit from the cost savings that the
Retirement Benefits Package structure provides. As stated below, Ms. Gerschultz
describes on page 4, lines 9 through 20, of her testimony the benefits that result from
the Retirement Benefits Package structure:
The Company considers its current retirement-related
benefis to be a competitive package that supports
employees' financial needs in retirement while appropriately
sharing the market risk between the Company and its
employees. Maintaining a competitive retirement benefits
package allows the Company to recruit and retain its highly
skiled workforce. Further, the competitiveness of Idaho
Powets retirement benefits package supports the
Company's intent to maintain a flexible workforce that can
easily adjust work duties and assignments to meet the
changing demands and operational needs which in turn keep
the Company's costs of service lower.
The response to this Request was prepared by Greg Said, General Manager of
Regulatory Affairs, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 11
REQUEST NO.6: Please provide a complete copy of the benchmark analysis
completed by Towers Watson comparing the retirement benefits of 700 companies,
including 92 energy industry companies, and referred to in the Company's Application.
Please provide the schedule in Excel format with all links and formulas operational and
searchable.
RESPONSE TO REQUEST NO.6: The Company has requested information in
accordance with Staffs Request. However, the Company received permission from
Towers Watson to share only the summary study results provided as Exhibit NO.1 to
the testimony of Ms. Gerschultz.
As stated in the Company's Response to Staffs Production Request No.1, the
Towers Watson Employee Benefit Information Center database and valuation model are
confidential and proprietary to Towers Watson and Towers Wats~m is unwiling to
provide this information. However, Towers Watson wil make available, at the
Commission's request, a benefit consultant to explain the study and methodology.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 12
REQUEST NO.7: Exhibit NO.1, page 1, states that "Twelve Idaho Power peer
group companies were analyzed separately."
a) Please provide a list of the twelve companies in the peer group of twelve
similar-sized and geographically proximate utilties.
b) Please provide the analysis used for each company.
c) Please also provide the schedules in Excel format with all links and
formulas operational and searchable.
d) Please provide the search criteria used to determine the companies
included in the analysis.
RESPONSE TO REQUEST NO.7: The information being provided in response
to this Request is confidential and is only being provided to those parties that have
signed the Protective Agreement.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 13
REQUEST NO.8: Exhibit No.1, page 1, states that "Based on benefits available
to a new salaried employee at time survey was conducted; most recent changes not
reflected". Please provide the actual surveys done for each company and the dates that
the survey was conducted.
RESPONSE TO REQUEST NO.8: As indicated in the Company's Response to
Staffs Production Request No.1, information gathered by Towers Watson was based
on salaried plan provisions from 2009/2010 available to a new employee. The survey
materials were consistent for each employer surveyed, and are collected during the
spring of each year. Company-specific data gathered by Towers Watson and included
in their Employee Benefits Information Center database is not in the Company's
possession and is proprietary and confidential to Towers Watson.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 14
REQUEST NO.9: The Application states that "Idaho Power respectfully
requests that the Commission issue its Order accepting the Company's 2011
Retirement Benefits Package..." In addition to the statement in Anderson Direct, p. 13,
how does the Company define the term "accept" in this case? What does the Company
believe the ramifications to be if the Commission does not accept the Company's 2011
Retirement Benefits Package?
RESPONSE TO REQUEST NO.9: In addition to the statement on page 13 of
Darrel Anderson's Direct Testimony, the Company defines the term "accept" in this case
to mean a formal acknowledgment by the Commission that Idaho Power has fulfiled the
Commission's directive in Order No. 31091, which states that prior to a request for
additional recovery of pension plan contributions, the Company is to provide "evidence"
that it "has carefully reviewed alternatives to reduce the burden placed on customers."
Further, the Company believes that "acceptance" of the Company's 2011 Retirement
Benefits Package indicates that the Commission views the package structure to be
reasonable and in the customers' best interests.
The Company believes that should the Commission choose not to accept the
Company's 2011 Retirement Benefits Package, the Company might be forced to modify
its retirement benefits package in a manner that the Company does not believe would
be in the best interests of the Company, its employees, or its customers. The Company
also believes that it is not the desire of the Commission to replace the Company's
operational decision-making process, including decisions regarding retirement benefis,
but rather to monitor the Company's decision-making process to ensure that the costs
associated with those decisions are prudently incurred and in the best interests of
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -15
customers. With this in mind, the Company has filed within its request for "acceptance"
of the 2011 Retirement Benefits Package a demonstration that it has carefully reviewed
its current Retirement Benefits Package structure against other alternatives and, based
on that review, has acted reasonably and prudently in developing the 2011 Retirement
Benefits Package.
The response to this Request was prepared by Greg Said, General Manager of
Regulatory Affairs, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 16
REQUEST NO. 10: Given the direction from Commission Order No. 31091, as
acknowledged in the Application and direct testimony of Greg Said, please explain how
the Company's review of its retirement benefis package was different this year from
previous years.
RESPONSE TO REQUEST NO. 10: Idaho Power reviews its Retirement
Benefits Package on an annual basis, and the benchmarking analyses performed this
year did not differ materially from years past.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 17
REQUEST NO. 11: Please provide copies of the plan documents and summary
plan descriptions for the defined benefit pension plan, the 401 (k) plan and the retiree
medical benefit plan.
RESPONSE TO REQUEST NO. 11: Please see the documents provided on the
enclosed CD.
The response to this Request was prepared by Toni Olson, Senior Human
Resource Professional, Idaho Power Company, in consultation with Lisa D. Nordstrom,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 18
REQUEST NO. 12: Sharon Gerschultz states in her direct testimony (p. 11, In.
21) that "while the present value of both plans were very similar, the costs and
contributions for the 401 (k) benefit plan would be higher in the near term as compared
to the defined benefit plan." Please provide any and all analyses done that supports
Ms. Gerschultz's conclusion.
RESPONSE TO REQUEST NO. 12: Please see the Excel file provided on the
enclosed CD which provided the analysis that supports this conclusion. This analysis
includes the following assumptions:
· Similar retirement plan value for both the current defined benefit
pension plan and the 401(k) plan.
. Age at hire 35, which is actual average using the past 5 years of
data.
. Retirement at age 62.
As the analysis demonstrates, Company contribution expense is larger under the
401 (k) plan for the first 11 years of an employee's career.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, and Ken Petersen, Controller and
Corporate Chief Accounting Offcer, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 19
REQUEST NO. 13: Please provide the detailed analysis to support Ms.
Gerschultz's (Direct p. 12) conclusion "that the defined benefit plan would tend to attract
and incent a more experienced workforce, whereas the 401 (k) plan would tend to attract
a less experienced workforce."
RESPONSE TO REQUEST NO. 13: Related to the Company's Response to
Staffs Production Request No. 12, the retirement plan value for the average worker
beginning at age 35 would be greater under a 401 (k) plan versus a defined benefit final
average pay plan until their 15th year of service.
Please see the Excel file provided on the enclosed CD. The Company has
expanded the analysis contained in the Company's Response to Staffs Production
Request No. 12 to project retirement values under the current pension and simulated
replacement 401 (k) plan for workers at age 25 (less experienced) and age 45 (more
experienced). Again, assuming a retirement age of 62, these analyses demonstrate
that the retirement plan value for the less experienced worker is greater under the
401 (k) plan and the retirement plan value for the more experienced worker is greater
under the current pension plan. Thus, the analysis supports the Company's contention
that its existing retirement program structure is more attractive to an experienced worker
than a 401 (k) plan would be.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefis, Idaho Power Company, and Ken Petersen, Controller and
Corporate Chief Accounting Officer, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 20
REQUEST NO. 14: Sharron Gerschultz states in her direct testimony (p. 17) that
the "modified plan wil also result in additional cost savings by promoting the retention of
highly-skiled, fully-trained, long-tenured workers." Please provide any and all studies
quantifying the cost savings referred to in the above statement.
RESPONSE TO REQUEST NO. 14: As noted in the Company's Response to
Staff's Production Request No.3, training time and resources for Idaho Power's highly
skiled workforce are significant. These investments are greatest during the first several
years of an employee's career. The Company has not quantified the cost savings
associated with a fully-trained workforce. However, as noted in the Company's
Response to Staff's Production Request No.3, the average cost to train a Line Worker
Apprentice (Apprentice Lineman) to a Journeyman level is $214,000. This average
training cost increases to $242,000 to attain the level of a Trouble Response Line
Worker (Troubleman). The Company currently has 107 and 55 employees in the
Journey Line Worker and Trouble Response Line Worker categories, respectively.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 21
REQUEST NO. 15: Please provide the source of the total pensionable earnings
of $164 milion referred to in Ms. Gerschultz direct testimony, page 17.
RESPONSE TO REQUEST NO. 15: The source of this data is the "Retirement
Plan of Idaho Power Company Revised Actuary's Report" - as prepared by the plan
actuary, Miliman, using data as of January 1, 2010. This amount can be found in
Exhibit 6 of Millman's report by multiplying the active employee count by the capped
(per IRS limits) average compensation (2,007 employees X $81,769 average
compensation) during 2009. Exhibit 6 of Miliman's report is confidential and has been
provided on the enclosed confidential CD. Since Exhibit 6 is confidential, Idaho Power
is providing this information only to parties that have executed the Protective
Agreement.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 22
REQUEST NO. 16: Ms. Gerschultz claims in her direct testimony (p. 17) that the
modified plan wil "result in approximately $1.97 milion yearly savings once the
workforce is fully transitioned." Please explain what is meant by "fully transitioned", and
state the Company's estimate of time it wil take for the workforce to be "fully
transitioned" .
RESPONSE TO REQUEST NO. 16: "Fully transitioned" refers to the point in
time when all current employees wil be covered under the new pension formula.
Savings will begin in 2011, and, as stated on page 8, lines 5 and 6 of Ms. Gerschultz's
testimony, 56 percent of all current employees wil be eligible for retirement by 2020.
Therefore, the plan stands to realize a large portion of these yearly savings within 10
years. Full savings wil be realized following the termination of employment or
retirement of any employee hired prior to January 1, 2011.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 23
REQUEST NO. 17: Did the Company analyze any other defined contribution
plan formulas that would incent longevity? If so, please provide the analysis. If not,
why not?
RESPONSE TO REQUEST NO. 17: Yes. The Company did analyze alternate
defined contribution plan formulas; however, defined contribution plans do not typically
incent longevity. As previously noted, Idaho Power believes it is in the best interests of
the Company and its customers to retain a highly-skiled and fully-trained workforce. A
fully portable plan is not aligned with this strategic objective.
The maximum 401 (k) vesting allowed by law is three years for cliff vesting and
six years for graded vesting. After these vesting periods are fulfilled, both employer and
employee contributions are fully portable by the employee should they leave the
Company. Based on these limitations, a complete replacement of the defined benefit
component in the Company's retirement package with a defined contribution plan was
not considered appropriate at this time, and was not presented as an alternative to the
Offce of the CEO.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 24
REQUEST NO. 18: Please list any and all other types of defined contribution
plans that were considered as a part of the annual review of the retirement benefits
package.
RESPONSE TO REQUEST NO. 18: Given the drawbacks outlined in the
Company's Response to Staffs Production Request No. 17, the Company considers the
current defined contribution plan component as providing desired and appropriate
balance to the overall retirement benefit package. While the Company evaluated the
cost and benefits associated with the defined contribution plan structures, no defined
contribution plans alternatives were presented to the Office of the CEO for its
consideration.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefis, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 25
REQUEST NO. 19: Ms. Gerschultz states in her direct testimony (p. 19) that as
she has "looked at other utilties, it is clear that the Company's workforce structure has
allowed it to avoid many additional employee-related costs that other utilties incur and
must pass on to customers." Please identify all utilities reviewed and all costs that
those utilties incur that Idaho Power does not.
RESPONSE TO REQUEST NO. 19: In discussing "workforce structure," Idaho
Power is specifically referring to the fact that its workforce is not represented by a union.
In the spring of 2010, the Company hired Jim Gray, President of Jim Gray Consultants,
LLC, to develop an analysis of the potential cost of a union presence at Idaho Power. A
copy of a summary analysis is included on the enclosed CD. Since this summary is
confidential, Idaho Power is providing this information only to parties that have executed
the Protective Agreement. The analysis supports maintaining a union-free environment
at Idaho Power and supportive data for the Company's retention and employee
engagement initiatives.
The analysis included third-party research, evaluation of tangible costs, risks,
and long-term impact. Costs for Idaho Power are conservatively estimated at
$5,309,000 intangible first year cost and $2,479,000 in annual recurring tangible costs.
Cost considerations were evaluated in the following areas:
. Dispute resolution
. Union contract negotiations
. Safety and workers compensation
. Union campaigns
. Union dues, fines, and assessments
. Strike contingency planning
. Other costs
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 26
Other non-quantified costs included unfair labor practice charges, job flexibilty
and overtime restrictions, contracting and out-sourcing restraints, and capital equipment
restrictions, and delays on deployment. Idaho Power employees are effcient and
effective because they are properly trained and have the abilty to perform several crafts
and skils. In union environments, job flexibilty is hampered because of the inabilty to
cross craft lines, overdependence on seniority, and complex scheduling rules.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefis, Idaho Power Company, and Lonnie Krawl, Director of
Human Resources, Idaho Power Company, in consultation with Lisa D. Nordstrom,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 27
REQUEST NO. 20: Please provide a list of all studies or analyses completed
relating to the retirement benefits package review. Also provide a copy of each
studylanalysis or identify the Production Request Response where it has been provided.
RESPONSE TO REQUEST NO. 20: In addition to the Towers Watson
retirement program review provided as Exhibit NO.1 to the Direct Testimony of Ms.
Gerschultz, the executive management team reviewed the "Annual Retirement Benefits
Review Summary" provided on the enclosed CD. The names of the twelve Idaho Power
peer group companies were redacted on slide 13 as required by Towers Watson. The
Company has also received permission from Millman to release its confidential cash
balance plan analysis, which is provided on the enclosed confidential CD. Since the
Miliman report is confidential, Idaho Power is providing this information only to parties
that have executed the Protective Agreement.
The response to this Request was prepared by Sharon Gerschultz, Director of
Compensation and Benefits, Idaho Power Company, in consultation with Lisa D.
Nordstrom, Lead Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 24th day of November 2010.
gg'~~LISA D. NOR TROM
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 28
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 24th day of November 2010 I served a true and
correct copy of IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER
COMPANY upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
-- Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-- Email Weldon.Stutzman(ëpuc.idaho.gov
Industrial Customers of Idaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street
P.O. Box 7218
Boise, Idaho 83702
Hand Delivered
-- U.S. Mail
_ Overnight Mail
FAX
-- Email peter(ërichardsonandoleary.com
greg(ërichardsonandoleary.com
Dr. Don Reading
Ben Johnson Associates
6070 Hil Road
Boise, Idaho 83703
Hand Delivered
-- U.S. Mail
_ Overnight Mail
FAX
-- Email dreading(ëmindspring.com
dfuil:fkbuLisa D. Nordstro
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 29