20111219Volume IV Technical Hearing.pdf

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"'.BEFORE ~~.ãDAJHÒ PUBLIC UTILITIES COMMISSION
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! .l:..:',l.' ~~.r,~, :~ji~-.,r:'-;:_ ): i~,__:_ " - '.:':.": :
IN THE MAWÎtíF ¡ öFj THE APPLICATION
OF IDAHO POWER COMPANY FOR
AuTHORITY TO INCREASE ITS (
RATES AND CHARGES FOR ELECTRIC
SERVICE IN IDAHO
)
) CASE NO. IPC-E-11-08
)
)
)
)
BEFORE
COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER MACK A. REDFORD
COMMISSIONER PAUL KJELLANDER
.PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:December 5, 2011
VOLUME iv - Pages 159 ~ 586
,~~(,
CSBREPORTING
Constance S. Bucy, CSRNo. ,187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb~heritagewifi.com
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11
12
13
14
15
16
17
18
19
20
21
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23
24
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1 APPEARANCES
2 For the Staff:
3
4
5
6 For Idaho Power Company:
Donald L. Howell, II, Esq.
and Karl T. Klein, Esq.
Deputy Attorneys General
472 West Washington
Boise, Idaho 83720-0074
Lisa D. Nordstrom, Esq.
and Jason B. Williams, 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
Benjamin J. Otto, Esq.
Attorney at Law
Idaho Conservation League
Post Office Box 844
Boise, Idaho 83701
RACINE, OLSON, NYE, BUDGE
& BAILEY
by Eric L. Olsen, Esq.
Post Office Box 1391
Pocatello, Idaho 83204-1391
Brad M. Purdy, Esq.
Attorney at Law
2019 North 17th Street
Boise, Idaho 83702
HOLLAND & HART LLP
by Thorvald A. Nelson, Esq.
and Fred Schmidt, Esq.
6380 S. Fiddlers Green Circle
Suite 500
Greenwood Village, CO 80111
7
8
9
10
For Industrial Customers
of Idaho Power:
For Idaho Conservation
League, the Northwest
Energy Coalition and the
Snake River Alliance:
For Idaho Irrigation
Pumpers Association:
For the Community Action
Partnership of Idaho:
For Micron Technology,
Inc. :
CSB REPORTING
[phone]
APPEARANCES
. 2
10
11
12
13
. 14
15
16
17
18
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20
21
22
23
24
25.
1 A P PEA RAN C E S (Continued)
3 For Hoku Materials, Inc.:McDEVITT & MILLER
by Dean J. Miller, Esq.
Post Office Box 2564
Boise, Idaho 83701-2564
BOEHM, KURTZ & LOWRY
by Jody M. Kyler, Esq.
36 E. Seventh Street
Suite 1510
Cincinnati, Ohio 45202
APPEARANCES
4
5
6 For The Kroger Company:
(Of Record)
7
8
9
CSB REPORTING
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1 I N D E X.2
3 WITNESS EXAMINATION BY PAGE
4 Warren Kline Mr.Richardson (Cross-Ct i d)159
(Idaho Power)Commissioner Redford 172
5 Mr.Williams (Redirect)176
6 Scott Sparks Mr.Williams (Direct)178
(Idaho Power)Prefiled Direct Testimony 180
7 Mr.Richardson (Cross)225
Commissioner Redford 232
8 Mr.Williams (Redirect)234
Commissioner Redford 236
9
Michael Youngblood Mr.Williams (Direct)237
10 (Idaho Power)Prefiled Rebuttal Testimony 239
Mr.Richardson (Cross)263
11 Commissioner Redford 302
Commissioner Smith 304
12 Commissioner Redford 306
Mr.Williams (Redirect)307
13.Kevin Higgins Ms.Kyler (Direct)311
14 (Kroger Company)Prefiled Direct Testimony 313
Prefiled Rebuttal Testimony 324
15 Mr.Otto (Cross)335
Mr.Williams (Cross)338
16
Del Butler Mr.Richardson (Direct)341
17 (ICIP)Prefiled Direct Testimony 343
Mr.Williams (Cross)355
18
Don Reading Mr.Richardson (Direct)359
19 (ICIP)Prefiled Direct Testimony 362
Mr.Williams (Cross)425
20 Commissioner Redford 433
Commissioner Smith 441
21 Mr.Richardson (Redirect)445
Commissioner Redford 448
22
Don Sturtevant Mr.Richardson (Direct)453
23 ( ICIP)Prefiled Direct Testimony 455
Mr.Richardson (Direct-Ct i d)481
24 Mr.Williams (Cross)483
Mr.Richardson (Redirect)488.25
CSB REPORTING INDEX
(208 )890-5198
1 I N D E X (Continued).2
3 WITNESS EXAMINATION BY PAGE
4 Nancy Hirsh Mr.Otto (Direct)490
(Conservation Parties)Prefiled Direct Testimony 494
5 Pre filed Rebuttal Testimony 535
Mr.Purdy (Cross)546
6 Mr.Miller (Cross)547
Ms.Nordstrom (Cross)552
7 Mr.Otto (Redirect)554
8 Donn English Mr.Klein (Direct)556
(Staff)Prefiled Direct Testimony 558
9 Prefiled Rebuttal Testimony 565
Mr.Nelson (Cross)573
10 Mr.Otto (Cross)576
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12
13.14
15
16
17
18
19
20
21
22
23
24.25
CSB REPORTING INDEX
(208 )890-5198
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1 EXHIBITS
2
3 NUMBER DESCRIPTION PAGE
4 FOR IDAHO POWER COMPANY:
5 52.Rule M, Facilities Charge
Service Premarked
6
7
FOR THE KROGER COMPANY:
8
501.Present vs Kroger Recommended Premarked
Energy Efficiency Rider Revenue9
10
11 FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
12
13
14
15
16
17
18
19
20
21
22
23
24
25
301.CV of Dr. Don Reading Premarked
302.I PCO 's Responses to Request
No. 28
Premarked
303.IPCO's Responses to Request
Nos. 6, 7, 46 & 47
Premarked
304.IPCO i S Responses to Request
Nos. 21-25, 45, 60, 64-67,
69 & 71
Premarked
305.IPCO i S Responses to Request
Nos. 14-16, 18, 53, 58,
70 & 73
Premarked
306.IPCO i S Responses to Request
No. 19, 20, 57 & 72
Premarked
307.IPCO i S Responses to Request
Nos. 9-11 & 68
Premarked
308.I PCO i S Responses to Request
Nos. 12 & 51
Premarked
CSB REPORTING
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EXHIBITS
1.EXHIBITS (Continued)
2
3 NUMBER DESCRIPTION PAGE
4
FOR THE CONSERVATION COMPANIES:
5
801.IPCO i S Response to CAPAI i S Premarked
6 First Production Requests
7 802.IPCO i S Response to First Premarked
Production Requests of ICL,
8 NWEC & SNA
9 803.Staff Response to First Premarked
Production Requests of ICL,
10 NWEC & SNA
11
12 FOR THE STAFF:
13 103.Demand-Side Management Premarked.Revenue
14
15
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17
18
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20
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22
23
24.25
CSB REPORTING EXHIBITS
(208 )890-5198
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1 BOISE, IDAHO, MONDAY, DECEMBER 5, 2011, 1:15 P. M.
2
3
4 COMMISSIONER SMITH: Thank you, ladies and
5 gentlemen. I hope you i re all refreshed from your noon
6 hour break. We were having questions from Mr.
7 Richardson. We lost our witness, Mr. Kline, so
8 Mr. Richardson, it i S back to you.
9 MR. RICHARDSON: Thank you, Madam
10 Chairman.
11
12 WARREN KlINE,
13 produced as a witness at the instance of the Idaho Power
14 Company, having been previously duly sworn, resumed the
15 stand and was further examined and testified as follows:
16
CROSS-EXAINATION
19 BY MR. RICHARDSON: (Continued)
20 Q Mr. Kline, we were before the lunch break
21 discussing your testimony at page 5 at line 15 where you
22 state that I believe Simplot maybe unique, if not in a
23 very small minority of customers in terms of their
24 concerns about the facilities charge and I had just.25 handed you what what was marked 409 --
CSB REPORTING
[phone]
159 KLINE (X)
Idaho Power Company
.
.
.
1 COMMISSIONER SMITH: 309.
2 MR. RICHARDSON: 309, thank you, Madam
3 Chairman.
4 Q BY MR. RICHARDSON: -- which is a letter
5 from Boise State University filed on Friday in this
6 docket and I was asking you if you would read for the
7 record the last two paragraphs of that letter.
8 A "It is the University's position that the
9 facili ties charge at issue is excessive and lacks
10 justification when applied to older equipment. Both the
11 current charge (20.4%) and proposed revised charge
12 (16.97%) are excessive and more reflective of a consumer
13 credit card rate of interest than a reasonable commercial
14 finance charge. For example, were Boise State University
15 to initiate a bond issuance for the construction of new
16 facilities at the present time, it could do so at an
17 interest rate of approximately 4.25%. Moreover, the
18 charge is assessed in perpetuity, regardless of the
19 depreciated value of the asset assessed, or its age. As
20 a resul t, cumulative facilities charges assessed by Idaho
21 Power against the equipment on Boise State University's
22 campus have more than doubled the cumulative total of
23 Idaho Power's initial investment in the equipment
24 ($604,150.81 in initial investments; $1,443,774.31 in
25 facilities charges assessed). On older transformers,
CSB REPORTING
[phone]
160 KLINE (X)
Idaho Power Company
.
.
.
1 this discrepancy is even greater. In the case of the
2 1947 transformer, facility charges assessed over the last
3 64 years have exceeded Idaho Power's investment by more
4 than 13 times ($725.35 initial investment; $9,470.17 in
5 cumulative facility charges, with no forseeable end in
6 sight) .
7 Boise State Uni versi ty therefore concurs
8 wi th the Industrial Customers of Idaho's recommendation
9 for a reasonable, reduced facilities charge, adjusted to
10 reflect the age and depreciated value of the equipment at
11 issue, and that customers be provided the option to own
12 or purchase facilities charge equipment based on a fair
13 calculation of the depreciated book value of the assets."
14 Q Thank you, Mr. Kline, and were you here in
15 the Hearing Room this morning when the public witness
16 from McCain spoke?
17 A I was.
18 Q Were you?
19 A Yes.
20 Q So do you still believe that Simplot is in
21 a very small minority or in fact unique when it comes to
22 concerns about the facilities charge?
23 A Well, we have several hundred customers
24 that are on the facilities charge and I'm unaware of very
25 many of them, with the exception of what I just read and
CSB REPORTING
[phone]
161 KLINE (X)
Idaho Power Company
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.
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20
1 those of those customers like Simplot that are part of
2 the Industrial Customers of Idaho, that's the ones I'm
3 aware of.
4 Q And they would in all likelihood be
5 representati ve of the facilities charge customers who
6 comprise the bulk of the facilities charges you recover,
7 wouldn't they?
8 A I don't know.
9 Q You state on page 6 of your testimony,
10 beginning on line 6, that you strongly disagree with Mr.
11 Sturtevant and Mr. Butler that the facilities charge
12 consti tutes an unfair business practice. Well, wouldn't
13 you agree that fairness is largely in the eye of the
14 beholder?
15 A I believe fairness would be according to
16 those parties that are involved in valuing a particular
17 service or an asset.
18 Q And ultimately isn't it for this
19 Commission to decide what is fair and what isn't fair?
A Yes. As I stated under that question, it
21 is on page 6 and I stated that -- let's see, I talked
22 about the fact that the Commission had approved this
23 service or approved this rate in the past.
24
25
Q Well, do you think it is fair for Idaho
Power to charge Simplot a facilities charge on a
CSB REPORTING
[phone]
162 KLINE (X)
Idaho Power Company
1 transformer that was installed in 1945 that's 66 years.2 old?
3 A I believe that one must consider the
4 service that we're providing. We are providing a service
5 in addition to just supplying the equipment and that
6 charge encompasses all of those services. Now, Idaho
7 Power provides this at the request of the customer and we
8 pay the -- we cover the upfront costs of both the
9 engineering and the design of those facilities and also
10 buy the equipment.
11 In addition to that, we know that our
12 customers rely on this equipment to run their plants and
.13 they've got to have 24-hour/7-day service, so in addition
14 to that, we cover the inventory that's made available at
15 any time of the day that these customers may need some
16 equipment repair. In addition to that, we provide
17 ongoing 24-hour/7 service by our folks. If it's during
18 the day, if something breaks down, we've got people
19 available, but we've got people on call 24 hours a day,
20 seven days a week, 365 days a year to provide emergency
21 response services.
22 In addition to that, we have mechanisms in
23 place so that we've got our dispatch center staffed 24
24 hours a day so that they can get the information and also.25 get crews dispatched out and, of course, like I say, we
CSB REPORTING
[phone]
163 KLINE (X)
Idaho Power Company
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1 have crews, we have stations techs, we have troublemen
2 that are always available to respond and get them back in
3 service and that's what this charge is covering and I
4 think it's very fair.
5 Q Let me ask the question a little bit
6 differently. This particular transformer is 66 years old
7 and in your facilities charge, it comprises of several
8 line items. Would you believe that it's fair for Idaho
9 Power to charge a rate of return charge on a 66-year-old
10 transformer, for you to continue to earn a return on that
11 investment for 66 years?
12 A I would like to refer you to my testimony
13 on page 1 and it talks about, and I'LL cover the
14 question, what issues are you not discussing in your
15 rebuttal testimony, it says, "I am not testifying about
16 any tariff language, the appropriate rate or methodology
17 for the facilities charge buyout, or any other regulatory
18 or ratemaking matters. Company witness Mr. Scott Sparks
19 will testify regarding the facilities charge rate
20 methodology and Company witness Mr. Michael Youngblood
21 will testify regarding the facilities charge buyout
22 option as well as the regulatory and ratemaking issues
23 associated with facilities charges."
24 Q So you're saying you're not the witness
25 who can testify as to the fairness of that question?
CSB REPORTING
[phone]
164 KLINE (X)
Idaho Power Company
.
.
1 A I'm here to talk about the service that we
2 provide customers. In fact, I will refer you to page 1
3 of my testimony, what is the purpose of your rebuttal
4 testimony, it says, "I will describe Idaho Power's
5 facilities charge service option from a customer service
6 standpoint, particularly some of the issues associated
7 wi th mixed ownership of facilities and with Company
8 personnel maintaining customer-owned facilities. I will
9 also respond to the characterization made by the
10 Industrial Customers of Idaho Power that the Company's
11 facilities charge option is an unfair business practice."
12 Q Do you keep a log of how often you're
13 called to provide these emergency services for facilities
14 charge customers?
15 A I don't keep a log.
16 Q You don't know how often you've had to
17 provide these services?
18 A I believe that we could go back and look
19 at the service orders that we got from those calls from
20 those customers and probably come up with close to what
21 we have covered.
22
.
Q You heard Mr. Campbell this morning state
23 that in over a decade at McCain that they have never once
24 needed the services that you say you're providing?
25 A I heard him state that.
CSB REPORTING
[phone]
165 KLINE (X)
Idaho Power Company
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10
11
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1 Q And you don't keep a log, so you don't
2 know how often you need to provide these services for
3 other customers?
4 A Could you restate your question?
5 Q You said you didn't keep a log of when and
6 how often you provide these services?
7 A I said I don't keep a log.
8 Q But you're the witness testifying about
9 providing these services; right?
A Yes, I am.
Q Okay; so you didn't investigate to prepare
12 for your testimony how often these services are used?
13 A I did not.
14 Q And you're not here to testify about how
15 they're valued or priced?
16 A No.
17 Q You use an analogy, and I believe it's
18 still there on page 6, yes, of a house rental situation
19 by stating, "If I were to rent a house for 30 years, I
20 would not reasonably expect the owner of the house to
21 hand it over to me at the end of the 30 years because I
22 had' paid for it.'" Do you see that?
23 A Yes, I do.
24 Q Now, when you rent a house, is it
25 reasonable for the owner to tell you up front what the
CSB REPORTING
[phone]
166 KLINE (X)
Idaho Power Company
..
10
1 rent is going to be?
2 A Yes.
3 Q When you rent a house, is it reasonable
4 for you to have something up front in writing documenting
5 what all the costs are going to be?
6 A What do you mean by "all the costs"?
7 Q What is it going to cost you to rent the
8 house.
9 A I agree with that, yes.
Q And when you rent a house, do you actually
11 have a choice of who you can rent it from?
12
13.14
A I do.
Q And when you rent a house, do you have the
choice to move out and rent a different hourse if you're
15 not satisfied with the current rental situation?
16 A Yes.
17 Q And when you rent a house, do you have the
18 option to buy one instead of renting?
19 A I have the option to buy perhaps not that
20 house but a different house.
21 Q Now, when Idaho Power installs, say, a new
22 turbine at the Hells Canyon Dam, do you think it's fair
23 for this Commission to allow Idaho Power to put the cost
24 of that turbine into rates and to earn a return, allow.25 Idaho Power to earn a return on it?
CSB REPORTING
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167 KLINE (X)
Idaho Power Company
.
.
.
1 A Yes.
2 Q And it's fair for this Commission to set
3 retail rates such that Idaho Power can collect that
4 return from its ratepayers; correct?
5 A Yes.
6 Q And it's also fair for the ratepayers,
7 isn't it, to require Idaho Power to depreciate the cost
8 of that turbine over its useful life?
9 A Yes.
10 Q And it would not be fair to the
11 ratepayers, would it, if the cost of that turbine were
12 never depreciated for purposes of setting rates?
13 A No.
14 Q So when that turbine is fully depreciated
15 out, who has the claim to any residual value of that
16 turbine? Do the shareholders own it or do the ratepayers
17 own it?
18 MR. WILLIAMS: Madam Chair, I'm going to
19 obj ect to that question. It calls for a legal
20 conclusion. I'm also concerned that this testimony or
21 the questions Mr. Richardson are asking, which I've let
22 him go on a little while, are getting into the ratemaking
23 and regulatory issues which the witness has specifically
24 said he's not testifying to here today.
25 COMMISSIONER SMITH: Mr. Richardson.
CSB REPORTING
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168 KLINE (X)
Idaho Power Company
.
.
1 MR. RICHARDSON: I'll let the question
2 stand, Madam Chairman.
3 COMMISSIONER SMITH: Thank you.
4 Q BY MR. RICHARDSON: On page 7, you discuss
5 mixed facilities.
6 A Yes.
7 Q And you point out there are differences in
8 the National Electric Safety Code that Idaho Power
9 follows and the National Electric Safety Code that the
10 consumer is required to follow. Do you see that?
11 A I pointed it out, but I don't think you
12 stated it correctly, sir.
13 Q Would you correct me, then?
14 A Yes. I said that in addition, there are
15 differences between the National Electric Safety Code
16 that Idaho Power follows and the National Electric Code
17 that the customer is required to follow.
18 Q You're not suggesting, are you, that the
19 J. R. Simplot Company doesn't have to comply with the
20 same National Electric Code that Idaho Power has to
21 comply with?
22 A The Company has to comply with the
23 National Electric Safety Code. The J. R. Simplot Company
24 has to comply with the National Electric Code.
25.Q You're not testifying today as an
CSB REPORTING
[phone]
169 KLINE (X)
Idaho Power Company
1 electrical engineer, are you?.2 A No, I am not.
And have you read Mr. Sturtevant's
4 testimony where he states that the Simplot-Caldwell plant
3 Q
5 has had mixed facilities since 1945 with no incident?
10
6 A I have read the testimony.
And do you know that Mr. Sturtevant is an
Yes.
At page 10 of your testimony, you note
11 that during the course of this proceeding, the Company
7 Q
12 has changed its position on the sale of facilities
8 engineer?
9 A
13 subject to the facilities charge. Do you see that?.14
Q
A
15 Q
Yes.
When did that change occur?
Well, it says "during the course of this
17 proceeding," so it's just the last couple of months.
16 A
Is there a specific document that the
19 Company prepared expressing this new policy that I could
18 Q
20 look at?
21
22
.
A
Q
23 its position?
24 A
No.
How do you know the Company has changed
Because I was part of the discussion to
25 decide to make that change.
CSB REPORTING
[phone]
170 KLINE (X)
Idaho Power Company
.
10
i Q And explain to me how that came about
2 internally with the Company. What process did you follow
3 to decide to change your position on ownership?
4 MR. WILLIAMS: Madam Chair, I'm going to
5 obj ect on relevance. The fact of the matter is the
6 Company is proposing a new buyout option in its tariff.
7 How the Company got there or why or the process used, I
8 don't see the relevance in that for this proceeding.
9 COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: I'll change directions a
11 li ttle, Madam Chair.
12
13.
COMMISSIONER SMITH: Thank you.
Q BY MR. RICHARDSON: Do you know how long
14 the Simplot Company has been trying to get at least that
15 much of a concession from Idaho Power?
17
16 A I do not know how long.
Q As vice president of customer operations,
18 do you think it is good customer relations to force the
19 J. R. Simplot Company to expend the time and expense of
20 participating in this proceeding to get Idaho Power to
21 make that one small concession?
22 MR. WILLIAMS: Madam Chair, I'm going to
23 object. That's argumentative.
24 COMMISSIONER SMITH: Mr. Richardson, I
25 believe he's correct..
CSB REPORTING
[phone]
171 KLINE (X)
Idaho Power Company
.
.
.
1
2
MR. RICHARDSON: I'll withdraw the
question, Madam Chair, and that's all my questions for
3 this witness.
4 COMMISSIONER SMITH: Thank you. I hope I
5 haven't lost track, I think that was everyone who had the
6 opportuni ty. Are there questions from the Commission?
7
8 or two.
9
10
11
COMMISSIONER REDFORD:Just one question
EXAMINATION
12 BY COMMISSIONER REDFORD:
16
13 Q Do you keep an equipment log for all
14 pieces of equipment other than maybe small tools for
19 Q
15 Idaho Power?
A In terms of, like, the equipment that
17 we've been discussing, Commissioner, you know, the large
18 pieces of equipment?
Well, I would suggest that it's
20 operational equipment. I don't expect you to keep a log
21 on a hammer.
22
23
A
Q
24 the log?
25 A
Yes, we do keep a log.
And does it have several columns on it, in
I would say that it would.
CSB REPORTING
[phone]
172 KLINE (Com)
Idaho Power Company
.1 Q Probably has an acquisition date?
Yes.
It would have an acquisition cost?
Yes.
It would have a maintenance log?
Yes.
Cost of the maintenance?
Yes.
So when you previously testified that you
10 don't have that information, you may not have it with you
2 A
11 today, but you have that information?
.
3 Q
Yes.
So if you had a generator or some piece of
14 equipment that went into Simplot in 1959 or whatever it
A
Q
A
Q
please?
A
Q
question of
CSB REPORTING
[phone]
15 is, that log would continue on each year?
4 A
16
17
5 Q
Right.
And it would be used for purposes of
18 depreciation and other things, so don't you have that
6 A
19 information readily available to you?
22
23
24
25.
7 Q
Yes.
And presumably, that would merely be a
mathematics, that it would demonstrate how
173 KLINE (Com)
Idaho Power Company
8 A
9 Q
12 A
13 Q
.
.
1 much you have into it, how much it costs to maintain it,
2 how much it costs to replace it and so on?
3 A Yes.
4 Q So the difference there would demonstrate
5 how much revenue, maybe not cost but revenue, that you
6 have into that piece of equipment, so that would pretty
7 well tell the whole story, wouldn't it?
8 A It would give you a good picture of it.
9 Q Whe.n could we expect that?
10 MR. WILLIAMS: Madam Chair, Commissioner
11 Redford, the amount of information that you're talking
12 about is incredibly voluminous. There are, I think, a
13 couple thousand different pieces of individual equipment.
14 I can talk to Mr. Kline. We can try to figure something
15 out.
16 COMMISSIONER REDFORD:Well, you
17 certainly have a summary, and you have column adds and
18 subtracts.
19 MR. WILLIAMS: To be honest, I don't
20 really know. I'd have to talk to some of our regulatory
21 and finance people.
22 COMMISSIONER REDFORD: It doesn't seem
23 reasonable to me that you would simply every time your
24 tax people would want to do a depreciation calculation
.25 that they'd have to go through 2,000 pages of documents.
CSB REPORTING
[phone]
174 KLINE (Com)
Idaho Power Company
.
.
.
1 MR. WILLIAMS: I don't know.
2 COMMISSIONER REDFORD:So you can get
3 that information when?
4 MR. WILLIAMS: I would need to discuss
5 wi th our regulatory and finance people to see if we could
6 get it and give you a timeline.
7 COMMISSIONER REDFORD: A week?
8 MR. WILLIAMS: I don't know.
9 COMMISSIONER SMITH: I think you just
10 could tell us maybe tomorrow when you can provide that.
11 MR. WILLIAMS: Sure, I will be able to
12 provide the answer tomorrow.
13 COMMISSIONER SMITH: Thank you.
14 Q BY COMMISSIONER REDFORD: And I think that
15 would give us, you can correct me if I'm wrong, it would
16 give us some information of cost and all the other
17 figures for that piece of equipment; would you agree?
18 A Yes, I think the information that we have
19 and looking back on what we've done with that equipment
20 and when we purchased it and the records that we would
21 have on providing any kind of maintenance --
22 COMMISSIONER REDFORD: Well, I might
23 suggest that I'm sure that it's available for Internal
24 Revenue purposes, so that may be a start. Thank you. I
25 have no further questions.
CSB REPORTING
[phone]
175 KLINE (Com)
Idaho Power Company
1 COMMISSIONER SMITH: Do you have any.2 redirect, Mr. Williams?
3 MR. WILLIAMS: Just a couple, Madam Chair.
4
5 REDIRECT EXAMINATION
6
7 BY MR. WILLIAMS:
8 Q Mr. Kline, the letter from Boise State
9 Uni versi ty that Mr. Richardson handed out, he indicated
10 it had been submitted to the Commission in this docket.
11 Are you aware of whether it was submitted to the
12 Company?
13 A I'm not aware that it was submitted. The.14 date of it is December 2nd and whether it was mailed to
15 us or not, I'm not aware of us receiving it at this point
16 in time.
17 Q As the vice president of customer
18 operations, would you be made aware by major customer
19 service representatives whether or not the Company's
20 largest customers have concerns or problems with their
21 service?
22 A I believe most of the time, yes, I
23 would.
24 Q And as vice president of customer
25 operations, would you be willing to agree to have the.
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176 KLINE (Di)
Idaho Power Company
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1 Company's maj or account representatives meet with McCain
2 Foods or BSU or Simplot or any other large industrial
3 customers to talk about any concerns they have with their
4 service?
5 A Yes, we would.
6 MR. WILLIAMS: I have no further
7 questions, Madam Chair.
8 COMMISSIONER SMITH: Thank you. Thank
9 you, Mr. Kline.
10 (The witness left the stand.)
11 MR. WILLIAMS: Madam Chairman, at this
12 time we would we would like to call Mr. Scott Sparks to
13 the stand.
14
15 SCOTT D. SPARKS,
16 produced as a witness at the instance of the Idaho Power
17 Company, having been first duly sworn, was examined and
18 testified as follows:
19
20 MR. WILLIAMS: Madam Chair, before I
21 begin, there is a procedural issue with Mr. Sparks'
22 testimony that you alluded to earlier this morning. Of
23 his approximately 41 pages of direct testimony, he is
24 only prepared and is planning on testifying to pages 34
25 through 41 which directly deal with the facilities charge
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177 SPARKS
Idaho Power Company
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18
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1 service. I have copies of the relevant portions of his
2 testimony and we could admit those or we could use the
3 original direct prefiled that contains everything,
4 whichever the Commission prefers.
5 COMMISSIONER SMITH: I think what's in our
6 books is the complete testimony.
7 MR. WILLIAMS: That's correct.
8 COMMISSIONER SMITH: So that would
9 probably be the easiest as opposed to switching
10 everything out, and as I understood your co-counsel' s
11 request early this morning, it was to put all of the
12 direct testimony into the record.
13 MR. WILLIAMS: That's correct.
14 COMMISSIONER SMITH: So I think we should
15 just go with the complete set, understanding that
16 probably what's only at issue here starts on page 34.
17 MR. WILLIAMS: All right, thank you.
DIRECT EXAMINATION
21 BY MR. WILLIAMS:
22 Q Mr. Sparks, could you please state your
23 name, spelling your last for the record?
24
25
A Scott D. Sparks, S-p-a-r-k-s.
Q By whom are you employed and in what
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178 SPARKS (Di)
Idaho Power Company
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1 capacity?
2 A I'm employed by Idaho Power Company as a
3 senior regulatory analyst in the regulatory affairs
4 department.
5 Q Are you the same Scott Sparks that filed
6 direct testimony on June 1st, 2011?
7 A Yes, I am.
8 Q Do you have any corrections or changes to
9 your testimony?
A I do not.
11 Q And if I were to ask you the questions set
12 forth in your prefiled direct testimony, would your
13 answers today under oath be the same?
14 A Yes, they would.
15 MR. WILLIAMS: Madam Chair, I move that
16 the direct testimony of Scott Sparks be spread upon the
17 record as if read.
18 COMMISSIONER SMITH: If there's no
19 obj ection, we will spread the prefiled testimony of Mr.
20 Sparks upon the record as if read.
21 (The following prefiled direct testimony
22 of Mr. Scott Sparks is spread upon the record.)
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23
24
25
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179 SPARKS (Di)
Idaho Power Company
i Q.Please state your name and business address..2 A.My name is Scott D. Sparks and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what capacity?
5 A.I am employed by Idaho Power Company (" Idaho
6 Power" or "Company") as a Senior Regulatory Analyst in
7 the Regulatory Affairs Department.
8 Q.Please describe your educational background.
9 A.In May of 1989, I received a Bachelor of
10 Business Administration degree in Business Management
11 from Boise State University. I have also completed
12 post-graduate econometrics courses and attended the
13 electric utility ratemaking course offered through New.14 Mexico State Uni versi ty' s Center for Public Utili ties as
15 well as various advanced ratemaking courses presented by
16 the Edison Electric Institute.
17 Q.Please describe your work experience with Idaho
18 Power.
19 A.I became employed by the Company in 1985 as a
20 part-time mail clerk and have held positions as Meter
21 Reader, Customer Service Representative, Economic
22 Analyst, Human Resource/Compensation Analyst, Regulatory
23 Analyst, and Resource Planning Analyst.
24 In January of 1991, after two years in the Customer
25 Service Department, I was offered and I accepted aposition.
180 SPARKS, DI 1
Idaho Power Company
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1 in the Company's Energy Services Department. My
2 responsibilities over six years in the department varied
3 from conservation program evaluation, special studies,
4 load forecasting, and load research. In 1995, I was
5 asked to temporarily transfer to the Human Resources
6 Department to assist with implementation of the Company's
7 reorganization, benefit, and compensation plans.
8 In 1998, I applied for and accepted a position in
9 the Regulatory Affairs Department where I was responsible
10 for reviving the Company's resource planning and
11 integrated resource planning processes. As part of
12 reorganization, I was reassigned to the Power Supply
13 Planning Department in 2001 where I acted as the lead
14 analyst for the Integrated Resource Plan. In July 2003,
15 I left the Company to pursue self-employment in the real
16 estate and construction sectors. I returned to the
17 Company as a Senior Regulatory Analyst in the Regulatory
18 Affairs Department in June 2008.
19 What is the scope of your testimony in thisQ.
20 proceeding?
21 Based upon direction from Mr. Michael J.A.
22 Youngblood, Manager of Rate Design, my testimony
23 addresses proposed changes to the Company's commercial,
24 industrial, irrigation, lighting, and non-metered retail
25 tariff schedules. I will also address proposed changes
181 SPARKS, DI 2
Idaho Power Company
.1 to Rule H, New
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182 SPARKS, DI 2a
Idaho Power Company
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1 or Alterations, and updates to the rates charged under
2 the Company's facilities charge provisions.
3 Q.What are your overall obj ecti ves in arriving at
4 the proposed rate designs for the various service
5 schedules identified in your testimony?
6 A.As discussed in Mr. Youngblood's testimony, the
7 first obj ecti ve is to establish prices which primarily
8 reflect the costs of the services provided. As part of
9 the Company's last several general rate cases, this
10 obj ecti ve has been pursued in demand-metered schedules by
11 emphasizing increases in the demand and customer
12 components and the inclusion of fewer non-energy-related
13 costs in the energy charges. Mr. Youngblood's testimony
14 also discusses a second obj ecti ve of designing the
15 cost-based rate proposals to encourage increased energy
16 efficiency.
17 I . COMMRCIAL AN INDUSTRIAL
18 Q.How is the discussion of your rate design
19 proposals organized within your testimony for the
20 commercial and industrial customer classes?
21 A.My testimony for the commercial and industrial
22 customer classes will address rate design proposals for
23 Schedules 7, 9, 19, 31, 45, and 46, respectively.
24 Q.Please describe the methodology used to
25 determine the rate component adjustments for Schedules 7,
9, and 19.
183 SPARKS, DI 3
Idaho Power Company
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1 A.The methodology used to calculate the proposed
2 rate component adjustments for Schedules 7, 9, and 19
3 represent a uniform percentage movement of 5 percent
4 toward the unit cost of service intended for recovery by
5 that rate component. In doing this, the Company first
6 considered the percentage of overall revenue requirement
7 identified by the customer billing components for
8 Schedules 7, 9, and 19 resulting from the Company's
9 proposed class cost-of-service study. These percentages
10 established the target revenue requirement for each
11 billing component. Second, the Company determined the
12 percentage of overall revenue currently recovered by each
13 billing component of existing base rates. The
14 difference, or gap, between the target and the actual
15 percentage was then determined for each billing
16 component. The current percentage of overall revenue by
17 billing component was then adjusted by approximately 5
18 percent of the gap to establish targets. The customer
19 related charges were then established to achieve these
20 new targets.
21 A.Small General Service, Schedule 7.
22 Q.What is the present rate structure for Small
23 General Service under Schedule 7?
24 A.Customers taking service under Schedule 7 pay a
25 monthly Service Charge, a monthly seasonal Energy Charge
for the first 300 killowatt-hours ("kWh") used, and a
184 SPARKS, DI 4
Idaho Power Company
1 separate seasonal Energy Charge for all usage over 300.2 kWh in a month. Summer Energy Charges begin on June 1 of
3 each year and end on August 31 of each year while the
4 non-summer Energy Charges begin on September 1 of each
5 year and end on May 31 of each year. Schedule 7
6 customers do not have a Demand Charge.
7 Q.What is the revenue requirement to be recovered
8 from Small General Service customers taking service under
9 Schedule 7?
10 A.The annual revenue requirement for Schedule 7
11 customers is $16,493,381. This is shown on page 9 of Mr.
12 Matthew T. Larkin's Exhibit No. 38.
13 Q.Please describe the proposed rate design.14 adj ustments for Schedule 7.
15 A.The Service Charge for Schedule 7 was set to
16 coincide with the Service Charge proposed by Ms. Darlene
17 Nemnich for Schedule 1. These charges have traditionally
18 been set at the same rate and the Company desires to
19 continue this rate design relationship. For all energy
20 components, the Company is proposing rates that represent
21 a uniform 5 percent movement towards the costs to serve
22 that rate component. All rate design adjustments for
23 Schedule 7 are included on page 1 of Exhibit No. 47 and
24 target the proposed class revenue increase of 14.85
25 percent shown on page 9 of Mr. Larkin's Exhibit No. 38..
185 SPARKS, DI 5
Idaho Power Company
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10
1 Q.Have you prepared an exhibit that illustrates
2 the impact of the proposed rate adjustments on Small
3 General Service customers?
4 A.Yes, page 1 of Exhibit No. 48 shows the billing
5 comparison between Schedule 7 existing rates and proposed
6 rates for typical billing levels.
7 B.Large General Service, Schedule 9.
8 Q.In general terms, what is the current rate
9 structure for Schedule 9?
A.Service under Schedule 9 may be taken at
11 Secondary, Primary, or Transmission Service level. All
12 customers taking service under Schedule 9 pay a Service
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13 Charge, a Basic Charge, and both summer and non-summer
14 Energy and Demand Charges. Customers taking Primary or
15 Transmission service may also pay a Facilities Charge for
16 Company-owned facilities installed beyond Idaho Power's
17 Point of Delivery.
18 Large General Service, Schedule 9 - Secondary.c.
19 What is the current rate structure for ScheduleQ.
20 9, Secondary Service?
21 A.The current rate structure for Schedule 9
22 Secondary Service includes a two-tier declining block
23 Energy Charge along with a block Demand Charge and a
24 block Basic Charge. Under this rate structure, the first
25 block Energy Charge applies to the first 2,000 kWh per
month of
186 SPARKS, DI 6
Idaho Power Company
1 usage and the second block Energy Charge applies to all.2 usage greater than 2,000 kWh per month.
3 Under the Demand Charge, the first rate block
4 applies to the first 20 kilowatts (" kW") of Billing
5 Demand and the second block applies to all additional kW.
6 For the Basic Charge, the first rate block applies to the
7 first 20 kW of Basic Load Capacity and the second block
8 applies to all additional kW.
9 Q.What is the reason that Schedule 9 Secondary
10 Service has this block design in place?
11 A.The current block rate design structure for
12 Schedule 9 Secondary Service was put in place to remedy a
13 pricing disparity that occurred when customers.14 transi tioned between Schedule 7 and Schedule 9 at the
15 Secondary level. Before this block structure was put in
16 place, many of the customers moving from Schedule 9 to
17 Schedule 7 would see an increase in their monthly bill of
18 more than 100 percent. This disparity provided an
19 incenti ve to artificially increase their usage to remain
20 on Schedule 9, even when they qualified for Schedule 7.
21 The block rate structure in place for Schedule 9
22 Secondary Service provides a similar rate level and a
23 smooth transition to customers moving from Schedule 7 to
24 Schedule 9 Secondary Service.
25 Q. What is the revenue requirement for customers
taking Secondary Service under Schedule 9?.
187 SPARKS, DI 7
Idaho Power Company
1 A.The annual revenue requirement for customers.2 taking Secondary Service under Schedule 9, as shown on
3 page 9 of Mr. Larkin's Exhibit No. 38, is $181,624,927.
4 Q.Have you prepared an exhibit that illustrates
5 the rate design proposal for revenue recovery under
6 Schedule 9 Secondary Service?
7 A.Yes, the rate design proposal for Schedule 9
8 Secondary Service is included on page 2 of Exhibit No. 47
9 and targets the proposed class revenue increase of 14.85
10 percent shown on page 9 of Mr. Larkin's Exhibit No. 38.
11 As previously described, for all rate components, the
12 Company is proposing rates that represent a uniform 5
13 percent movement towards the costs to serve that rate.14 component.The costs to serve each rate component are
15 indicated on page 3 of Mr. Larkin's Exhibit No. 36.
16 Q.Have you prepared an exhibit that shows the
17 impact of the rate design on Schedule 9 Secondary Service
18 level customers?
19 A.Pages 2-4 of Exhibit No. 48 show the billing
20 comparison between the Schedule 9 Secondary Service level
21 existing rates and proposed rates for typical billing
22 levels. As can be seen from this exhibit, for each
23 Demand level, the higher load factor customers will see a
24 lower overall increase as compared to low load factor
25 customers..
188 SPARKS, DI 8
Idaho Power Company
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i Q.Are you proposing any other changes to Schedule
2 9?
3 A.Yes. The Company is proposing to change the
4 sebtion heading of "Power Factor" to "Power Factor
5 Adjustment". This clarification is a more accurate
6 description of the section and it aligns with the "Power
7 Factor Adjustment" headings listed under Schedules 19 and
8 24.
9 D .Large General Service, Schedule 9 - Primary &
Transmission.
10
11 Q.What is the current rate structure for Schedule
12 9, Primary and Transmission Service?
13 A.All customers taking service under Schedule 9
14 Primary or Transmission Service pay seasonal time-of-use
15 Energy Charges, seasonal Demand Charges, a summer On-Peak
16 Demand Charge, a Basic Charge, and a Service Charge.
17 Customers may also pay a Facilities Charge for
18 Company-owned facilities installed beyond Idaho Power's
19 Point of Delivery.
20 Q.What is the revenue requirement to be recovered
21 from Schedule 9 customers taking service at the Primary
22 and Transmission levels?
23 A.The annual revenue requirement for Schedule 9
24 Primary and Transmission level customers as shown on page
25.9 of Mr. Larkin's Exhibit No. 38 is $21,239,152.
189 SPARKS, DI 9
Idaho Power Company
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1 Q.Have you prepared an exhibit that illustrates
2 the rate design proposal for revenue recovery of Primary
3 and Transmission Service under Schedule 9?
4 A.Yes, the rate design proposals for Schedule 9
5 Primary Service and Transmission Service are included on
6 pages 3 and 4 of Exhibit No. 47 and target the proposed
7 class revenue increase of 14.85 percent shown on page 9
8 of Mr. Larkin's Exhibit No. 38. For all rate components,
9 the Company is proposing rates that represent a uniform 5
10 percent movement towards the costs to serve that rate
11 component. The costs to serve each rate component are
12 indicated on page 4 of Mr. Larkin's Exhibit No. 36.
13 Q.Have you prepared an exhibit that shows the
14 billing impact of this rate design proposal on customers
15 recei ving Primary Service under Schedule 9?
16 A.Yes, pages 5-7 of Exhibit No. 48 show the
17 billing comparisons between the existing rates and
18 proposed rates for Schedule 9 Primary Service.
19 E.Large Power Service, Schedule 19.
20 Q.What is the current rate structure for Schedule
21 19?
22 A.Service under Schedule 19, just like service
23 under Schedule 9, is provided at Secondary, Primary, and
24 Transmission Service levels. All customers taking
25 service under Schedule 19 pay seasonal time-of-use Energy
Charges,
190 SPARKS, DI 10
Idaho Power Company
.1 seasonal Demand Charges, a summer On-Peak Demand Charge,
2 a Basic Charge, and a Service Charge. Customers taking
3 Primary or Transmission Service may also pay a Facilities
4 Charge for Company-owned facilities installed beyond
5 Idaho Power's Point of Deli very. In addition, Schedule
6 19 includes a 1,000 kW per month minimum Billing Demand
7 and Basic Load Capacity.
8 Q.What is the revenue requirement to be recovered
9 from Large Power Service customers taking service under
10 Schedule 19?
11 A.The annual revenue requirement for Schedule 19
12 customers as shown on page 9 of Mr. Larkin's Exhibit No.
13 38 is $95,170,378..14 Q.Have you prepared an exhibit that illustrates
15 the proposed rate design to recover the annual revenue
16 requirement for Schedule 19?
17 A.Yes, the rate design proposal for Schedule 19
18 is shown on pages 6-8 of Exhibit No. 47 and targets the
19 proposed class revenue increase of 14.84 percent shown on
20 page 9 of Mr. Larkin's Exhibit No. 38. For all rate
21 components, the Company is proposing rates that represent
22 a uniform 5 percent movement towards the costs to serve
23 that rate component. The costs to serve each rate
24 component are indicated on page 3 of Mr. Larkin's Exhibit.25 No. 36.
191 SPARKS, DIll
Idaho Power Company
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1 Q.Have you prepared an exhibit that shows the
2 billing comparisons between the existing rates and the
3 proposed rates for Schedule 19 Primary Service customers?
4 A.Pages 8-10 of Exhibit No. 48 show the billing
5 comparisons between the existing rates and the proposed
6 rates for Schedule 19 Primary Service customers. As with
7 Schedule 9 Primary Service, for each Demand level, the
8 higher load factor customers will see a lower overall
9 increase as compared to low load factor customers.
10 F.Schedule 31.
11 Q.Is the Company proposing any rate adjustments
12 to the standby charges for Amalgamated Sugar Company
13 under Schedule 31?
14 A.Yes. The Company has revised the charges to
15 reflect the updated unit cost information resulting from
16 the cost-of-service study for Schedule 19 Primary
17 Service. The methodology used to update the charges is
18 the same methodology used to establish the currently
19 approved charges. The derivations of the updated charges
20 are included in my workpapers.
21 G.Standby Service, Schedule 45.
22 Q.Is the Company proposing any rate adjustments
23 to Schedule 45, Standby Service?
24 A.Yes. The proposed rate design for Schedule 45
25 reflects the updated cost information resulting from the
192 SPARKS, DI 12
Idaho Power Company
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1 cost-of-service study. The updated charges were derived
2 using the same methodology used to derive the charges
3 approved by the Commission in past general rate cases.
4 The derivations of the updated charges are included in my
5 workpapers.
6 H.Alternate Distribution Service, Schedule 46.
7 Q.Is the Company proposing any rate design
8 changes to Schedule 46, Alternate Distribution Service?
9 A.Yes. The Company is proposing to increase the
10 Capacity Charge under Schedule 46. The updated Capacity
11 Charge is derived by summing the Distribution demand
12 revenue requirement for Substations, Primary Lines, and
13 Primary Transformers for Schedule 19 Primary Service
14 shown on page 5 of Mr. Larkin's Exhibit No. 36
15 ($3,648,086; $4,633,134; and $516,902, respectively) and
16 dividing this sum by the total billed kW of 4,848,941.
17 This methodology is the same as that used to derive the
18 charges approved by the Commission in the Company's
19 previous general rate cases. The derivation of the
20 updated charge is included in my workpapers.
21 II. IRRIGATION
22 A.Schedule 24 - Agricultural Irrigation Service.
23 Q.What is the current rate structure for Schedule
24 24?
25
193 SPARKS, DI 13
Idaho Power Company
.1 A.Service under Schedule 24 is classified as
2 being either "in-season" or "out-of-season." The
3 in-season for each customer begins with the customer's
4 meter reading for the May billing period and ends with
5 the customer's meter reading for the September billing
6 period. The out-of-season encompasses all other billing
7 periods.
8 For the in-season, customers pay a higher monthly
9 Service Charge than during the out-of-season to encourage
10 customers to continue service throughout the
11 out-of-season period.
12 Customers pay both an Energy Charge and a Demand
13 Charge for the metered usage during the in-season. The.14 Energy Charge utilizes a load-factor pricing mechanism by
15 separating charges into two energy blocks. The first
16 block charges irrigation customers a monthly rate per kWh
17 for the first 164 kWh per kW of demand. The second block
18 charges customers a lower monthly energy rate per kWh for
19 all other energy use to encourage installation of energy
20 efficient irrigation systems with reduced demand and
21 longer hours of operation. Customers pay an in-season
22 Demand Charge only. During the out-of-season, customers
23 pay a flat Energy Charge per kWh for all energy use.
24 Both Secondary Service and Transmission Service are.25 available under Schedule 24, although no customers are
currently taking Transmission Service.
194 SPARKS, DI 14
Idaho Power Company
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1 Q.What is the revenue requirement to be recovered
2 from Schedule 24?
3 A.The total annual revenue to be recovered from
4 customers taking service under Schedule 24, as shown on
5 page 9 of Mr. Larkin's Exhibit No. 38, is $118,371,905.
6 Q.Please describe the rate design proposal for
7 Schedule 24.
8 Consistent with the overall rate designA.
9 obj ecti ves, the Company is proposing to move the
10 individual rate components 5 percent closer to the costs
11 indicated by Mr. Larkin's class cost-of-service study as
12 shown on page 6 of Exhibit No. 36. The rate design
13 proposal on page 9 of Exhibit No. 47 targets the capped
14 14.85 percent average revenue increase indicated on page
15 9 of Mr. Larkin's Exhibit No. 38.
16 In addition to moving each rate component closer to
17 the cost-of-service, the Company is also proposing to
18 increase the pricing differential between energy blocks
19 for the in-season load factor pricing mechanism.
20 Out-of-season energy sales will not be impacted by the
21 proposed change to the load-factor energy rates.
22 Why are you proposing to increase theQ.
23 differential between the current load factor energy
24 pricing blocks?
25
195 SPARKS, DI 15
Idaho Power Company
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1 By increasing the differential between theA.
2 in-season load factor energy pricing blocks, a stronger
3 pricing signal will be sent to irrigators encouraging
4 them to install and operate their irrigation systems more
5 efficiently.
6 What is the current price differential betweenQ.
7 the first and second load factor energy blocks?
8 The current price differential between theA.
9 first and second load factor energy blocks is 3 percent.
10 What price differential is the CompanyQ.
11 proposing between the first and second energy blocks?
12 The Company is proposing to increase the loadA.
13 factor pricing differential from 3 percent to 6 percent
14 in order to send a stronger pricing signal to irrigators
15 encouraging them to install and operate their irrigation
16 systems more efficiently. As stated in Case No.
17 IPC-E-08-10, the 3 percent differential was established
18 as an introductory rate design to help familiarize
19 customers with the load factor pricing structure.
20 How were the rates for Transmission ServiceQ.
21 determined?
22 Once the percentage revenue change for eachA.
23 rate component was determined for Secondary Service, the
24 same percentage changes were applied to each component
25 for
196 SPARKS, DI 16
Idaho Power Company
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1 Transmission Service to maintain the same relationship
2 between service levels as currently exists.
3 Q.Have you prepared an exhibit that shows the
4 billing impact of the rate design on Schedule 24
5 irrigation service customers?
6 A.Yes, pages 11-13 of Exhibit No. 48 show the
7 impact on customers' bills of the proposed rate
8 adjustments for Schedule 24 Secondary Service. As can be
9 seen from Exhibit No. 48, with load factor pricing,
10 customers with the highest percentage increase in annual
11 bills have the lowest average load factors. Similarly,
12 the higher a customer's load factor, the more beneficial
13 the rate structure tends to be in terms of the overall
14 impact to the annual billing.
15 III. LIGHTING
16 Q.How have you organized the discussion of the
17 rate design proposals for area lighting, unmetered
18 service, street lighting and traffic control signal
19 lighting?
20 A.The discussion of rate design proposals for
21 lighting will address Schedules 15 (Dusk to Dawn Customer
22 Lighting), 40 (Unmetered General Service), 41 (Street
23 Lighting Service), and 42 (Traffic Control Signal
24 Lighting Service), respectively.
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197 SPARKS, DI 17
Idaho Power Company
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1 A.Dusk To Dawn Customer Lighting, Schedule 15.
2 Q.What is the current rate structure for Dusk to
3 Dawn Customer Lighting under Schedule 15?
4 A.Customers taking service under Schedule 15 are
5 charged on a per lamp basis. Lamps currently served
6 under Schedule 15 include 100, 200, and 400 watt high
7 pressure sodium vapor area lighting, 200 and 400 watt
8 high pressure sodium vapor flood lighting, and 400 and
9 1,000 watt metal halide flood lighting.
10 Q.What is the revenue requirement to be recovered
11 from customers taking service under Schedule 15?
12 A.The annual revenue requirement for Schedule 15
13 customers as shown on page 9 of Mr. Larkin's Exhibit No.
14 38 is $1,128,744.
15 Q.Have you prepared an exhibit that illustrates
16 the rate design proposal for Schedule 15?
17 A.Yes. The rate design proposal for Schedule 15
18 is included on page 5 of Exhibit No. 47 and does not
19 include any rate increases to recover the proposed
20 revenue requirement. Although no rate adjustment is
21 required, the Company is proposing to update rate
22 components based upon the actual cost-of-service for each
23 lamp size offered under Schedule 15. My workpapers
24 detail the updated actual cost-of-service for each lamp
25 size.
198 SPARKS, DI 18
Idaho Power Company
.1 Is the Company proposing any other changes toQ.
2 Schedule 15?
3 Yes, the Company is proposing to update theA.
4 Facilities Charge from 1.75 percent to 1.51 percent to
5 more accurately reflect current costs. The derivation of
6 the updated facilities charge is addressed later in my
7 testimony.
8 Unmetered General Service, Schedule 40.B.
9 What is the present rate structure forQ.
10 Unmetered General Service under Schedule 40?
11 A.Customers taking service under Schedule 40 are
12 non-metered but have energy loads and periods of
13 operation which are fixed. A customer's estimated usage.14 is charged a flat Energy Charge. Demand- and
15 customer-related costs are also recovered through the
16 Energy Charge. The minimum bill for service under
17 Schedule 40 is $1.50 per month. With Company approval,
18 an Intermittent Usage Charge, per unit, per month, may be
19 charged to municipalities or agencies of federal, state,
20 or county governments having the potential of
21 intermi ttent variations in energy usage.
22 Q.What is the revenue requirement to be recovered
23 from customers taking service under Schedule 40?
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A.The annual revenue requirement for Schedule 40
customers as shown on page 9 of Mr. Larkin's Exhibit No.
38 is $1,174,275.
199 SPARKS, DI 19
Idaho Power Company
1 Q.Please describe the rate design proposal for.2 Schedule 40.
3 A.The rate design proposal for Schedule 40 is
4 included on page 11 of Exhibit No. 47. It targets the
5 proposed class revenue increase of 10.56 percent as shown
6 on page 9 of Mr. Larkin's Exhibit No. 38.
7 Q.Are any other changes being proposed to
8 Schedule 40?
9 A.Yes. The Company is proposing to remove
10 language in the Applicability section of Schedule 40
11 indicating that service under this schedule may include
12 "street and highway lighting". The Company is proposing
13 that all street lighting systems are served under.14 Schedule 41, Street Lighting Service, to more accurately
15 reflect the Company's cost to serve these types of
16 facilities. The Company is also proposing to rename
17 Schedule 40 from "Unmetered" General Service to
18 "Non-Metered" General Service in an effort to maintain
19 consistent use of terms throughout all schedules.
20 c.Street Lighting Service, Schedule 41.
21 Q.What is the present rate structure for Street
22 Lighting Service under Schedule 41?
23 A.The current rate structure for Schedule 41
24 provides two service options for street lighting.25 customers. Option "A" provides for Idaho Power-owned and
Idaho Power-
200 SPARKS, DI 20
Idaho Power Company
.
.
.
1 maintained street lighting systems. Street lighting
2 systems under this option are not metered and customers
3 pay monthly lamp charges based on their choice of
4 standard wattage high pressure sodium vapor lamps.
5 Standard wattages include 70, 100, 200, 250, and 400
6 watts. The monthly lamp charges under Option "A" reflect
7 the Company's cost to provide energy, install the street
8 lighting system, and provide ongoing maintenance.
9 Option "B" provides for customers choosing to own
10 and install their own street lighting systems. Under
11 this option, street lighting systems may be metered or
12 non-metered. For metered systems, maintenance may be
13 provided by the customer or by Idaho Power.For
14 non-metered systems, Idaho Power provides maintenance.
15 As in Option "A", standard wattages include 70, 100,
16 200, 250, and 400 watts. The monthly lamp charges for
17 non-metered service reflect the Company's cost to provide
18 energy, install lamps, and provide ongoing maintenance of
19 the lamps only. For metered systems, customers may
20 choose to provide their own maintenance and incur a kWh
21 charge for their energy usage only or request maintenance
22 from Idaho Power. In the latter case, customers pay an
23 additional monthly maintenance charge based on their
24 choice of installed standard wattage high pressure sodium
25 vapor lamps (70, 100, 200, 250, and 400 watts).
201 SPARKS, DI 21
Idaho Power Company
.
10
.
.
1 Both Options "A" and "B" offer a monthly Non-Metered
2 Service - Variable Energy Charge for non-metered street
3 lighting systems installed prior to June 1, 2004, that
4 allow for potential or actual variation in energy use.
5 This charge is applied to the estimated usage of the
6 variable energy use to determine a separate monthly
7 charge. All systems installed on or after June 1, 2004,
8 which allow for potential or actual variation in energy
9 usage are required to be metered.
Q.What is the revenue requirement to be recovered
11 from customers taking service under Schedule 41?
12 A.The annual revenue requirement for Schedule 41
13 is $2,786,748 as shown on page 9 of Mr. Larkin's Exhibit
14 No. 38. The Company is not proposing a rate adj ustment
15 to recover this revenue requirement.
16 Q.Please describe the rate design proposal for
17 Schedule 41.
18 The rate design proposal for Schedule 41 isA.
19 included on pages 12-15 of Exhibit No. 47. These pages
20 outline the proposed new service options and monthly
21 charges for street lighting service under Schedule 41.
22 Please explain why the Company is proposing toQ.
23 modify Schedule 41 provisions and offer new service
24 options?
25
202 SPARKS, DI 22
Idaho Power Company
.1 A.The Company is proposing to modify Schedule 41
2 in an effort to meet customer needs resulting from the
3 introduction of new and enhanced street lighting
4 technologies. In recent years, the Company has received
5 a growing number of inquiries from street lighting
6 customers, namely cities and municipalities, concerning
7 the inability of the existing street lighting rate
8 schedule to properly address energy charges and
9 maintenance provisions related to new lighting
10 technologies.
11 Q.What specific changes is Idaho Power proposing
12 for Schedule 41?
.13
14
A.Based on the Company's internal evaluation and
interaction with current street lighting customers, the
15 Company is proposing changes for street lighting service
16 that will: 1) update all existing charges to reflect the
17 current cost-of-service, 2) add language requiring that
18 all new customer-owned street lighting systems installed
19 outside of subdivisions be metered and maintained by the
20 customer, 3) modify the existing Option "B" to apply to
21 customer-owned and Idaho Power-maintained street lighting
22 systems only, and 4) add a new Option "C" for
23 customer-owned and customer-maintained street lighting
24 systems.
.25 Q. Please describe the charges that are being
updated in Schedule 41.
203 SPARKS, DI 23
Idaho Power Company
.
.
.
1 A.The Company is proposing to update the
2 accelerated replacement charge, lamp charges, meter
3 charges, energy charges, and facilities charges in an
4 effort to more accurately represent actual costs.
5 Q.How did the Company update these charges to
6 reflect the actual cost-of-service?
7 A.The Company conducted a new cost-of-service
8 analysis for the accelerated replacement charge, lamp
9 charges, meter charges, and energy charges under Schedule
10 41. The update to the facilities charge under Schedule
11 41 is described later in my testimony.
12 Q.Please describe the methodology used in
13 cost-of-service analysis to update charges.
14 A.The cost-of-service methodology used to update
15 the accelerated replacement charge, lamp charges, meter
16 charges, and energy charges determined the actual cost to
17 provide these services. The analysis examined the
18 Company's labor costs, lamp and fixture costs,
19 maintenance costs, sales taxes, overheads, vehicle costs,
20 metering costs and energy costs to determine the updated
21 charges. A complete breakout of these costs and the
22 methodology used to update charges is contained in my
23 workpapers.
24 Q.Please describe the proposed service options
25 under the proposed Schedule 41.
204 SPARKS, DI 24
Idaho Power Company
.1 A.The Company is proposing to offer three service
2 options under Schedule 41:
3 ."A" - Idaho Power-Owned, Idaho
4 Power-Maintained System
5 ."B"- Customer-Owned, Idaho
6 Power-Maintained System
7 ."C" - Customer-Owned, Customer-Maintained
8 System
9 Options A and B are currently offered under Schedule
10 41 while Option "C" is a newly proposed section.
11 Q.Please describe Option A.
12 A.Option A provides for non-metered, high
13 pressure sodium vapor lighting systems that are.
.
14 installed, owned, operated, and maintained by Idaho
15 Power. Customers choosing this option are required to
16 pay a monthly per lamp charge to cover the cost of
17 energy, materials, and maintenance provided by the
18 Company.
19 Please describe the proposed updates to OptionQ.
20 A.
21 A.In an effort to clarify the requirements for
22 receiving service under Option A, the Company is
23 proposing to change the heading from "Overhead Lighting
24 Company-Owned System" to "Idaho Power-Owned, Idaho
25 Power-Maintained System". As mentioned above, all
205 SPARKS, DI 25
Idaho Power Company
1 existing lamp, pole, and facilities charges have been.2 updated to more accurately
3 /
4 /
5 /
6
7
8
9
10
11
12
13.14
15
16
17
18
19
20
21
22
23
24.25
206 SPARKS, DI 25a
Idaho Power Company
.
.
1 reflect the current cost of providing street lighting
2 service.
3 Q.Is the Company proposing to offer any new
4 lighting technologies, such as light emitting diodes
5 (LEDs), under Option A?
6 A. No. Idaho Power is not proposing to offer new
7 lighting technologies on Idaho Power-owned street
8 lighting systems due to high product costs and unproven
9 energy and maintenance savings. Although LEDs are an
10 attractive option for customers receiving federal grants
11 or other forms of additional funding, the Company has
12 determined that the monthly charges needed to offer these
13 products on its own lighting systems would be too high to
14 attract customer participation. This was confirmed in an
15 informal assessment of existing street lighting
16 customers. Nevertheless, the Company will continue to
17 evaluate the cost, energy savings, and maintenance
18 savings of LEDs and other new lighting technologies on an
19 ongoing basis.
20 Q.What changes are being proposed for Option B in
21 Schedule 41?
22 A.Option B has been modified to include
23 customer-owned and Idaho Power-maintained street lighting
24 systems only. This service option will only be offered
25.to existing customers that desire to have Idaho Power
207 SPARKS, DI 26
Idaho Power Company
1 maintain their
2 systems.As
3 /
4 /
5 /
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
.
.
.
high pressure sodium vapor street light
208 SPARKS, DI 26a
Idaho Power Company
.
.
.
1 proposed, no new service will be allowed under this
2 option as the Company implements its new policy requiring
3 that all new customer-owned systems are metered and
4 maintained by the customer. Existing lighting systems
5 under Option B may be metered or non-metered.
6 Q.Why are you proposing to add Option C to
7 Schedule 41?
8 A.The proposed provisions and charges under
9 Option C are designed for customers that own their own
10 lighting systems and desire to install new and unique
11 lighting technologies and designs that are not offered by
12 the Company. This option will also allow customers with
13 non-metered systems to provide their own maintenance
14 wi thout being charged for Idaho Power-provided
15 maintenance, as is the case under the current rate
16 design.
17 Ul timately, over time, the Company anticipates that
18 Option C will become the primary service option for
19 customer-owned street lighting systems as it transitions
20 to requiring meters and customer-provided maintenance on
21 all new customer-owned lighting systems. This new
22 provision will provide customers greater flexibility as
23 they seek to install new and unique lighting technologies
24 that are not standard to Idaho Power.
25 Q. Is the Company proposing to require metering on
street lighting systems installed inside subdivisions?
209 SPARKS, DI 27
Idaho Power Company
.
.
.
1 A.No. The Company is not proposing to require
2 metering on street lighting systems installed inside
3 subdi visions for two reasons: 1) this requirement would
4 create additional maintenance costs for customers and 2)
5 this requirement would require installation of duplicate
6 infrastructure.
7 Typically, developers of subdivisions are required
8 to install street lighting systems inside subdivisions at
9 the request of municipalities or agencies of federal,
10 state, or county governments. Once installed, the
11 municipality assumes ownership of the street lighting
12 system and provides ongoing maintenance. As pointed out
13 in conversations with various cities, a requirement to
14 install meters for street lighting inside of subdivisions
15 would necessitate installation of duplicate
16 infrastructure and would not be supported by some
17 municipali ties. In many cases, developers would need to
18 install meter cabinets, a second condui t/ circuit system
19 for the lighting, and in some cases a third
20 conduit/circuit for the irrigation system power. In the
21 long-term, cities would have to maintain the second
22 circuit system including dig-line markings, additional
23 junction boxes and connections, as well as multiple meter
24 cabinets.
25 Q. Is the Company proposing to update any other
charges under Schedule 41?
210 SPARKS, DI 28
Idaho Power Company
.
.
1 A.Yes, the Company is proposing to update all
2 charges in the "No New Service" section of Schedule 41 to
3 more accurately reflect the Company's cost to serve
4 customer-owned mercury vapor lamps. The derivations of
5 these updates are shown in my workpapers.
6 Traffic Control Signal Lighting Service,
Schedule 42.
D.
7
8 Q.What is the present rate structure for Traffic
9 Control Signal Lighting Service, Schedule 42?
10 A.Customers taking service under Schedule 42 pay
11 an Energy Charge for each kWh of estimated energy use for
12 non-metered systems and for each kWh of actual usage for
13 metered systems. For non-metered systems, usage is
14 estimated based on the number and size of lamps burning
15 simul taneously in each signal and the average number of
16 hours per day the signal is operated. There is no
17 minimum charge under Schedule 42.
18 Q.What is the revenue requirement to be recovered
19 from customers taking service under Schedule 42?
20 A.The annual revenue requirement for Schedule 42
21 customers as shown on page 9 of Mr. Larkin's Exhibit No.
22 38 is $183,979.
23 Q.Please describe the rate design proposal for
24 Schedule 42.
25.
211 SPARKS, DI 29
Idaho Power Company
1 A.The rate design proposal for Schedule 42 is.2 included on page 16 of Exhibit No. 47. It targets the
3 proposed capped class revenue increase of 14.85 percent
4 shown on page 9 of Mr. Larkin's Exhibit No. 38.
5 iv. RULE H
6 Q.What changes to Rule H, New Service Attachments
7 and Distribution Line Installations or Alterations, is
8 the Company proposing?
9 A.The Company is proposing to remove the 1.5
10 percent limitation for recovery of general overhead costs
11 in the Work Order Cost definition of Rule H. The Company
12 instead proposes to recover all actual general overhead
13 costs related to construction under Rule H..14 This proposal was most recently requested in Case
15 No. IPC-E-08-22 in an effort to recover general overhead
16 costs related to new service attachments and line
17 installations. In Order No. 30853, the Commission agreed
18 that "customers requesting Rule H line extensions should
19 bear the overhead costs of those line extensions";
20 however, the "appropriate calculations and adjustments
21 are best made during the Company's next general rate case
22 to ensure that rates are set based on costs that do not
23 include the portion of construction overhead belonging to
24 Rule H work orders". Order No. 30853, p. 11.
25.
212 SPARKS, DI 30
Idaho Power Company
1 Q.What is the current general overhead rate for.2 new service attachments and line installations under Rule
3 H?
4 A.The Company's current general overhead rate for
5 construction related to new service attachments and line
6 installations is 22.00 percent.
7 Q.Is this the overhead rate the Company is
8 proposing to include on all Rule H work orders?
9 A.Yes it is.
10 Q.Why is the current and effective cap of 1.5
11 percent on general overhead costs so low when compared to
12 the actual general overhead rate?
13 A.The current cap on general overheads is.14 misaligned for a couple of reasons. First, the cap was
15 originally established in Case No. IPC-E-95-18 and
16 expenses have changed greatly since 1995. Also, as
17 explained to me by Mr. Gregory W. Said, the Commission
18 capped the general overhead rate in Case No. IPC-E-95-18
19 at 1.5 percent to avoid double collection of engineering
20 charges.
21 Q.Are engineering fees included in the proposed
22 collection rate for general overheads?
23 A.No. Engineering fees are currently charged
24 directly to work orders and are not included in the
.25 Company's determination of general overheads. This was
213 SPARKS, DI 31
Idaho Power Company
.
.
.
1 audi ted and confirmed by the Commission's Staff in Case
2 No. IPC-E-08-22.
3 Q.Please provide a detailed explanation of how
4 general overhead costs are determined.
5 A.Overhead costs are pooled costs that are
6 incurred in support of the Company's construction
7 process, but would be very difficult to directly
8 associate to a particular construction job. These costs
9 are accumulated and allocated back to construction jobs
10 based on a cost allocation methodology. It is Idaho
11 Power's policy, per Code of Federal Regulations, Title
12 18, Part 101, Electric Plant Instructions, to apply
13 overheads to construction work orders.
14 "18 CFR Part 101 Electric Plant Instructions
15 (4) (2007) allows the pay and expenses of the general
16 officers, administrative workers, engineering supervisors
17 and other engineering services applicable to construction
18 work to be charged to construction." As a result, some of
19 the construction related-employees that support Rule H
20 type projects charge a portion of their wages and other
21 expenses to overhead (FERC account 107). Each cost
22 center that is involved in the construction process has a
23 separate overhead work order that employees charge to for
24 general support tasks that benefit both operations and
25 the construction process. These work orders areallocated
214 SPARKS, DI 32
Idaho Power Company
.
.
.
1 based on yearly studies of the actual split between
2 direct operations and maintenance ("O&M") and direct
3 capi tal work performed by the cost center. The amount of
4 overhead are bucketed and monitored monthly by leaders to
5 assure that only reasonable and prudent costs are charged
6 to the accounts. Through the use of these overhead work
7 orders, the Company determines the amount each cost
8 center has contributed to overheads.
9 The Company accumulates the budgeted overheads,
10 groups them by contributing functional area, and divides
11 them by the budgeted construction proj ects during the
12 same period, by work order type, to create the overhead
13 rate. The Company has a separate overhead rate for
14 Co-Generation, Stations, Transmission Lines, and
15 Distribution Lines. The Distribution Line rate applies
16 to the Rule H work orders.
17 Q.Please explain how general overheads are
18 recovered.
19 A.The Company's general overheads are recovered
20 per 18 CFR Part 101 Electric Plant Instructions (4)
21 (2007), to appiy overheads to construction work orders.
22 Overhead costs are applied back to actual construction
23 jobs based on the methodology described previously.
24 When capital work orders are completed, the overhead
25 charges that have been allocated to those work orders are
closed to the individual plant accounts based on the
215 SPARKS, DI 33
Idaho Power Company
.
.
.
1 property units on the work order.At this point the
2 overheads become part of Idaho Power's rate base.
3 Q.How often does the Company update its general
4 overhead rate for Rule H construction?
5 A.General overhead rates are updated periodically
6 depending on significant changes in costs.
7 Q.If Idaho Power was allowed to charge its actual
8 general overhead rate for Rule H construction, would the
9 periodic updates to general overheads be reflected in
10 Rule H work orders?
11 A.Yes. If approved, any accounting adj ustments
12 (increases or decreases) to general overhead rates would
13 be automatically reflected in the Company's work order
14 processing and accounting systems.
15 V. FACILITIES CHAGES
16 Q.What change is the Company proposing to
17 facili ties charges?
18 A.The Company is proposing to update the rates
19 that customers pay under Idaho Power's facilities charge
20 provisions to more accurately reflect the Company's
21 current costs to offer this service.
22 Q.When was the last time the facilities charge
23 rates were reviewed by the Commission?
24 The facilities charge rates were last reviewedA.
25 by the Commission in 1987 in Case No. U-I006-298.
216 SPARKS, DI 34
Idaho Power Company
.1 Subsequent Order No. 21836 reaffirmed that the monthly
2 facili ties charge rates of 1.75 percent for Schedule 15
3 and 41 and 1.7 percent for Schedule 19 were reasonable
4 and should continue.
5 Q.Please explain Idaho Power's existing
6 facili ties charge provisions.
7 A.At the option of the Company, facilities
8 charges may be offered to Primary and Transmission
9 Service level customers under Schedule 9 (Large General
10 Service) and Schedule 19 (Large Power Service).
11 Facilities charges may be offered to Transmission Service
12 level customers only under Schedule 24 (Agricultural
13 Irrigation Service). If offered, and in consideration of.14 a Customer paying a monthly facilities charge, the
15 Company will own, operate, and maintain facilities
16 installed beyond Idaho Power's Point of Delivery.
17 As of June 1, 2004, customers taking service under
18 Schedule 15 (Dusk to Dawn Customer Lighting) and Schedule
19 41 (Street Lighting Service) were no longer eligible for
20 facilities charges although some customers continue to
21 pay monthly facilities charges for facilities installed
22 prior to June 1, 2004.
23 Q.What rates do eligible customers pay under the
24 current facilities charge provisions?.25
217 SPARKS, DI 35
Idaho Power Company
1 A.Customers taking Primary or Transmission.2 Service under Schedules 9 and 19 and Transmission Service
3 under Schedule 24, pay a facilities charge rate of 1. 7
4 percent per month of the Company's total investment in
5 facili ties installed beyond Idaho Power's Point of
6 Delivery.
7 Customers taking service under Schedules 15 and 41
8 pay a facilities charge rate of 1.75 percent per month of
9 the Company's investment in facilities installed prior to
10 June. 1, 2004. Eligible facilities installed under
11 Schedules 15 and 41 included overhead secondary, poles,
12 anchors, and underground circuits. Costs for these
13 facili ties are charged through work orders..14 Q.What monthly rates is the Company proposing for
15 facili ties charges?
16 A.The Company is proposing to update the monthly
1 7 facilities charge rate to 1.41 percent for customers
18 taking Primary or Transmission Service under Schedules 9
19 and 19. The Company is also proposing a rate of 1.41
20 percent for customers taking Transmission Service under
21 Schedule 24.
22 For customers taking service under Schedule 15, the
23 Company is proposing a rate of 1.51 percent per month and
24 for Schedule 41, the Company is proposing a rate of 1.21
25 percent per month..
218 SPARKS, DI 36
Idaho Power Company
.
13.14
1 Q.What cost components were used to update the
2 current facilities charge rates?
3 A.The cost components used to update the
4 facili ties charge rates include:
5 .Rate of Return
6 .Depreciation
7 .Income Taxes
8 .Property Taxes
9 .Other Taxes (Regulatory Fees)
10 .Operation and Maintenance Expenses
11 .Administration and General Expenses
12 .Working Capital
.Insurance
Q.Are these the same cost components that were
15 reviewed and considered reasonable by the Commission in
16 its most recent review of Idaho Power' s facilities charge
17 rates?
18 A.Yes. These are the same cost components that
19 the Company presented in Case No. U-I006-298 to validate
20 the Company's current facilities charge rates.
21 Q.Please describe the individual cost components
22 that are used to derive the Company's facilities charges.
23 A.The cost components used to derive the
24 Company's facilities charges are the same components
25.
219 SPARKS, DI 37
Idaho Power Company
1 included in the Company's revenue requirement for like.2 facili ties. Descriptions of each cost component are as
3 follows:
4 Rate of Return - Idaho Power's cost of financing its
5 original investment in facilities. This uses a weighted
6 average of the Company's cost of debt and cost of equity.
7 The facilities charge methodology uses a level payment
8 stream to simplify the rate calculation and the
9 administration of the facilities charge. The Rate of
10 Return used to determine the facilities charge will be
11 the Rate of Return ordered by the Commission in this
12 filing.
.13 Booked Depreciation - The straight-line annual
14 depreciation of assets based on a levelized 31 year
15 basis.
16 Income Taxes - The tax that Idaho Power pays on the
17 amount of revenue received from the equity portion of the
18 Rate of Return.
19 Property Taxes - The tax that Idaho Power pays for
20 its distribution facilities. Each dollar the Company
21 invests beyond the Point of Delivery is assessed property
22 taxes.
23 Other Taxes (Regulatory Fees) - The taxes and fees
24 that Idaho Power pays to the Idaho and Oregon public
25 utilities commissions. A portion of these fees is tied
to the Company's distribution investment which includes.
220 SPARKS, DI 38
Idaho Power Company
.
.
1 facili ties installed beyond the Company's Point of
2 Delivery.
3 Operation and Maintenance Expenses - Includes all of
4 Idaho Power's costs to operate and maintain its
5 distribution facilities. This cost component represents
6 an average maintenance rate for all distribution
7 equipment.
8 Administration and General Expenses - Represents an
9 expense based on total Administration and General as a
10 percentage of total plant investment.
11 Working Capital - Working Capital is the carrying
12 cost of inventory. Working Capital is based on the cost
13 of capital to finance the distribution facilities
14 inventory and the property taxes that the Company pays on
15 its inventory.
16 Insurance - The insurance rate reflects the
17 addi tional cost Idaho Power incurs for insurance premiums
18 resulting from facilities installed beyond the Company's
19 Point of Delivery. This insurance rate covers property,
20 casual ty, and worker's compensation. It does not cover
21 facili ty replacement costs for failed facilities.
22 Q.What are the proposed percentage amounts for
23 each cost component by rate class?
.
24
25
A.The proposed percentage amounts used to derive
the proposed facilities charge rates are as follows:
221 SPARKS, DI 39
Idaho Power Company
.
.
1
2 Cost Components Rate 15 Rate 19 Rate 41
3 1 Rate of Return 4.81%4.81%4.81%
4 2 Book Depreciation 3.23%3.23%3.23%
5 3 Income Taxes 1.90%1.90%1.90%
6 4 Property Taxes 0.56%0.56%0.56%
7 5 Other Taxes
(Regulatory Fees)
0.14%0.14%0.14%
8
6 Operation & Maintenance 4.73%3.58%1.18%
9
7 Administration & General 2.28%2.28%2.28%
10
8 Working Capital 0.14%0.14%0.14%
11
9 Insurance 0.32%0.32%0.32%
12
10 Annual Total 18.10%17.00%14.60%
13
11 Monthly Rate 1.51%1.41%1.21%
14
15 Q.Please explain why Schedules 9 and 24 are not
16 identified in the table.
17 A.Under Idaho Power's approved rate schedules,
18 the facilities charge rates for Schedules 9 and 24 are
19 aligned with the derived rate for Schedule 19. The
20 Company and the Commission, through previous orders, have
21 determined that the facilities charge rate for Schedule
22 19 accurately reflects facilities charge costs under
23 Schedules 9 and 24.
24
25.Q.What cost component has driven the proposed
reduction in the facilities charge rates?
222 SPARKS, DI 40
Idaho Power Company
.
.
.
13
14
1 A.The primary cost component that has driven the
2 reduction in the facilities charge rates is the Rate of
3 Return, which has decreased since the last update.
4 Q.What is the estimated reduction in the
5 Company's revenue from the proposed facilities charge
6 rates?
7 A.The estimated reduction in revenue received
8 through facilities charges under the Company's proposal
9 is approximately $1.1 million per year.
10 Q.How will the reduction in revenue for
11 facili ties charges affect the energy rates of customer
12 classes?
A.The reduction in revenue will result in
increases in the revenue requirements for each customer
15 class that collects facilities charge revenue, namely
16 Schedules 9, 15, 19, 24, and 41. In turn, the energy
17 rates for these customer classes will increase slightly
18 to recover the decline in facilities charge revenue.
19
20
21
22
23
24
25
Q.Does this conclude your testimony?
A.Yes it does.
223 SPARKS, DI 41
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
MR. WILLIAMS: Madam Chair, the witness is
4 now available for cross-examination.
3
5 COMMISSIONER SMITH: What about the
6 exhibits? Did you also want the exhibits identified?
7 MR. WILLIAMS: The exhibits are not
8 relevant to the facilities charge issue.
9 COMMISSIONER SMITH: All right, we won't
10 worry about them, then. Mr. Otto, do you have questions?
11 MR. OTTO: I do not, Madam Chair.
.
17
18
19
20
21
22
23
24
25.
12
13
14
15
16
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: No questions, Madam Chair.
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: No, thank you.
COMMISSIONER SMITH: Mr. Nelson.
MR. NELSON: No questions. Thank you.
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: No, thank you.
COMMISSIONER SMITH: Ms. Kyler.
MS. KYLER: No questions.
COMMISSIONER SMITH: Mr. Howell.
MR. KLEIN: Klein, no.
COMMISSIONER SMITH: Oh, I'm sorry.
MR. KLEIN: I need to hold a flag.
224 SPARKS
Idaho Power Company
CSB REPORTING
[phone]
1 COMMISSIONER SMITH: You do, I'm sorry, my.2 mistake. Mr. Richardson.
3 MR. RICHARDSON: Thank you, Madam Chair.
4
5 CROSS-EXAMINATION
6
7 BY MR. RICHARDSON:
8 Q Good afternoon, Mr. Sparks.
9 A Good afternoon.
10 Q I see you are a senior regulatory analyst
11 for Idaho Power?
12 A That's correct.
13 Q So you could probably answer some.14 regulatory and ratemaking questions that Mr. Kline
15 declined to?
16 A Possibly. I know that Mr. Youngblood is
17 also testifying to some of those issues, so...
18 Q So should I wait for Mr. Youngblood or
19 should I use your talents to explore the regulatory
20 aspects of this?
21 A I would say if your questions are directed
22 towards the actual update of the actual rate, the monthly
23 rate, then I could certainly handle those questions.
24 Q But if I was going to ask basic generic.25 ratemaking questions, would you be the appropriate
CSB REPORTING
[phone]
225 SPARKS (X)
Idaho Power Company
.1 witness?
2 A Mr. Youngblood would be the appropriate
On page 34, line 24 of your testimony, you
5 state that the facilities charge rates were last reviewed
3 witness.
4 Q
6 by the Commission in 1987.
7 A Yes.
Is it your position these charges are
9 based on the Company's actual costs?
.
8 Q
Yes.
But the charges haven't changed in the
The costs have changed; however, through
14 our periodic reviews, this is the first year we've seen a
16 Q
10 A
15 need to actually make a change in the rate.
11 Q
So the cost to the Company in providing
17 this service over the last 25 years hasn't changed since
12 last 25 years?
13 A
No, it's changed; however, in our periodic
20 reviews, we have not determined that there was a need to
18 this case?
19 A
21 actually update the rate until this case.
.
22 Q Are those periodic reviews formal
I would say they are not formal reviews.
25 They're conducted by our finance department.
CSB REPORTING
[phone]
23 reviews?
24 A
226 SPARKS (X)
Idaho Power Company
.1 Q And when do they do that?
2 A Periodically.
3 Q How often is periodic?
4 A Based on my knowledge, it could be as soon
5 as every year, once a year.
6 Q Do you know for a fact how often they do
7 that?
8 A I do not.
9 Q And you know that they do that because
10 someone told you they do that?
11
12
13.14
A Yes,actually.
Q Who is that?
A My manager Mr.Youngblood.
Q Mr.Youngblood?So he would know about
the periodic reviews,then?15
16 A I can't answer for him. I would assume he
17 would, though.
18 Q He told you they did periodic reviews?
19 A Yes, so he would be able to answer that,
20 yes.
21
.
Q On page 39 at line 15, you discuss the
22 insurance affiliated with the facilities charge
23 equipment. You state that the insurance rate reflects
24 the additional cost Idaho Power incurs for insurance
25 premiums resulting from facilities installed beyond the
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227 SPARKS (X)
Idaho Power Company
.
.
.
20
1 Company's point of delivery, so does this mean that when
2 the Company puts in a new transformer on a customer's
3 property, does it affect the premiums the Company pays
4 for insurance?
5 A Yes. Whenever the Company adds additional
6 assets, it would affect the premiums that the Company
7 pays.
8 Q Does the Company in fact pay premiums on
9 facili ties charge equipment?
10 A If there was a catastrophic event, then an
11 insurance premium would kick in, yes.
12 Q On page 41, you state that the primary
13 cost component that has driven the reduction in the
14 facilities charge rates is the rate of return, which has
15 decreased since the last update, and what rate of return
16 was used in the last facilities rate setting?
17 A What rate was used to determine the
18 current rate?
19 Q The current rate, correct.
A I don't have that with me. I know an
21 approximation of what it was.
22 Q Would you accept, subject to check, that
23 it was 10.5 percent?
24
25
A No.
Q Then why don't you take a moment and find
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[phone]
228 SPARKS (X)
Idaho Power Company
.1 it, then.
2 I don't have it with me. All I have withA
3 me is my testimony.
4 On page 41, line 1, you testified, "TheQ
5 primary cost component that has driven the reduction in
6 the facilities charge rates is the rate of return, which
7 has decreased since the last update," and you're telling
8 me you don't know what the rate of return was?
9 MR. WILLIAMS: Madam Chair, he's asked and
10 answered that question, he said no.
11 COMMISSIONER SMITH: I think he's entitled
12 to ask this question and the witness should answer.
13.14
.
THE WITNESS: The rate that was used the
last time the rate was updated was approximately 9.9
15 percent.
16 BY MR. RICHARDSON: Now, it's yourQ
17 testimony that the facilities charges are based on the
18 Company's costs; correct?
19 It's an estimate, yes. It's an estimateA
20 of the costs the Company incurs to provide facilities
21 charge services.
22 So if you stop providing the service,Q
23 those costs go away?
24 Yes. If a customer is not on a facilitiesA
25 charge arrangement, it would be not charged a facilities
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229 SPARKS (X)
Idaho Power Company
.
.
.
1 charge.
2 Q And the Company would not incur those
3 costs?
4 A Correct.
5 Q So can you explain for me how when a
6 customer leaves the facilities charge program rates for
7 the class as a whole go up as a consequence?
8 A Well, the revenue that we recover through
9 the facilities charge arrangement is, again, an estimate
10 of the costs the Company incurs to provide these services
11 for solely dedicated facilities to a specific customer.
12 Those revenues are then used to offset the revenue
13 requirement which then determines the rates for that
14
15
customer class.
Q So if the costs go away by a customer
16 leaving the facilities charge program, the rates for the
17 remaining members of that class go up? Does that seem
18 counterintuitive to you?
19 A Well, the facilities charge is based on
20 averaging a pool of costs, so when you're averaging costs
21 for a pool of assets within the facility charge customer
22
23
class would you repeat the question, please?
Q Sure. If the Company no longer incurs the
24 costs of providing the service to, say, Simplot, Simplot
25 buys the facilities from you and they're no longer paying
CSB REPORTING
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230 SPARKS (X)
Idaho Power Company
.
.
.
1 your facilities charge, those costs have gone away
2 because you're not providing the service; right?
3 A Yes, as long as they made the Company
4 whole.
5 Q And as a consequence, however, you're
6 telling me that the rates for the whole class will go up
7 because of that event, and I asked you if that didn't
8 seem to be counterintuitive as a rate analyst that when
9 Idaho Power's costs go away, the remaining ratepayers see
10 an increase in rates because of that event.
11 A Well, if those costs went away at the time
12 of a rate case when we're resetting our revenue
13 requirement, costs would be trued up; however, if there's
14 a sale that takes place outside of a rate case, the
15 Company has determined its rates based on a revenue
16 requirement, which includes revenue it's been receiving.
17 Q Doesn't this suggest, this fact suggest,
18 that there's an intraclass subsidy taking place?
19 A The Company has not denied that there are
20 some subsidies that take place with the facilities charge
21 arrangement.
22 Q And I asked you doesn't this fact that
23 when a customer stops subscribing to the facilities
24 charge service that that event causes the remaining
25 ratepayers in that class to experience a rate increase,
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231 SPARKS (X)
Idaho Power Company
.
.
.
14
1 doesn't that fact alone suggest that there's a subsidy?
2 A Yes.
3 MR. RICHARDSON: Thank you, Madam Chair.
4 That's all I have.
5 COMMISSIONER SMITH: Thank you, Mr.
6 Richardson. Mr. Williams -- Oh, I'm sorry, I forgot the
7 Commissioners. Questions from the Commission?
8 COMMISSIONER REDFORD: I just have a few
9 questions.
10
11 EXAMINATION
12
13 BY COMMISSIONER REDFORD:
Q Once Simplot makes a determination that a
15 generator or a transformer is of no longer a benefit to
16 them for a variety of reasons, maybe they've upgraded or
17 whatever, you supply a new generator or a new substation;
18 right?
19 A Are you referring to a piece of equipment
20 under the facilities charge arrangement?
21
22
Q Yes.
A Yes, if they requested a removal or a
23 change, replacement to a piece of equipment, the Company
24 would provide that.
25 Q And if that piece of equipment is
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232 SPARKS (Com)
Idaho Power Company
.
.
.
16
1 continually usable, what do you do with it?
2 A We would determine a salvage value of that
3 piece of equipment.
Q And how is that salvage value carried?
A How is it carried?
Q How is it carried on the Company books?
A Well,there's a non-salvable that would be
4
5
6
7
8 charged to customer requesting the change.
9 Q If there's no value to the Company, to
10 Idaho Power, of course, you would want the full
11 replacement value from the customer; right?
12 A Right.
13 Q In the event this piece of equipment could
14 be rehabbed or used for another purpose, how do you carry
15 that? Do you sell it someone?
A We would give the customer credit for that
17 value and then more than likely that piece of equipment
18 would be -- if the Company needed that piece of equipment
19 in its inventory, it would be included back into its
20 inventory.
21
22
Q What if they didn't need it?
A It's possible they might try and sell
23 it.
24
25
Q To you?
A Not to me.
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233 SPARKS (Com)
Idaho Power Company
.
.
.
1 Q Idaho Power?
2 A Idaho Power would try and sell it to a
3 third party.
4 Q And your receipt for that amount, how is
5 that carried? Just as revenue?
6 A I would assume so, but I can't really
7 answer that.
8 COMMISSIONER REDFORD:I have no further
9 questions.
10 COMMISSIONER SMITH: Any redirect,
11 Mr. Williams?
12 MR. WILLIAMS: Briefly, Madam Chair.
13
14 REDIRECT EXAMINATION
15
16 BY MR. WILLIAMS:
17 Q Mr. Sparks, what happens if a piece of
18 facilities charge equipment fails prior to it being fully
19 depreciated?
20 A If a piece of equipment fails prior to
21 being depreciated, the Company will remove that piece of
22 equipment and install a new piece of equipment. On the
23 books it will remove the piece of equipment from the
24 facilities charge, add on the value of the new piece of
25 equipment and recalculate or update the facilities charge
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234 SPARKS (Di)
Idaho Power Company
.
.
.
1 the customer pays.
2 Q So let me understand. When you say remove
3 from the books, does that mean the Company loses out on
4 the ability to fully recover its costs of that piece of
5 equipment?
6 A That's correct.
And isn't it true that the revenue the
8 Company collects in a facility charge is credited back to
7 Q
9 the customer class in which it was assessed?
10 A That's correct.
So the Company doesn't have a revenue
12 stream of facilities charge revenue that's going into its
19
11 Q
13 coffers?
14 A
15
16 Madam Chair.
17
18 help.
20 question.
21
22
23
24
25
That's correct.
MR. WILLIAMS: No further questions,
COMMISSIONER SMITH: Thank you for your
COMMISSIONER REDFORD: I have one more
COMMISSIONER SMITH: Commissioner Redford.
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235 SPARKS (Di)
Idaho Power Company
.
.
.
1
2
EXAINATION
3 BY COMMISSIONER REDFORD:
4 Q So you take a piece of equipment that has
5 no further value but its scrap value, do you sell it to a
6 scrap dealer?
7 A Yeah, we would get whatever value we could
8 out of that piece of equipment for scrap, yes.
9 Q I thought you said that the owner of the
10 equipment or Simplot would get the value of that.
11 A Well, in the charge that we would charge
12 them for that -- I think if I understand correctly, you
13 described a removal, a customer-requested removal.
14 Q
15 pieces.
16
17
18
A
Q
A
Well, assume that the thing goes to
A failure, then?
Yes.
A failure would work as I just described
19 to Mr. Williams.
20
21 questions.
22
COMMISSIONER REDFORD:I have no further
COMMISSIONER SMITH: Thank you for your
23 help, Mr. Sparks.
24 (The witness left the stand.)
25 MR. WILLIAMS: Madam Chair, at this time
CSB REPORTING
[phone]
236 SPARKS (Com)
Idaho Power Company
.
.
.
1 Idaho Power would call Mr. Michael J. Youngblood to the
2 stand.
3
4 MICHAEL J. YOUNGBLOOD,
5 produced as a witness at the instance of the Idaho Power
6 Company, having been first duly sworn, was examined and
7 testified as follows:
8
9 DIRECT EXAMINATION
10
11 BY MR. WILLIAMS:
12 Q Mr. Youngblood, please state your name,
13 spelling your last for the record.
14 A My name is Michael J. Youngblood. The
15 last name is spelled Y-o-u-n-g-b-l-o-o-d.
16 Q By whom are you employed and in what
1 7 capacity?
18 A I am employed by Idaho Power Company as
19 the manager of rate design.
20 Q Are you the same Michael Youngblood that
21 filed rebuttal testimony on November 16th, 2011, and
22 prepared Exhibit No. 52?
23
24
A Yes, I am.
Q Do you have any corrections or changes to
25 make to your testimony or exhibits at this time?
CSB REPORTING
[phone]
237 YOUNGBLOOD (Di)
Idaho Power Company
.
.
.
1 A I do not.
2 Q If I were to ask you here today under oath
3 the same questions set forth in your rebuttal testimony,
4 would your answers be the same?
5 A Yes, they would.
6 MR. WILLIAMS: Madam Chair, at this time I
7 move that the rebuttal testimony of Michael J. Youngblood
8 be spread upon the record as if read, and that Exhibit
9 No. 52 be marked for identification.
10 COMMISSIONER SMITH: If there is no
11 objection, it is so ordered.
12 (The following prefiled rebuttal
13 testimony of Mr. Michael Youngblood is spread upon the
14
15
16
17
18
19
20
21
22
23
24
25
record. )
CSB REPORTING
[phone]
238 YOUNGBLOOD (Di)
Idaho Power Company
.
.
.
1 Q.Please state your name and business address.
2 A.My name is Michael J. Youngblood. My business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.Are you the same Michael Youngblood that
5 submitted direct testimony in this proceeding?
6 A.Yes, I am.
7 Q.What is the intent of your rebuttal testimony?
8 A.The intent of my rebuttal testimony is to
9 provide Idaho Power Company's (" Idaho Power" or
10 "Company") response to the pre-filed direct testimony of
11 Dr. Don Reading, Mr. Don Sturtevant, and Mr. Del Butler,
12 all witnesses for the Industrial Customers of Idaho Power
13 ("ICIP").
14 Q.What is the scope of your rebuttal testimony?
15 A.I will respond to some of the allegations made
16 by the witnesses from ICIP regarding the calculation and
17 allocation of facilities charges, as well as provide
18 testimony describing a new tariff provision giving
19 customers the option to purchase Company-owned equipment
20 installed beyond Idaho Power's point of deli very. The
21 latter discussion is a direct response to requests made
22 by Mr. Sturtevant of the J.R. Simplot Company ("Simplot")
23 who has an interest in purchasing Company-owned
24 facilities.
25 Q. Please describe the intent of the service
provided under a facilities charge arrangement.
239 YOUNGBLOOD, REB 1
Idaho Power Company
.
.
.
1 A.As described in more detail in the Rebuttal
2 Testimony of Mr. Warren Kline, the facilities charge
3 service was originally designed, and continues to
4 provide, a service primarily to our Schedule 9, Large
5 General Service, and Schedule 19, Large Power Service
6 (Primary and Transmission) service level customers by
7 providing them an option whereby the Company installs,
8 owns, operates, and maintains electric facilities beyond
9 the Company's normal point of deli very. Because
10 facili ties beyond the Company's point of delivery are
11 solely for the purpose of meeting the electrical service
12 requirements of an individual customer, it is not
13 appropriate to charge any other customers for the
14 investment and maintenance of those facilities.
15 Therefore, the facilities charge service was designed to
16 provide a means to charge specific customers the
17 cost-of-service related to facilities beyond the point of
18 delivery which are installed, owned, operated, and
19 maintained by the Company.
20 Q.Please describe at a high level how the
21 Company's facilities charge is calculated.
22 A.The Idaho Public Utili ties Commission
23 ("Commission") approved methodology for calculating the
24 facilities charge is designed to provide a levelized rate
25 of cost recovery from individual customers using the same
cost components that are included for similar facilities
240 YOUNGBLOOD, REB 2
Idaho Power Company
.
.
.
1 under the Company's approved non-levelized determination
2 of the revenue requirement. In short, the facilities
3 charge is a levelized method for assigning costs, whereas
4 the cost-of-service approach is a point in time
5 methodology of assigning costs on a non-levelized basis.
6 Both are intended to recover, on average, the same amount
7 of revenue over time.
8 Q.How are the facilities charge revenues treated
9 in the Company's non-levelized determination of
10 class-specific base rate revenue requirements?
11 A.In the Company's non-levelized determination of
12 class-specific base rate revenue requirements, the
13 Company determines the total revenue required for
14 recovery on all distribution facilities-related
15 investments, including facilities beyond the Company's
16 point of delivery, as well as the associated operation
17 and maintenance expense and other administrative
18 expenses. This determination is made for each class of
19 customers. As part of this process, the revenues the
20 Company receives from providing facilities charge
21 services are directly assigned as a revenue credit, or an
22 offset, to the revenue requirements of the associated
23 class of customers. As a result, any differences between
24 the non-levelized revenue requirement and the levelized
25 revenue requirement exist as intra-class subsidies
between those customers paying
241 YOUNGBLOOD, REB 3
Idaho Power Company
.
.
.
1 facili ties charges and those who do not wi thin each
2 customer class.
3 Please explain how the levelized revenueQ.
4 recovery from the facilities charge methodolo9Y for an
5 individual Schedule 19, Large Power Service, customer
6 would recover the same revenue as a non-levelized
7 methodology used for determining the revenue requirement
8 for the Schedule 19 customer class as a whole.
9 The chart below provides a pictorialA.
10 representation of the two cost recovery methodologies.
11
II12
13 i I
14 I i
15 Ii
16 I ~J
17 I ~
18 I ~
i I19 I ii i
I !20 i I: Ii l
21 Ll
22
Cost Recovery Comparison
Levelized/
Average Expected Life
23 This chart shows an ever-decreasing revenue
24 requirement associated with plant investment that
25 depreciates over time. The total amount of revenue
242 YOUNGBLOOD, REB 4
Idaho Power Company
.
.
.
1 recovered from either mechanism is identical. The
2 difference is in the timing of the revenue recovery. In
3 the early years, the levelized methodology does not
4 recover the full revenue requirement needed, however, in
5 the later years, the levelized methodology provides more
6 than would be required under the non-levelized approach.
7 It is important to note that the revenue requirement for
8 facili ties charge customers is an estimate of cost the
9 Company incurs to provide facilities beyond the Company's
10 point of delivery. This revenue requirement
11 determination is only used to offset the costs that are
12 already being collected through customers' rates, in this
13 example Schedule 19. Wi th that said, regardless of the
14 amount of the facilities charge and the associated
15 revenue, the revenue offset treatment applied by the
16 Company ensures that Idaho Power only earns its allowed
17 rate of return on all non-depreciated plant balances,
18 including facilities beyond the point of delivery.
19 Q.How is this example applicable to the
20 determination of the facilities charge?
21 A.It would be very complicated and not practical
22 to determine an individual revenue requirement for each
23 and every customer who has facilities beyond the
24 Company's point of delivery. If the Company would take
25 that approach, as suggested by the ICIP witnesses, not
243 YOUNGBLOOD, REB 5
Idaho Power Company
.
.
.
1 only would the calculated facilities charge service rate
2 be different for each of the approximately 240 facilities
3 charge customers the Company currently maintains in
4 Idaho, but the rate would continually change for each of
5 those customers. In addition, when the Company's
6 investment in facilities changed due to replacement of
7 failed facilities, the individual's rate could change
8 again significantly, depending on their position in time
9 along the curve with regard to the recovery of
10 investment.
11 Q.If the Commission were to adopt ICIP' s
12 recommendation for. determining an individual facilities
13 charge rate for each facilities charge customer, would
14 there be an effect to the remaining customers in the
15 class?
16 A.Yes. As shown in the chart above, when the
17 levelized facilities charge recovery is less than the
18 non-levelized rate, the amount of revenue requirement
19 shortfall for the individual facilities charge customer
20 is being subsidized by the remainder of the class. In
21 the later years, when the levelized facilities charge is
22 greater than the necessary revenue requirement at that
23 time, the facilities charge customer is paying back the
24 previous subsidy. These intra-class subsidies are an
25 expected and normal outcome of the levelized approach for
244 YOUNGBLOOD, REB 6
Idaho Power Company
.
.
.
1 ratemaking. Because the facilities charge revenue is an
2 offset to the revenue requirement of that customer's
3 class, any change in
4 /
5 /
6 /
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
245 YOUNGBLOOD, REB 6a
Idaho Power Company
.
.
.
1 the facilities charge for an individual customer would
2 change the amount of the revenue credit being received as
3 an offset to the revenue requirement of the class. This
4 would require that a new revenue requirement
5 determination be made to adjust the base rates of the
6 entire class. Thus, to adopt the recommendation of ICIP,
7 the Company would be required to recalculate its revenue
8 requirement for each customer class that has the
9 facili ties charge any time there is a change in the
10 facilities charge rate for an individual customer. An
11 approach such as this would be extremely complicated to
12 administer and would require continual changes to the
13 base rates of the class.
14 What are the ratemaking issues associated withQ.
15 tracking actual depreciation levels for each individual
16 piece of equipment subject to the facilities charge, as
17 proposed by ICIP?
18 While it is impractical to have an individualA.
19 facili ties charge rate for each customer as I described
20 above, to track the actual depreciation levels for each
21 individual piece of equipment subject to a facilities
22 charge for ratemaking purposes would be even more
23 complicated. The implication, as suggested by ICIP
24 wi tness Dr. Reading, would be to have a separate
25 facilities charge rate for each of the thousands of
246 YOUNGBLOOD, REB 7
Idaho Power Company
1 individual pieces of equipment for each of the 240.2 individual facilities charge
3 /
4 /
5 /
6
7
8
9
10
11
12
13.14
15
16
17
18
19
20
21
22
23
24
25.
247 YOUNGBLOOD,REB 7a
Idaho Power Company
.
.
.
1 customers in Idaho. Under Dr. Reading's approach, this
2 would mean that the Company would be required to
3 determine its revenue requirement any time a single piece
4 of facilities charge equipment depreciated. The end
5 resul t would be an administrative nightmare and unduly
6 burdensome for the Company, as well as increasing the
7 complexity of the facilities charge rate.
8 Does the Company track depreciation levels forQ.
9 individual facilities £or any other customer class or
10 service?
11 A.No. It is a standard ratemaking practice to
12 average the actual levels of depreciation together for a
13 particular level of service or customer class and spread
14 the recovery of those costs equally to all customers
15 within the class.
16 Q.Does the Company believe that the facilities
17 charges proposed in this proceeding are fair, just, and
18 reasonable?
19 Yes. The Company's proposed facilitiesA.
20 charges in this proceeding were developed under the
21 methodology approved by this Commission in prior
22 proceedings and will result in charges to customers that
23 are fair, just, and reasonable.
24
25
248 YOUNGBLOOD, REB 8
Idaho Power Company
.
.
.
1 What is the Company's response to ICIP' sQ.
2 suggestion that the Company should simply give away fully
3 depreciated facilities to facilities charge customers?
4 Even if the Company were to consider thisA.
5 proposi tion, which it is not, ICIP' s proposal would not
6 be administratively feasible. As I have described above,
7 the Company does not depreciate for ratemaking purposes
8 individual pieces of equipment separately, so
9 determination of when an individual piece of equipment
10 was fully depreciated would be nearly impossible. In
11 addition, "turning over" specific pieces of equipment
12 which are "fully depreciated" while leaving pieces of
13 equipment that are not "fully depreciated" would result
14 in mixed ownership of facilities, which is contrary to
15 the Company's current policy because it creates
16 operational and safety issues, as described by Mr. Kline.
17 The facilities charge has never been a "lease-to-own"
18 charge, such that a customer would pay an amount for a
19 number of years, and then have that piece of equipment
20 given to them at no cost. Instead, the service provided
21 under a facilities charge arrangement is intended to
22 collect additional revenue that is used to offset the
23 costs the Company incurs to own, operate, and maintain
24 facilities installed beyond the Company's point of
25 delivery that are solely for the purpose of meeting the
service requirements of one customer.
249 YOUNGBLOOD, REB 9
Idaho Power Company
.
.
.
1 Do existing facilities charge customers haveQ.
2 the option today of owning and operating their own
3 electrical equipment in order to eliminate the facilities
4 charge they are paying?
5 Yes. In accordance with the tariff provisions,A.
6 a customer may request the Company to remove
7 Company-owned facilities beyond the Company's point of
8 delivery. The customer would pay the Company the
9 "non-salvable cost" of such removal, which is comprised
10 of the total depreciated costs of materials, labor, and
11 overheads of the facilities, less the difference between
12 the salvable cost of material removed, and removal labor
13 cost including appropriate overhead costs. All
14 facili ties charge customers have this option today. In
15 fact, on August 25, 2011, Simplot made such a formal
16 request to the Company to provide a quote for the removal
17 of Company-owned facilities from its locations. The
18 Company responded by inviting Simplot to meet with
19 Company's operational and engineering personnel to
20 develop such a plan.
21 Has the Company proposed an option forQ.
22 customers to purchase Company-owned facilities beyond its
23 point of delivery?
24 Yes. The Company is proposing in this case toA.
25 provide changes to its tariff language that would allow
facili ties charge customers with a buyout option.
250 YOUNGBLOOD, REB 10
Idaho Power Company
.
.
.
1 Please describe the Company's proposal forQ.
2 tariff language changes in order to provide facilities
3 charge customers with a buyout option.
4 The Company is proposing to create a new rule,A.
5 Rule M - Facilities Charge Service, which would fully
6 describe the Company's rules and policies for providing
7 facili ties charge services. Currently, rules for
8 facili ties charges are located in various schedules.
9 Consolidating facilities charge rules and policies into a
10 single rule will allow the Company to more efficiently
11 manage tariff issues related to facilities charge
12 services, as well as provide facilities charge customers
13 with more transparency related to facilities charge rules
14 and policies. Exhibi t 52 is a copy of the Company's
15 proposed new Rule M . Within Rule M, the Company
16 describes the responsibilities of the Company to provide
17 ownership, operation, and maintenance of Company-owned
18 facilities beyond the Company's point of delivery in
19 consideration of the customer paying a facilities charge
20 approved by the Commission. In addition, the Company has
21 provided a new option for customers who may request to
22 purchase Company-owned facilities installed beyond the
23 point of delivery. As stated in the new provisions of
24 the Company's proposed Rule M, all sales must be approved
25 by the Commission and meet the following provisions:
251 YOUNGBLOOD, REB 11
Idaho Power Company
.
.
.
10
1 .Idaho Code Section 61-328;
2 .no mixed ownership of facilities;
3 .the customer must provide the operation
4 and maintenance of all facilities installed beyond the
5 point of delivery after the sale is complete; and
6 .the customer must pay for the engineering
7 costs for determination of the sale.
8 What do the provisions of Idaho Code SectionQ.
9 61-328 provide?
A.Within Idaho Code Section 61-328, it states
11 that before authorizing the sale of public utility owned
12 property, the Commission shall find that the transaction
13 is consistent with the public interest; that the cost of
14 and rates for supplying service will not be increased by
15 reason of the sales transaction; and that the customer
16 who would be making the purchase has the bona fide intent
17 and financial ability to operate and maintain the
18 property purchased.
19 How does the Company interpret the provisionsQ.
20 of Idaho Code Section 61-328 with regard to providing
21 customers with a buyout option of Company-owned
22 facilities beyond the point of delivery?
23 In order for the Company to agree to the saleA.
24 of its facilities beyond the point of delivery, the
25 Company would need to determine that none of its
remaining
252 YOUNGBLOOD, REB 12
Idaho Power Company
.
.
.
1 customers would be adversely impacted by the sale of
2 those facilities. Specifically, the Company would need
3 to ensure that the appropriate equipment is in place at
4 the point of deli very such that no equipment failure or
5 malfunction would result in a degradation of the
6 Company's reliability and service to its remaining
7 customers. In addition, the Company would need to ensure
8 that customers' rates, which may include a revenue credit
9 from revenues collected through the facilities charge,
10 would not be adversely impacted by the sale. If these
11 conditions were met, the Company would make a filing with
12 the Commission for each proposed sale asserting that such
13 sale would be in the public interest.
14 Has the Company determined a proposedQ.
15 methodology for determining the sales price for the sale
16 of facilities beyond the point of delivery?
17 No. The Company is not proposing any specificA.
18 pricing methodology in this case, just the proposal to
19 change its tariffs in order to provide an option for
20 customers to purchase the facilities. If the Company's
21 proposed tariff language is adopted and approved by the
22 Commission, and if and when a customer requests the
23 purchase of facilities beyond the Company's point of
24 delivery, the Company would attempt to determine a
25 mutually agreed upon price for the sale of the facilities
prior to
253 YOUNGBLOOD, REB 13
Idaho Power Company
.
.
.
1 bringing the sales transaction to the Commission for
2 approval. If a sales price cannot be mutually agreed
3 upon, the Company or the customer may initiate a
4 proceeding before the Commission in order to determine
5 the appropriateness of the price.
6 Q.Are there other provisions of the new buyout
7 option the Company wishes to discuss?
8 Yes. The Company's proposal would include theA.
9 provisions that there be no mixed ownership of
10 facili ties. In other words, the customer would need to
11 purchase all of the Company-owned equipment beyond the
12 point of delivery, not just pick and choose which pieces
13 of equipment they would want to purchase. Also, Idaho
14 Power would not perform any operation or maintenance of
15 the facilities once they have been purchased. Such
16 activities would be an unregulated activity for services
17 rendered beyond the Company's point of delivery, and is
18 not a part of the Company's core business practices.
19 Q.If facilities charge customers elect this new
20 tariff option and purchase Company-owned facilities,
21 would that same customer have the option in the future to
22 sell the facilities back to the Company and have the
23 Company maintain and operate those facilities?
24
25
254 YOUNGBLOOD, REB 14
Idaho Power Company
1 A.No. Once a customer elects this new tariff.2 provision and the Company sells them Company-owned
3 facili ties, the customer will be solely responsible for
4 maintaining and operating those facilities on a
5 going-forward basis.
6 Q.Are you proposing anything else which responds
7 to the issues raised by ICIP witnesses in their direct
8 testimony?
9 A.Yes. The witnesses for ICIP expressed concern
10 over the fact that the Company had no record of customers
11 requesting that the Company install, own, operate, and
12 maintain electrical facilities beyond the Company's point
13 of deli very in consideration for the payment of a.14 facili ties charge. As described earlier in my testimony
15 and in the testimony of Mr. Kline, the facilities charge
16 service is a service the Company provides at the request
17 of the customer, and which the Company has the discretion
18 to accept or rej ect providing that service. That said,
19 ICIP witnesses are correct that in many instances there
20 is no written record or contract memorializing the fact
21 that the Company was agreeing to provide this service on
22 behalf of the customer. Therefore, the Company is
23 proposing the Facilities Charge Consent and
24 Acknowledgement Form which will be signed by all.25 customers requesting to enter into a Facilities Charge
Services arrangement. The new form will
255 YOUNGBLOOD, REB 15
Idaho Power Company
be a part of the Company's newly proposed Rule M and is1.2 provided on page three of Exhibit 52. The form is
3 intended specifically on a going-forward basis for new
4 facili ties charge transactions. However, the Company
5 also commits to communicate with all of its existing
6 facilities charge customers to provide them with the
7 opportunity to sign the form and provide information
8 regarding the new proposed facilities charge buyout
9 option.
10 Q.Is the Company proposing any changes to the
11 existing methodology for determining the appropriate
12 facilities charge?.13 A. No. The Commission-approved methodology that
14 the company currently uses is appropriate and fair to all
15 customers. The Company maintains that the facilities
16 charge rate reduction that was proposed in the Direct
17 Testimony of Mr. Scott Sparks is fair and reasonable.
18 The Company continues to encourage the Commission to
19 adopt its proposed revised monthly facilities charge
20 rates of 1.41 percent for customers taking Primary or
21 Transmission Service under Schedules 9 and 19. The
22 Company is also proposing a rate of 1.41 percent for
23 customers taking Transmission Service under Schedule 24.
24 For customers currently paying a facilities charge.25 under Schedule 15, the Company continues to propose a
256 YOUNGBLOOD, REB 16
Idaho Power Company
.
1 rate of 1.51
2 currently
3 /
4 /
5 /
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
percent per month and for customers.
.
257 YOUNGBLOOD, REB 16a
Idaho Power Company
.1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
.
.
.
paying a facilities charge under Schedule 41, the Company
is proposing a rate of 1.21 percent per month consistent
with the direct testimony provided by Mr. Sparks in this
case.
Q. Is it true, as Mr. Sturtevant points out in his
direct testimony, that the Company is not proposing to
update the facilities charge rate for the Simplot special
contract, Schedule 29?
A. No, that is not true. While the Company did
not specifically discuss the revised special contract
Schedule 29 in its direct testimony, the updated rate was
included in the proposed Schedule 29 tariff sheet
submitted with the Company's Application in both
Attachment No. 1 and Attachment No.2. The proposed
revised facilities charge rate for the special contract
Schedule 29 is 1.41 percent, the same reduction as is
being proposed for the Company's Schedule 19 customers.
Q. Have the signing parties to the general rate
case settlement stipulation ("Stipulation" ) submitted in
this proceeding agreed to any provision in the event that
the Commission adopts ICIP' s recommendation to modify the
existing facilities charge methodology such that it
changes the amount of revenue proposed to be recovered
through the facilities charge?
258 YOUNGBLOOD, REB 17
Idaho Power Company
1 A.Yes. Paragraph 11 (c) of the Stipulation.2 submitted on September 23, 2011, in this proceeding
3 provides that the "Signing Parties agree that any revenue
4 requirement impacts resulting from changes to the
5 facili ties charge methodology or changes in property
6 ownership shall be directly assigned to Schedule 19
7 customers in the form of a base rate increase or
8 reduction so that no other customer classes shall be
9 impacted by any resulting change."
10 Q .What would be the impact of this provision of
11 the Stipulation if the Company were to give away
12 Company-owned facilities to customers for free, as
13 proposed by ICIP?.14 A.If the Company were to assign ownership of
15 fully depreciated facilities to customers, as advocated
16 by ICIP, the Company would experience a shortfall to its
17 revenue requirement. Per the Stipulation, the Company
18 would directly assign to all Schedule 19 customers an
19 increase in rates to make-up for that revenue shortfall.
20 Q.Do you have any concerns with the proposal to
21 give away facilities made by ICIP?
22 A.Yes, I do. As explained in Mr. Kline's
23 testimony, of the Company's approximately 240 facilities
24 charge customers in Idaho, Simplot is the only facilities.25 charge customer in recent memory that has formally'
259 YOUNGBLOOD, REB 18
Idaho Power Company
i requested a buyout option. I believe, as does Mr. Kline,.2 that this indicates that the vast maj ori ty of the
3 Company's other facilities charge customers have
4 appreciated and benefited from the Company operating and
5 providing maintenance on facilities that they would have
6 had to pay for and maintain themselves. The Company
7 submitted data requests to ICIP asking which of their
8 members are actively participating in this case and
9 whether any of their members would be willing to purchase
10 Company-owned facilities knowing that they would need to
11 maintain those facilities once sold. The intent of these
12 data requests was to determine which of ICIP' s members
13 were aware that the ICIP proposal could result in a rate.14 increase. ICI P refused to answer these questions. So,
15 ultimately, Idaho Power has no way of knowing whether the
16 proposals made by ICIP are representative of all of its
17 members, let alone all of the approximately 240
18 facili ties charge customers in Idaho.
19 Q.Did the Industrial Customers of Idaho Power
20 sign the Stipulation in Case No. IPC-E-II-08?
21 A.Yes. Mr. Peter Richardson, Attorney for
22 Industrial Customers of Idaho Power, signed the
23 Stipulation on September 21, 2011.
24 Q.Is the Company proposing any additional.25 commitments with regard to its facilities charge service?
260 YOUNGBLOOD, REB 19
Idaho Power Company
.
.
.
1
2
A.Yes. Since the revenue received from
facilities charge customers reduces the revenue
3 requirement of the associated class, the Company commits
4 to performing a review and potential update of its
5 facili ties charge rate as part of each future general
6 rate case filing. In this way, the facilities charge
7 rate will be subj ected to not only the Company's internal
8 review on a regular basis as it has in the past, but will
9 be scrutinized by the Commission and interested
10 intervening parties as part of the revenue requirement
11 determination.
12 Q.Does this conclude your rebuttal testimony in
13 this case?
14
15
16
17
18
19
20
21
22
23
24
25
A.Yes, it does.
26'1 YOUNGBLOOD, REB 20
Idaho Power Company
.
.
.
1
2 open hearing.)
(The following proceedings were had in
MR. WILLIAMS: Thank you, Madam Chair.
4 The witness is now available for cross-examination.
10
11
12
13
14
3
5
6
7
8
9 you.
COMMISSIONER SMITH: Mr. Otto.
MR. OTTO: No questions, Madam Chair.
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: I have no questions. Thank
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: No questions.
COMMISSIONER SMITH: Mr. Nelson.
MR. NELSON: No questions. Thank you.
COMMISSIONER SMITH: Mr. Miller. No
15 questions. Ms. Kyler.
16
17
18 Mr. Klein, sorry.
19
20
21 Richardson.
22
23
24
25
MS. KYLER: No questions.
COMMISSIONER SMITH: So Mr. Howell or
MR. KLEIN: No questions.
COMMISSIONER SMITH: Now to Mr.
MR. RICHARDSON: Thank you, Madam Chair.
CSB REPORTING
[phone]
262 YOUNGBLOOD
Idaho Power Company
.1 CROSS-EXAMINATION
2
3 BY MR. RICHARDSON:
4 Q Good afternoon, Mr. Youngblood.
5 A Good afternoon, Mr. Richardson.
6 Q Were you here when Mr. Sparks testified?
7 A I was.
8 Q And do you recall my line of questions
9 wi th Mr. Sparks on how often Idaho Power conducts the
10 periodic review of the facility charge rates?
11
12
13.14
15
.
A Yes, I do.
Q Did you hear Mr. Sparks refer to you as
the person who informed him that such reviews take
place?
A Yes, I did.
16 Q And did you in fact tell Mr. Sparks that
17 such reviews take place?
18 A They do. They do periodically.
19 Q Can you tell me what that means?
20 A Periodically means just periodically, so
21 it's not necessarily on a fixed, set, established basis.
22 They are done every year, every couple of years on an
23 as-needed basis.
24 Q How do you know when they need to be
25 updated? What's the as-needed trigger?
CSB REPORTING
[phone]
263 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 Part of the recent trigger was inquiriesA
2 by the Industrial Customers and they were reviewed at
3 that time. If interest rates change significantly, they
4 may be reviewed at that time. If rate of returns change
5 or change differently, they will be reviewed at that
6 time.
7 Q And over the last 25 years there's never
been an event such that you felt that the facilities
charge rates needed to be updated?
A That is not correct.Well,it is correct
that they didn't need to be updated.They were reviewed
over the past 25 years.
8
9
10
11
12
13 I understand that. Also, Mr. Sparks wasQ
14 asked about salvage of equipment. Who at the Company
15 makes the determination of the salvage value of a piece
16 of equipment?
17 I believe it's our finance department.A
18 And I also started on down a line ofQ
19 questions with Mr. Sparks which he deferred which
20 Mr. Kline, I believe, deferred to you, so I'll go down
21 that line and see if we can't make some progress. When
22 Idaho Power installs a new turbine at Hells Canyon Dam,
23 do you think it's fair for this Commission to allow Idaho
24 Power to put the cost of that turbine into rates and to
25 earn a return on it?
CSB REPORTING
[phone]
264 YOUNGBLOOD (X)
Idaho Power Company
1 A Yes, I do..2 Q Is it fair for the Commission to set Idaho
3 Power's retail rates such that Idaho Power can in fact
4 collect that return?
5 A
6 Q
Yes, I do.
Is it also fair to the ratepayers of Idaho
7 Power to require that piece of equipment to depreciate
8 over its useful life?
9
10
A Yes, it is.
Q So the flip side of that question is,
11 then, it's unfair to the ratepayers to never depreciate
12 that equipment over its useful life?
13.14 turbine still?
15
16
17
A You're speaking about the generator or
Q Yes.
A That is correct.
Q And when that turbine is fully depreciated
18 out, who has claim to any residual value, the ratepayers
19 or the shareholders?
20 A If it is fully depreciated out, there is
21 no residual value.
22 Q If it's depreciated out for ratemaking
23 purposes, a piece of equipment may in fact have economic
24 value after being depreciated.25 A Market value?
CSB REPORTING
[phone]
265 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 -- out; correct?Q
2 A Yes.
3 Who has rightful claim to that residualQ
4 value, the ratepayers or the shareholders?
5 I would say that both the ratepayers andA
6 the shareholders. The ratepayers have paid for it and
7 the shareholders have earned a return on that, so I'm not
8 sure who the rightful claim would be. It's Idaho Power's
9 equipment.
10 Beginning on page 2 of your testimony onQ
11 line 14, you state that the facilities charge was
12 designed to provide a means to charge specific customers
13 the cost of service related to facilities beyond the
14 point of delivery; correct?
15 The facilities charge service was designedA
16 to provide a means to charge specific customers the cost
17 of service related to facilities beyond the point of
18 delivery which are installed, owned, operated, and
19 maintained by the Company, correct.
20 Now, when I hear the phrase "cost ofQ
21 service" in relation to a charge that a utility is
22 charging for a service, I naturally assume that it is
23 attempting to identify the actual cost to provide that
24 service; would you agree with that definition?
25 I would not.A
CSB REPORTING
[phone]
266 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 How would you define cost of service?Q
2 It says cost of service related to theA
3 facili ties, so it's not a one-for-one recovery of cost of
4 service.
5 Are you not attempting to identify theQ
6 cost to provide that service when you do your periodic
7 reviews of the facilities charge rate?
8 No. We are determining similarA
9 components, the same billing components, used to
10 determine a non-levelized approach as you do in
11 ratemaking to a levelized approach as we do in the
12 facilities charge, so we are looking at similar billing
13 components, cost components in order to determine that
14 rate. It is not a one-for-one recovery of those
15 dollars.
16 But according to your own testimony, it'sQ
17 an attempt to charge specific customers the cost of
18 service related to facilities, so you're attempting to
19 identify the cost of service, are you not?
20 What it is is to try to recover thoseA
21 costs related to the facilities beyond the point of
22 deli very in order to offset the costs that are being
23 recovered through base rates.
24 Can you tell me how the J. R. SimplotQ
25 Company's payment of 20 percent a year on the original
CSB REPORTING
[phone]
267 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 installed cost of a transformer that is now over 66 years
2 old is in any way related to Idaho Power's cost of
3 providing that transformer to Simplot?
4 The 20 percent a year I'm assuming is theA
5 1. 7 percent facilities charge per month that is in the
6 tariff.
7 Q That's correct.
8 The 1. 7 percent facilities charge that isA
9 in the tariff is charged on a levelized basis times the
10 installed cost or initial cost of that equipment. That
11 is on a pool of assets that -- would you like me to
12 describe the facilities charge methodology?
13 Q Please.
14 In the facilities charge methodology, weA
15 have an attempt to try to recover those costs that are
16 associated with providing a service for facilities that
17 are installed solely for specific customers beyond the
18 point of delivery of the Company. All of the facilities,
19 the distribution facilities, for the Company's customers,
20 including all of those facilities that are beyond the
21 point of delivery, are within base rates of all the
22 customers, let's say, of a particular class, Schedule 19
23 customers.
24 All of those are being recovered in the
25 rates that are determined for that class, but it's not
CSB REPORTING
[phone]
268 YOUNGBLOOD (X)
Idaho Power Company
1 prudent to charge all of those customers for facilities.2 that are only in place to serve a particular customer, so
3 what the facilities charge methodology does is takes the
4 same costs and on a levelized basis for administrative
5 purposes credits back in the determination of the revenue
6 requirement for that class, so the chart on page 4, what
7 I was trying to demonstrate, then, is the difference
8 between a non-levelized recovery and a levelized
9 recovery. The non-levelized recovery mechanism is the
10 mechanism that is used during the typical ratemaking
11 revenue requirement and the levelized is what facilities
12 charge customers pay. In total, the same amount of
13 revenue is recovered..14 Q Let's turn to page 4 and take a look at
15 that chart. Now, help me understand where the phrase
16 "levelized cost recovery" comes from, because in this
17 venue, I'm only familiar with talking about levelized
18 rates in the PURPA context. Where does this levelized
19 rate concept come from?
20 A It is another methodology for rate
21 recovery, revenue requirement.
22 Q I understand that, but what's the source
23 of this?
24 A This is the approved methodology by the.25 Commission for the facilities charge.
CSB REPORTING
[phone]
269 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
10
1 Okay, and has the Commission called itQ
2 levelized cost recovery before?
3 I don't recall if they have or not.A
4 Okay; so possibly this levelized conceptQ
5 is one way of you describing this ratemaking construct to
6 help us understand more fully what you're doing?
7 It is exactly what we're trying to helpA
8 you understand is how the revenue is being recovered
9 under two different methodologies, correct.
Q And in the box on page 4, the horizontal
11 axis, the bottom line there, that represents time;
12 correct?
13
14
A Correct.
Q And each line, vertical line, represents a
15 year?
16 A It represents nothing. It's a
17 coloring-in, just trying to show that early on, before
18 the midpoint, whatever time frame that you would like to
19 use, that the non-levelized approach recovers more than
20 the levelized approach does, and later on in that same
21 time period, the levelized approach would be paying back
22 the subsidy that existed at the beginning of the
23 period.
24 Well, I counted the little lines there andQ
25 it's coincidental that it's the same number of years that
CSB REPORTING
[phone]
270 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 the facilities charge depreciates at, 32 years, so
2 there's 32 lines there.
3 I will accept that subj ect -- I can countA
4 them if you would like.
5 So under what you called the traditionalQ
6 base revenue requirement ratemaking methodology, the
7 non-levelized line -- correct?
8 A Correct.
9 -- what happens at year 32 according toQ
10 your chart?
11 In year 32, what do you mean by "whatA
12 happens"?
13 Well, how much cost recovery is theQ
14 Company entitled to at the end of that line?
15 If there was an asset that was implementedA
16 or installed at the very beginning of the time and
17 nothing ever happened during that time and it was fully
18 depreciated over, as you said, the 31, 32 years, it would
19 be fully depreciated. There would be zero residual
20 value.
21 Q Zero cost recovery?
22 A There would be no cost recovery,
23 correct.
24 So on the non-traditional levelized line,Q
25 we get out to year 32, what happens then?
CSB REPORTING
[phone]
271 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 A Exactly the same. All the same amount of
2 revenue recovery has been recovered under the levelized
3 approach as it had been under the non-levelized
4 approach.
5 Q So in year 33, that line goes to zero as
6 well?
7 A What you're saying here, I think what
8 you're trying to lead toward is the 31 years and saying
9 that after 31 years that costs are fully recovered; is
10 that what you're trying to --
11 Q Well, I'm just trying to understand your
12 testimony here.
13 A My testimony with regard to this chart is
14 saying that two different approaches for recovering a
15 revenue requirement are identical in what they recover or
16 are close to; that being the non-levelized approach
17 recovers the same amount of revenue recovery as the
18 levelized approach.
19 Q Isn't that only true if at the year 31 the
20 levelized number also goes to zero going forward?
21 A At whatever time frame that you would take
22 a non-levelized approach and a levelized approach, they
23 would recover the same amount of recovery.
24
25
Q Okay, and the time frame you've chosen on
your chart is 31 bars, 31 years, and let's keep the 31
CSB REPORTING
[phone]
272 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 years of depreciation that you've identified here and
2 extend five more bars out, so it's now 37 and the
3 non-levelized rate hits zero in year 32, what happens to
4 the levelized rate in years 33 through 37?
5 A What I think you're trying to say with
6 regard to I mean, I don't have a time frame on this
7 and what I have said is that it is an average expected
8 life and so this would be the average expected life of an
9 asset. In the case of facilities charges, that is the
10 average expected life of a pool of assets, and those pool
11 of assets are determined for the facilities charge and it
12 would be the average expected life of the pool of assets
13 for depreciation purposes as 31 years, so that would mean
14 that assets would depreciate or could be fully
15 depreciated over that period of time, but that their
16 expected life could live well beyond that point in
17 time.
18 Q So if the average expected life is 31 or
19 32 years, if the actual life is longer in reality, then
20 the levelized facilities charge works as a subsidy,
21 doesn't it?
22 A If the average expected life was longer in
23 reali ty, then it would be depreciated over a longer
24 period of time, and both the levelized and the
25 non-levelized approach would still recover the same
CSB REPORTING
[phone]
273 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 amount of revenue.
2 Q If the average expected life is as you
3 represented, 32 years, and the actual asset was in
4 service for longer than that time period, doesn't this
5 levelized charge work as a subsidy?
6 A I guess what you're saying is would
7 customers who have equipment that are in place for a long
8 period of time be subsidizing and the answer to that
9 would be yes, just as customers who have equipment in for
10 a very short period of time and it is removed are being
11 recovered. It is an average expected life of
12 equipment.
13 Q So when you state at the bottom of page 4
14 over to the top of page 5 that your chart shows the total
15 amount of revenue recovered from either mechanism is
16 identical, that statement is not true, is it, if the
17 facili ties charge equipment lasts longer than 32 years?
18 If the facilities charge actually, theA
19 statement is true that the total amount of revenue
20 recovered from either mechanism is identical. I'm
21 showing it over the same time period. If a non-levelized
22 approach was used for a longer period of time and a
23 levelized approach was used for the same amount of time,
24 under a levelized or a non-levelized approach the same
25 amount of revenue would be recovered.
CSB REPORTING
[phone]
274 YOUNGBLOOD (X)
Idaho Power Company
1 Q And I asked you, but whenever a facilities.2 charge facility has a life longer than your depreciation
3 period, that statement is no longer true, is it?
4 A And what I'm saying is if you have a piece
5 of facility that is -- you're using levelized and you're
6 trying to compare that to the non-levelized approach, you
7 need to extend both lines.
8 Q Do you have any data on the actual average
9 life of the equipment subject to this charge?
10 A I believe the average expected life --
11 Q I said actual.
12 A I'm sorry?
13 Q The question was do you have any data on.14 the actual average life of the equipment subj ect to this
15 charge and you started answering the expected and that's
16 not what I asked you.
17 A Well, average life and average expected
18 life I would term the same and that would be 31 years.
19 Q So it would surprise you, then, to learn
20 that many of these facilities are closer to 40 or 50
21 years old?
22 A It would not at all. If the average life
23 is 31 years, that means that some facilities are less
24 than 31 years and some facilities are greater than 31.25 years, so it would not surprise me at all.
CSB REPORTING
[phone]
275 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 Would you agree that much of Simplot' sQ
2 equipment is outliving the 31-year life?
3 I would agree that Simplot who is one ofA
4 the first, if not the first, facilities charge customer
5 may have equipment that has long lives, yes. I also know
6 that there may be some facilities on Simplot' s site that
7 may be less than 31 years.
8 In your testimony you state thatQ
9 Dr. Reading's proposal to track actual depreciated costs
10 of facilities charge equipment would be difficult -- that
11 it would be difficult to track thousands of pieces of
12 equipment for 240 customers; do you recall that?
13 A I do.
14 Have you thought that statement throughQ
15 and researched what type of Excel program may be
16 available to handle those calculations?
17 A No, I mean no.
18 So you haven't explored how to possibly doQ
19 those calculations at all?
20 For every single piece of equipment on aA
21 facilities charge, determining the date of their
22 installation, determining separate depreciable lives, no.
23 The Company's accounting does a group and pools assets.
24 For example, all poles are pooled together. There's a
25 depreciable life for those. There are different
CSB REPORTING
[phone]
276 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 depreciation tables for different pieces of equipment.
2 Transformers may have different depreciable lives than
3 poles or lines or switch gear. It is just
4 administratively difficult, if not impossible.
5 So isn't Idaho Power used to dealing withQ
6 thousands of calculations and many thousands of customers
7 in very complex ways?
8 Idaho Power does have billing systems thatA
9 deal with hundreds of thousands of customers and provides
10 the bills for them, yes.
11 Q How many customers does Idaho Power
12 have?
13 I believe it is 450 some odd thousandA
14 residential customers. I would have to check on that for
15 sure.
16 Probably pushing as many as 500,000 totalQ
17 customers?
18 Very easily.A
19 And does each and everyone of thoseQ
20 500,000 customers generate a unique bill each and every
21 month?
22 Yes, they do.A
23 And how many facilities. charge customersQ
24 did you say you have?
25 240 facilities charge -- approximately 240A
CSB REPORTING
[phone]
277 YOUNGBLOOD (X)
Idaho Power Company
1 locations..2 Q Let's just look at, for example, Schedule
3 19, the charges that you keep track of each month for
4 each customer. You have seasonal time-of-use rates. You
5 have seasonal demand rates, summer on-peak demand
6 charges, a basic charge, a service charge, and a minimum
7 billing charge. That's six different charges for one
8 customer
9 A Correct.
10 Q -- on Schedule 19 and how many Schedule 19
11 customers do you have?
12 A I believe around 136. I don't recall
13 right now..14 Q So in light of Idaho Power's ability to
15 keep track of this seemingly unlimited amount of data on
16 500,000 customers and your sophisticated billing capacity
17 to keep track of customers, doesn't it seem to you that
18 it's not that big of a burden to keep track of 240
19 customers?
20 A No, not at all. What you're saying is
21 trying to keep track of the thousands of pieces of
22 equipment for them. I did not say for those 450 or
23 500,000 customers that we have identified for every
24 single one of those customers the thousands of pieces of
25 equipment that are used to deliver the service to them..
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278 YOUNGBLOOD (X)
Idaho Power Company
.1 I don't have track of each of the line miles, the meters
2 for each individual customer identified.
3 Now, on page 4 you talk about thisQ
4 non-traditional cost recovery mechanism for facilities
5 charge equipment.
6 I did not say it was non-traditional.A
7 Well, you characterized the non-levelizedQ
8 as traditional, so I assumed that you were
9 differentiating the levelized from the non-levelized as
10 being non-traditional.
11 A I was differentiating levelized from
12 non-levelized.
13.14
.
Q You did not use the word traditional when
you described non-levelized?
15 From traditional ratemaking, correct.A
16 So that's the traditional way to do it, soQ
17 levelized is what way to do it?
18 It is a levelized approach.A
19 Non-tradi tional?Q
20 The traditional ratemaking is for cost ofA
21 service of general rates, not for facilities charge.
22 What I was differentiating was between the non-levelized
23 approach that is used in the traditional ratemaking like
24 general base rates and a levelized approach.
25 And you differentiated the non-levelizedQ
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279 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
10
11
1 as being traditional and is it not a logical conclusion,
2 therefore, to say that the levelized is
3 non-traditional?
4 Mr. Richardson, if you would like to makeA
5 that assumption, that is fine, too.
6 Thank you; so on page 4, you justify thisQ
7 non-traditional cost recovery mechanism for facilities
8 charge equipment from what you termed the traditional
9 non-levelized depreciation?
A Could you please direct me to the line
12
that you're referring to?I'm sorry.
Q It's in the box on page 4 --
A Okay.
Q --non-levelized.
A Yes.
Q So you justify using the non-traditional
13
14
15
16
17 line, which is the levelized line --
18 COMMISSIONER SMITH: Mr. Richardson, I
19 think that's a mischaracterization of his testimony,
20 so--
21 MR. RICHARDSON: Thank you, Madam Chair.
22 I i 11 move on.
23 COMMISSIONER SMITH: Thank you.
24 BY MR. RICHARDSON: On page 8, line 8, youQ
25 talk about Dr. Reading's approach for tracking
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280 YOUNGBLOOD (X)
Idaho Power Company
1 depreciation levels for individual facilities; do you see.2 that?
3 A Line 8 I see the question, "Does the
4 Company track depreciation levels for individual
5 facilities for any other customer class or service?"
6 Q Then on line 11, you testify that you
7 don't agree that the Company doesn't do that because
8 it's not a standard ratemaking practice no, it is a
9 standard ratemaking practice to average the actual levels
10 of depreciation; do you see that?
11 A Yes. I said, "No. It is a standard
12 ratemaking practice to average the actual levels of
13 depreciation together for a particular level of service.14 or customer class and spread the recovery of those costs
15 equally to all customers within the class."
16 Q Is it standard ratemaking practice to
17 never depreciate utility equipment such as
18 transformers?
19 A It is not.
20 Q On page 7, you express concern about
21 changing revenue requirement for a customer class when
22 changes are made to facilities charges for individual
23 customers; do you see that?
24 A Can you point me to the line, please?.25 Q It starts at line 6.
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281 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
20
21
22
1 A Okay.
2 Q So I don't understand your concern about
3 class revenue requirement in this instance when class
4 revenue requirements are constantly changing, aren't
5 they, and probably never precisely perfect?
6 A Class revenue requirement is determined
7 during a general rate case.
8 Q And in between general rate cases those
9 revenue requirements are constantly changing, are they
10 not?
11 A The revenue requirement, I think, remains
12 the same. The rates that are place are based upon that
13 revenue requirement.
14 Q But the actual what's going on in the real
15 world in between general rate cases,there are changes?
A There are costs that are incurred.
Q And savings that are incurred?
A Yes.
Q And isn't that what general rate cases are
for is to capture those changes in between?
16
17
18
19
A That is correct.
Q And on page 8, you recite that the
23 Company's proposed facilities charge is fair, just and
24 reasonable, line 23.
25 A Yes.
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282 YOUNGBLOOD (X)
Idaho Power Company
1 Q Were you in the room when I asked.2 Mr. Kline whether the concept of fairness is largely in
3 the eye of the beholder?
4 A I was.
5 Q And isn't it true that this Commission
6 will make that call and not us?
7 A I believe that is correct, that the
8 Commission will determine whether or not the rates are
9 fair, just and reasonable.
10 Q And have you read the testimonies of Mr.
11 Butler and Mr. Sturtevant where they make the assertion
12 that this rate is not fair?
13 A I have read that testimony, those.14 testimonies.
15 Q So it is true that at least one of your
16 largest customers doesn't share your belief that this is
17 a fair rate?
18 A The customer, I believe that the customer
19 is misinformed on how the rate of a facilities charge is
20 charged and may have made an erroneous assumption on
21 their part; nevertheless, I believe that the rates have
22 been determined by the Commission to be fair, just and
23 reasonable.
24 Q And so the question was, isn't it true.25 that at least one of your largest customers doesn't share
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283 YOUNGBLOOD (X)
Idaho Power Company
1 your belief that this is a fair rate?.2 A They have stated that, yes.
3 Q And you were here this morning when Mr.
4 Campbell from McCain provided public testimony?
5 A I was.
6 Q And were you here this afternoon when we
7 discussed the BSU letter?
8 A I was.
9 Q Would you turn to page 9? At the top of
10 that page on line 2, you are asked what is your response
11 to ICIP' s suggestion that the Company should simply give
12 away fully depreciated facilities; do you see that?
13 A I do..14 Q Did you write that question?
15 A I did.
16 Q So I looked and I couldn't find anywhere
17 in the ICIP' s testimony of any suggestion that Idaho
18 Power give away its facilities. Can you point to that
19 for me?
20 A I do not have the testimonies of Mr.
21 Sturtevant and Mr. Butler, but if I recall, and I will
22 paraphrase, they were saying that facilities that they
23 were paying a facilities charge on, by their
24 characterization, as having no value should be given to.25 them or turned over to them.
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284 YOUNGBLOOD (X)
Idaho Power Company
1 Q Would you agree that the Industrial.2 Customers' witnesses have said that they have actually
3 paid for the facilities several times over and that this
4 suggests to me that they believe they have purchased the
5 facilities? They're not asking for, as you say in your
6 question, a give-away.
7 A I would agree that that is what is the
8 witnesses have characterized has happened. That is not
9 what hs occurred, that they have paid for those
10 facilities.
11 Q Also, in that first answer on page 9, you
12 state that "ICIP' s proposal would not be administratively
13 feasible," and you go on because "the Company does not.14 depreciate for ratemaking purposes individual pieces of
15 equipment separately," and you conclude that "so
16 determination of when an individual piece of equipment
17 was fully depreciated would be nearly impossible," but
18 isn't that an impossibility of the Company's own making?
19 I mean, one could figure out a system, couldn't one, by
20 which the facilities charge equipment could be tracked in
21 this day and age?
22 A It is just not the way accounting
23 practices, generally accepted accounting principles and
24 practices, go or in ratemaking, general ratemaking..25 Q Okay, and I was asking you about your
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285 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
10
1 statement that it's impossible, nearly impossible, and my
2 question wasn't about what you traditionally do,
3 levelized or non-levelized, the question was could one
4 figure out a system by which facilities charge equipment
5 could be tracked in this day and age?
6 In this day and age, I am sure that aA
7 system could be created. The administrative cost and
8 administrative overhead to implement such a system, I can
9 only guess, would be astronomical.
Q That's a guess?
11 That is correct.A
12 And you haven't investigated theQ
13 possibility of doing that?
14 No, sir.A
15 On page 9, also on page 9, still on pageQ
16 9, on line 17, you state that the facilities charge has
17 never been a "lease-to-own" charge and you put quotes
18 around the phrase "lease-to-own." You weren't quoting an
19 Industrial Customer witness, were you?
20 A I was not.
21 So that's your phrase?Q
22 Yes, that is my phrase.A
23 Turning over to page 10, you cite theQ
24 Commission to Idaho Code Section -- I guess it's page 11
25 to 12 where you cite the Commission to Idaho Code Section
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286 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 61-328; do you see that?
2 A I do.
3 And as you identify several provisions atQ
4 the top of page 12 that must be met in order for the
5 Company to sell a facility; do you see that?
6 I see that. What I am describing there isA
7 the Company's proposal to provide a buyout option as part
8 of this proceeding in response in particular to Simplot
9 Company.
10 And then you're asked at line 8 on pageQ
11 12, "What do the provisions of Idaho Code Section 61-328
12 provide?" And your answer is at line 10, "Within Idaho
13 Code Section 61-328, it states that before authorizing
14 the sale of public utility owned property..."; do you see
15 that?
16 I do, and that is correct.A
17 So is your understanding that this firstQ
18 part of the Code section only requires that the property
19 be public utility owned property?
20 That would be a legal interpretation, butA
21 it is my understanding this is with regard to public
22 utili ty owned property, this section of Idaho Code.
23 Have you read that section of the IdahoQ
24 Code?
25 A I have.
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287 YOUNGBLOOD (X)
Idaho Power Company
1 Q So would it surprise you to learn that the.2 test may be a little more nuanced than just public
3 utility owned?
4 A I would defer to legal counsel.
5 Q And you note at the end of that paragraph
6 that the customer who purchases the facility must have a
7 bona fide intent and financial ability to operate and
8 maintain the property; do you see that?
9 A The property purchased, correct.
10 Q Yeah, the property purchased, that's what
11 we're talking about, so if Simplot purchased that
12 66-year-old transformer from you and thereafter decided
13 that that factory is going to be closed and didn't.14 actually use that transformer, do you think that they
15 could legally buy it from you because they wouldn't be
16 operating that purchased facility?
17 A Again, I would probably defer on legal
18 counsel on that, but what I 'm describing here were the
19 provisions provided in the Idaho Code and it was provided
20 as one of the conditions that would need to be met under
21 the Company's proposed buyout option, if approved by the
22 Commission at this point in time, but it would be, I
23 think, a legal determination whether or not the company
24 who purchased the equipment if it was no longer going to
25 use that equipment would meet this qualification..
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[phone]
288 YOUNGBLOOD (X)
Idaho Power Company
1 Q When I was visiting with Mr. Sparks, we.2 were talking about facilities that are much older than
3 your average expected 31-, 32-year life and those
4 facilities are still being assessed the full facilities
5 charge, which includes depreciation, return, et cetera,
6 et cetera, and I think we talked about subsidies between
7 individual customers and the remaining customers in the
8 class, and we talked about -- do you recall our
9 discussion about when, like, Simplot leaves the
10 facilities charge family that the lost revenue from that
11 facilities charge payments they were making are to be
12 made up by the remaining members of the class?
13 A I recall the discussion, yes..14 Q And do you agree with Mr. Sparks that when
15 a facilities charge customer goes away that revenue is
16 thereafter made up by raising the rates of the other
17 class members?
18 A The revenue lost by that facilities charge
19 revenue because it is used as a credit to the revenue
20 requirement determination of a particular class, that
21 class would need to recover that revenue, yes.
22 Q Okay, then in your further discussion at
23 the bottom of page 12 of the operation of Section 61-328,
24 you state starting on line 24 that the Company would need
25 to determine -- and this is the Company's interpretation.
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289 YOUNGBLOOD (X)
Idaho Power Company
1 of the provisions of this Code section according to the.2 question -- that the Company would need to determine that
3 none of its remaining customers would be adversely
4 impacted by the sale of those facilities, and if what
5 Mr. Sparks and I discussed was true and you just
6 confirmed that every time that happens those revenues
7 have to be made up by the other customer classes, how is
8 it possible to make that determination?
9 A I believe that it would be done through a
10 determination of a sales price that would be used to
11 offset any kind of impact to the customer or done at the
12 same time as a general rate case filing where the base
13 rates for a particular class could be adjusted.14 accordingly.
15 Q So you adjust the sales price, keep the
16 remaining customer class whole for the lost facilities
17 charge customer?
18 A You asked how could it happen and I said
19 that might be one way. Another way would be through
20 determination at the time of a general rate case.
21 Q So walk me through how that would work on
22 the purchase price scenario.
23 A We have not determined a methodology for
24 determining purchase price, but if you look at future.25 revenues that would be recovered through a facilities
CSB REPORTING
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290 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 charge that would now be lost and those revenues were
2 used as a determination of the base revenue requirement
3 for a particular class, then some kind of present value
4 analysis, I would assume, could be used to determine what
5 that price would be.
6 So correct me if I'm not understanding youQ
7 properly, so if Simplot was going to buy their facilities
8 from you, the purchase price would not just be the
9 non-sal vagable cost, but it would also include the cost
10 to make the remaining customers in the class whole, so
11 how does Simplot ever get away from having to pay that?
12 The Company's provision for a buyoutA
13 option proposed in this case right now in my rebuttal
14 testimony, but has not yet been approved by the
15 Commission, was that the two companies, Idaho Power
16 Company and the customer, would try to mutually agree
17 upon a purchase price and that that price would be set in
18 such a way that it would meet the provisions as stated
19 there, the Idaho Code Section 61-328, no mixed ownership
20 of facilities, so they could not just buy the
21 transformer, they would have to buy all the facilities on
22 their site, and the customer must provide the operation
23 and maintenance of all facilities installed beyond the
24 point of delivery and that the customer must pay for the
25 engineering costs for determination of the sale.
CSB REPORTING
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291 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 The Company is not proposing at this point
2 in time any methodology at all for determining that
3 price. The Company is only proposing right now to
4 provide what it does not currently have in its tariffs,
5 which is a buyout option for facilities that are beyond
6 the Company's point of deli very.
7 Q You mentioned on allowing Simplot to
8 exercise the option to pay for removal of the facilities,
9 have you read Idaho Power's letter that's in Exhibit 308
10 at pages 5 and 6 in response to Simplot' s request to
11 purchase its facilities charge equipment?
12 A I don't have that letter before me, but I
13 may have read it during the course of the year.
14 Q Would you agree with me that that letter
15 indicates that Simplot will need to pay substantial
16 expenses to even devise a plan to implement such removal
17 and purchase?
18 A I do not have that letter before me, but I
19 do know and recall that there are that the Company
20 told Simplot to go ahead and propose which ones that they
21 would want to go ahead and purchase and that they would .
22 begin developing a plan with Simplot in how to remove
23 those facilities. There's a lot of things that need to
24 be taken into consideration about downtime of particular
25 plants, coordination of facilities, coordination of the
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( 2 0 8 ) 8 90 - 519 8
292 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 changeover from Company-owned facilities to
2 customer-owned facilities. It was part of the process, I
3 believe.
4 Did Idaho Power ever offer to sell SimplotQ
5 its facilities charge equipment?
6 It did not.A
7 Did you read Mr. Sturtevant's testimony onQ
8 that issue where he testified that Idaho Power suggested
9 that Simplot would have to pay Idaho Power approximately
10 $10 million for the facilities charge equipment to be
11 sold and that these facilities have a total initial
12 investment of only 4.2 million?
13 MR. WILLIAMS: Madam Chair, I'm going to
14 obj ect. This is way beyond the scope of Mr. Youngblood's
15 testimony and he's now asking him a question based on
16 some hearsay that might be in one of his own witnesses'
17 testimony.
18 COMMISSIONER SMITH: Mr. Richardson.
19 BY MR. RICHARDSON: Mr. Youngblood, didQ
20 you participate in any discussions with Simplot on the
21 purchase or sale of their facilities charge equipment?
22 THE WITNESS: Is this for me to answer?
23 COMMISSIONER SMITH: Yes.
24 THE WITNESS: I did participate, yes.
25 BY MR. RICHARDSON: And do you recall theQ
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293 YOUNGBLOOD (X)
Idaho Power Company
1 purchase prices that were discussed?.2 A I do recall that a purchase price was not
3 discussed.
4 Q And on page 14, line 8 in your testimony,
5 you talk about the need to prevent mixed ownership of
6 facili ties; do you see that?
7 A I do.
8 Q And do you recall that Mr. Sturtevant also
9 talks about mixed ownership in his testimony and he
10 concludes that it's not such a bad thing?
11 A I recall that he did talk about mixed use.
12 I don't recall whether or not he included the
13 characterization that it was not such a bad thing or.14 not.
15 Q But I'm confused, Mr. Youngblood, about
16 exactly what mixed ownership means.
17 A Mixed ownership means facilities that are
18 beyond the point of delivery of the Company that are
19 owned both by the Company and other facilities that are
20 owned by the customer and that they are intertwined. As
21 Mr. Kline stated earlier, the Company desires not to have
22 mixed use facilities on an ongoing basis and has made
23 that determination some time ago, is in the process of
24 trying to remove all mixed use facilities..25 We have allowed customers where we
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294 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
10
11
1 currently have mixed use facilities to continue. It is
2 our policy not to go further into developing or
3 increasing the number of mixed use facilities, and it is
4 our proposal in this case here with a buyout option that
5 the customer would purchase all of the facilities on the
6 site so that there's not a pick and choose and pick only
7 the ones they want to purchase, but they would buyout
8 all of the facilities, the Company-owned facilities, on
9 their site.
Q Can you describe for me a facility that is
on the customer's side an Idaho Power-owned facility
12 on the customer's side of the meter that is subj ect to
13 the facilities charge, what it would like if it were not
14
15
a mixed facility?
A I'm not an engineer or expert on that, but
16 in the simplest form I would say a transformer.
17 Q And a transformer on Simplot' s property is
18 not a mixed facility?
There is a delineation or a point where19A
20 from that transformer on would be all customer
21 facilities, so from the Company's point of delivery,
22 which typically is the property line, if the transformer
23 existed or resided on the customer's side of that
24 property line and that is the very last piece of Idaho
25 Power's equipment, that would not be a mixed use
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295 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 facility. The customer would take it from that point
2 forward.
3 The difference would be on a mixed use
4 facility where there are some, let's say a transformer
5 and then perhaps some switch gear that is customer-owned
6 and then perhaps some additional equipment beyond the
7 swi tch gear that is Company-owned, that would be mixed
8 use facilities. The concerns from the Company point of
9 view is safety of its personnel, maintenance of the
10 equipment, determining which equipment is our equipment
11 or the customer's equipment. There have been incidences
12 and in fact, incidences on Simplot' s facility where some
13 equipment has been moved or removed that was
14 Company-owned and the customer removed it. Incidences
15 like that is not something that the Company wants to
16 continue.
17 Q Is there a definition of that term
18 anywhere that I can look up?
19
20
A I'm not aware of one right now, no.
Q Who makes the call about whether a
21 facility is mixed or not mixed?
22
23
A It seems fairly simple to me that the --
Q Well, the reason I ask is you're telling
24 the customers in your proposed Rule M that if they want
25 to purchase the facilities they have to purchase all of
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296 YOUNGBLOOD (X)
Idaho Power Company
.
.
.
1 them, bundle.
2 A They have to purchase all of the
3 facilities beyond the Company's point of delivery,
4 correct.
5 Q And then at the same time, you're offering
6 to continue to create situations where they're
7 potentially mixed by offering the service to new
8 customers.
9 A No, no, no. Please understand the Company
10 is not proposing any new mixed use facilities at all.
11 But you're still proposing to provide theQ
12 facili ties charge service.
13 The Company is continuing the facilitiesA
14 charge service as it is currently right now with
15 customers on facilities that are beyond the Company's
16 point of delivery.
17 Q Right; so I've got a transformer on my
18 side of the fence and that's by definition, according to
19 you, not mixed with my other facilities, but if the
20 transformer is another 20 yards into the facility, does
21 that then become mixed?
22 Mr. Richardson, I'm not sure what theA
23 difficul ty is here. From the Company's point of
24 delivery, any Company-owned facilities beyond that point
25 that are contiguous with the Company's facilities is the
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297 YOUNGBLOOD (X)
Idaho Power Company
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.
.
1 Company's facilities. Beyond that point, beyond the last
2 piece of equipment that the Company owns, if the customer
3 has some facilities or continued distribution of the
4 electricity throughout their property, those are
5 customer-owned facilities. That is not mixed use
6 facilities. If the Company has facilities beyond its
7 point of delivery that are on the customer's property,
8 but at the point of demarcation of the last piece of
9 equipment all the rest of the equipment is
10 customer-owned, that is not mixed use.
11 What would be mixed use would be if there
12 are some Company-equipment beyond our point of delivery
13 that is on customer property and then beyond that point
14 there is some customer-owned facilities and beyond that
15 point there is some Company-owned facilities, then that
16 is an intermingling of facilities and that is mixed use.
17 That is what the Company does not want to continue. It
18 has grandfathered existing customers. It is not
19 incurring any additional mixed use facilities with new
20 customers on a facilities charge and is not proposing to
21 do that for the buyout option.
22 In your Rule M proposal , Exhibit 52 toQ
23 your testimony, I noticed that your consent that
24 consumers would sign does not actually state what the
25 facili ties charge is. Could you show me where you plan
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298 YOUNGBLOOD (X)
Idaho Power Company
1 to inform customers of how much this charge will be?.2 A Under item No. 2 there, it says, "This
3 service is provided at the Customer's request and at the
4 option of Idaho Power in exchange for the Customer paying
5 a monthly facilities charge to Idaho Power as listed in
6 Schedule 66 of Idaho Power's current and effective
7 tariff. " These are proposed new Rule M and in part of
8 the Rule M, this last sheet, page 3 of the Rule M, the
9 Consent and Acknowledgement Form, the Company has
10 proposed in recognition of the Industrial Customers'
11 assertion that customers did not know about facilities or
12 had not given their written endorsement of having a
13 facilities charge, the Company is trying to respond to.14 the Industrial Customers by committing to going out to
15 our industrial customers who have facilities charges and
16 having them sign this form.
17 Schedule 66 is a place where
18 non-traditional charges, miscellaneous charges are put
19 and the Company would update its Schedule 66 with the
20 facilities charge rate. Our hope is if the Commission
21 adopts or approves the reduction in the facilities charge
22 rate that the Company has proposed that that rate would
23 be 1.41 percent times the installed value or the initial
24 value and it would be represented on Schedule 66..25 Q So this form is entitled Consent and
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299 YOUNGBLOOD (X)
Idaho Power Company
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.
.
1 Acknowledgment Form; correct?
2 Correct.A
3 And I guess I have to ask the question,Q
4 why wouldn't you include what the monthly charge is on
5 the Consent and Acknowledgment Form?
6 Just for expediency. The Company did notA
7 want to have multiple forms with the charge out there so
8 that we go ahead -- that charge or that rate could change
9 over time, so if a customer signed a form, let's say a
10 customer signed the form today and that rate was 1. 7
11 percent, then a customer if the Commission approved the
12 request by the Company to reduce that rate, at a later
13 point in time that rate would go down. If a customer is
14 different from a Schedule 19 or a Schedule 24 or a
15 Schedule 15 or a 41 or special contract customer 29,
16 there may be a different rate incurred.
17 Q Do you think a customer's consent may be
18 influenced by what that rate is?
19 The customer would be knowledgeable ofA
20 that rate at that point in time.
21 Q Has that been your experience in the past
22 with your customers?
23 I have not been out with the customer. IA
24 cannot talk to that.
25 Q On page 19, lines 2 to 6 of your
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300 YOUNGBLOOD (X)
Idaho Power Company
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.
.
1 testimony, you state that the vast maj ori ty of the
2 Company's other facilities charge customers have
3 appreciated and benefited from the Company operating and
4 providing maintenance on facilities that they would have
5 had to pay for and maintain themselves. Do you have any
6 evidence supporting that statement?
7 A The evidence that we used to make that
8 determination was prior to today. We were aware of only
9 one customer out of the 240 who had issues or reasons or
10 concerns and that was the Simplot Company. As of today,
11 I believe we now have two other customers that may have
12 concerns or issues. We have not talked, to my knowledge
13 have not talked, to those customers and helped explain
14 what the benefits are of the facilities charge, so based
15 upon even that, three out of 240 customers, I think I
16 would still say that the vast majority of the Company's
17 other facilities charge customers have appreciated and
18 benefi ted from the Company operating and providing
19 maintenance on facilities that they would have to pay for
20 and maintain themselves.
21 That's just based upon your assumption,Q
22 though?
23 Based upon the fact that the facilitiesA
24 charge has been in place for a number of years, as you
25 have stated, and that we have not heard any other
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301 YOUNGBLOOD (X)
Idaho Power Company
.1 complaints, yes. The companies who are paying the
2 facilities charge continue to receive the same benefit
3 that they received from the beginning.
4 MR. RICHARDSON: Madam Chair, that's all I
5 have. Thank you, Mr. Youngblood.
6 THE WITNESS: Thank you.
7 COMMISSIONER SMITH: Thank you, Mr.
8 Richardson. Do you have questions?
9 COMMISSIONER REDFORD: I only have one
10 question.
11
12
.
.
EXAINATION
13
14 BY COMMISSIONER REDFORD:
15 Q In my 32 years of life, I've heard the
16 word levelized used in many ways, from a level for
17 levelizing wood to what you're talking about today, tell
18 me what levelized means.
19 A What I was trying to describe was that --
20 Q And I'm sure you did. I just didn't get
21 it.
22 A Well, apparently not, but what I was
23 trying to describe was that the revenue that would be
24 recovered through a non-levelized approach would be
25 exactly the same as one that would be recovered through a
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302 YOUNGBLOOD (Com)
Idaho Power Company
1 levelized approach, and in saying that, that means that.2 in a non-levelized approach, the customer would pay more
3 in the early years, perhaps paying more -- their bill
4 would be higher, and over the course of time, it would
5 decrease as the investment decreases. The levelized
6 methodology takes all of those and takes the -- it
7 creates or calculates an equal payment --
8 Q The average?
9 A -- the average for the entire period of
10 time, very much like, for example, your home mortgage,
11 that is
12 Q I don't want to talk about that.
13 A Okay. Well, yours is probably much.14 smaller than mine, unfortunately, but it is the same
15 amount over a period of time, rather than paying more in
16 the beginning of the 30-year mortgage than it is at the
17 end.
18 Q Why don't you use just the words differing
19 facilities charges per year?
20 A For which one?
21 Q It appears either one.
22 A What I'm trying to describe is the fact
23 and I think this is something --
24 COMMISSIONER REDFORD: I understand what.25 you're tal king about now, but that was just kind of a
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303 YOUNGBLOOD (Com)
Idaho Power Company
1 quip, so you don't need to answer that. Thank you. I.2 have no further questions.
3
4 EXAMINATION
5
6 BY COMMISSIONER SMITH:
7 Q At the risk of making it worse, I want you
8 to confirm what I believe I understand.
9 A Okay.
10 Q The chart on page 4 I analogize what it
11 seemed similar to me was tax depreciation. You can
12 either take accelerated or you can do straight line, but
13 when you get to the end, you've paid the same amount..14 A That is correct.
15 Q And the only thing that happens if you
16 change the time frame is that that crossover point moves.
17 A That is correct.
18 Q Okay; so what we have, too, then, is a
19 pool of assets, just like any other Uniform System of
20 Accounts class and assets come in and they get
21 depreciated over an average life and some are done and
22 some come in, but it never goes to zero because some are
23 always coming in.
24 A Correct..25 Q All right; so another approach if
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304 YOUNGBLOOD (Com)
Idaho Power Company
1 customers don't like a facilities charge is you just roll.2 all these costs into the revenue requirement number and
3 calculate a base rate using the total revenue requirement
4 instead of having separate charges that then are
5 subtracted from the total revenue requirement.
6 A It could be an approach. The concern is
7 that these are facilities that are solely for the use of
8 specific customers.
9 Q So what you were trying to do with the
10 facili ties charge is more closely align the recovery of
11 the expense from the entity who's benefiting from it?
12 A That is correct. What all of those
13 facili ties, including those facilities beyond the point.14 of delivery, so including those facilities that are
15 recovered under the facilities charge, all of those are
16 being recovered through base rates, and so is it prudent
17 for customers under base rates to be paying for
18 facili ties that are only used for a particular customer.
19 The Company's determination is that is not prudent and so
20 what we have done is a levelized approach to offset that
21 revenue requirement being paid by the class, so it is an
22 attempt, and it's not perfect in timing, but it is an
23 attempt to offset that revenue requirement determination
24 for the class..25 Q And in ratemaking, I always think of it as
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305 YOUNGBLOOD (Com)
Idaho Power Company
.
.
.
1 more of an art than a science and wi thin any customer
2 rate class there's always the issue and the reality of
3 intraclass subsidies.
4 Absolutely. A residential customer whoA
5 lives in a subdivision that is very old and has an old
6 transformer may be subsidizing a customer who is in a
7 brand new subdivision with a brand new transformer.
8 COMMISSIONER SMITH: Thank you. I think I
9 got it.
10 Any redirect?
11 COMMISSIONER REDFORD:Could I have just
12 one more question?
13
14
15
16
COMMISSIONER SMITH: Certainly.
EXAMINATION
17 BY COMMISSIONER REDFORD:
18
20
Q So Marsha's question that an old resident
19 might be subsidizing --
COMMISSIONER SMITH: A resident with old
21 facilities.
22 COMMISSIONER REDFORD: -- may beQ
23 subsidizing a resident with new facilities; correct?
24 Correct.A
25 Q When you're talking about pooling, are you
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306 YOUNGBLOOD (Com)
Idaho Power Company
.
.
.
20
1 talking about pooling assets for a particular company or
2 for the Company-wide assets?
3 A The Company-wide assets of distribution
4 facilities.
5 Q Okay; so that could be -- part of that
6 pooling could be the 1947 whatever and the 2012?
7 A Absolutely, and if the 1947 is on the
8 books and fully depreciated, there is no value for
9 that.
10 COMMISSIONER REDFORD:No further
11 questions. I think I'm fully convinced that I'm
12 confused.
13 COMMISSIONER SMITH: Mr. Williams.
14 MR. WILLIAMS: Yes, Madam Chair, just a
15 few redirect questions.
16
17 REDIRECT EXAMINATION
18
19 BY MR. WILLIAMS:
Q Mr. Youngblood, has the Company used a
21 levelized ratemaking approach in depreciating its assets
22 at the Hells Canyon generating station?
23 A I do not believe so.
24 Q So any comparison between using a
25 levelized approach that we use for a facilities charge
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YOUNGBLOOD (Di)
Idaho Power Company
307
1 and how we depreciate assets at Hells Canyon wouldn't be.2 appropriate?
3 A Correct.
4 COMMISSIONER REDFORD: Well, that's
5 because Idaho Power owns the facilities; is that correct?
6 MR. WILLIAMS: Is that for me or him?
7 THE WITNESS: The Company owns all of the
8 facilities, including those that are being charged the
9 facili ties charge.
10 COMMISSIONER REDFORD: This is generating
11 down into a discussion, I apologize. Zip it up, right?
12 Q BY MR. WILLIAMS: Mr. Youngblood, you
13 talked about this pooling of assets of 31 years, is it.14 normal to expect that some of the assets within that pool
15 will survive the 31-year average?
16 A Absolutely.
17 Q And is it normal to say that some of those
18 assets will last less than 31 years?
19 A Yes.
20 Q And the facilities charge customers get
21 the same level of service for their facilities regardless
22 of the age of those facilities?
23 A Yes.
24 Q Does the Company's cost to operate and
25 maintain facilities disappear once a particular asset is.
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308 YOUNGBLOOD (Di)
Idaho Power Company
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1 fully depreciated?
2 A No, the operation and maintenance expense
3 continues on.
4 Q Other than the handful of special
5 contracts the Company has, does the Company perform
6 individual revenue requirements for individual
7 customers?
8 A No.
9 Q Are you aware of whether or not this
10 Commission has approved that type of methodology?
11
12
A I am not aware.
Q Under the currently approved tariff on
13 file with the Commission, isn' t it true that Simplot has
14 the option to have the Company remove the facilities and
15 it can install its own facilities to do away with the
16 facilities charge?
17
18
A Yes, that is correct.
Q And isn't it true that in this case the
19 Company is providing an additional alternative wherein
20 Simplot can buyout the facilities?
21
22
A Yes, that is correct.
Q And just to be clear, as far as the
23 existing facilities charge rate, what the Company is
24 proposing is a reduction to that rate, the current rate;
25 is that correct?
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309 YOUNGBLOOD (Di)
Idaho Power Company
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.
1 A That is correct. For all three of the
2 rates, yes.
3 MR. WILLIAMS: No further questions,
4 Madam Chair.
5 COMMISSIONER SMITH: Thank you, and thank
6 you, Mr. Youngblood.
7 (The witness left the stand.)
8 COMMISSIONER SMITH: It is now my
9 intention to go to the Kroger witness who apparently
10 needs to be done today, and following that, we will go to
11 Mr. Richardson's witnesses and get Mr. Butler on his way,
12 and then depending on how long that takes, we will fit in
13 Ms. Hirsh, if necessary, or will she be here tomorrow?
14 MR. OTTO: She's able to be here
15 tomorrow.
16 COMMISSIONER SMITH: Does she plan to be
17 here?
18 MR. OTTO: Yes.
19 COMMISSIONER SMITH: Well, we'll see how
20 that goes and maybe we'll get you done today, and yes, we
21 are taking a break now until 3: 15.22 (Recess. )
23 COMMISSIONER SMITH: All right, we're
24 ready to go back on the record. We'll go to Ms. Kyler.
25 MS. KYLER:Kroger calls Kevin C. Higgins
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310 YOUNGBLOOD (Di)
Idaho Power Company
.1 to the stand.
2
3 KEVIN C. HIGGINS,
4 produced as a witness at the instance of The Kroger
5 Company, having been first duly sworn, was examined and
6 testified as follows:
7
8
9
10 BY MS. KYLER:
11 Q
DIRECT EXAINATION
Please state your full name and spell your
12 last name for the record.
.13 A My name is Kevin C. Higgins,
By whom are you employed and in what
I'm a principal in the firm Energy
Are you the same Kevin C. Higgins whose
20 direct and rebuttal testimony and exhibit were prefiled
.
14 H-i-g-g-i-n-s.
Yes, I am.
On whose behalf do you appear today?
I'm here on behalf of The Kroger
311 HIGGINS (Di)
The Kroger Company
15 Q
16 capacity?
17 A
18 Strategies.
19 Q
21 in this case?
22 A
23 Q
24 A
25 Company.
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.
1 Do you have your prefiled testimony andQ
2 exhibit with you on the stand?
3 Yes, I do.A
4 Do you have any changes or corrections toQ
5 your pre filed direct and rebuttal testimony or exhibit?
6 Yes, I have a spelling error in myA
7 rebuttal testimony that I need to correct.
8 Unfortunately, I misspelled the name of the witness for
9 the Conservation Parties, Ms. Hirsh. I inadvertently put
10 a "c" in her name, but I apologize and that error appears
11 on page 4 of my rebuttal, line 8 and line 14, as well as
12 page 5 of my rebuttal at line 2. That's my only
13 correction.
14 MS. KYLER: Kroger moves for the admission
15 of the direct and rebuttal testimony of Kevin Higgins
16 prefiled in this case, as well as Kroger Exhibit No. 501.
17 COMMISSIONER SMITH: If there's no
18 objection, we will spread the prefiled direct and
19 rebuttal testimony of Mr. Higgins upon the record as if
20 it had been read and identify Exhibit No. 501.
21 (The following pre filed direct and
22 rebuttal testimony of Mr. Kevin Higgins is spread upon
23 the record.)
24
25
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312 HIGGINS (Di)
The Kroger Company
.
.
.
1 Introduction
2 Q.Please state your name and business address.
3 A.Kevin C. Higgins, 215 South State Street,
4 Suite 200, Salt Lake City, Utah, 84111.
5 Q.By whom are you employed and in what capacity?
6 A.I am a Principal in the firm of Energy
7 Strategies, LLC. Energy Strategies is a private
8 consulting firm specializing in economic and policy
9 analysis applicable to energy production, transportation,
10 and consumption.
11 Q.On whose behalf are you testifying in this
12 proceeding?
13 A.My testimony is being sponsored by The
14 Kroger Co. ("Kroger"). Kroger is one of the largest
15 retail grocers in the United States, and has over 25
16 accounts served by Idaho Power, which together consume
1 7 over 30 million kWh per year. A large portion of Kroger's
18 load takes service under Schedule 9. Kroger's Schedule 9
19 load takes service at both secondary and primary voltage.
20 Q.Please describe your professional experience
21 and qualifications.
22 A.My academic background is in economics,
23 and I have completed all coursework and field
24 examinations toward a Ph. D. in Economics at the
25 University of Utah. In addition, I have served on the
313 HIGGINS, DI 1
The Kroger Company
.
.
.
1 adjunct faculties of both the University of Utah and
2 Westminster College, where I taught undergraduate and
3 graduate courses in economics. I joined Energy
4 Strategies in 1995, where I assist private and public
5 sector clients in the areas of energy-related economic
6 and policy analysis, including evaluation of electric and
7 gas utility rate matters.
8 /
9 /
10 /
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314 HIGGINS, DI la
The Kroger Company
.
.
.
1 Prior to joining Energy Strategies, I held policy
2 positions in state and local government. From 1983 to
3 1990, I was economist, then assistant director, for the
4 Utah Energy Office, where I helped develop and implement
5 state energy policy. From 1991 to 1994, I was chief of
6 staff to the chairman of the Salt Lake County Commission,
7 where I was responsible for development and
8 implementation of a broad spectrum of public policy at
9 the local government level.
10 Q.Have you testified previously before this
11 Commission?
12 A.Yes. I testified in Idaho Power's 2008
13 general rate case, Case No. IPC-E-08-102007; its 2007
14 general rate case, Case No. IPC-E-07-8; and in its 2003
15 general rate case, Case No. IPC-E-03-13.
16 Q.Have you testified previously before any other
17 state utility regulatory commissions?
18 A.Yes. I have testified in approximately
19 140 proceedings on the subjects of utility rates and
20 regulatory policy before state utility regulators in
21 Alaska, Arizona, Arkansas, Colorado, Georgia, Illinois,
22 Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri,
23 Montana, Nevada, New Mexico, New York, Ohio, Oklahoma,
24 Oregon, Pennsylvania, South Carolina, Texas, Utah,
25 Virginia, Washington, West Virginia, and Wyoming. I have
315 HIGGINS, DI 2
The Kroger Company
1 also filed affidavits in proceedings at the Federal.2 Energy Regulatory Commission.
3 /
4 /
5 /
6
7
8
9
10
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12
13.14
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24
25.
316 HIGGINS,DI 2a
The Kroger Company
1 Overview and Conclusions.2 Q.What is the purpose of your testimony in this
3 proceeding?
4 A.My testimony addresses the limited issue
5 of the appropriate level of the Energy Efficiency Rider,
6 Schedule 91.
7 Q.By way of background, is Kroger a party to the
8 Stipulation that has been filed in this case?
9 A.Yes. Kroger fully supports the
10 Stipulation package. The matter of the appropriate level
11 of the Energy Efficiency Rider has been reserved in
12 Section 11 (a) of the Stipulation as a contested issue.
13 Q.What is your recommendation to the Commission?.14 A.I recommend that the Commission approve
15 the Stipulation as filed. In addition, I recommend that
16 the Energy Efficiency Rider be reduced from 4. 75% to
17 3.40% to recognize that $11.2 million in demand response
18 program costs are being shifted from energy efficiency
19 funding into base rates pursuant to the Stipulation.
20 Even after my proposed reduction in the Energy Efficiency
21 Rider, the funding for non-demand-response programs will
22 increase by $1.2 million relative to pro forma levels due
23 to the underlying 4.1% rate increase proposed in the
24 Stipulation..25
317 HIGGINS, DI 3
The Kroger Company
.1 Energy Efficiency Rider Adjustment
2 Q.What is the current level of Idaho Power's
3 Energy Efficiency Rider?
4 A.The current level of Idaho Power's Energy
5 Efficiency Rider, Schedule 91, is 4. 75%.
6 Q.What is level of funding is recovered from this
7 rider?
8 /
9 /
10 /
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12
13.14
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23
24.25
318 HIGGINS, DI 3a
The Kroger Company
1 A.As shown in line 18, column (c) of Kroger.2 Exhibit No. 501, approximately $39.7 million would be
3 recovered through this rider in 2012 at current rates. i
4 Q.Please explain the basis of your proposed
5 adj ustment to the Energy Efficiency Rider.
6 A.Demand response program costs are
7 currently recovered through the Energy Efficiency Rider.
8 In its rate case filing, Idaho Power proposed to shift
9 recovery of these costs, which amount to $11.2 million,
10 into base rates. Idaho Power did not offer a
11 corresponding reduction in the Energy Efficiency Rider to
12 recognize this change.
13 The Stipulation accepts the shifting of cost.14 recovery from the Energy Efficiency Rider into base
15 rates, but reserves the question of the appropriate level
16 of the Energy Efficiency Rider.In my opinion, it would
17 be reasonable to reduce the Energy Efficiency Rider
18 charge to account for fact that $11.2 million in current
19 program costs will be recovered in base rates going
20 forward.
21 As shown in Kroger Exhibit No. 501 (line 18, column
22 f), non-demand-response program cost recovery through the
23 Energy Efficiency Rider at current rates amounts to $28.5
24 million (for 2012). This amount can be recovered - at.25 current rates - with a 3.4% rider charge. If this level
319 HIGGINS, DI 4
The Kroger Company
1 of rider charge is applied to the revenue requirement.2 recommended in the Stipulation, revenues to fund
3 non-demand-response program will increase by nearly $1.2
4 million to $29.6 million.2
5 /
6 /
7 /
8
9
10
11
12
13.14
15
16
17
18
19
20
21 i This calculation is consistent with Idaho Power Energy Efficiency
Rider revenues presented in Idaho Power Exhibits No. 47 (Sparks) and
22 No. 43 (Youngblood) and includes expected Energy Efficiency Rider
recovery from Hoku First Block sales effective January 1, 2012.
23 2 Additionally, going forward, $5.2 million in Custom Efficiency
costs will be booked as a regulatory asset, providing additional
24 headroom for non-demand-response programs relative to historical
funding levels..25
320 HIGGINS, DI 4a
The Kroger Company
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.
.
20
21
22
23
24
25
1 In light of these facts, I recommend that the Commission
2 reduce the Energy Efficiency Rider to 3.4%.
3 This approach allows for net growth in funding for
4 non-demand-response programs while being mindful of the
5 overall rate impacts being borne by Idaho Power
6 customers. In contrast, shifting $11.2 million into base
7 rates while raising those base rates by 4.1% - and
8 failing to adj ust the Energy Efficiency Rider charge
9 downward - would pose an unreasonable cost burden on
10 customers.
11 Q.If the Energy Efficiency Rider is reduced to
12 3.4%, how would this surcharge compare to those of other
13 utilities in the region that levy a percentage surcharge?
14 A.In Table KCH-l, below, I have compiled a
15 list of the utilities in the West, of which I am aware,
16 that levy a percentage surcharge for energy efficiency
17 program cost recovery.
18
19
321 HIGGINS, DI 5
The Kroger Company
.
.
22
23
24.
1 Table KCH-1
2 Percentage Energy Efficiency Riders in Western States
3 Utility DSM Rider
4 El Paso Electric (New Mexico)1.8052%
5 Public Service Co. of New Mexico 2.262%
6 Rocky Mountain Power (Idaho)3.40%
7 Rocky Mountain Power (Utah)3.70% (Industrial)/
3.91% (Residential)
8
Rocky Mountain Power (Wyoming)0.43% (Industrial)/1.87% (Residential)9
10
11 As shown in the table, a 3.4% surcharge is equal to
12 the surcharge approved for Rocky Mountain Power in Idaho,
13 but is still in the upper part of the
14 /
15 /
16 /
17
18
19
20
21
25
322 HIGGINS, DI Sa
The Kroger Company
.
.
.
1 range. Adopting my recommendation would result in a
2 surcharge for Idaho Power customers that is not out of
3 line with what is charged elsewhere in the region for
4 energy efficiency cost recovery.
5 Q.Please summarize your recommendation to the
6 Commission.
7 A.Kroger fully supports the Stipulation as
8 filed. In my opinion, it produces just and reasonable
9 rates and I recommend its adoption by the Commission.
10 The appropriate level of the Energy Efficiency Rider
11 remains a contested issue in this case. I recommend that
12 the Energy Efficiency Rider be reduced from 4. 75% to
13 3.40% to recognize that $11.2 million in demand response
14 program costs are being shifted from energy efficiency
15 funding into base rates pursuant to the Stipulation.
16 Even after my proposed reduction in the Energy Efficiency
17 Rider, the funding for non-demand-response programs will
18 increase by $1.2 million due to the underlying 4.1% rate
19 increase proposed in the Stipulation. The resulting 3.4%
20 rider is equal to the surcharge approved for Rocky
21 Mountain Power in Idaho, and is consistent with the level
22 of percentage surcharges levied elsewhere in the region
23 for energy efficiency cost recovery.
24 Q.Does this conclude your direct testimony?
25 A.Yes, it does.
323 HIGGINS, DI 6
The Kroger Company/
.
.
.
1 Introduction
2 Q.Please state your name and business address.
3 A.Kevin C. Higgins, 215 South State Street,
4 Suite 200, Salt Lake City, Utah, 84111.
5 Q.Are you the same Kevin C. Higgins who pre-filed
6 direct testimony in this case on behalf of The Kroger Co.
7 ("Kroger")?
8 A.Yes, I am.
9 Q.What is the purpose of your rebuttal testimony?
10 A.My rebuttal testimony responds to the
11 positions of other parties on the issue of the
12 appropriate level of the Energy Efficiency Rider,
13 Schedule 91. Specifically, I respond to proposals from
14 the PUC Staff to reduce the Rider from 4. 75% to 4.0% and
15 the NW Energy Coalition, the Idaho Conservation League,
16 and the Snake River Alliance - collectively the
17 Conservation Parties - to maintain the Rider at 4. 75%.
18 Q.Please summarize your rebuttal testimony.
19 A.In my direct testimony I recommend that
20 the Energy Efficiency Rider be reduced from 4.75% to
21 3.40%. I continue to recommend adoption of this
22 proposal. My proposal will increase the funding
23 available for energy efficiency programs by $6.35 million
24 relative to current funding levels, after taking into
25 account the fact that $16.4 million in Demand Response
324 HIGGINS, Reb 1
The Kroger Company
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.
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10
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25
1 and Custom Efficiency Incentives program costs are in the
2 process of being shifted from energy efficiency funding
3 into base rates, as pointed out by Staff wi tness Don
4 English.I
5 /
6 /
7 /
8
9
325 HIGGINS, Reb la
The Kroger Company
.
.
.
1 believe my proposal strikes the appropriate balance
2 between energy efficiency funding and customer rate
3 impacts.
4 PUC Staff proposes to reduce the Energy Efficiency
5 Rider to 4.0%. When taken in combination with the 4.1%
6 rate increase proposed in the Stipulation, Staff's
7 proposal increases net funding for energy efficiency by
8 $16.6 million relative to 2010 levels. I recognize and
9 appreciate that Staff is taking into account the transfer
10 of major program funding from the Energy Efficiency Rider
11 into base rates and is attempting strike a balance
12 between energy efficiency funding and customer rate
13 impacts. However, in my view, Staff's proposal is still
14 too heavily weighted toward increased program funding.
15 The Conservation Parties recommend that the Energy
16 Efficiency Rider remain at its current level of 4.75%.
17 The level of energy efficiency funding recommended by the
18 Conservation Parties represents an increase of
19 approximately $23 million relative to 2010 levels. In my
20 view, this is overreaching and should be rej ected by the
21 Commission.
22
23 Response to PUC Staff
24 Q.What does the PUC Staff recommend with respect
25 to the level of the Energy Efficiency Rider?
326 HIGGINS, Reb 2
The Kroger Company
1 A.PUC Staff witness Donn English recommends.2 that the Energy Efficiency Rider be reduced from 4. 75% to
3 4.0% .Mr. English points out two maj or considerations
4 to support his recommendation:(1) the shifting of
5 $11.25 million in demand response program costs from
6 energy efficiency funding into base rates pursuant to the
7 proposed Stipulation; and (2) the establishment of a
8 regulatory
9 /
10 /
11 /
12
13.14
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24.25
327 HIGGINS, Reb 2a
The Kroger Company
.
.
.
1 asset for Custom Efficiency Incentives pursuant to Order
2 No. 32245 that removes $5.2 million from energy
3 efficiency cost recovery.When taken in combination
4 with the 4.1% rate increase proposed in the Stipulation,
5 Mr. English points out that Staff's proposal actually
6 increases net funding for energy efficiency by $16.6
7 million relative to 2010 levels. This would be a 92%
8 increase in available energy efficiency funds after
9 moving the incentive payments for Demand Response
10 programs and incentives paid under the Custom Efficiency
11 program from DSM Rider funding into base rates.
12 Q.What is your response to Staff's proposal?
13 A.I appreciate that Staff is taking into
14 account the transfer of maj or program funding from the
15 Energy Efficiency Rider into base rates and is attempting
16 strike a balance between energy efficiency funding and
17 customer rate impacts. However, in my view, Staff's
18 proposal is still too heavily weighted toward increased
19 funding. A 92% increase in available energy efficiency
20 funds is too steep a ramp-up when customers are also
21 facing a rate increase.Greater weight should be given
22 t.o customer rate impacts.
23 As I stated in my direct testimony, my proposal to
24 reset the Energy Efficiency Rider to 3.40% would increase
25 the funding available for energy efficiency programs by
328 HIGGINS, Reb 3
The Kroger Company
.
13
. 14
16
17
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19
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22
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24
25.
1 $1.2 million when considering the shift in $11.25 million
2 in demand response program costs from energy efficiency
3 funding into base rates. But as Mr. English points out,
4 another $5.2 million is being shifted into base rates as
5 a result of the establishment of a regulatory asset for
6 Customer Efficiency Incentives pursuant to Order No.
7 32245. When this additional headroom is taken into
8 account, my proposal to reset the Energy Efficiency Rider
9 to 3.40% would
10 /
11 /
12 /
15
329 HIGGINS, Reb 3a
The Kroger Company
1 actually increase the funding available for energy.2 efficiency programs by $ 6.35 million.In my opinion,
3 this strengthens the case for a reduction in the Rider to
4 3.4%.
5
6 Response to Conservation Parties
7 Q.What do the Conservation Parties recommend with
8 respect to the level of the Energy Efficiency Rider?
9 A.As presented in the direct testimony of
10 Nancy Hirsh, the Conservation Parties recommend that the
11 Energy Efficiency Rider remain at its current level of
12 4.75%.
13 Q.What is the Conservation Parties' rationale for.14 retaining this level of charges in light of the headroom
15 that is created by the shifting of $16.4 million of
16 current funding into base rates?
17 A.Ms. Hirsh argues that the increased
18 revenue available should be used to: (1) pay down in one
19 year the $8 million balance owed by customers due to
20 prior period spending in excess of revenues collected;
21 (2) continue the level of program spending that led to
22 the $8 million balance owing; and (3) expand program
23 spending beyond this level by an additional $7 million
24 per year..25 Q.Do you believe this level of program expansion
330 HIGGINS, Reb 4
The Kroger Company
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1 is reasonable?
2 A.No. I do not agree that it is reasonable
3 to be expanding the funding to the degree advocated by
4 the Conservation Parties. As I discussed above, a 3.4%
5 Rider would increase energy efficiency funding by $6.35
6 million per year. At a Rider of 4.0%, Staff demonstrates
7 that its proposal would increase funding by $16.6 million
8 over 2010 levels. Maintaining the Rider at 4. 75% would
9 add
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331 HIGGINS, Reb 4a
The Kroger Company
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1 another $ 6.5 million per year to Staff's calculation.
2 Thus, the level of energy efficiency funding recommended
3 by Ms. Hirsh represents an increase of approximately $23
4 million relative to 2010 levels. In my view, this is
5 overreaching.
6 Q.Why shouldn't energy efficiency funding
7 continue to be expanded so long as it is cost effective?
8 A.Even if energy efficiency is
9 cost-effective it is still important to consider the
10 importance of short-term rate impacts. When energy
11 efficiency programs pass the standard tests used to
12 determine cost effectiveness it may be tempting to become
13 complacent about the potential short-term rate impacts of
14 the energy efficiency investments. So long as an
15 investment is cost effective, the argument goes, society
16 is better off if the investment is made, so we should
17 strive to make the incremental investment capital
18 available. What sometimes gets overlooked in this
19 si tuation is that energy efficiency cost-effectiveness is
20 measured (properly) over the life of the investment by
21 comparing it to the cost of supply-side alternatives.
22 Yet, the costs of the supply-side alternatives with which
23 energy efficiency competes are recovered from customers
24 in a very different manner than the cost of efficiency
25 investments: supply side costs are recovered from
332 HIGGINS, Reb 5
The Kroger Company
.1 customers over the life of the investment, e. g., 35
2 years, smoothing out the rate impact over time, whereas
3 efficiency investment costs typically are recovered in
4 full from customers by the utility upfront, i. e. ,
5 expensed in a single year.This mismatch between cost
6 recovery periods of supply-side and demand-side resources
7 explains, in part, why energy efficiency that is cost
8 effecti ve can nevertheless cause unreasonable rate
9 impacts in certain situations. Add to this the fact that
10 utility
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333 HIGGINS, Reb Sa
The Kroger Company
.1 energy efficiency programs are fundamentally structured
2 as cross subsidies among individual customers, and we
3 come to the obvious (but sometimes overlooked) conclusion
4 that short-term rate impacts do matter.
5 Q.What is your recommendation to the Commission
6 wi th respect to the proposal by the Conservation Parties
7 to continue the Energy Efficiency Rider at its current
8 level of 4.75%?
9 A.I recommend that the proposal be rej ected
10 in light of the additional headroom that is now
11 available.
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Q.Does this conclude your rebuttal testimony?
A.Yes, it does.
334 HIGGINS, Reb 6
The Kroger Company
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1 (The following proceedings were had in
2 open hearing.)
3 MS. KYLER: The witness is available for
4 cross-examination.
5 COMMISSIONER SMITH: Thank you.
6 Mr. Miller, do you have questions?
7 MR. MILLER: I do not. Thank you.
8 COMMISSIONER SMITH: Mr. Otto?
9 MR. OTTO: I do have just a few questions.
10
CROSS-EXAMINATION
15
BY MR.OTTO:
Q Good afternoon,Mr.Higgins.
A Good afternoon,Mr.Otto.
Q Have you reviewed Idaho Power's 2009
demand side management potential study?
A I have not.
Q Have you reviewed the 2011 IRP and its
16
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20 forecast in demand side management potential?
21 A I'm aware of the outputs of that analysis,
22 but I have not reviewed the entire analysis.
23 Q And what were the outputs as far as you
24 recall?
25 A The outputs being what is represented in
CSB REPORTING
[phone]
335 HIGGINS (X)
The Kroger Company
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1 Exhibi t No. 50 which is provided by Idaho Power, which I
2 understand ties in to the 2011 IRP.
3 Okay, and lastly, on page 5 of your directQ
4 you present a comparison oftestimony, you compare
5 various a selection of Western utili ties.
6 A Yes.
7 Q What is your basis for using a comparison
8 of rider levels of other Western utilities as a metric to
9 use when figuring Idaho Power's rider level?
10 I think that it's sometimes interestingA
11 and informative to see where similar charges stack up for
12 other utilities simply as a basic test of reasonableness.
13 Q For any of these other utili ties, have you
14 reviewed their potential levels of energy efficiency?
15 A I have not reviewed their specific studies
16 in that regard. I'm generally familiar with what some of
17 the obj ecti ves are in some of these states, such as
18 Utah.
19 So this was more of a comparison just on aQ
20 money basis?
21 It's a comparison based on a rate impactA
22 basis. These are the other utilities that charge a
23 percentage-based DSM rider and I think that it provides a
24 useful framework to see where the other utilities in the
25 West that have a similar type of rate design are with
CSB REPORTING
[phone]
336 HIGGINS (X)
The Kroger Company
.1 respect to the charges.
2 Q Wi th respect to the charges, but as you
3 said, you had not reviewed the amount of cost-effective
4 efficiency potential, whether they're achieving that or
5 not with the level of charge?
6 My understanding, for example, in Utah isA
7 that they have been producing energy efficiency
8 meeting energy efficiency targets that are cost effective
9 with their current rates, which they have just recently
10 proposed to lower to a 2.4 percent, and my understanding
11 is that that lines up with their proj ected efficient use
12 of demand side management.
.13
14
MR. OTTO: Okay, that's all I have.
COMMISSIONER SMITH: Thank you, Mr. Otto.
15 Mr. Richardson.
.
16 MR. RICHARDSON: Madam Chair, I have no
17 questions.
18 COMMISSIONER SMITH: Okay, Mr. Nelson.
19 MR. NELSON: Thank you. No questions.
20 COMMISSIONER SMITH: Mr. Olsen.
21 MR. OLSEN: No questions, Madam Chair.
22 COMMISSIONER SMITH: Mr. Purdy.
23 MR. PURDY: No questions.
24 COMMISSIONER SMITH: Mr. Howell -- Klein.
25 MR. KLEIN: None.
CSB REPORTING
[phone]
337 HIGGINS (X)
The Kroger Company
.1 COMMISSIONER SMITH: Mr. Williams.
2 MR. WILLIAMS: Yes, Madam Chair, just a
3 few questions.
4
5 CROSS-EXAMINATION
6
7 BY MR. WILLIAMS:
8 Q Mr. Higgins, have you been in the Hearing
9 Room all day today during the discussion of the
10 facilities charge among the witnesses?
11 A Yes.
12 Q Is it true that The Kroger Company is a
.13 facilities charge customer of Idaho Power?
14 MR. RICHARDSON: Madam Chair, I'm going to
15 obj ect. This witness hasn't addressed facilities charge
16 in his testimony and Mr. Williams is cross-examining him
17 on something that doesn't exist.
18 MR. WILLIAMS: Madam Chair, I wasn't aware
19 Mr. Richardson represented Mr. Higgins, nOr The Kroger
20 Company, and I think it's particularly relevant if The
21 Kroger Company has facilities charges. There has been
22 lots of facilities charge discussion today.
23 COMMISSIONER SMITH: I think it's
24 relevant, too, Mr. Richardson, so I'll allow the.25 question.
CSB REPORTING
[phone]
338 HIGGINS (X)
The Kroger Company
.1 MR. RICHARDSON: Thank you, Madam Chair.
2 Q BY MR. WILLIAMS: Mr. Higgins, the
3 question is does The Kroger Company have facilities
4 charges with Idaho Power?
5 A Yes.
6 Q And does The Kroger Company oppose the
7 existing facilities charge methodology and the resulting
8 rate reduction that's been proposed in this case?
9 A The Kroger Company is taking a neutral
10 posi tion on this issue, Mr. Williams. We have neither
11 challenged the facilities charge methodology that's
.
12 currently in place, nor do we oppose the parties that
13 have placed a challenge, so I would just characterize our
14 posi tion as neutral and wait and see what happens and see
15 if this changes in the future and we'll take it from
16 there.
17 MR. WILLIAMS: All right, thank you. No
18 further questions, Madam Chair.
19 COMMISSIONER SMITH: Do we have any
20 questions from the Commissioners?
21
22
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COMMISSIONER REDFORD: No.
COMMISSIONER SMITH: Redirect?
23 MS. KYLER: No, Your Honor.
24 COMMISSIONER SMITH: Thank you very much
25 for your help.
CSB REPORTING
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339 HIGGINS (X)
The Kroger Company
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1
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3
THE WITNESS: Thank you very much.
(The witness left the stand.)
COMMISSIONER SMITH: Mr. Richardson, we
4 will go to your witnesses now.
5 MR. RICHARDSON: Thank you, Madam Chair.
6 The Industrial Customers of Idaho Power call Dr. Reading
7 to the stand.
8 COMMISSIONER SMITH: Oh, wait a minute. I
9 was trying to get through the people who wanted to be
10 done today.
11 MR. RICHARDSON: Well, to be optimistic,
12 Dr. Reading shouldn't take all afternoon.
13
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15
COMMISSIONER SMITH: We have no optimism
where Dr. Reading is concerned.
THE WITNESS: Then, Madam Chair, the
16 Industrial Customers withdraws that and calls Mr. Butler
17 to the stand.
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COMMISSIONER SMITH: Thank you.
CSB REPORTING
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340 HIGGINS (X)
The Kroger Company
.1 DEL BUTLER,
2 produced as a witness at the instance of the Industrial
3 Customers of Idaho Power, having been first duly sworn,
4 was examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. RICHARDSON:
9 Q Mr. Butler, would you please state and
10 spell your name?
11 A Del Butler, B-u-t-l-e-r.
12 Q And are you the same Del Butler who caused
.13 prefiled testimony to be filed in this docket?
14 A I am.
15 Q And you have no exhibits to your
16 testimony, do you?
17 A No.
18 Q Thank you. Do you have any corrections or
19 additions to make to your testimony this afternoon?
20 A No.
21 Q Mr. Butler, if I were to ask you the same
22 questions you were asked in your prepared testimony this
23 afternoon, would your answers be the same?
24 A Yes, they would..25 MR. RICHARDSON: Madam Chair, I move that
CSB REPORTING
( 2 0 8 ) 8 9 0 - 519 8
341 BUTLER (Di)
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1 the prefiled testimony of Mr. Butler be spread upon the
2 record as if it were read in full.
3 COMMISSIONER SMITH: Seeing no obj ection,
4 it is so ordered.
5 (The following prefiled direct testimony
6 of Mr. Del Butler is spread upon the record.)
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CSB REPORTING
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342 BUTLER (Di)
ICIP
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1 Q. Please state your name, occupation, and
2 business address.
3 My name is Del Butler, Senior Director,A.
4 Business Development, J.R. Simplot Company, 1130 West
5 Highway 30, Pocatello, Idaho.
6 Please describe you educational background.Q.
7 A.I have a Bachelors Degree in Business
8 Administration, from Idaho State University.
9 Q.What is your work experience at the J. R.
10 Simplot Company?
11 A. I have worked for the J. R. Simplot Company for
12 39 years. I was the Plant Manager at the Don Plant in
13 Pocatello for nine (9) years, from 1998 to 2007.
14 Q. What is the purpose of your testimony?
15 A.The purpose of my testimony is to provide
16 customer insight into the Idaho Power facilities charge
17 for equipment located on our property and express my
18 concern over what I consider to be an unfair business
19 practice.
20 Q.Please explain in general terms the location
21 and products produced at J.R. Simplot Company's Don
22 Plant, which takes service from Idaho Power as a special
23 contract customer.
24 A.The Don Plant, located in Pocatello, Idaho
25 produces a full line of agricultural phosphate
343 Del Butler, DI 1
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1 fertilizer.
2
3
Q.How many people does the Don Plant employ?
A.The plant employs 350 to 360 regular employees,
4 with seasonal employment peaking around 450 to 500
5 workers in late spring.
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344 Del Butler, DI la
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1 Q. How much electricity does the Don Plant receive
2 from Idaho Power annually?
3 A.We routinely consume approximately twenty-one
4 (21) megawatts.
5 Q.Does the Don Plant pay Idaho Power a facilities
6 charge for electrical distribution equipment installed
7 and maintained beyond the point of deli very by Idaho
8 Power?
9 A.Yes.
10 Q.What types of equipment are included in the
11 Idaho Power facilities charge?
12 A.The charge includes typical higher-voltage
13 equipment such as transformers, switches, power poles,
14 and wiring.
15 Q.Could you explain your understanding of the
16 facilities charge when you were the Plant Manager at the
17 Don Plant?
18 A.As I understood it at the time, whenever we
19 needed equipment such as transformers, poles, or
20 swi tches, we would contact Idaho Power and they would
21 provide this equipment with no up-front charge.The
22 cost of the equipment plus installation would then be
23 added to the bill as a facilities charge. In effect, the
24 newly installed piece of equipment would become leased
25 equipment. Idaho Power was responsible for servicing and
345 Del Butler, DI 2
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1 maintaining the equipment. If the equipment failed and
2 required replacement once again, the asset would be
3 retired, the remaining book value would be zeroed out and
4 a new facility charge would be established based upon the
5 cost and installation of the new equipment installed in
6 place of the old equipment.
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346 Del Butler, DI 2a
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1 Q. Could you explain your current understanding of
2 the facilities charge?
3 As I understand it now, once a piece ofA.
4 equipment gets added to the facilities charge, we pay a
5 20.4% annual fee every year, forever. It never gets paid
6 off and we do not have the option to pay it off.
7 Addi tionally, if we ever wanted to purchase our own
8 equipment, Idaho Power has provided no reasonable
9 opportuni ty for us to do this.Essentially, we have no
10 choice and no options and we are stuck paying 20.4%
11 annually on an ongoing basis.
12 Do you know how much the original equipmentQ.
13 cost Idaho Power including installation?
14 A. I do, now. The total amount for the Don Plant
15 is $2,619,846.62.
16 How much does the Don Plant currently pay inQ.
17 facili ties charges annually for this equipment?
18 We pay $534,448.71 annually.A.
19 What is the average age of the facilitiesQ.
20 charge equipment at the Don Plant?
21 The average age of the Idaho Power equipment atA.
22 the Don Plant is 24.5 years. We've got sixty-three (63)
23 pieces of equipment that were installed in 1964,
24 forty-seven (47) years ago. I understand that Idaho
25 Power has informed us in this case that the annual rate
347 Del Butler, DI 3
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1 at the Don Plant has been 20.4% since 1976, and was 15%
2 annually from 1964 to 1976. For the equipment dating
3 back to 1964, we have paid $534,330 to date for equipment
4 that cost $75,791 installed. We have paid for these
5 sixty-three (63) items more than seven (7) times already.
6 Q.What is the total dollar amount that the Don
7 Plant has paid to Idaho Power for facilities charge
8 equipment currently installed?
9 /
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348 Del Butler, DI 3a
ICIP
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1 A.J. R. Simplot Company has been paying a
2 facili ties charge at the Don Plant since 1964, for the
3 past forty-seven (47) years, on equipment that was
4 installed as early as 1964. We have estimated, based on
5 the historic rates Idaho Power has provided to us in this
6 case, for $2.6 million in currently installed equipment,
7 we have now paid $10,027,224. This does not include the
8 time-value of money, and if we included that, the actual
9 cost would be much higher.
10 Q.How did you become aware of the facilities
11 charge?
12 A.I have always been aware of the facilities
13 charge at the Don Plant, but the full extent of this
14 unfair business practice was brought to my attention this
15 fiscal year by our Corporate Energy Manager, Don
16 Sturtevant.
17 Q.Has Idaho Power ever requested your written
18 consent, as a plant manager at J. R. Simplot Company to
19 install any facilities beyond the point of delivery at
20 your plants?
21 No.I have never given formal consent that IA.
22 understood the facilities charge equipment would be
23 charged an annual 20.4% fee, never be paid off, and have
24 no option to be paid off ever.
25 Are you aware of such consent given by anyQ.
349 Del Butler, DI 4
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1 other J. R. Simplot Company officials?
2 A.No.
3 Q.What insurance requirements does J. R. Simplot
4 Company require of electrical contractors that conduct
5 work on its property?
6 A.The J. R. Simplot Company requires all
7 contractors, electrical or otherwise, to provide a $5
8 million insurance liability policy.
9 /
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350 Del Butler, DI 4a
ICIP
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1 Does Idaho Power's ownership and management ofQ.
2 electrical equipment on plants owned by J. R. Simplot
3 Company concern you from a liability perspective?
4 Absolutely.The safe and reliable operationA.
5 of the facility could easily be impacted by the
6 interruption of power and the liabilities that go along
7 with that loss.
8 Do you think it is fair for Idaho Power to continueQ.
9 charging the facilities charge rate for Idaho Power's
10 initial investment made an average of 24 years ago?
11
12
A.No.
Q.Idaho Power has offered a reduction in the
13 annual facilities charge from 20.4% of the initial
14 investment to 17.00%. Please explain your thoughts on
15 that.
16 A.For the Don Plant, we have paid for this
17 equipment many times already. Simply providing a small
18 reduction in the rate is not fair.
19 Q.When you were responsible for the Don Plant
20 operations, what was your understanding of the options
21 provided by Idaho Power's facilities charge for the
22 customer to stop paying the charge?
23 A.I believed that there were no options and that
24 we were required to pay the facilities charge.
25 What is your current understanding of Simplot' sQ.
351 Del Butler, DI 5
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1 options regarding the facilities charges?
2 A.We currently do not have any option other than
3 to require Idaho Power to remove their facilities and
4 replace their system with our own. However, as I
5 understand it, we must pay Idaho Power for the remaining
6 book value, plus the cost to remove the facilities, minus
7 a credit
8 /
9 /
10 /
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352 Del Butler, DI 5a
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1 for the salvage value of the equipment, if any.This
2 would be a substantial cost and would not be a
3 financially responsible al ternati ve.
4 Do you consider it fair for Idaho Power toQ.
5 refuse to sell the equipment to you at a fairly
6 negotiated value?
7 A.No.
8 If you had the choice, how would you proposeQ.
9 Idaho Power address the problems you see with its
10 facilities charge?
11 A.We have paid for our current facilities-charge
12 equipment more than three times already at the Don Plant.
13
14
I believe that Idaho Power has already recovered its
ini tial costs and any authorized rate of return several
15 times over. At this point, it would only be fair to
16 simply turn ownership of these facilities over to J. R.
17 Simplot Company.
18 In addition, I believe it is imperative that the
19 Commission seriously reform the facilities charge
20 structure and stop this unfair business practice. I
21 fully support the recommendations contained in the direct
22 testimony of Dr. Don Reading, which would make the
23 monthly charge fair for those customers who wish to pay
24 it and would provide reasonable mechanisms by which
25 customers may take over ownership of equipment on their
353 Del Butler, DI 6
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A.
Q.Does this conclude your testimony?
Yes.
354 Del Butler, DI 6a
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.1
2 open hearing.)
(The following proceedings were had in
MR. RICHARDSON: Madam Chair, Mr. Butler
4 is available for cross-examination.
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6 Otto.
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9 Nelson.
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19 few.
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22
23 BY MR. WILLIAMS:
24
25
Q
A
COMMISSIONER SMITH: Thank you. Mr.
MR. OTTO: No questions, Madam Chairman.
COMMISSIONER SMITH: All right, Mr.
MR. NELSON~ No questions.
COMMISSIONER SMITH: Olsen.
MR. OLSEN: No questions.
COMMISSIONER SMITH: Purdy.
MR. PURDY: None. Thank you.
COMMISSIONER SMITH: Klein?
MR. KLEIN: None, thanks.
COMMISSIONER SMITH: On the Company.
MR. WILLIAMS: Yes, Madam Chair, just a
CROSS-EXAINATION
Good afternoon, Mr. Butler.
Good afternoon.
355 BUTLER (X)
ICIPCSB REPORTING
[phone]
1 Q Your testimony states that you're the.2 former manager of the Simplot Don plant; is that
3 correct?
4 A That's correct.
5 Q And in what year~ were you the plant
6 manager?
7 A From 1998 to 2007.
8 Q Okay. What does the term or phrase
9 "special contract" mean to you in the context of your
10 electric utility bills?
11 A I don't know that it necessarily --
12 MR. RICHARDSON: Could you give me a
13 reference to the testimony?.14 MR. WILLIAMS: I'm just asking if the
15 phrase "special contract" means anything to the witness.
16 I'm not asking about his testimony.
17 MR. RICHARDSON: I'm just wondering where
18 in his testimony you find that.
19 MR. WILLIAMS: I'll rephrase the question,
20 Madam Chair.
21 COMMISSIONER SMITH: Thank you.
22 Q BY MR. WILLIAMS: Are you aware that Idaho
23 Power has a special contract with Simplot for the
24 electric service it provides to the Don plant?.25 A I don't know that I would characterize it
CSB REPORTING
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356 BUTLER (X)
ICIP
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1 as special. I was aware of the working agreement that
2 we've had with Idaho Power for a number of years from
3 working at the Don plant.
4 Q So are you aware that the most recent
5 special contract between Idaho Power and Simplot for
6 providing electricity service to the Don plant was
7 negotiated in 2004?
8 A I don't know that I would characterize
9 that there was a special contract, once again.
10 Q Are you denying that a special contract,
11 Schedule No. 29, exists between Idaho Power and Simplot
12 for the Don plant?
13 A I'm not denying that there was one that
14 existed.It's not one that I had seen.
15 Q So to be clear, you were the plant manager
16 during 2004, but yet, you weren't a party for Simplot's
17 side for negotiating the terms and conditions of that
18 agreement?
19 A No, I was not.
20 Q So then you wouldn't be aware that that
21 special contract explicitly contains a provision whereby
22 the Company agrees to provide the facilities charge
23 service and Simplot specifically agrees to pay the
24 facilities charge service?
25 Over a number of years of working withinA
CSB REPORTING
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357 BUTLER (X)
ICIP
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1 the facility I was aware that there was a facilities
2 charge. The exact circumstances that were and conditions
3 around that facilities charge were never presented to me
4 in writing or asked for approval or sign-off.
5 Q So I guess who at Simplot, then,
6 negotiated that agreement or would have been responsible
7 for negotiating that agreement?
8 A I would anticipate that the individuals
9 back at that time may have been David Hawk would have
10 been involved in the negotiation of the contract and then
11 someone from the senior executive staff with signing
12 authori ty would have signed that particular agreement.
13 MR. WILLIAMS: No further questions for
14 this witness, Madam Chair.
15 COMMISSIONER SMITH: Thank you. Do we
16 have any questions from the Commissioners?
17 COMMISSIONER REDFORD: No.
18 COMMISSIONER SMITH: Any redirect?
19 MR. RICHARDSON: No redirect,
20 Madam Chair.
21 COMMISSIONER SMITH: Thank you very much,
22 appreciate your being here.
23 MR. RICHARDSON: Madam Chair, may this
24 witness be excused?
25 COMMISSIONER SMITH: Seeing no obj ection,
CSB REPORTING
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358 BUTLER (X)
ICIP
1 this witness is excused..2 MR. RICHARDSON: Thank you.
3 (the witness left the stand.)
4 MR. RICHARDSON: I call Dr. Reading.
5
6 DON C. READING,
7 produced as a witness at the instance of the Industrial
8 Customers of Idaho Power, having been first duly sworn,
9 was examined and testified as follows:
10
11 DIRECT EXAMINATION
12
13 BY MR. RICHARDSON:.14 Q Dr. Reading, would you please state and
15 spell your name for the record?
16 A Don C. Reading, R-e-a-d-i-n-g.
17 Q And are you the same Dr. Reading who
18 caused prefiled testimony and Exhibits No. 301 through
19 308 to be prepared and filed in this case?
20 A Correct.
21 Q Do you have any corrections or additions
22 to make to your prefiled testimony or exhibits?
23 A Yes, I have two.
24 A Would you make those now, please?.25 A Yes, one kind of technical and one kind of
CSB REPORTING
[phone]
359 READING (Di)
ICIP
meaning something. The first one would be on page 7,1.2 line 13. At the very end of the sentence there it says
3 "2.05%." To risk having my Ph.D. revoked, that should
4 say either "2.05 percentage points" or say "205 basis
5 points. " There's a difference between percentage points,
6 basis points and percent.
7 COMMISSIONER SMITH: Just a little decimal
8 thing.
9 THE WITNESS: What?
10 COMMISSIONER SMITH: Just a little decimal
11 thing.
12 THE WITNESS: Yeah, fussy, fussy. It's.13 the bank. They worry so about decimal points. The
14 second one is page 9, lines 10 and 11. I make the
15 statement that the Company has not proposed to update the
16 special contract. That is not a correct statement. The
17 contract, as I understand it, refers to a tariff and as
18 Mr. Youngblood's testimony on page 17 points out, the
19 tariff that would apply there has been updated.
20 COMMISSIONER SMITH: I missed the
21 reference.
22 THE WITNESS: What?
23 COMMISSIONER SMITH: I missed the page and
24 line reference..25 THE WITNESS: Oh, page 9, lines 10 and 11
CSB REPORTING
[phone]
360 READING (Di)
ICIP
1 starting on the first full sentence on line 10..2 COMMISSIONER SMITH: Thank you.
3 THE WITNESS: Eliminate that.
4 Q BY MR. RICHARDSON: Strike that
5 sentence?
6 A Yes.
7 Q Dr. Reading, with those corrections, if I
8 were to ask you the questions that you were asked in your
9 prefiled testimony today, would your answers be the
10 same?
11 A Yes, they would.
12 MR. RICHARDSON: Madam Chair, I move that
13 the prefiled testimony of Dr. Reading be spread upon the.14 record as if it were read in full and Exhibits No. 301
15 through 308 be marked for identification purposes.
16 COMMISSIONER SMITH: Without obj ection, it
17 is so ordered.
18 (The following prefiled direct testimony
19 of Dr. Don Reading is spread upon the record.)
20
21
22
23
24.25
CSB REPORTING
[phone]
361 READING (Di)
ICIP
.1 Q.Would you please state your name, address, and
2 occupation?
3 My name is Don Reading. I am a regulatory andA.
4 utilities economist employed with Ben Johnson Associates,
5 in Boise, Idaho. The Industrial Customers of Idaho Power
6 (ICIP) have retained my consulting service to investigate
7 Idaho Power's request to increase its rates and charges
8 for electric service in Idaho.
9 Q.Have you prepared an exhibit that describes
10 your qualifications in regulatory and utility economics?
11 A.Yes. I am sponsoring ICIP Exhibit 301, which
12 contains my curriculum vitae.
.13
14
15
Q. Have other exhibits been prepared in support of
this testimony?
A.Yes. I am also sponsoring several exhibits
16 containing Idaho Power's responses to discovery requests
17 and other correspondence, which I will describe below.
.
18 Q.What is the purpose of your testimony in this
19 case?
20 ICIP entered into a Stipulation settling manyA.
21 issues in this case, which was submitted for Commission
22 approval on September 24, 2011. The Stipulation listed
23 Unresolved Issues under paragraph 11.Those issues
24 include the facilities charge rate determination
25 methodology and issues relating to ownership of
362 Dr. Reading, DI 1ICIP
1 facilities subject to the facilities charge, as well as.2 the proper level of the Energy Efficiency Rider. My
3 testimony will address these two unresolved issues.
4 Q. Lets turn to the first section of your
5 testimony. Could you please describe the currently
6 effective facilities charge on Idaho Power's system?
7 A.For Schedule 9, 19 and Special Contract
8 Customer Schedule 29, the facilities charge currently is
9 a 20.4% annual charge, which is assessed on customers'
10 bills as a 1. 7 % monthly charge. The charge is the
11 Company's rate recovery mechanism for the Company's
12 /
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15
16
17
18
19
20
21
22
23
24.25
363 Dr. Reading, DI la
ICIP
1 investments in Company-owned distribution facilities that.2 are on the customer's property beyond the point of
3 delivery. These facilities are usually comprised of
4 poles, wires, transformers, switches, meters, etc., that
5 are needed to provide power to the customer. The
6 principal investment amount on which the customer is
7 charged 20.4% annually is the total of the undepreciated
8 sum of all the investments the Company has made in
9 equipment currently in use at the individual customer's
10 premises, irrespective of the year the investment was
11 made. In other words, the Company's facilities charge
12 imposes a 20.4% annual payment on the initial investment
13 in the Company-owned distribution facilities on the.14 customer's property. The principal investment amount
15 changes only when a new piece of equipment is installed
16 or existing equipment is replaced. If a piece of
17 equipment is replaced, the investment amount for the
18 original equipment is removed from the investment total
19 and replaced by the cost of the new replacement
20 equipment. i
21 Q.Could you provide an overview of your
22 recommendation with regard to Idaho Power's facilities
23 charge?
24 A.As I will explain in more detail below, I.25 recommend that Idaho Power's proposed revised facilities
364 Dr. Reading, DI 2ICIP
1 charge percentage of 17.00% should be re-calibrated to.2 take into account the lower rate of return and other cost
3 components that will result from approval of the
4 Stipulation in this case. I also recommend that the
5 Commission require the Company to calculate the monthly
6 facili ties charge using the depreciated value of the
7 ini tial investment in distribution facilities in
8 /
9 /
10 /
11
12
13.14
15
16
17
18
19
20
21 i There is no facilities charge language or percentage
charge amount contained in tariffs for Schedules 1, 7, or 15,
22 however the Company's cost of service study in this docket
indicates $128,677 (2.1%) of the total facilities charge
23 revenue is being collected from customers in these rates
classes. There is facilities charge language and the 20.4%24 annual rate contained in Schedule 24, but there is no
facili ties revenue collected from that class..25
365 Dr. Reading, DI 2a
ICIP
.
.
.
1 use at a customer's premises, not Idaho Power's existing
2 and proposed method which ignores depreciation regardless
3 of the age of the equipment. Further, I recommend that
4 the Commission require Idaho Power to provide customers
5 with the option to own or purchase facilities charge
6 equipment based on a fair calculation of the depreciated
7 book value of the facilities. Finally, I recommend
8 several changes to the facilities charge tariff and
9 recommend notices be sent to customers to provide for,
10 and inform customers of, the charge and the ownership
11 options.
12 Q.How much does the Company receive in facilities
13 charges revenue annually?
14 A.According to the cost of service study filed in
15 the current docket, Idaho Power expects to collect
16 $6,0201018 for these facilities beyond the point of
17 delivery from customers for the test year. The following
18 pie chart displays the revenue collected from each
19 customer class.
20 /
21 /
22 /
23
24
25
366 Dr. Reading, DI 3
ICIP
.
.
.
10
11
12
13
14
15 /
16 /
17 /
1 Graph 1
2 Idaho Power Facilities Charge - 2011 COS
$13,879,0%
3
6
W1JR SIMPLOT SC
$119,0%
$1,573,678,
26%4
5 . RESIDENTIAL (1)
. GEN SRV PRIMARY (7)
ir GEN SRV PRIMARY (9P)
7 e:AREA LIGHTING (15)
8 t'lG POWER PRIMARY (19P)
9 OMUNY ST LIGHT (41)
$67,981,1%
As depicted above, three-fifths of the revenue (61%) is
collected is from Schedule 19 customers,
18
19
20
21
22
23
24
25
367 Dr. Reading, DI 3a
ICIP
1 wi th 26% coming from Schedule 9 customers, and 9% from.2 the J. R. Simplot Company Special Contract Schedule 29 for
3 facili ties at their Don Plant in Pocatello. These three
4 customer classes make up 96% of the total facilities
5 charges collected.
6 Q.You stated that Idaho Power is charging
7 Schedule 9, 19, and 29 customers for Company-owned
8 facilities beyond the point of delivery at a rate of
9 20.4% annually. How does the Company derive this 20.4%
10 rate?
11 A.When I began investigating the derivation of
12 the facilities charge amount in March 2010, I reviewed
13 the Commission's docket that discussed facilities.14 charges. I found the most recent Commission Order
15 addressing the derivation of the facilities charge was
16 Case No. U-I006-298 in 1988. In Order 21836 in that case
17 the Commission stated:
18 This case was initiated by Idaho Power's Application
19 on August 27, 1987, to implement a new line
20 extension tariff Schedule No. 71. By Order No.
21 21475 issued in this case and in Idaho Power's
22 general rate Case No. U-I006-265A, we added two
23 additional issues at the behest of several Idaho
24 cities:.25 (1) Are the existing charges in tariff Schedules
368 Dr. Reading, DI 4ICIP
.
.
.
1
2
3
4
5
6
7
8
9
10
11 /
12 /
13 /
14
15
16
17
18
19
20
21
22
23
24
25
15 and 41 providing for 1.75% monthly rate for
underground/ overhead costs differences in line
extension requests excessive?
(2) Is the existing charge in tariff Schedule 19
for 1.7% monthly facilities charges excessive?
These issues were residual issues that through
inadvertence were unaddressed in Case No.
U-I006-265A. No party opposed these existing
charges at either the prehearing conference or the
hearing in this proceeding. The Cities did not
369 Dr. Reading, DI 4a
ICIP
participate in either. The Staff stated that it1.2 reviewed the charges and that the charges were
3 reasonable. Accordingly, we find that the two
4 charges in question are reasonable and lay this
5 issue to rest. 2
6 The cities addressed the facilities charge issue in the
7 original case, however the issue appears to have been
8 overlooked and not litigated. There have been no orders
9 since the 1987 review of the methodology, and the
10 methodology and its inputs have been the same for at
11 least the past 23 years. 3
12 Q.Please describe how the Company justified the.13 20.4% annual rate in 1987.
14 A. The philosophy behind the development of the
15 facilities charge is to calculate a charge to the
16 individual customer that mirrors the costs the Company
17 would incur for an equivalent investment. The charge is
18 intended to cover costs associated with the investment
19 and operation of distribution equipment on the customer's
20 property such as taxes, operations and maintenance,
21 administration and general, etc., and provide the Company
22 with a fair return on its investment just like any other
23 rate based equipment. Specifically, the Company has
24 determined the facilities charge should be made up of.25 nine elements. Table 1 below indicates the percentage
370 Dr. Reading, Dr 5ICIP
.
.
.
10
11
1 levels for each of the elements filed by
2 /
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4 /
5
6
7
8
9
12
13
14
15
16
17
18
19
20 2 Order No. 21836, Case No. U-1006-298 (1988).
21 3 In Order No. 29576 approving the currently effective Special
Contract between Idaho Power and the J. R. Simplot Company, the
22 Commission stated, "Section 7.2 of the 2004 Agreement sets forth the
monthly Facilities Charge that Simplot agrees to pay for the use of
23 the Company's distribution facilities. Under the 2004 Agreement, the
monthly facilities charge remains unchanged at 1.7% per month."
24 Order No. 29576, Case No. IPC-E-04-14, at p.2. That order did not
analyze the facilities charge methodology.
25
371 Dr. Reading, DI Sa
ICIP
1 Idaho Power in Case U-I006-298..2 Table 1
3 Summary Facilities Charge
4 Costs Schedule 19; U-I006-
5 298
6 Rate of Return 9.902%
7 Depreciation 0.560%
8 Income taxes 2.119%
9 Property tax 0.880%
10 Other taxes 0.250%
11 Operation & Maint 4.643%
12 Admin & General 1. 556%.13 Working capital 0.194%
14 Insurance 0.379%
15 Total 20.483%
16
17 Monthly Rate 1. 71%
18 Q.Do you know how the Company calculated the rate
19 of return factor of 9.902% used in deriving the 1987
20 facilities charge from Case No. 0-1006-298?
21 A.Work papers filed by Idaho Power in that case
22 indicate that 9.902% was the overall rate of return for
23 the Company in 1987. They assumed a capital structure of
24 50% debt, 10% preferred stock, and 40% common stock. The.25 Company used 7.976% for debt, 10.140% for preferred
372 Dr. Reading, DI 6
ICIP
1 stock, and an equity return of 12.250% for a weighted.
.
.
2 cost of capital of 9.902%.
3 /
4 /
5 /
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
373 Dr. Reading, DI 6a
ICIP
1 Q.Has the rate of return in the facilities charge.2 been 9.902% since 1987?
3 A.Yes. The Company has not updated the charge
4 since 1987.
5 Q.Is this calculation consistent with the
6 Company's authorized rates of return since 1987?
7 A.No. Idaho Power's current weighted cost of
8 capital is 8.18%, and it has been below the level used in
9 the 1987 facilities charge calculation since 1994. In
10 fact, the rate of return component for the facilities
11 charge has been higher than Idaho Power's authorized rate
12 of return since 1994. I have attached as ICIP Exhibit
13 No. 302 Idaho Power's Response to ICIP' s Production.14 Request No. 28, wherein Idaho Power sets forth its
15 Commission-approved authorized rate of return in general
16 rate cases since 1987. The authorized rate of return was
17 set at 9.199% in 1994, 7.852% in 2002, 8.1% in 2005, 8.1%
18 in 2007, and 8.18% in 2008. At all times since 1987, the
19 rate of return component of the facilities charge has
20 been 9.902%, which has exceeded Idaho Power's actual
21 authorized rate of return for the last 17 years, at times
22 by as much as 2.05 percentage points.
23 Q.Has Idaho Power explained why it has not
24 lowered the authorized rate of return in the facilities.25 charge since 1987?
374 Dr. Reading, DI 7ICIP
A. Idaho Power's response contained in ICIP1.2 Exhibit No. 302 is that Idaho Power conducted "periodic
3 validations" to verify that the facilities charge was
4 accurate. Prior to this general rate case, other
5 representatives of the ICIP and I met with Idaho Power to
6 discuss this charge and the failure to update the rate of
7 return since 1987. The Company indicated they believed
8 that the depreciation rate was set too low at 0.560% in
9 1987, and according to the Company, depreciation should
10 have been set at a straight line value for 31 years at
11 3.226% (1/31=.03226). According to the Company, the
12 over-statement of the rate of return and the.13 /
14 /
15 /
16
17
18
19
20
21
22
23
24.25
375 Dr. Reading, DI 7a
ICIP
.
.
.
1 understatement of the depreciation rate essentially
2 canceled each other out so the impact on the overall rate
3 would not change significantly.
4 During those meetings before this rate case,Q.
5 did the Company state the charge was still accurately set
6 at 20.4% annually?
7 A.The Company did provide the ICIP with an
8 updated facilities charge calculation based on 2009
9 actual charges that would result in a facilities charge
10 rate that would be essentially the same as the one
11 calculated 23 years ago. The Table 2 below displays the
12 updated value supplied by Idaho Power prior to this rate
13
14
15
16
20
21
22
23
case, with the percentage differences from the
calculation approved in 1987.
Table 2
17
Idaho Power Company
Facilty Charges
Summary of Facilties Charges
2010
(based on 2009 actual charges)18
Percentage
Points
Difference
-3.03%
2.67%
2.60%
-0.38%
-0.23%
-1.13%
-0.37%
0.10%
-0.08%
0.14%
19 Updated
Rate 19
6.870%
3.226%
4.722%
0.497%
0.020%
3.518%
1.185%
0.2900Ai
0.317%
20.64%
24
Items
Rate of Return
Book Depreciation
Income Taxes
Property Taxes
Other Taxes
Operation & Maintenance
Administrative & General
Working Capital
Insurance
Total
25
376 Dr. Reading, DI 8
ICIP
1 Q.Has the Company filed for a new facilities.2 charge in this general rate case?
3 A.Yes.The Company has proposed a new facilities
4 charge calculation,which is set
5 /
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8
9
10
11
12
13.14
15
16
17
18
19
20
21
22
23
24.25
377 Dr.Reading,DI 8a
ICIP
1 forth in Mr. Scott Sparks Direct Testimony and Exhibits..2 The Company's proposal before the Commission in this case
3 is to lower the percentage rate, and it therefore appears
4 to concede that the 20.4% charge has been set too high.
5 Q.What is the Company's proposed revision to the
6 charge in this case?
7 A.For Schedule 19, the Company has proposed a
8 rate of 16.92% rounded up to 17% annually, or 1.41%
9 monthly, and still proposes to assess that charge as a
10 monthly percentage of the undepreciated initial
11 investment in all distribution facilities installed at an
12 indi vidual customer's premises in the month of the
13 charge. Because the Company's charge for Schedule 9.14 cross references the charge for Schedule 19, this 17%
15 annual charge would also apply to Schedule 9. The
16 Company has also proposed to update the rate for
17 Schedules 15 and 41, but those parties do not appear to
18 challenge the charge.
19 Q.Are you challenging how the Company derives
20 the facilities charge in this case?
21 A.Yes.A charge of 17% annually assessed into
22 perpetui ty against the initial investment in equipment
23 that will never be amortized or depreciated is an
24 excessive charge. The percentage rate should be.25 calculated based on the lower rate of return and other
378 Dr. Reading, DI 9ICIP
1 costs contained in the Stipulation adopted in this case..2 Most importantly with regard to arriving at a fair
3 calculation of the monthly charge, the principal amount
4 of the initial investment in distribution facilities must
5 be depreciated over time as the equipment ages, just as
6 the principal amount of any other rate based asset
7 depreciates over time. As I will explain below, to treat
8 the facilities charge otherwise would result in
9 individual customers subsidizing the rest of the customer
10 class and, depending on how the over-charge is actually
11 credited or not credited to other customers,
12 /.13 /
14 /
15
16
17
18
19
20
21
22
23
24.25
379 Dr. Reading, DI 9a
ICIP
.
.
.
1 may even over-inflate Idaho Power's revenues for
2 equipment that is partially or wholly depreciated.
3 Finally, I recommend that the Commission allow
4 certain customers to take over ownership and control of
5 distribution facilities on their property under more fair
6 and reasonable terms than Idaho Power has offered to
7 date.
8 Q.Could you please explain in detail how the
9 facilities charge is calculated and impacts rates?
10 A.According to work papers and discovery
11 responses the Company has provided to ICIP in this case,
12 the Company appears to derive the facilities charge rate
13 by using costs from distribution facilities equipment on
14 the Company's own side of the meter. The Company
15 initially includes all of the distribution equipment,
16 including the equipment subj ect to the facilities charge
17 in the Company's rate base. But the Company has
18 identified the components of standard distribution
19 equipment that it believes should be allocated to an
20 individual customer for use of distribution facilities on
21 the customer's own property. The Company has used FERC
22 Form 1 account figures to calculate the percentage amount
23 for each identified component that it believes it would
24 need to recover from an individual customer to recover
25 the amounts that it has placed in rate base for these
380 Dr. Reading, DI 10
ICIP
.
.
.
1 distribution facilities on the customer's side of the
2 meter. In that manner, the Company calculated the
3 individual components of the facilities charge set forth
4 in the tables above, including income taxes, property
5 taxes, other taxes, operations and maintenance,
6 administration and general, working capital, and
7 insurance. Along with rate of return and depreciation,
8 these components make up the Company's estimated charge
9 to the individual customer for its use of the
10 distribution facilities on its property.
11 The sum of these nine components is the annual
12 facilities charge rate. The product of the
13 /
14 /
15 /
16
17
18
19
20
21
22
23
24
25
381 Dr. Reading, DI lOa
ICIP
.
.
.
1 monthly rate and the value of the initial undepreciated
2 investment in the distribution facilities on the
3 individual customer's property is the customer's monthly
4 facilities charge. For example, if the Company's total
5 initial investment in equipment in service at a
6 customer's premises was $100,000, that customer would pay
7 1.41% monthly, which is $1,410.00 each month or
8 $16,920.00 per year, for that equipment and any needed
9 maintenance.
10 Once the Company receives the facilities charge
11 revenue from the individual customer, it "credits" that
12 revenue back to that individual customer's class in the
13 cost of service model. In theory, the credit thereby
14 makes the rest of the class whole for the distribution
15 facilities and services already included in rate base for
16 the whole class. The credit should directly offset the
17 cost of the distribution facilities already included in
18 rate base for that customer class. I have included ICIP
i
19 Exhibit No. 303, which is the Company's explanation of
20 how this "credit" mechanism works in its Responses to
21 ICI P Production Request Nos. 6, 7, 46, and 47.
22 You stated earlier that the facilities chargeQ.
23 does not take depreciation into account. Does the
24 distribution equipment subject to the facilities charge
25 depreciate in rate base?
382 Dr. Reading, DI 11
ICIP
.
.
.
1 A. Yes. This is the major failure in the
2 rationale of the facilities charge. Facili ties charge
3 revenues are treated as a credit back to the customer's
4 class, and hence reduce the revenue required from that
5 class when rates are set in a general rate case. As I
6 stated above, the value of the facilities charge revenue
7 and its credit back to the customer class's revenue
8 requirement should directly mirror the costs already
9 included in the customer class's revenue requirement for
10 that customer's distribution facilities. The Company
11 does not account for the fact that the Company is
12 depreciating the same equipment in rate base while at the
13
14
same time charging individual facilities charge customers
for the accumulation of original, undepreciated
15 /
16 /
17 /
18
19
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21
22
23
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25
383 Dr. Reading, DI lla
ICIP
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.
.
1 costs - irrespective of the age of the equipment. This
2 means facilities charge customers are compensating the
3 Company for a portion of rate base that has already been
4 depreciated. In some instances, it appears that
5 equipment was fully depreciated by the time the Company
6 even began utilizing the facilities charge, yet the
7 Company began charging individual customers the
8 facilities charge on the full initial value of the
9 completely depreciated equipment.
10 ICIP discovered this treatment only after extensive
11 discovery requests. I have included, as ICIP Exhibit 304,
12 Idaho Power's Responses to Production Request Nos. 21,
13 22, 23, 24, 25, 45, 60, 64, 65, 66, 67, 69, and 71.
14 Through these responses the Company explains the lack of
15 depreciation. The Response to ICIP Request No. 65 is most
16 direct - "The use of depreciated values has never been
17 approved by the Commission and the Company has never used
18 depreciated values to calculate monthly facilities
19 charges."
20 Q.Do you think this is fair rate treatment?
21 A.No. This treatment either amounts (1) to an
22 unfair subsidy from individual facilities charge
23 customers to other ratepayers, or (2) if the Company is
24 not crediting the entire amount of facilities charge
25 revenue back to the customer class, this treatment could
384 Dr. Reading, DI 12
ICIP
.
.
.
1 be resulting in the Company being overcompensated for
2 depreciated assets. It is not entirely clear to me what
3 the impact of the charge is on all customers. For
4 example, the J. R. Simplot Company operates its Don Plant
5 under a Special Contract subject to its own rate class -
6 Schedule 29. It is not clear how the Company credits
7 back this significant facilities charge revenue from this
8 customer.
9 Q.What is the Company's justification for this
10 different treatment between the individual customer's
11 facilities charge rate and the amount included in that
12 customer's class's revenue requirement?
13 A. The Company's justification is not entirely
14 clear to me. ICIP Exhibit 304
15 /
16 /
17 /
18
19
20
21
22
23
24
25
385 Dr. Reading, DI 12a
ICIP
.
.
.
1 contains their justification in Response to ICIP
2 Production Request No. 69 (b). The Company stated:
3 Because the facilities charge calculation is
4 based on a levelized revenue determination method
5 and base rates are determined using a single test
6 period method, there will always be differences in
7 the annual revenue requirements determined under
8 each method. These timing differences or
9 "subsidies" go in either direction for individual
10 customers depending on the average age of the
11 facili ties subj ect to the facilities charge. For
12 example, a customer with newer facilities will pay
13 less in facilities charges than the actual annual
14 revenue requirement with the rest of the customer
15 class paying the difference through their base
16 rates. The opposite is true for customers with
17 older facilities who pay more in facilities charges
18 than the single-year revenue requirement would
19 suggest. 4
20 This does not really explain the need for this
21 differential treatment, or why the Company cannot
22 calculate the facilities charge based on a single test
23 period method similar to all other rates. It also
24 appears to concede that the charge constitutes a subsidy
25 by individual ratepayers whenever that individual
386 Dr. Reading, DI 13
ICIP
.
.
.
1 customer's equipment is "older."
2 Q.Do most facilities charge customers have
3 "newer" equipment?
4 A. Not based on the evidence provided by Idaho
5 Power. Idaho Power provided the average age of the
6 facilities charge equipment in Response to ICIP
7 Production Request No. 60, which is contained in ICIP
8 Exhibit 304. The average ages of equipment for the
9 primary facilities charge customer classes are set forth
10 below:
11 /
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13 /
14
15
16
17
18
19
20
21
22
23
24
25
387 Dr. Reading, DI 13a
ICIP
.
.
.
1 Table 3
2 Customer Class Average Age of Equipment
3 Schedule 9 17 years old
4 Schedule 19 18 years old
5 Special Contract
Schedule 29
24 years old
6
7 This clearly shows that on average customers do not have
8 "newer" equipment, and that individual customers are
9 being overcharged for distribution facilities on their
10 premises. As I explain below, the dollar weighted age of
11 the equipment is even older than these average ages for
12 the customer sites I have analyzed.
13 Q.What happens if a piece of facilities charge
14 equipment fails prior to expiration of its assumed
15 31-year depreciation schedule?
16 A.Again, this equipment does not appear to be
17 failing early on average. However, Idaho Power and other
18 customers do not appear to lose when equipment fails
19 early. When ICIP representatives and I first met with
20 Idaho Power regarding this charge, Idaho Power
21 representati ves stated the lack of depreciation in the
22 facilities charge was justified in part because Idaho
23 Power would have to replace any equipment that did not
24 last for its full useful life. Idaho Power believed that
25 if equipment failed and had to be replaced prior to the
388 Dr. Reading, DI 14
ICIP
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.
.
17
18
19
20
21
22
23
24
25
1 31 years assumed in the depreciation schedule used in the
2 levelized facilities charge rate, the facilities charge
3 customer would benefit from Idaho Power replacing that
4 piece of equipment at no additional cost to the customer.
5 But this reasoning overlooks three important points. The
6 insurance mechanisms and effect of early failure of
7 equipment are explained in the Company's Responses to
8 ICIP' s Production Request Nos. 14, 15, 16, 18, 53, 54,
9 58, 70, and 73, which I have included
10 /
11 /
12 /
13
14
15
16
389 Dr. Reading, DI 14a
ICIP
.
.
.
1 as ICIP Exhibit No. 305.
2 First, the facilities charge customer pays for
3 "insurance" as one of the components of the facilities
4 charge. Idaho Power has stated in discovery that the
5 actual insurance policy, accounted for in the FERC Form 1
6 account from which the charge is derived, does not cover
7 losses typical with facilities charge equipment. This is
8 demonstrated in the Company's Response to ICIP' s
9 Production Request No. 24 (c), where the Company stated
10 very clearly that it has never made an insurance claim
11 for facilities charge equipment. Because the insurance
12 charge to facilities charge customers includes a charge
13 for an insurance policy that does not cover facilities
14 charge losses, that facilities charge insurance revenue
15 should not be considered to be used by Idaho Power to
16 actually pay for the insurance policy. Instead, those
17 payments for insurance from the facilities charge
18 customer could be considered to be used in the aggregate
19 to replace any failed equipment.
20 Second, Idaho Power has also stated that the
21 replacement costs for facilities charge equipment that
22 fails early are passed onto other ratepayers, including
23 the individual facilities charge customer, through the
24 Company's recovery under its "self-insurance" provisions.
25 That is, customers are Idaho Power's "self insurance,"
390 Dr. Reading, DI 15
ICIP
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.
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1 and the customers' rates ultimately make the Company
2 whole for any unrecovered expenditures associated with
3 facili ties charge equipment which fails prior to the
4 Company recovering its full expenses.
5 In addition, it can be reasonably assumed, due to
6 inflation, the cost of the equipment replaced will be
7 more expensive than the older failed equipment included
8 in the total amount of undepreciated Company investment.
9 The investment amount would increase, and the charges to
10 the facilities charge customer would therefore increase.
11 Thus, in the rare case that a piece of equipment
12 fails before completion of the assumed 31-year life, the
13 Company is kept whole by ratepayers "self-insuring" Idaho
14
15 /
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17 /
18
19
20
21
22
23
24
25
Power, and the other
391 Dr. Reading, DI 15a
ICIP
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.
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1 ratepayers should be kept whole by the payments for
2 insurance on the facilities charge for an insurance
3 policy that does not cover facilities charge equipment
4 failure. Again, those insurance payments paid by
5 facilities charge customers are credited back to reduce
6 the revenue requirement of the customer's customer class.
7 In sum, the argument that the equipment might fail and
8 have to be replaced prior to the individual customer
9 paying for it completely through the 31-year levelized
10 facilities charge rates is simply not a justification for
11 ignoring depreciation in the facilities charge.
12 Q.You stated that some of the equipment that was
13 in rate base was fully depreciated at the time the
14 Company began charging the facilities charge percentage
15 of 20.4% against the initial investment of the fully
16 depreciated equipment. Could you provide evidence of
17 that?
18 A.Yes. In fact, the Company admits this is the
19 case in Response to ICIP Production Request Nos. 65, 66,
20 and 67, contained in ICIP Exhibit No. 304. For example,
21 Idaho Power stated that the oldest piece of facilities
22 charge equipment for a Schedule 19 customer was installed
23 in 1945. That piece of equipment was 31 years old and
24 thus presumably fully depreciated in rate base by the
25 time Idaho Power initiated the facilities charge for
392 Dr. Reading, DI 16
ICIP
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.
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18
19
20
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22
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1 Schedule 19 in 1976. However, Idaho Power admits that it
2 used the value of the initial investment in that piece of
3 1945 equipment when Idaho Power first calculated the
4 facili ties charge in 1976 and has done so ever since in
5 calculating that Schedule 19 customer's monthly
6 facili ties charge. The same is true for a Schedule 9
7 customer still paying a charge calculated against the
8 initial investment on a piece of equipment from 1969, and
9 for the Simplot Special Contract Schedule 29 customer
10 paying for a 47 year old piece of equipment. These items
11 should have long ago been fully paid off by rates, but
12 individual customers are still paying for them.
13 /
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393 Dr. Reading, DI 16aicrp
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11
12
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15
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1 Q.Do you have any examples of an individual
2 customer with very old facilities charge equipment?
3 A.Yes. At the request of one ICIP member
4 company, the J. R. Simplot Company, Idaho Power completed
5 a full audit of all of Idaho Power's equipment on
6 Simplot 's property. As shown in Graph 2 below the oldest
7 facilities charge equipment for which Simplot is paying
8 the facilities charge dates back to immediately following
9 World War II in 1945.10 Graph 2
JRS Facility Charge Equipment By Age
70
60
50
40
44
30
20
10
o
fl-t ~~fl 'b~-
~~ (.11~
~ ~ ~(f ~it¡,fl~ ~~~o (§'b
~~ ~~~~ 'X-s~ (;~o
~9.~~
".:
11 Average Age im Oldest 0 Newest
394 Dr. Reading, DI 17
ICIP
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12
13
. 14
.
15
16
17
18
19
20
21
22
23
24
25
1 The oldest items the Company is applying facilities
2 charges to are 66 years old. The items are a transformer
3 and switch installed in 1945 at Simplot' s Caldwell plant,
4 which is a Schedule 19 customer. As discussed above, a
5 safe assumption would be that the transformer and switch
6 have
7 /
8 /
9 /
10
11
395 Dr. Reading, DI 17a
ICIP
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1 long since been fully depreciated and taken off Idaho
2 Power's books, yet Simplot is currently being charged
3 20.4% annually for the original cost of the transformer
4 and switch when installed in 1945. Depending on how the
5 accounting has been handled in the rate proceedings since
6 1976 when the Company initiated the facilities charge for
7 Schedule 19, those payments have either been credited
8 back to subsidize the rates of other customers in
9 Schedule 19, or, if not properly credited, the payments
10 may have otherwise increased Idaho Power's revenues above
11 what should have been authorized.
12 Q.If Customers are paying for facilities
13 installed as early as 1945, is that when the Company
14 began the facilities charge?
15 A.Apparently not. The Company has explained in
16 Response to ICIP' s Production Request Nos. 45 and 64,
17 which are included in ICIP Exhibit 304, that Company
18 records indicate that facilities charges have in place
19 since February 1995 for Schedule 9, January 1976 for
20 Schedule 19, and 1964 for one special contract customer.
21 The Company explained further that prior to implementing
22 the facilities charge provisions, the costs associated
23 with most customer-dedicated distribution facilities
24 installed beyond the Company's point of delivery were
25 included in the Company's general rate base and allocated
396 Dr. Reading, DI 18
ICIP
.
.
.
1 to the associated customer class. This would mean, at
2 least for the transformer and switch installed in 1945,
3 that the J. R. Simplot Company began paying facilities
4 charges based on the original cost for a piece of
5 equipment that was 31 years old when the charges began in
6 1976, and for which customers had already paid for 31
7 years.
8 Q.Do you have any information regarding the total
9 amounts paid in facilities charges and the accumulated
10 original cost of the equipment for any customers?
11 A.The data we have is, again, for the J. R.
12 Simplot Company. As shown in Graph 3
13 /
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15 /
16
17
18
19
20
21
22
23
24
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/
397 Dr. Reading, DI 18a
ICIP
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1 below, it is apparent that Simplot has paid an amount in
2 facilities charges several times over the cost of
3 installed equipment with plenty left over for fair
4 operation and maintenance expenses. At two of Simplot' s
5 plants, Caldwell and WSI, Simplot has paid in facilities
6 charges more than four times the accumulated original
7 costs of the equipment currently installed.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
8
9
Graph 3
Total JRS Facilities Charges
$12
$10
$8
$6
$4
$2
$0
0(; $: e~~ 'b.$ ~r¿O~ rt"~
é~~o.s'c
~q. lS~~\)
r.",(:
!l ~
§'~ Ä,..1l~~ ~~
0'''
.~a"
~~
IIlnstalled value ~ Paid to date
398 Dr. Reading, DI 19
ICIP
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12
13
. 14
15
16
17
18
19
20
21
22
23
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25.
1 Q.Who decides whether the Company can place
2 distribution equipment on the customer's property and
3 charge the customer the monthly facilities charge rate?
4 A.According to the Company's tariffs, the Company
5 has the sole option to place equipment on the customer's
6 premises. The tariffs for Schedules 19 contains the
7 following
8 /
9 /
10 /
11
399 Dr. Reading, DI 19a
ICIP
.
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1 language:
2 At the option of the Company, transformers and
3 other facilities installed beyond the Point of
4 Delivery to provided Primary or Transmission Service
5 may be owned, operated, and maintained by the
6 Company in consideration of the Customer paying a
7 Facili ties Charge to the Company.
8 According to this language, Idaho Power can place
9 distribution facilities on a customer's premises without
10 even asking the customer for permission to enter their
11 property . Additionally, the Company can refuse a
12 customer's request for the Company to provide
13 distribution facilities on the customer's property even
14 if the customer is willing to pay the facilities charge.
15 Q.Are you aware of whether the Company obtains
16 any formal consent from customers prior to placing
17 distribution facilities on their property and charging
18 the customer for such equipment under the facilities
19 charge?
20 A.I have included ICIP Exhibit 306, which
21 contains Idaho Power's Responses to ICIP' s Production
22 Request Nos. 19, 20, 57, and 72. Those responses explain
23 Idaho Power's position on its authority and the
24 customer's consent that it obtains. To summarize, Idaho
25 Power has stated that it only places facilities beyond
400 Dr. Reading, DI 20
ICIP
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20
21
22
23
24
25
1 the point of delivery after it receives a request from a
2 customer, but Idaho Power has not obtained written
3 consent from customers in the form of a uniform contract
4 or otherwise. Idaho Power believes a customer's request
5 and the tariff itself provides it with adequate legal
6 permission to enter onto a customer' sproperty and to
7 subj ect the customer to the facilities charge for
8 whatever equipment the Company chooses to place there.
9 In 2010, Idaho Power began requesting that customers sign
10 a "Service Request form" indicating that the facilities
11 charge will be added or adjusted on a monthly power bill.
12 However, even this form does not contain any express
13 explanation of the charge that would allow customers to
14 /
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18
19
401 Dr. Reading, DI 20a
ICIP
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1 understand they are agreeing to pay 20.4% annually on the
2 ini tial investment of an asset that will never be
3 depreciated. 5 Also, Idaho Power has not stated that it
4 keeps any formal record of customer "requests" prior to
5 2010.
6 Q.Can customers purchase the distribution
7 facili ties on their property for the remaining book value
8 in order to stop paying the charge?
9 A.Idaho Power does not appear to be allowing that
10 option at this point in time. I have attached ICIP
11 Exhibit No. 307, which contains the Company's Reponses to
12 ICIP's Production Request Nos. 9, 10, 11, and 68 on this
13 issue as well as correspondence between the ICIP
14 representatives and Idaho Power representatives in the
15 year prior to this rate case. The Company allowed one
16 customer - the Sinclair Oil Company dba Sun Valley Co.
17 to purchase distribution facilities at remaining book
18 value in Case No. IPC-E-05-16. However, the Company has
19 now taken the position that it will not sell distribution
20 facilities to other customers.
21 Q.Are you aware of any customers who have tried
22 to take over ownership and control of all distribution
23 facili ties on their premises and thereby stop paying the
24 charge?
25 A.Yes. As described in greater detail in ICIP
402 Dr. Reading, DI 21
ICIP
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.
21
23
24
25
1 Wi tness Don Sturtevant's Direct Testimony and evidenced
2 in letters and emails contained in ICIP Exhibit No. 307,
3 there were discussions in the past year between Simplot
4 and Idaho Power for the potential sale of the facilities
5 subj ect to the facilities charge. During the course of
6 the discussions Idaho Power made the decision that it
7 would not be willing to sell the facilities, at any
8 price, to the customer. Idaho Power stated that the
9 factors that went into that decision were: (1) the
10 Company's statutory obligation under I. C. § 61-328 to
11 hold other customers harmless in selling utility owned
12 assets; and (2) the way the Company runs its business as
13 a regulated public utility.
14 /
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17
18
19
20
22
5 See ICIP Exhibit No. 306, p.6.
403 Dr. Reading, DI 21a
ICIP
..
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.
1 Q.Please explain your understanding of why the
2 Company believes it cannot hold other customer's harmless
3 in a sale of the assets at book value?
4 A.According to Idaho Power, any reduction in
5 facili ties charge revenue through the sale or removal of
6 the Company's equipment would result insignificant
7 increases in rates for the customer class that was being
8 credi ted with those specific facilities charge revenues.
9 Because of the credit back to the customer class's
10 revenue requirement, Idaho Power believes that a
11 reduction in facilities charge revenue after the sale of
12 the facilities charge equipment would result in a
13 corresponding increase in the revenue requirement for
14 that customer class.
15 This approach ignores the other side of the
16 facilities charge equation. For example, should the
17 customer purchase the facilities, the rate base and
18 maintenance costs assigned to that customer class would
19 be reduced because the Company should remove the
20 equipment from the revenue requirement altogether.If
21 the Company no longer owned the facilities, then it would
22 no longer incur the other costs that are used in the
23 calculation of the facilities charge. The charges that
24 should no longer exist anywhere in the Company's revenue
25 requirement would include taxes, insurance, operations
404 Dr. Reading, DI 22
ICIP
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14
1 and maintenance, administrative and general, and working
2 capi tal. The customer class's revenue requirement would
3 be "credited" with the book value "sale price" paid by
4 the individual customer, and the class would thereby be
5 kept whole.For longer lived assets discussed above
6 dating back to 1945, the customer has paid for the
7 equipment several times over and has been subsidizing
8 other ratepayers. If the facilities were sold for their
9 depreciated value of zero dollars, the Company and other
10 customers would still be made whole and the associated
11 costs would cease. Basically, if the facilities go away
12 then all the costs should also go away as well. If the
13 customer pays the depreciated book value, the two sides
of the equation balance out and should keep all parties
15 whole. But as I testified earlier, Idaho Power is
16 /
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19
20
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23
24
25
405 Dr. Reading, DI 22a
ICIP
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1 not willing to agree to this arrangement.
2 Q.Has Idaho Power provided customers with any
3 option to ever stop paying the charge once Idaho Power
4 places distribution facilities on the customer's
5 property?
6 A.The tariff only provides an option for the
7 customer to pay Idaho Power to remove the facilities.
8 The tariff for Schedule 19 states:
9 In the event the Customer requests the Company
10 to remove or reinstall or change Company-owned
11 Facili ties Beyond the Point of Delivery, the
12 Customer shall pay to the Company the "non-salvable
13 cost" of such removal, reinstallation or charge.
14 Non-salvable cost as used herein is comprised of the
15 total depreciated costs of materials, labor and
16 overheads of the facilities, less the difference
17 between the salvable cost of material removed and
18 removal labor cost including appropriate overhead
19 costs.
20 Q.How would that process work?
21 A.I have included ICIP Exhibit No. 308, which
22 includes the Company's Response to ICIP' s Production
23 Request Nos. 12 and 51 and two letters regarding the
24 removal option. To summarize, it would be a time
25 consuming and difficult process for the customer, which
406 Dr. Reading, DI 23
ICIP
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21
22
23
24
25
1 would include shutting off power to the customer's
2 facili ties. Although this option has been in place for
3 some time now, it appears that no customers have
4 exercised this option. I am aware that J. R. Simplot
5 Company has expressed interest in exercising this option
6 to the Company after the Company refused to sell the
7 equipment. The Company has recently responded with an
8 outline of a very complicated valuation process to even
9 provide the customer with an estimate of the cost of
10 removal. In fact, the Company suggested that J. R.
11 Simplot Company must pre-pay Idaho Power to even obtain a
12 removal cost estimate and removal plan before they can
13 even determine the cost.
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18
19
20
407 Dr. Reading, DI 23a
ICIP
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1 The actual removal process may require "multiple proj ect
2 plans that reflect phased work efforts." I have included
3 the Company's letter to the attorney assisting J. R.
4 Simplot Company, which explains the Company's removal
5 proposal in ICIP Exhibit No. 308.
6 Q.What are your thoughts on that option the
7 Company has provided?
8 A.It is entirely unreasonable and unnecessary.
9 The customer has obviously paid for its equipment many
10 times over, and rather than agree to sell the equipment
11 or arrange some mechanism that will not require
12 interrupting service, Idaho Power is now insisting on an
13 unnecessary removal process. It is not even clear that
14 Idaho Power will be able to find a use for all of the
15 J. R. Simplot Company equipment if it is removed, which
16 would of course increase the removal cost to J. R. Simplot
17 Company. From an economist's perspective, this makes no
18 sense at all when the equipment is already being used in
19 an efficient manner. The Company should not provide
20 removal as the only option because the Company has now
21 proved that it is an unworkable and unrealistic option.
22 There are valuable benefits to the customer of
23 owning its own facilities, and the Company should provide
24 its customers with a realistic and fair opportunity for
25 such ownership. If a customer owned the facilities on
408 Dr. Reading, DI 24
ICIP
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20
21
22
24
25
1 their property, the customer could maintain them and not
2 be required to compensate Idaho Power for their rate of
3 return. Customers could also take advantage of any
4 depreciation and tax benefits. Also, as described in Mr.
5 Don Sturtevant's testimony, there are considerations with
6 making sure the customer is adequately insured for any
7 accidents that may occur on its own property, which may
8 compel certain customers to prefer to own the equipment
9 themselves.
10 I understand that when J. R. Simplot Company
11 approached Avista Utilities with very similar concerns
12 regarding that company's facilities charge for a plant in
13 Washington, Avista
14 /
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17
18
19
23
409 Dr. Reading, DI 24a
ICIP
.1 agreed to sell the facilities to J. R. Simplot Company and
2 to reduce the facilities charge to a fair operations and
3 maintenance level. It is not clear why Idaho Power
4 cannot do the same for its customers.
5 Q.Idaho Power's proposal is to lower the
6 facilities charge from 20.4% to 17.00% annually. What
7 are your comments on that proposal?
8 A.Updating the percentage is a good start, albeit
9 long overdue. Also, the Company's proposed facilities
10 charge percentage would need to be recalculated to match
11 the costs contained in the Stipulation. For example, the
12 proposed facilities charge rate in the rate case filing
.13
14
was based on the Company's current weighted cost of
capital of 8.18%. The Stipulation specifies 7.86% rate
15 of return on page 4. Therefore, the rate of return
16 component would need to be adjusted downward. Also, the
17 Company requested a revenue increase of approximately $83
18 million; the Stipulation reduces that request by $43
19 million down to $34 million. The corresponding deceases
20 in the FERC Form 1 accounts used to calculate the
21 facilities charge should also be updated to ensure that
22 the charge and its credits back to each customer class
23 closely match the value of the assets contained in that
24 class's revenue requirement. Further, as described.25 below, I recommend that the revised percentage be
410 Dr. Reading, DI 25
ICIP
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12 /
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20
21
22
23
.
1 calculated against the depreciated value of the initial
2 investment using appropriate amortization schedules
3 discussed further below.
4 I also recommend that the Commission consider
5 investigating the components of the proposed charge other
6 than the lack of depreciation. The FERC Form 1 accounts
7 used for the calculation the facilities charges are based
8 primarily on the Company's distribution system. However,
9 depending on the customer, the cost to Idaho Power for
10 the facilities could vary
11 /
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14
15
16
17
18
19
24
25
411 Dr. Reading, DI 25a
ICIP
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1 significantly. For example, the Operation & Maintenance
2 component charge in the proposed rates is 3.58% which
3 means the Company is collecting $1.25 million annually to
4 maintain facilities on the customers' properties. Because
5 these facilities are on a customer's property, in many
6 cases, they would require significantly less attention
7 than distribution systems located on public roads or in
8 rural areas. A time and materials charge to each
9 individual customer may be more appropriate than this
10 system wide average calculation. Each of the individual
11 components that make up the facilities charge could be
12 subj ect to similar analysis. For customers who wish
13 remain on the facilities charge, I would recommend the
14 Commission open a docket to examine the equity of each of
15 the elements that make up the facilities charge.
16 Q.What are your overall recommendations for
17 changes to the ownership options for facilities charge
18 equipment?
19 A.Over a 15 year time period at an annual
20 interest rate of over 14%, the payback equals 2.5 times.
21 Thus, I propose it would be fair for the Company to
22 assign ownership of facilities charge equipment to
23 existing facilities charge customers who have paid
24 overall facilities charge rates of more than 2.5 times
25 the original cost for the equipment currently installed.
412 Dr. Reading, DI 26
ICIP
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1 For example, the J. R. Simplot Company has paid for their
2 equipment 3.4 times, when a firm has paid this many times
3 over it would seem fair that they should be allowed to
4 just assume ownership. For existing facilities charge
5 customers who have not paid more than 2.5 times the
6 original cost, I propose that the Company provide such
7 facili ties charge customers with the option to purchase
8 the facilities at depreciated book value for each piece
9 of equipment based the Company's Commission-approved
10 depreciation schedule for that specific type of
11 equipment.
12 I also recommend that the Commission direct Idaho
13 Power to implement an ownership option which allows the
14 customer to take over ownership of the equipment and pays
15 a "limited
16 /
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19
20
21
22
23
24
25
413 Dr. Reading, DI 26a
ICIP
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1 facili ties charge" for the Company's ongoing operation
2 and maintenance expense. This was the resolution that
3 J. R. Simplot Company reached amicably with Avista
4 Utili ties in Washington, and it would likely be useful to
5 Idaho customers who would like to have Idaho Power
6 continue to operate and maintain the equipment necessary
7 for delivery to the customer.
8 Do you have an alternative proposal for aQ.
9 purchase price if the Company believes it is unable to
10 calculate the depreciated book value for each piece of
11 equipment based the Company's Commission-approved
12 depreciation schedule for that specific type of
13 equipment?
14 Yes. I believe that the remaining book valueA.
15 can be approximated by calculating the initial value of
16 all equipment installed at a customer's facility by an
17 appropriate depreciation schedule that would apply to all
18 facilities charge equipment. An appropriate depreciation
19 schedule can be estimated by determining the dollar
20 weighted age of the facilities charge equipment at actual
21 customers' premises with facility charge equipment.
22 Calculating the dollar weighted age of the equipment
23 provides a more accurate picture of the economic or rate
24 impact of the equipment's age than a simple average age
25 of the equipment would provide. Using data supplied by
414 Dr. Reading, DI 27
ICIP
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10 /
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13
14
15
16
20
1 the J. R. Simplot Company for the Caldwell Plant and the
2 Don Plant, I developed a dollar weighted age of
3 facili ties charge equipment. This first requires a
4 simple calculation of the original cost of the equipment
5 multiplied by the age for each item. Next, I calculated
6 the percent of the total facilities charge dollar amount
7 for each year beginning when the oldest piece of
8 equipment was installed to the present. The results are
9 shown in Graphs 4 and 5 below.
17
18
19
21
22
23
24
25
415 Dr. Reading, DI 27a
ICIP
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7
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9
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11
12.13
14
15
16
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23
24.25
Graph 4
J.R. Simplot Caldwell Plant Percent of Original Year Investment
By Dollar Weighted Age
100%r~
J,r7
í~
I
-)-~
,,,,,,,,.,,j ,¡,j j ,,,,,.,
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
19451954 1959 19611964 19661969 19711973 19751978 19811983 1985 19871989 19911994 1997 20022007 2009
Year
_ Perce nt of Original Year of I nvestment by Dollar We ighted Age
Graph 5
J. R. Simplot Don Plant Percent of Original Year Investment By
By Dollar Weighted Age
100%~J~,;
T
I./J.~
~rT
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1964 1966 1969 19711974 1976 1978 1980 1982 1984 1986 1988 1990 1992 19941996 1998 20002002 2004 2008
Year
_Percent of Original Year of investment by Dollar Weighted Age
416 Dr. Reading, DI 28
ICIP
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.
.
1 As can be seen in Graph 4 for the Caldwell Plant,
2 approximately half (49.2%) of the cumulative amount of
3 the dollar weighted age of the facilities charge
4 equipment pre-dates 1975. In other words, from a dollar
5 value perspective, half of the equipment was installed
6 prior to 1975. That was 30 years after the first piece of
7 equipment was installed by Idaho Power, and 36 years ago
8 from the present. For the Don Plant, depicted in Graph
9 5, with the first piece of equipment installed in 1964,
10 60% of the dollar weighted age of the facilities charge
11 equipment predates 1986, which is 25 years ago. The
12 Company uses 31 years in their calculation of the
13 depreciation component of the facilities charge rate.
14 However, Graphs 4 and 5 demonstrate that, from a dollar
15 value perspective, much of the equipment at these two
16 actual customer sites is well beyond its 31-year life
17 expectancy, and J.R. Simplot Company has been paying for
18 much of the equipment long after it has been fully
19 depreciated in rate base. Because these dollar-weighted
20 ages of much of the equipment at these representative
21 customer sites show that the customer has already paid
22 for fully depreciated assets beyond Idaho Power's assumed
23 31-year life, customers should be entitled to purchase
24 the equipment at the remaining book value on a more
25 accelerated depreciation scale than Idaho Power's assumed
417 Dr. Reading, DI 29
ICIP
.
.
.
1 31-year scale.
2 Each customer's facilities would have a different
3 dollar weighted age profile, but these representative
4 customer sites demonstrate that an accurate calculation
5 of remaining book value would require the Company to use
6 a depreciation schedule far shorter than 31 years.
7 Otherwise, customers will get no credit for their ongoing
8 payment for facilities charge equipment that has long
9 been fully depreciated. Thus, if Idaho Power cannot
10 calculate the actual remaining book value, I recommend
11 for simplification and compromise that customers be
12 allowed to purchase the equipment from Idaho Power at a
13 depreciated book value using a 15-year straight line
14 depreciation schedule.
15 /
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17 /
18
19
20
21
22
23
24
25
418 Dr. Reading, DI 29a
ICIP
.1 How do you propose the Company modify theQ.
2 facili ties charge for those customers who do not want to
3 buy the equipment from the Company?
4 I recommend that Idaho Power's proposedA.
5 facilities charge percentage of 17.00% annually be
6 re-calibrated for the costs contained in the Stipulation,
7 and going forward be adj usted consistent with general
8 rate case results. I also propose that the re-calibrated
9 percentage amount be charged against the depreciated
10 value of the equipment using a 15-year straight line
11 depreciation schedule for equipment already installed,
12 and the Company's approved depreciation schedule for the.13
14
15
16
specific type of equipment for any new or replacement
equipment.
Q.Do you have any other recommendations?
A.Yes. I recommend that the Commission require
17 Idaho Power to inform each facilities charge customer in
18 wri ting wi thin 90 days informing customers of the
19 facilities charge and its costs over the life of the
20 equipment and to inform them of their ownership options
21 outlined above. This should include a disclosure showing
22 payoff amounts at different milestones, effective
23 interest rates and other components of the charge and
24 require written consent from the customer. The buy-out.25 option described above should be clearly provided for in
419 Dr. Reading, DI 30
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1 the tariff. Also, the tariff itself should state that a
2 customer can choose to own its own distribution
3 facili ties, rather than be stated in a manner that
4 appears to provide only the Company with the option to
5 decide whether to sign a customer up for the facilities
6 charge. Finally, Idaho Power should allow for a mix of
7 ownership between the Company and customers on customer
8 property. That would allow the customer to have the
9 choice of which equipment will be owned by itself or be
10 subject to the facilities charge.
11 Q.Does that conclude your facilities charge
12 testimony?
13 A.Yes.
14 /
15 /
16 /
17
18
19
20
21
22
23
24
25
420 Dr. Reading, DI 30a
ICIP
1 Q.You stated earlier that you would also testify.2 as to the Energy Efficiency Rider percentage. Could
3 explain that issue?
4 A.The current level being collected by the Energy
5 Efficiency Rider (EE Rider) is 4. 75% of a customer's base
6 rates. The Company has proposed moving the recovery of
7 approximately $11.3 million projected for three demand
8 response programs ' incentive payments into "normal" base
9 rates as a net power supply expense rather than being
10 collect through the EE Rider. 6 At the current level of
11 Company's sales revenue, leaving the EE Rider rate at
12 4.75% after removing the $11.3 million of demand response
13 costs would mean Idaho Power would collect approximately..
14 $7.5 million more than the current level of overall
15 demand side management expenditures.
16 Even though some demand side management costs will
17 be collected in base rates rather than through the EE
18 Rider, the overall rate impact of Idaho Power's proposal
19 on customers is the same as increasing the Rider by $11.3
20 million. If the EE Rider is left at 4. 75%, and the
21 demand response programs are moved to base rates,
22 customers would be effectively paying the equivalent of a
23 6.1% EE Rider. A dollar for dollar reduction in the
24 rider from removing the $11.3 million demand response.25 incenti ve programs would equal an EE Rider of
421 Dr. Reading, DI 31
ICIP
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10 /
11
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1 approximately 3.8%.
2 Q.What is your recommendation for the treatment
3 of the EE Rider in this case?
4 A.A dollar for dollar reduction to 3.8% may be an
5 equi table and justifiable path, particularly since this
6 is how I understand the Commission treated Rocky Mountain
7 Power's EE
8 /
9 /
12
13
14
15
16
17
18
19
20
21
22
23
24
25 6 Idaho Power Application, IPC-E-ll-08, p. 6.
422 Dr. Reading, DI 31a
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10
11
12
13
14
15
1 Rider after one of its conservation programs was moved
2 out of the rider. 7 However, the ICIP fully supports
3 the Commission Staff's testimony and recommendation of
4 lowering the EE Rider to 4.0%.
5 Does this conclude your testimony?Q.
6 A.Yes.
7
8
9
16
17
18
19
20
21
22
23
24 7 Order No. 32196, Case No. PAC-E-10-07, p. 26.
25
423 Dr. Reading, DI 32
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1
2 open hearing.)
(The following proceedings were had in
MR. RICHARDSON: Madam Chair, Dr. Reading
4 is now available for cross-examination.
3
5 COMMISSIONER SMITH: Thank you. Mr. Otto,
6 do you have questions?
7 MR. OTTO: Unfortunately I do not,
8 Madam Chair. It's always fun to talk to Dr. Reading.
10
9
11 this witness.
12
13
14
15
16
COMMISSIONER SMITH: Mr. Nelson.
MR. NELSON: Thank you. No questions of
COMMISSIONER SMITH: Olsen.
MR. OLSEN: No questions, Your Honor.
COMMISSIONER SMITH: Mr. Purdy.
MR. PURDY: No questions.
COMMISSIONER SMITH: Mr. Miller? Ms.
17 Kyler? Nothing from the Staff. How about from the
18 Company?
19 MR. WILLIAMS: Yes, Madam Chair, a few
20 questions for Dr. Reading.
21
22
23
24
25
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1 CROSS-EXAMINATION
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3 BY MR. WILLIAMS:
4 Q Dr. Reading, I'd just like to start on
5 page 1 of your testimony beginning on the question at
6 line 19 and going over to the next page, you at a high
7 level describe your interpretation of the facilities
8 charge. Do you see that?
9 A Yes.
10 Q What does Simplot get in return for the
11 charge?
12 A They get the facilities that are on their
13 property that are owned by the Company, given either all
14 of it or what's there less what they own, and they get,
15 as one of the Idaho Power witnesses said here, they get
16 24/7 maintenance on the equipment if something should go
17 wrong.
18 Q Do you know whether or not the facilities
19 charge rate includes an element for keeping back-up or
20 spare inventory that's specific to those facilities
21 charge customers that are paying the rate?
22 A I'm trying to think. I would have to look
23 closer wi thin the list to know whether the back-ups would
24 be included. My first impression is they're not, but I
25 would have to go back to the workpapers supplied by the
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1 Company under, for instance, their maintenance charges to
2 see whether there was a FERC account for that that would
3 be loaded into that. I don't recall one.
4 Q Regardless, though, as part of the service
5 the Company agrees to replace equipment that fails for
6 facilities charge customers?
7 A Oh, certainly, yes.
8 Q I think -- let's turn to page 12 of your
9 testimony. I think there's actually a couple of places
10 in here on page 12, beginning on line 18, where you
11 I'm sorry, at line 14 where you allege that if the
12 Company is not crediting the entire amount of the
13
14
facilities charge revenue back to the customer class,
this could result in the Company being overcompensated.
15 Have you or any of the other Simplot witnesses provided
16 any evidence at all that that is indeed the case?
17 A Do you mean numerically or, I'm trying to
18 think, theoretically or methodologically? I would say
19 there's no calculation that I've made, but as I
20 understand the way ratemaking is done and the way
21 facilities charges are, there is a mismatch between
22 what's in rate base for that particular class and the
23 level of investment that the facilities charge is
24 calculated on for the individual customer.
25 Let me explain. I think this goes back to
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426 READING (X)
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i Commissioner Smith's question that I heard her ask
2 earlier and if you ask me the question when Idaho Power
3 installs a piece of equipment or whatever for facilities
4 charges, it takes that total calculated amount and it
5 would be assigned to rate base, and then in the
6 ratemaking procedure, given what we argue about in here
7 all the time how the class allocations go for each one of
8 those, then X percent of rate base would be assigned to
9 that particular customer class. There is a mismatch in
10 the fact that when Commissioner Smith was asking the
11 question, what happens to that group or collectivity of
12 rate base items, such as, you know, I'd have to look at a
13 depreciation study, poles, transformers and whatever , it
14 goes into rate base.
15 Year after year there is a depreciation
16 calculation, 3.24 percent, 2.4 percent, whatever that
17 group is, and so in effect, the total amount of rate base
18 that would be assigned to that particularthat goes in
19 class goes down over time if there were no new
20 investment, and, of course, that's never true, there's
21 new investment, but that amount tends to go down over
22 time, and the original investment amount is depreciated
23 over time, moved to the facilities charge.
24 In the facilities charge, the original
25 cost of that investment is assigned to that particular
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427 READING (X)
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1 facili ties charge customer. That never changes. Whether
2 you ask questions to Mr. Youngblood or Tim Tatum and our
3 negotiations supplied spreadsheets that showed on an
4 average of 31 years or 32 years that it all comes out
5 even. The difference is that original investment,
6 whether it was made in 1955 or '76 or whatever, never
7 changes at all, so the percent, this 1.7 percent or this
8 1.4 percent or whatever, is timesed by this cumulative
9 amount of original cost rate base over time. That says
10 to me that the facilities charge customer is then paying
11 for what the equivalent is in rate base for the Company,
12 is "overpaying" and if they're overpaying, that's
13 consti tutes a subsidy, either interclass or intraclass.
14 Thanks, let's move on. It is yourQ
15 testimony, is it not, that Idaho Power should assign
16 ownership of facilities subj ect to the facilities charge
17 that are fully depreciated?
18 Would you repeat that, please?A
19 Is it your testimony that Idaho PowerQ
20 should assign ownership of facilities subject to the
21 facilities charge that are fully depreciated to
22 Simplot?
23 A Yes.
24 Would you agree with me that those fullyQ
25 depreciated facilities are used and useful?
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1 MR. RICHARDSON: Madam Chair?
2 COMMISSIONER SMITH: Mr. Richardson.
3 MR. RICHARDSON: Is he asking in a legal
4 sense or is he asking in a non-legal sense?
5 MR. WILLIAMS: Madam Chair, however
6 Dr. Reading would wish to respond.
7 COMMISSIONER SMITH: Dr. Reading.
8 THE WITNESS: I would say yes, they're
9 used and useful, and without boring the Hearing Room
10 going back through what I just said a few minutes ago
11 that the difference is they might be used and useful, but
12 Simplot is paying the facilities charge based on the
13
14
original cost, that is different.
Q BY MR. WILLIAMS:I hear you loud and
15 clear there, Dr. Reading, so would you agree with me that
16 fully depreciated facilities at these locations are not
17 only used and useful, but they may have value?
18 A Oh, sure, they have value, and I might add
19 if the piece of equipment exceeds that levelization
20 31-year whatever time period parallel to the way we look
21 at rates, the ratepayer, in this particular case Simplot,
22 has paid for that equipment.
23 Q So what you're asking, though, really,
24 isn't it, that facilities that the Company owns that are
25 used and useful and which have value, you're not asking
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429 READING (X)
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1 that we simply just give those away, are you?
2 I would say that your statement, give itA
3 away, if the customer has paid for it, then in my mind
4 it's not giving it away.
5 You don't expect the Company, the CompanyQ
6 being Idaho Power, to maintain and operate facilities for
7 free, do you?
8 A No.
9 Okay. Isn't it true, Dr. Reading, thatQ
10 what you're proposing as part of your testimony is that
11 the Company, again Idaho Power, calculate the monthly
12 facilities charge using the depreciated value of the
13 ini tial investment in distribution facilities at each
14 customer premises that's subject to the facilities
15 charge?
16 That would to me be a fairer approach thanA
17 the one being currently used.
18 Q Okay; so would that mean each facilities
19 charge location would have a different rate?
20 It wouldn't necessarily -- define "rate."A
21 It wouldn't necessarily have a different 1.4 percent or
22 1.7 percent or 1. whatever. What would be different is
23 rather than the total accumulated original value of that
24 equipment, no matter when it was put in and when it
25 wasn't put in, that base would change and so you would be
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430 READING (X)
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1 applying the 1. whatever percent or we'll argue whatever
2 percent, I don't want to give away it's over 1 percent,
3 that it would be charged to a -- each customer would have
4 a different base.
5 Q Okay, but that different base would be
6 based upon the depreciated value of the equipment as to
7 when it was installed?
8 A Correct.
9 Q Dr. Reading, isn't what you're really just
10 talking about is vintage ratemaking, vintage pricing?
11 A You've got to tell me more.
12 Q You're saying that each customer should
13 simply have a different rate based upon when the
14 equipment was put into service and when it was
15 depreciated?
16 MR. RICHARDSON: Madam Chair, he didn't
17 say each customer should have a different rate. He
18 specifically differentiated what he was talking about
19 there.
20 COMMISSIONER SMITH: I think, Mr.
21 Richardson, this question attempts to get at what
22 Dr. Reading is proposing, so I'm going to allow it.
23 THE WITNESS: In my mind, and I have to
24 always do this, I'm not a lawyer, you know, if I tried to
25 make a legal decision, you'd be allover my case
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431 READING (X)
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immediately, in my mind, no, it wouldn't be vintage,1.2 because if you look at the individual components of how
3 the Company calculates the facilities charge, included in
4 those components are rate of return, depreciation,
5 insurance, maintenance, and in my mind, it's the
6 equivalent to the customer buying that equipment over
7 time and, therefore, it wouldn't be vintage ratemaking.
8 That fits with the concept I'm trying to explain here is
9 that the fatal flaw in my mind, a fatal flaw, is that
10 that original investment amount never changes.
11 Q BY MR. WILLIAMS: Dr. Reading, are you
12 aware of any other utility customers that have the option.13 to purchase facilities over time as part of their regular
14 ratemaking process?
15 A No, I'm not, but it wouldn't surprise me
16 if I was diligent I couldn't find some.
17 MR. WILLIAMS: No further questions,
18 Madam Chair.
19 COMMISSIONER SMITH: Do we have questions
20 from the Commission?
21 COMMISSIONER REDFORD:I just have a
22 couple of questions.
23
24.25
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432 READING (X)
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1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 Q In 1958 Simplot orders a piece of
5 equipment
6 A Yes.
7 Q -- that's covered under a tariff.
8 You mean Idaho Power installs on Simplot' sA
9 property a piece of equipment that goes into the
10 facilities charge; is that the question? That makes up
11 the base
12 Q I guess maybe that's one of my problems is
13 there are two documents, one that is already in the Idaho
14 Power tariff that says for special contracts, you will
15 pay in addition to the cost of, the yearly cost of,
16 whatever it is or however you purchase it that you're
17 going to pay a facilities charge.
18 You said special contract. MyA
19 understanding and quick reading of the special contract,
20 there is a clause in there that says facilities charges
21 would apply for that special contract.
22 Q Okay; so at a later date there's a
23 special contract that's a contract like you and I would
24 know where there's signatories on both sides and then the
25 contract terms takes care of that and includes the
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433 READING (Com)
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10
11
1 tariff.
2 A Okay.
3 Q Okay?
4 A Yeah.
5 Q You've had two sophisticated parties who
6 are certainly capable of reading the tariff and
7 understanding what facilities charges are, and then you
8 have the special contract and if you add those two
9 together, you have one complete transaction; right?
A Okay.
Q So what's the rub here about enforcing
12 contracts other than for just and reasonable and so on,
13 what's the rub here about enforcing contracts regardless
14 of how long they have been in existence that provide for
15 facilities charges and for a special contract? What's
16 the deal here?
17 A If I understand your question, you're
18 saying Simplot signed the contract, therefore, they
19 should live with it; is that the essence? You're the
20 lawyer. Would that be a non-lawyer --
21 Q No, that's pretty basic law.
22 A Okay.
23 Q I mean, at what point in time do you come
24 back and say well, wait a minute, we've gotten 32 years
25 here and we made a bad deal and now we want to transfer
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434
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1 this bad deal into some sort of a give-away or a sale of
2 this equipment for a nominal amount. I'm really
3 struggling with this.
4 I would say that due to the fact that theA
5 charges, be they facilities charges or the approval of
6 the special contract, whenever there is a rate case,
7 special contract customers, just like individual customer
8 classes, are subject to that rate case, what is presented
9 by each party and also what the Commission decides is
10 fair and reasonable, so what you have that is different
11 from virtually all the private party contracts that I
12 know, you have the Commission changing the costs and the
13
14
15
terms within that contract every time there is a rate
case.
Q Well, when is a contract a contract,
16 then?
17 A Well, Commissioner, without being smart,
18 you're the lawyer. Let's see, I look at what I read on
19 the sports page and a lot of those contracts don't seem
20 like contracts to me. I would say a special contract in
21 my mind, my non-lawyer mind here, that a special contract
22 with a regulated utility is a different thing than the
23 contract
24 Q It's a moving target?
25 A Yeah, and it moves and everybody
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435 READING (Com)
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1
2
understands it moves and as you move forward and you see
different aspects in costs and return, et cetera, every
3 party wi thin a class or the special contract customer can
4 come into the Commission and say hey, whoa, that's not
5 fair, and then the Commissioners say well, that's fair or
6 that's not fair. You do thumbs up, thumbs down, cut the
7 baby in half, whatever you do.
8 Q Well, it just seems to me that you're in a
9 situation that no one can rely upon a contract,
10 especially if the contract has an expiration date.
11
12
13
14
A I guess I didn't understand.
Q All right, let's assume we want to put in
a generator at Simplot and the price is $500,000 or
whatever and we've agreed to pay for that over a period
15 of time, and in addition to that, there's a facilities
16 charge and the contract lasts for five years. Is it up
17 to Idaho Power or Simplot to say oh, no, no, no, it
18 wasn't for five years, it's for 25 years or 35 or
19 whatever? Don't you have difficulty, I mean, with
20 that?
21 A Okay, and if this isn't responsive, get on
22 my case again.
23 Q I will.
24 A For the case -- you wouldn't be shy about
25 it, I'm sure. The individual generator, whatever, for
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436 READING (Com)
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1 500,000 that Idaho Power would install on Simplot' s
2 property, there is no contract for that. Gi ven the way
3 the facilities charge has been administrated, it would
4 simply -- Idaho Power would install it. They would take
5 whatever the cumulative original cost investment of all
6 those facilities charges had been up to that point and
7 they would add 500,000, so now the 1. 7 percent would be
8 applied to an amount that would be $500,000 higher.
9 Well, that in my mind is quite a fiction,Q
10 if you don't mind me saying~ but I've always believed
11 that there should be on all contracts a beginning and an
12 end and at the end, you stop.
13 A I concur with that analysis and that goes
14 back to the thing that bothers me probably the most about
15 the way facilities charges are being applied is that it's
16 never ending. It's when that original piece of equipment
17 got put in at the original cost. It only ever changes if
18 that original piece of equipment stops working, then
19 Idaho Power would subtract that original cost and add
20 back in the original cost of the newer equipment, which
21 over time is, of course, always higher.
22 Q And that's according to Idaho Power or
23 according to Simplot or to this Commission or who's it
24 according to?
25 According to Idaho Power, the way theyA
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437 READING (Com)
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10
11
12
1 administer and calculate and charge the customer for the
2 facili ties charge and that's why I'm here, the lawyers
3 are here, several plant managers are here. They say that
4 is not fair and reasonable.
5 Q Over a period of time it's not?
6 Yes.A
7 Q If you go down and lease a car, you lease
8 the car for five years --
9 Correct.A
Q -- you pay a certain amount up front.
A Correct.
Q And if you pay your yearly amount and if
13 the engine blows up, they replace it.
14 A Correct.
15 Q No charge for replacing it.
16 If it' s within that leased period,A
17 correct.
18 Q What's the difference between that and
19 this?
20 That if you leased the car and the leaseA
21 payments were calculated on X percent of what the car
22 leasing agency assumed their costs were and that
23 particular car cost $25,000, then the lease the
24 analogous the way facilities charges work, the analogous,
25 you would drive that car and you would be charged 1. 7
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438 READING (Com)
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1 percent of the $25,000 for as long as it worked. If it
2 blew up, if it died, if it did whatever, then the leasing
3 agency would give you a new car. If that new car now had
4 a $35,000 charge, you would pay the 1.7 percent on the
5 35,000. If not, you would pay that forever; otherwise,
6 you would be buying a lifetime auto lease with a
7 percentage charge based on the original cost of the
8 car.
9 Q Sure, and that's in the terms and
10 conditions, isd't it?
11 A Yeah.
12 Q Have you read one of the special contracts
13 of Idaho Power?
14 A Briefly, yeah.
15 Q Does it clearly state that in its special
16 contract?
17 A No. What it says in addition, you know,
18 it says here's the special contract, the rates are based
19 on whatever. I'm not sure they even say in the contract
20 they'll change on every rate case. The part on
21 facilities charge, it says something as briefly as also
22 subj ect to facilities charges as listed in tariff X, Y,
23 Z, whatever the applicable tariff is.
24
25
Q Putting aside contract law for a minute,
what you're suggesting to us is the possibility that
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439 READING (Com)
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1 regardless of what's stated in the tariff and what's
2 stated in the contract, we're here to say that's just not
3 right, it's too much and we're trying to come up with
4 some sort of a different type of situation that
5 recognizes the equity of everything we're dealing with?
6 A Absolutely, yes, sir.
7 Q Okay, one other question and then I'll
8 stop. The pooling, I understand that when I put in a new
9 generator at Simplot, instead of tracking that generator,
10 it goes into a pool.
11 It's added into the total amount ofA
12 facili ties, original cost of equipment for the facilities
13 for that plant. It's just added on there.
14 Q Okay; so that seems to further complicate
15 the situation, because I could have a piece of equipment
16 that went bad or I wanted to get rid of or I wanted to
17 buy a new one and all of a sudden, instead of buying the
18 new piece of equipment and allowing it to be depreciated
19 over its life, I'm now picking up a portion of the
20 charges for everything that's included in the pool.
21 A Yes.
22 Q How is that fair?
23 A I don't think it is.
24 COMMISSIONER REDFORD: Okay, thanks. No
25 further questions.
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440 READING (Com)
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1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Oh, Dr. Reading, I can't let thisQ
5 opport uni t y go by.
6 Thank you, Commissioner Smith.A
7 So you've done regulation a long time --Q
8 A Yes.
9 -- on different sides. Is this the realQ
10 world?
11 A When I was on the Staff, the Commissioners
12 always asked me the hardest questions. Things haven't
13 changed. Regulation isn't the real world. Regulation
14
15
is --
Q You don't need to characterize it, but
16 just acknowledging that it's not the real world is
17 sufficient.
18
19
A No.
Q You know, this isn't a really new issue.
20 It's the same issue as when the widow calls and says I've
21 been in my house 50 years, why do I have to pay a
22 customer charge, my meter is fully depreciated, and we
23 all know the answer to that.
24
25
A Yes.
Q And why should it be different here?
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441 READING (Com)
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10
11
1 A
2
As I explained a little while ago, the
facili ties charges are based on that --
3 Q
4 original cost.
5 A
6 Q
7 everybody else?
8 A
9 Q
A
Q
12 question
13
14
A
Q
I understand the equity argument and the
Okay.
Isn't that the same thing we're doing to
My gut tells me no.
But your brain can't find an example?
You need to give me time.
I'll give you time while I ask my next
Okay.
-- which is, you know, I can't think of
15 any other circumstance where we've told a customer yeah,
16 you're right. You've paid this rate for 50 years. Your
17 equipment is totally depreciated, so it's yours. That
18 doesn't happen, does it?
19 A Right, I would agree with that and whether
20 you will accept or not, my brain is working --
21 Q Good.
or at least I think it's working. The
23 difference is, is if you were a retail customer, your
22 A
24 rates are made on the average rate base of all the other
25 customers, all right, so your meter, a new meter and an
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442 READING (Com)
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1 old meter and we do the averaging and I understand that.
2 In a ratemaking process, there is not this anomaly where
3 you're charging the retail customer, if I would say hey,
4 I want something, something for whatever and I will pay
5 an extra percentage of that over time; otherwise, the
6 difference is, is that the facilities charge that
7 customers pay are back around in a rate case and credited
8 back to that consumer class; otherwise, that's a specific
9 special kind of a charge that is calculated based on that
10 specific customer's desires, wants, et cetera.
11 When I'm a residential customer, I can
12 understand why I'm in a pool and I pay like everybody
13 else. The difference is I've got, you know, a million
14 dollars worth of Idaho Power's investment next to my
15 swingset, out in my pasture that my horses have to walk
16 around, that the Company ìs charging me X percent for
17 that million dollars worth of equipment, and so then
18 Idaho Power would take that amount, roll it back under in
19 this case and credit it back to the residential class,
20 and to me there is a definite difference and
21 distinction.
22 Q But would it surprise you to know that the
23 very first time that facilities charges, I think, came to
24 my attention, it actually was a residential customer over
25 east of Pocatello who had a facilities charge on their
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443 READING (Com)
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1 line extension?
2 A Okay.
3 Q And so I mean, it was the same deal.
4 A How was that handled, may I ask?
5 Q I think we told the poor woman that that
6 was what the tariff said, but we'll have to research
7 that, but anyway, a utility's customers, they're not out
8 buying equipment, are they, they're buying service;
9 right?
10 A Wow, from the electric company, they're
11 buying power and depending on who you are, if you're
12 Micron, you buy service, but you pay for the whole
13 substation to get that service.
14 Q And who owns the substation after you've
15 paid for it?
16 A Well, in that particular case Micron
17 does.
18 Q Okay, how about Hoku?
19 A I'm not familiar enough with them, but if
20 they paid a whole bunch of money to put in a lot of
21 infrastructure to receive service from Idaho Power for
22 their plant, then they would own it.
23 Q Would you be surprised to learn that Idaho
24 Power owns the substation?
25 A I have too much gray hair to have things
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444 READING (Com)
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1 like that surprise me.
2 Q Neither here nor there, and I do
3 appreciate and I do understand the percentage is not the
4 issue, it's the original cost is the basis against which
5 the percentage is applied.
6 Yes, accumulating over time forever.A
7 Q I've got it.
8 A Thank you, Commissioner.
9 COMMISSIONER SMITH: Thank you. Do you
10 have redirect, Mr. Richardson?
11 MR. RICHARDSON: Just a couple,
12 Madam Chairman, with your indulgence. I neglected to ask
13 Dr. Reading what I consider a housekeeping question.
14 It's not in his direct testimony, but if I could ask him.
15
16 REDIRECT EXAMINATION
17
18 BY MR. RICHARDSON:
19 Q Dr. Reading, you were present during the
20 settlement negotiations of the general rate case?
21 A Yes.
22 Q And when the issue of facilities charges
23 was being carved out, was it your understanding that the
24 Schedule 19 facilities charge customers had agreed to
25 accept any increase in costs that are caused by
CSB REPORTING
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445 READING (Di)
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1 non-Schedule 19 customers?
2 MR. WILLIAMS: Madam Chair, I'm going to
3 obj ect. This is way beyond anything in Dr. Reading's
4 testimony and it's actually plowing new ground on a new
5 issue.
6 COMMISSIONER SMITH: Mr. Williams, I'll
7 certainly give you your opportunity to ask any cross-exam
8 on it, but I think Dr. Reading's understanding of the
9 settlement is relevant.
THE WITNESS: If I heard your question
11 correctly, the clause in the settlement applied only to
12 Schedule 19 customers and changes in whatever impact
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14
there would be for Schedule 19 customers only.
Q BY MR. RICHARDSON: And you were being
15 questioned by Commissioner Redford and you were asked if
16 a contract is a contract is a contract kind of thing, the
17 contracts on these special facilities charges reference a
18 tariff, do they not?
19 A Correct.
20 Q And is it your understanding with all your
21 considerable gray hair in the utility industry that
22 people signing contracts that reference a rate in a
23 tariff always expect that tariff to be changed down the
24 road in rate cases?
25 A Periodically, yes.
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446 READING (Di)
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1 So although a contract is a contract , it'sQ
2 not really a rate freeze, if you will, forever?
3 It is not a fixed rate, yes.A
4 And Commissioner Smith asked you about theQ
5 poor widow complaining about the charge for her meter or
6 whatever, isn't the significant difference here is that
7 the widow is in a rate pool of residential customers that
8 enj oys a depreciating rate base that if there was never
9 any additions to it, it would eventually go to zero, and
10 here we have a pool, the facilities charge customers,
11 that do not enjoy a depreciating rate base?
12 If you have a situation where there isA
13 essentially negligible rate base added every year, one
14 would expect that their rates would go down over time as
15 the rate base goes down over time and is not added to
16 gi ven whatever happens to expenses.
17 COMMISSIONER SMITH: And is that even a
18 reasonable hypothesis?
19 THE WITNESS: I kind of --
20 COMMISSIONER SMITH: Never mind. That's
21 rhetorical.
22 MR. RICHARDSON: I thought it was.
23 COMMISSIONER SMITH: Well, obviously,
24 but--
25 THE WITNESS: I think I could probably
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447 READING (Di)
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1 find one somewhere, some co-op or something.
2 COMMISSIONER SMITH: Get real.
3 MR. RICHARDSON: That's all I have,
4 Madam Chair.
5 COMMISSIONER REDFORD: Could I ask?
6 COMMISSIONER SMITH: Commissioner Redford.
7
8 EXAMINATION
9
10 BY COMMISSIONER REDFORD:
11 Q Dr. Reading, notwithstanding everything
12 else that we're dealing with in this case, the
13 stipulation, which is quite frankly a remarkable document
14 to an extent, it appears that we've spent a great deal of
15 our time trying to talk about a dispute between Idaho
16 Power and Simplot.
17 A Yeah, I'd say that would be fair and other
18 customers that Simplot has made aware of what is actually
19 going on in the facilities charge, but essentially,
20 yes.
21 Q Would you suggest that the most
22 appropriate way to resolve this would be to bifurcate
23 this issue, give Idaho Power and the other similarly
24 situated customers and Idaho Power a further opportunity
25 to negotiate this to come out with a just solution and if
CSB REPORTING
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448 READING (Com)
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1 that doesn't work to bring it back to us? I ~ee my other
2 Commissioners laughing at me.
3 COMMISSIONER SMITH: My first comment is
4 that I think that would be a consultant's dream.
5 Q BY COMMISSIONER REDFORD:I realize that.
6 I want to be a consultant in that case, but I'm just
7 saying that as you know, there are very few issues or
8 disputes that aren't so totally unreasonable at least in
9 my history or lifetime, if the stakes are high enough,
10 they haven't been able to come up with some, if not a
11 full-time, decision, at least some sort of a decision
12 that handles the issues.
13 A I would answer that in tw6 ways and,
14 Commissioner Smith, I'll answer this straightforward if
15 you won't call Ben in Tallahassee, okay, that one reason
16 that the Industrial Customers of Idaho Power wouldn't
17 sign the stipulation unless this particular issue was
18 carved out was that the negotiations with Idaho Power
19 over this issue have been going on for more than two
20 years and that the zigs and zags that have occurred, such
21 as yeah, we'll sell it, no, we won't sell it, okay, we're
22 going to file a tariff and sell it, that we've pushed to
23 bring it in a rate case setting to try to get it
24 resolved, and I personally would be fearful that if it
25 was punted to a separate docket that it would go on and
CSB REPORTING
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449 READING (Com)
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1 on forever and it may be good for consulting, but the
2 Industrial Customers of Idaho Power and Simplot have
3 spent a significant amount of effort and expense in
4 trying to solve this issue and it has gone around and
5 around, so the Commission can do what the Commission will
6 do. I understand that this is a complicated issue and
7 you want to look at it some more, but I would not
8 recommend that.
9 Q Gi ven the reasonableness of everyone in
10 this room, don't you think that others might say well,
11 that's a fair resolution and we'll go ahead and sign the
12 stipulation and carve this out and have a time set and if
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it's not resolved, then we've got most of the testimony
in?
A I would have --
Q Give it six months, then the Commission
17 will answer it.
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A Yeah. I would have to ask the other
19 parties. I don't know where they would be.
Q Well, I don't think that's your charge,
21 but it certainly might be our charge of at least asking
22 the question, but, you know, if we don't resolve this,
23 then the stipulation is not going to get signed anyway;
24 correct?
25 A It could get signed. Sometimes the
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450 READING (Com)
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1 Commission approves a stipulation without all parties
2 signing the stipulation.
3 Q Well, I think of the stature and the
4 position of the parties in this case, especially the true
5 parties. We could have a stipulation signed without some
6 of the other signing. I see that Marsha is writing notes
7 to me, so that must mean something, shut up, Redford, and
8 that's it, so at any rate, that's not an issue for me
9 certainly to decide right now, but I after all these
10 years have found that there aren't very many
11 disagreements that aren't negotiable and maybe you don't
12 feel that way, but that's the way it is.
13 A Some aren't and that's why you three
14 exist.
15 COMMISSIONER REDFORD:Okay. Thank
16 you.
17 COMMISSIONER SMITH: It's good to know we
18 have a reason for being.
19 THE WITNESS: Yes.
20 COMMISSIONER SMITH: Dr. Reading -- did
21 you have any more redirect?
22 MR. RICHARDSON: No, Madam Chair.
23 COMMISSIONER SMITH: Okay, I just want to
24 thank you for your good-natured endurance of the
25 Commission's questions and ruminations.
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451 READING (Com)
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4
THE WITNESS: Thank you.
COMMISSIONER SMITH: Thank you.
(The witness left the stand.)
COMMISSIONER SMITH: We're going to take a
5 five-minute stretch break before we go to the next
6 witness.
7 MR. RICHARDSON: May Dr. Reading be
8 excused?
9 COMMISSIONER SMITH: If there is no
10 obj ection, we will excuse Dr. Reading.11 (Recess. )
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14
COMMISSIONER SMITH: All right, I believe
we are ready for Mr. Richardson's next witness.
MR. RICHARDSON: Thank you,
15 Madam Chairman. The Industrial Customers of Idaho Power
16 calls Don Sturtevant to the stand.
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452 COLLOQUY
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1 DON STURTEVANT,
2 produced as a witness at the instance of the Industrial
3 Customers of Idaho Power, having been first duly sworn,
4 was examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. RICHARDSON:
9 Q Good afternoon, Mr. Sturtevant. Would you
10 state and spell your name for the record, please?
11 A Donald Eugene Sturtevant, Jr.,
12 S-t-u-r-t-e-v-a-n-t.
13 Q And are you the same Don Sturtevant who
14 caused prefiled testimony to be filed in this case?
15 A I am.
16 Q And do you have any corrections or
17 addi tions to make to your testimony?
18 A I do not, but in the hopes of expediting
19 this, I am the one that made the Code Red, so I will
20 admi t to that. Bad movie reference to Code Red, you
21 can't handle the truth.
22 Q Thank you.
23 COMMISSIONER SMITH: This is a sheltered
24 utility world. No one even knows what you're talking
25 about.
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453 STURTEVANT (Di)
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1 Q BY MR. RICHARDSON: Mr. Sturtevant, if I
2 were to ask you the questions, same questions, that are
3 in your prefiled testimony today, would your answers be
4 the same?
5 A They would.
6 MR. RICHARDSON: Madam Chair, I move that
7 the testimony of Mr. Sturtevant be spread upon the record
8 as if it were read in full.
9 COMMISSIONER SMITH: Seeing no objection,
10 it is so ordered.
11 (The following prefiled direct testimony
12 of Mr. Don Sturtevant is spread upon the record.)
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454 STURTEVANT (Di)
ICIP
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1 Q.Please state your name, occupation, and
2 business address.
3 A.My name is Don Sturtevant, Corporate Energy
4 Manager for the J. R. Simplot Company headquartered at 999
5 Main Street, Boise, Idaho 83702.
6 Q.Please describe you educational background.
7 I'm a registered Professional Engineer,A.
8 licensed in the State of Idaho and a Certified Energy
9 I hold a Bachelor's degree in MechanicalManager.
10 Engineering from the University of Idaho and am a Masters
11 of Business Administration student at Boise State
12 Uni versi ty.
13 Q. What is your work experience at the J. R.
14 Simplot Company?
15 I've been the Corporate Energy Manager for fiveA.
16 years, and have been with the Company for the past eleven
17 In my current role, I work with twenty~twoyears.
18 different utili ties in North America, Canada, and
19 Australia.
20 What is the purpose of your testimony?Q.
21 The purpose of my testimony is to shed light onA.
22 the Idaho Power Facilities Charge program, explain the
23 effects on the J. R. Simplot Company, and propose a
24 solution to what I consider to be an unfair business
25 practice. J. R. Simplot Company is a member of the
455 Don Sturtevant, DI 1
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1 Industrial Customers of Idaho Power (ICIP), and supports
2 the ICIP' s position in this case.
3 Please explain in general terms the locationQ.
4 and products produced at J. R. Simplot Company's plants
5 taking service from Idaho Power as large power or special
6 contract customers.
7 We are one of Idaho Power's largest customersA.
8 with industrial facilities located in Pocatello,
9 Aberdeen, Nampa, and Caldwell.We also have several
10 commercial facilities
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456 Don Sturtevant, DI la
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1 scattered throughout the state.We are an AgriBusiness
2 company and have farming and cattle operations, produce
3 fertilizer, and process potatoes into frozen
4 french~fries.
5 How many people are employed by J. R. SimplotQ.
6 Company in the State of Idaho?
7 We currently employ over three thousand (3,000)A.
8 employees in Idaho.
9 How much does the J. R. Simplot Company spend onQ.
10 electricity bills to Idaho Power annually?
11 A.J.R. Simplot Company spends approximately $16.5
12 million annually in Idaho Power charges.
13 Does J. R. Simplot Company pay Idaho Power aQ.
14 facilities charge for electrical distribution equipment
15 installed and maintained beyond the point of delivery by
16 Idaho Power at J.R. Simplot Company's plants and
17 facilities?
18 A.Yes.
19 Could you explain your understanding of theQ.
20 facilities charge?
21 The current Schedule 19 tariff states that atA.
22 Idaho Power's option, it may install and maintain
23 facilities beyond the point of delivery and charge 1.7%
24 monthly or 20.4% annually for Company-owned facilities
25 beyond the point of delivery.
457 Don Sturtevant, DI 2
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1 Idaho Power has filed to reduce the facilities
2 charge to i. 41% monthly or 17.00% annually in this case
3 for Schedule 19 customers, but not for Special Contract
4 customers. In this context, I would like to point out
5 that although the Don Plant has a separate Special
6 Contract executed in 2004, section 15.2 of the contract
7 specifically allows for changes to the Schedule 29 rates,
8 which include the facilities charge rate.
9 !
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458 Don sturtevant, DI 2a
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1 Q. What types of equipment are included in the
2 facilities charge?
3 A.The charge covers typical higher-voltage
4 equipment such as transformers, poles, wires, and
5 switches.
6 How much does J. R. Simplot Company currentlyQ.
7 pay as a facilities charge?
8 We have $4.252 million in assets for which weA.
9 pay $867,426 each year.
Q.How did you become aware of the facilities
11 charge?
12
13
A.I was investigating our bills and noticed the
facili ties charges.I began to question what the
14 charges were for and the total amount we were paying.I
15 was very surprised to find out that the facilities charge
16 was so large, that it never gets paid off, and we pay
17 20.4% annually forever.
18 Q.Has Idaho Power ever requested your written
19 consent to install any facilities beyond the point of
20 delivery at your plants?
21 No.A.
22 Are you aware of such consent given by anyQ.
23 other J. R. Simplot Company officials?
24 I am aware that section 10.1 of the Don PlantA.
25 Special Contract approved in 2004 grants Idaho Power
459 Don Sturtevant, DI 3
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1 access to Simplot premises for installation, removal, and
2 maintenance of distribution facilities. I have reviewed
3 the Schedule 19 tariff, and it contains no provision
4 requiring the customer to grant Idaho Power access for
5 purposes of installing or maintaining distribution
6 facilities.Idaho Power formerly required customers to
7 execute a Uniform Schedule 19 Service Agreement, but the
8 version from 2001 that I have reviewed likewise provides
9 no
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460 Don Sturtevant, DI 3a
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1 provision granting the Company access to customers'
2 premises for purposes of installing or maintaining
3 distribution facilities.
4 Q.Does the Schedule 19 tariff appear to allow
5 J. R. Simplot Company as an Idaho Power customer to opt
6 out of the facilities charge, and to take on the
7 responsibili ty for electrical distribution facilities on
8 Simplot plants' property?
9 A.No. The tariff plainly states: "At the option
10 of the Company, transformers and other facilities
11 installed beyond the Point of Delivery to provide Primary
12 or Transmission Service may be owned, operated, and
13 maintained by the Company in consideration of the
14 Customer paying a Facilities Charge to the Company." This
15 tariff implies the customer has no choice and it does not
16 state that the customer has the option to itself own and
17 maintain the facilities on its property.
18 Q.Does Idaho Power's ownership and management of
19 electrical equipment on plants owned by J. R. Simplot
20 Company concern you from a liability perspective?
21 Absolutely.A.In large industrial and
22 commercial operations, safety is our highest priority.
23 Q.What insurance requirements does J. R. Simplot
24 Company require of electrical contractors that conduct
25 work on its property?
461 Don Sturtevant, DI 4
ICIP
1 A.We require that every contractor working at any.2 J. R. Simplot Company location provide proof of $5 million
3 dollars in liability insurance.
4 Q.Has Idaho Power provided J. R. Simplot Company
5 wi th assurance that these Simplot policies are met by
6 Idaho Power' s liability coverage?
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462 Don Sturtevant, DI 4a
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1 A.No. We asked for insurance coverage documents
2 prior to this rate case and did not receive them. The
3 attorney for the Industrial Customers of Idaho Power was
4 able to obtain summaries of Idaho Power's insurance
5 policies only through discovery in the general rate case.
6 The Company stated in its Response to ICIP Production
7 Request No. 14 contained in ICIP Exhibit No. 305 that
8 "the insurance carried by the Company would cover any
9 loss for which the Company was deemed negligent in an
10 accident or injury." It is not clear from this response,
11 or the documents describing the Company's insurance
12 policies providing in its Response to ICIP Production
13 Request No. 16 contained in ICIP Exhibit No. 305, that
14 the Company indemnifies or co-insures J. R. Simplot for
15 such negligent acts, or that the Commission requires it
16 to do so.
17 The Schedule 19 tariff provides no requirement for
18 Idaho Power to insure or indemnify customers against any
19 harm that may be caused to the customer or third parties
20 by Idaho Power's intentional or negligent acts related to
21 distribution facilities on the customers' premises.
22 However, the Don Plant Special Contract approved in
23 2004 contains a general liability requirement, in section
24 12.1, which states:
25 Each Party agrees to protect, defend, indemnify and
463 Don Sturtevant, DI 5
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hold harmless the other Party, its officers
directors, parent company, affiliates, subsidiaries,
agents representatives, and employees against and
from any and all liability, suits, loss, damage
claims, actions, costs, and expenses of any nature,
including court costs and reasonable attorney's
fees, even if such suits or claims are completely
groundless, as a result of injury to or death of any
person or destruction, loss or damage to property
arising in any way in connection with, or related
to, this Agreement, but only to the extent such
injury to or death of any person or
464 Don Sturtevant, DI Sa
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destruction, loss or damage to property is not due
to the negligence or other breach of legal duty of
such other Party; provided, however, that each
Party shall be solely responsible for claims of and
payment to its employees for inj uries occurring in
6 connection with their employment or arising out of
7 any worker's compensation law. In no event shall
8 ei ther Party be liable to the other for any
9 indirect, incidental, special, or consequential
damages of any character including, without
limitation, damages for lost profits or work
stoppages.
Q. Is this provision in the Don Plant Special
Contract consistent with J.R. Simplot Company's general
15 insurance requirements for contractors performing work at
16 the plant?
17 A.No. Even this provision does not expressly
18 require J. R. Simplot Company's $5 million in insurance
19 requirement I testified to above.
20 Q.Do you think it is reasonable for Idaho Power
21 to agree to indemnify J. R. Simplot at the Don Plant but
22 not to agree to indemnify J. R. Simplot at any of the
23 plants taking Schedule 19 Service?
24 A.No.
25 Q.Please comment on the average age and overall
465 Don Sturtevant, DI 6ICIP
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1 rates paid by J. R. Simplot Company for the equipment at
2 any J. R. Simplot Company plants subj ect to the facilities
3 charge.
4 Based on the Distribution Facilities ReportsA.
5 provided by Idaho Power periodically for each of our
6 plants and an inventory of the equipment undertaken by
7 myself and Idaho Power representatives in the past year,
8 we have 1,609 items on the facilities charge that were
9 installed at
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466 Don Sturtevant, DI 6a
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1
2
a total initial investment of $4,252,088 and an annual
charge of $867,426.Since this equipment has been
3 installed, we have paid around $14 million or three point
4 four (3.4) times its installed investment already. We
5 have two items that are sixty-six (66) years old and have
6 paid for those items almost seven (7) times. The average
7 age of all our facilities charge equipment is twenty-four
8 (24) years old.
You stated the average age of the equipment is9Q.
10 nearly 24 years old, and you have already paid for this
11 equipment 3.4 times. Do you think it is fair for Idaho
12 Power to continue charging the facilities charge rate for
13
14
Idaho Power's initial investment?
A. No, it is not fair at all.I believe that
15 Idaho Power has more than earned their rate of return
16 that would have been fair and reasonable many times over.
17 This falls under the category of subsidization and unfair
18 business practice.
19 Does a reduction in the annual facilitiesQ.
20 charge from 20.4% of the initial investment to 17.00% of
21 the initial investment seem adequate to you for Schedule
22 19 Customers?
23 A.No, this seems like a very high rate for
24 operation, maintenance, and a return on investment,
25 especially considering that the principal amount is never
467 Don Sturtevant, DI 7ICIP
1 paid off by J. R. Simplot Company and never goes away..2 Q. Have you calculated the remaining book value of
3 Idaho Power facilities charge equipment at any J. R.
4 Simplot Company premises subj ect to the facilities
5 charge.
6 A.Yes. The remaining book value for all of our
7 equipment is listed below:
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468 Don Sturtevant, DI 7a
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~f)~~,,al~f:~),~.~:3(yr___ _25~vr ..__~~~V!___~S~vr ___.__. ._ _ __ ___.
Don $998,570 $787,133 $615,726 $435,002
Caldwell $189,774 $156,019 $127,704 $106,322
Aberdeen $161,120 $125,967 $85,810 $40,236
Irving $120,271 $118,553 $115,975 $111,680
Nampa $114,201 $102,401 $88,916 $69,405
Grandview $74,086 $60,733 $46,379 $35,649
Double-J $60,341 $55,714 $48,775 $37,209
WSI $17,546 $9,273 $1,506 $
.!p_~~f~rnp_$.._~17/H5_S 16,411 $_.t4,al~$12!!S§.
Grand Total $1,753,38 $1,432,204 $1,145,60 $847,66
4
5
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10
11 Q.Do you think it would be fair for Idaho Power
12 to sell this equipment to you for that price?
13 A.No, I do not.We have many items that are
14 much older than 30 years. We have calculated that 520
15 items at our plants are over 30 years old, which is 32%
16 of all of our facilities charge equipment. We have paid
17 for this equipment several times already, and if we paid
18 the net book value on the remaining items, we would not
19 get fair credit for the overpayments that we have already
20 made on equipment that should have been paid off long
21 ago. Overall, we have paid for the initial value of this
22 equipment more than 3.4 times already and should be given
23 ownership of all items today.
24
25
Q.What is your understanding of the options
provided by Idaho Power's facilities charge for the
469 Don Sturtevant, DI 8
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1 customer to stop paying the charge?
2 A.Under the plain terms of the Schedule 19 tariff
3 and sections 4.2 and 7.3 of the 2004 Don Plant Special
4 Contract, we may require Idaho Power to "remove" the
5 facili ties. But then we must pay Idaho Power for the
6 remaining depreciated value of the facilities plus the
7 cost to remove the facilities minus a credit for the
8 sal vage value of the equipment. There is no express
9 provision allowing for purchase of facilities by the
10 customer to avoid paying removal
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470 Don Sturtevant, DI 8a
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1 costs and to avoid incurring additional costs that may
2 arise if Idaho Power is unable to find a willing buyer
3 for the facilities or otherwise salvage the facilities.
4 In other words, the facilities charge does not allow for
5 the customer to purchase the facilities from Idaho Power,
6 even if the customer has more than paid off the initial
7 investment and provided Idaho Power with reasonable fees
8 to cover operation and maintenance and a reasonable
9 return.
10 Q.Has the J. R. Simplot Company paid similar
11 facilities charges in other jurisdictions, or with other
12 utilities?
13 A.Yes. At our Othello, Washington facility,
14 Avista was charging us 21% annually, which was paid off
15 When I learned of this, Iafter thirty years.
16 approached the Avista staff and requested that we be
17 allowed to payoff this charge and get out from under the
18 exorbi tant payments.They agreed, we paid it off, and
19 they have offered to do maintenance or repairs for us at
20 a "time and materials" rate. This is the only other
21 utility with which we pay a facilities-type charge.
22 Q.If J. R. Simplot Company were soliciting
23 competitive bids from private companies to lease and
24 manage the electrical facilities similar to those
25 services provided by Idaho Power under the facilities
471 Don Sturtevant, DI 9
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1 charge, would you consider a bid of an ongoing annual
2 charge of 17.00% of the initial investment to be a
3 reasonable bid for your Schedule 19 facilities? How
4 about the 20.4% for the Don Plant?
5 Not at all.As you know, interest rates areA.
6 very low. Anyone who approached us with this type of
7 financing option would not be considered.
8 /
9 /
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472 Don sturtevant, DI 9a
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1 Q. Has J. R. Simplot Company approached Idaho Power
2 to request that Idaho Power sell the facilities charge
3 equipment, or otherwise allow J. R. Simplot Company to
4 stop paying Idaho Power for electrical equipment on J. R.
5 Simplot Company property?
6 A.Yes. In meetings and letters in the year prior
7 to this rate case, J. R. Simplot Company requested that it
8 be allowed to exercise the option to own all of its
9 distribution facilities beyond the point of delivery. In
10 a letter from our attorney dated December 30, 2010, we
11 requested that Idaho Power provide the depreciated book
12 value of those facilities so that we could evaluate the
13 option of ownership. We also requested that Idaho Power
14 provide the costs by the end of January 2011 because we
15 needed the information by that time to adequately
16 evaluate it in time for internal financial decision
17 timelines for the next fiscal year.
18 Idaho Power responded by letter on January 31, 2011,
19 by stating that it would provide J. R. Simplot Company
20 with "buy-out" prices by mid-March 2011. It stated that
21 it would only provide such prices at the "fair market
22 value price of those facilities, not at the depreciated
23 book value price." Idaho Power also indicated it would
24 need to install additional protective equipment on its
25 side of the meter if it sold these pieces of equipment to
473 Don Sturtevant, DI 10
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1 Simplot, and that it would provide the cost for that
2 equipment to us mid-March 2011 as well.
3 Idaho Power also stated it will not allow for mixed
4 ownership, or an option whereby Simplot owned the
5 equipment and paid Idaho Power a limited facilities
6 charge for maintenance expenses, like the option offered
7 by Avista in a similar situation. These letters are
8 included in ICIP Exhibit No. 307, attached to Dr. Don
9 Reading's direct testimony.
Q.Did Idaho Power provide such prices by
11 mid-March?
12 /
13 /
14 /
15
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22
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24
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474 Don Sturtevant, DI lOa
ICIP
.1 No. Idaho Power contacted us at the end ofA.
2 March to set up a meeting in April 2011. Prior to the
3 meeting, Idaho Power's attorney sent our attorney an
4 email stating, for the first time, that Idaho Power would
5 not agree to sell the facilities to us. This email is
6 included in ICIP Exhibit No. 307 attached to the direct
7 testimony of Dr. Don Reading. At a meeting on April 11,
8 2011, attended by our representatives, Idaho Power took
9 the position that it cannot sell facilities to Simplot at
10 a fair market price without increasing the rates of other
11 Schedule 19 customers. The price Idaho Power stated, for
12 discussion purposes only, that J. R. Simplot would have to.13
14
pay Idaho Power was approximately $10 million for the
facili ties if they were to be sold, which is over twice
15 the initial investment in the facilities provided by
16 Idaho Power of $4.25 million.
17 Q.Does it seem fair to offer to sell the
18 facili ties at over twice the initial investment?
19 A.No, but Idaho Power never actually stated that
20 was an option. They just provided the calculation of
21 what they believed we would need to pay in order to
22 purchase these facilities after years of paying the
23 facili ties charge.
.24
25
Q.Does Idaho Power's response that it cannot
allow for mixed ownership make sense to you?
475 Don Sturtevant, DI 11
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1
2
A.Not at all.They cite that safety is the
reason,and we agree that safety of all employees, theirs
3 and ours, is of the most paramount concern. However, we
4 have successfully had mixed ownership of equipment at our
5 Caldwell facility since 1945 without incident.
10 /
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12 /
13
14
15
16
17
18
19
20
21
22
6 Addi tionally, in conversations with other customers that
7 are paying facilities charges, they have mixed ownership
8 as well. Below is a picture of the mixed ownership at
9 our Caldwell facility:
23
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476 Don Sturtevant, DI lla
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1.
4
Idaho Power-owned:
Secondary transformers
7
8
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12.13
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Mixed Use - JR Simplot Plant, Caldwell, tD
Idaho power owns the transmissioni substation, and meter. Simplot owns the
majority of the distribution lines, poles, etc. Idaho Power owns some secondary
transformers. Sirnplot owns the secondary service.
24.25
477 Don Sturtevant, DI 12
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1 Q. Did Idaho Power ever provide J. R. Simplot
2 Company with the cost to simply remove the equipment
3 subject to the facilities charge, as expressly allowed in
4 the Don Plant Special Contract and the Schedule 19
5 tariff?
6 We requested that cost in discovery in thisA.
7 case, and they required us to request it outside of the
8 rate case. Our attorney then sent a letter to Idaho
9 Power requesting the removal costs. Idaho Power's
10 response letter from their attorney to our attorney,
11 contained in ICIP Exhibit No. 308 attached to Dr. Don
12 Reading's direct testimony, said exercising the removal
13 option may require turning the power off at our
14 facili ties, thus interrupting production. Removal would
15 also require J. R. Simplot Company to first pre-pay Idaho
16 Power to engineer a plan to remove the facilities in
17 phases. I understand that the removal cost may increase
18 if Idaho Power is not able to find a good salvage use for
19 the equipment. I believe that this complicated removal
20 process is unnecessary when we have already paid for the
21 equipment and when it is already being put to use at our
22 facili ties. It makes no sense to charge us to remove the
23 equipment and attempt to find some other use for it when
24 we have repeatedly paid for its full initial value
25 already.
478 Don Sturtevant, DI 13
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2
3
Q.What is the current status as you understand
it?
A.J. R. Simplot Company is still paying the
4 facilities charge at each of the plants served by Idaho
5 Power, and Idaho Power has provided no description
6 satisfactory to the J. R. Simplot Company of how it would
7 stop paying the charge.
8 Q.If you had the choice, how would you propose
9 Idaho Power address the problems you see with its
10 facilities charge?
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479 Don Sturtevant, DI 13a
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1 We have paid for our current facilities chargeA.
2 equipment more than three times already. I believe that
3 Idaho Power has already recovered its initial costs and
4 any authorized rate of return several times over. It
5 would be fair to simply turn ownership of these
6 facilities over to J.R. Simplot Company.
7 Additionally, I believe it is imperative that the
8 Commission seriously reform the facilities charge
9 according to the proposals and analysis contained in Dr.
10 Don Reading's testimony. I fully support the
11 recommendations contained in the direct testimony of Dr.
12 Don Reading, which would make the monthly charge fair for
13 those customers who wish to pay it and would provide
14 reasonable mechanisms by which customers may take over
15 ownership of equipment on their own property.
16 Does this conclude your testimony?Q.
17 A.Yes.
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480 Don Sturtevant, DI 14
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1 (The following proceedings were had in
2 open hearing.)
3 MR. RICHARDSON: Madam Chair, with your
4 indulgence, I have a couple of small housekeeping direct
5 questions.
6
7 DIRECT EXAMINATION
8
9 BY MR. RICHARDSON: (Continued)
Q Mr. Sturtevant, what's been your
11 experience with critical spare parts with this special
12 facilities program?
13 A That's a good question. Currently under
14 critical spares, Idaho Power has facilities charge
15 equipment that's sitting on the ground at our facilities,
16 specifically at our Don plant, that we're paying a
17 facili ties charge on.
18 MR. WILLIAMS: Madam Chair, pardon me, I'm
19 asking procedurally what's going on here, I guess. Are
20 we entitled to call our witnesses to provide live
21 testimony as well, then? I wasn't aware that was part of
22 the Commission's procedures.
23 COMMISSIONER SMITH: You are certainly
24 entitled to recall any of your witnesses. As the
25 Applicant with the burden, that is always your
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1 prerogative. The Commission frowns on, but does
2 sometimes allow, additional direct questions by the
3 lawyers within certain bounds, so if you think
4 Mr. Richardson has gone over the line, then just let me
5 know.
6 MR. WILLIAMS: All right, thank you,
7 Madam Chair.
8 MR. RICHARDSON: That's all I had, Madam
9 Chairman. Mr. Sturtevant is available for cross.
COMMISSIONER SMITH: Thank you. Do we
11 have any questions from Mr. Otto?
12 MR. OTTO: No questions,
13 Madam Chairwoman.
14 COMMISSIONER SMITH: How about Mr. Nelson.
15 MR. NELSON: No questions. Thank you.
16 COMMISSIONER SMITH: Olsen.
17 MR. OLSEN: No
18 COMMISSIONER SMITH: Purdy.
19 MR. PURDY: No.
20 COMMISSIONER SMITH: Mr. Miller.
21 MR. MILLER: No, thanks.
22 COMMISSIONER SMITH: Ms. Kyler.
23 MS. KYLER: No.
24 COMMISSIONER SMITH: Mr. Klein?
25 MR. KLEIN: No.
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482 STURTEVANT (Di)
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1 COMMISSIONER SMITH: We are back to you,
2 Mr. Williams;,
3 MR. WILLIAMS: Yes, Madam Chair.
4
5 CROSS-EXAMINATION
6
7 BY MR. WILLIAMS:
8 Q Good afternoon, Mr. Sturtevant.
9 A Good afternoon.
10 To start, I need just some clarification.Q
11 I think there might be a typo here in your testimony, but
12 I just want to make sure. On page 1 --
13 A Yes.
14 -- line 16, the sentence reads beginningQ
15 with, "J. R. Simplot Company is a member of the
16 Industrial Customers of Idaho Power (ICIP), and supports
17 of the ICIP' s position in this case." It looks like
18 there might be a word missing there.
19 It should say, "and supports the ICIP' sA
20 position in this case."
21 Q Okay.
22 Thank you, so you could strike "of."A
23 Page 2, line 5 of your testimony, statesQ
24 that Simplot employs 3,000 people in Idaho. Does that
25 number account for the recently announced closures of the
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.1 Aberdeen, Caldwell and Nampa Simplot facilities?
2 A That would.
3 I'm sorry, it would or wouldn't?Q
4 Yes, this was prepared before we announcedA
5 the closure of those facilities, so approximately 800
6 employees will be losing their jobs over the next three
7 years.
8 Also, a little later on on page 2, lines 8Q
9 and 9, your testimony states that Simplot spends
10 approximately 16.5 million annually in Idaho Power energy
11 charges. Again, does that number account for the
12 recently announced closures of the Aberdeen, Caldwell and.13
14
Nampa facilities?
A That number would include Aberdeen, Nampa
15 and Caldwell and it has not detracted from that number.
16 Q Mr. Sturtevant, is it your testimony that
17 Idaho Power should give away assets that have value at
18 Simplot locations that you have announced are going to be
19 closed?
20 A Well, prior to our announcement in
21 November 9th of the closure of those three facilities,
22 that would have been our position; however, now that
23 we're closing those facilities, we don't know exactly if
24 we're going to sell those facilities or level them to the.25 ground, but we know that we're not going to be producing
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484 STURTEVANT (X)
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1 at those facilities anymore. I can't speak necessarily
2 to what we're going to ask to do at that point, just that
3 we be given the choice.
4 Q Are you familiar with the Schedule 29
5 Don the contract between Idaho Power and Simplot for
6 the Don power plant?
7 A I am.
8 Q And are you aware that that contract
9 contains specific provisions whereby Idaho Power agrees
10 to own, operate and maintain facilities in exchange
11 for Idaho -- pardon me, in exchange for Simplot paying a
12 facilities charge?
13 A I do.
14 Q And are you aware that Simplot agreed to
15 similar facilities charge provisions in previous
16 contracts for the Don plant?
17 A Specifically for the Don plant, yes.
Q And that special contract doesn't contain
19 a provision whereby Idaho Power has to give away
20 facilities to Simplot, does it?
21
22
A Not that I'm aware of.
Q Has your counsel advised you whether this
23 Commission has the authority to modify terms and
24 conditions of special contracts?
25 A I don't know that they have or they
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1 haven't, but I believe that's why we're approaching the
2 Commission to determine.
3 Q Are you aware that Idaho Power's
4 facili ties charge methodology does contain a depreciation
5 expense in it?
6 A Depreciation is included in the 20.4
7 percent annually or the 1. 7 percent monthly. There is a
8 line item in there, as I understand it, that hasn't been
9 revisited since 1985.
10 Q So the answer, just to be clear, is yes,
11 there is a depreciation expense component in the
12 facili ties charge methodology?
13 A Yes, as I understand it from Idaho Power,
14 there's a listing on a line item that says depreciation.
15 As I understand from my studies that depreciation means
16 of something that you would payoff as a depreciation
17 expense, as a capital asset.
18 Q Thanks. Are you aware that Idaho Power
19 credits back 100 percent of the revenue it collects from
20 the facilities charge customers to the class in which the
21 customer resides?
22
23
24
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A No, I'm not, but if you say so, okay.
Q So you agree with me, then?
A I'm not aware that you do, but I'm not
that up to speed on all the rulemaking and how you
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1 account for the money. We don't see any money back on
2 our bills for facilities charges, if that's what you're
3 saying.
4 Q Would you agree with me that as part of
5 the facilities charge service that Idaho Power provides
6 that Simplot receives customer service on a
7 24/7/365-day-a-year basis?
8 A Yes.
9 Q And do you believe that the operations and
10 maintenance services provided by Idaho Power's field
11 personnel have been satisfactory?
12 A It's been absolutely satisfactory. To the
13 level of paying 20.4 percent forever, I think that we
14 could do it ourselves much cheaper.
15 MR. WILLIAMS: All right, thank you. No
16 further questions, Madam Chair.
17 COMMISSIONER SMITH: Thank you. Let's see
18 if there are questions from the Commissioners.
COMMISSIONER REDFORD: No.
COMMISSIONER SMITH: Nor I.
21 Mr. Richardson, do you have any redirect?
22 MR. RICHARDSON: Just a couple,
23 Madam Chair.
24
25
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487 STURTEVANT (X)
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1 REDIRECT EXAMINATION
2
3 BY MR. RICHARDSON:
4 Q Mr. Sturtevant, Mr. Williams asked you
5 about the 24/7/365 service, overall, how valuable is that
6 to you?
7 A When you're in a production facility such
8 as we are, it's extremely valuable, but value has a
9 specific connotation with it. Would we pay a million
10 dollars for that or would we pay 500,000 or 100,000, so
11 it's extremely valuable. I don't think that it's
12 necessarily priced competitively at 20.4 percent.
13
14
Q So what was your experience as an energy
official for Simplot with other utilities on facilities
15 charge-type services?
16 A Yeah, we had the same issue with Avista
17 Utili ties. We have a facility over in Othello,
18 Washington. We were currently paying 21 percent annual
19 interest rates to them or annual rate of payment. I
20 understand it's not necessarily an interest rate, and we
21 approached the utility over there and they said
22 absolutely, you can buy this out if you want and we'll
23 put it on your bill and they were very accommodating.
24 Within three to four months, we got it resolved to great
25 satisfaction.
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1 Q And as an energy facilities manager for
2 Simplot and you look at a program like the facilities
3 charge program that Idaho Power offers, in your view, who
4 was that program designed for?
5 A It's definitely, I think, designed towards
6 some of the smaller people out there that may not have
7 the capital to go forward with transformers and poles and
8 wiring, so it could be a good service if it was
9 structured correctly. For us as a larger industrial
10 customer, we actually have a pretty good position within
11 the community and have good access to capital and we'd
12 like to own that equipment outright if we could.
13 Q But you'd like to have the choice?
14 A That's right. It's all about the
15 choice.
16 MR. RICHARDSON: That's all I have,
17 Madam Chair. Thank you, Mr. Sturtevant.
COMMISSIONER SMITH: Thank you, Mr.
19 Sturtevant. We appreciate your help.
20 MR. RICHARDSON: May this witness be
21 excused, Madam Chair?
22 COMMISSIONER SMITH: Seeing no obj ection,
23 the witness is excused.
24
25
THE WITNESS: Thank you.
(The witness left the stand.)
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1 MR. RICHARDSON: Thank you. That
2 concludes the Industrial Customers' case, Madam Chair.
3 COMMISSIONER SMITH: Thank you, Mr.
4 Richardson.
5 Mr. Otto, we're ready for your witness.
6
7 NANCY HIRSH,
8 produced as a witness at the instance of the Conservation
9 Parties, having been first duly sworn, was examined and
10 testified as follows:
11
12
13
14
15
DIRECT EXAMINATION
BY MR. OTTO:
Q Okay, could you please state your name and
16 your position for the record?
17 A Nancy Hirsh, H-i-r-s-h. I'm the policy
18 director with the Northwest Energy Coalition.
19 Q Are you the same Nancy Hirsh that filed
20 direct testimony and rebuttal testimony in this case?
21
22
A Yes, I am.
Q And we discussed there were three
23 corrections that we found to this testimony.
24
25
A Yes.
Q And the first one had to do with -- well,
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490 HIRSH (Di)
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1 let's start with the first one that actually
2 Ms. Nordstrom brought to our attention.
3 A Yes. On page 10 of my direct testimony,
4 lines 7 and 8 where it says that -- where it starts
5 "$10,000,000" and it should say "of the back balance in
6 energy efficiency funding" instead of the "demand
7 response," and then on page 18 --
8 COMMISSIONER SMITH: Excuse me, we need
9 that one more time.
10 THE WITNESS: Page 10.
11 COMMISSIONER SMITH: Please read how it
12 should read right now.
13 THE WITNESS: Okay. Page 10, line 7
14 COMMISSIONER SMITH: Start with "the
15 Commission. "
16 THE WITNESS: "The Commission initially
17 con$idered this accounting change in a prior case" --
COMMISSIONER SMITH: Oh, I mean on line 7.
19 You have a "the Commission."
20 THE WITNESS: Okay. "The Commission
21 authorized Idaho Power to collect $10,000,000 of the back
22 balance in energy efficiency funding...".
23
24
25
COMMISSIONER SMITH: And strike
THE WITNESS: And strike "in demand
response incentives."
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491 HIRSH (Di)
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1 COMMISSIONER SMITH: Okay. All right,
2 thank you.
3 THE WITNESS: Okay, and then on page 18,
4 line 16, the word "funding" should actually be "rider."
5 MR. RICHARDSON: Which line is that?
6 THE WITNESS: That is line 16. "Funding"
7 should be struck and in its place should be "rider," and
8 then the third is a clarification. Throughout my
9 testimony, I characterize that the Commission's orders
10 COMMISSIONER SMITH: Would you start
11 again, please?
12 THE WITNESS: In my testimony, I
13 characterize the Commission's Orders as saying that they
14 require the Company to acquire all cost-effective
15 conservation or energy efficiency, and in fact, going
16 back through some of those Orders, the language is that
17 the Commission directs the Company to pursue all
18 cost-effecti ve energy efficiency. I do believe I
19 characterize that interpretation as acquire, because
20 pursuing is good, but acquiring savings is better. I
21 think that was the intent of the Commission, so that's
22 the end of my corrections.
23 MR. OTTO: Just on that last one, I can
24 work with the recorder, but I have the specific --
25 there's about five places where it says "acquire" instead
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492 HIRSH (Di)
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1 of "pursue." I don't think it's necessary for all of us
2 to chase through that.
3 Q BY MR. OTTO: Thank you for those
4 clarifications; so with that, if I asked you the same
5 questions in your direct and rebuttal testimony today,
6 would your answers be the same?
7 A Yes.
8 MR. OTTO: With that, I would move to
9 spread Ms. Hirsh's testimony, including Exhibits 801, 802
10 and 803 upon the record.
11 COMMISSIONER SMITH: Seeing no objection,
12 the prefiled direct and rebuttal testimony of Ms. Hirsh
13 will be spread upon the record and Exhibits 801 through
14 803 will be identified.
15 (The following pre filed direct and
16 rebuttal testimony of Ms. Nancy Hirsh is spread upon the
17 record. )
18
19
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493 HIRSH (Di)
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1 Q.Please state your name, affiliation, and
2 highlight some of your qualifications.
3 A.My name is Nancy Hirsh. Since 1996, I have been
4 the policy director for the NW Energy Coalition,
5 coordinating the work of the policy team in advocating
6 for investments in clean and affordable energy services.
7 The NW Energy Coalition is an alliance of more than 110
8 environmental, civic and human service organizations,
9 progressive utilities and businesses from Oregon,
10 Washington, Idaho, Montana, Alaska and British Columbia.
11 We promote energy conservation and renewable energy
12 resources, consumer and low-income protection and fish
13 and wildlife restoration in the Columbia River Basin.
14 The Coalition has 11 member organizations in Idaho,
15 including groups such as Advocates for the West, Idaho
16 Rural Council, the Idaho Conservation League, the League
17 of Women Voters, the Snake River Alliance, and the South
18 Central Community Action Agency. In addition, I serve as
19 Chair of the Board of the Renewable Northwest Project and
20 si t on Idaho Power's Energy Efficiency Advisory Group.
21 Previously, I spent twelve years in Washington, D.C.
22 working for the National Wildlife Federation and
23 Environmental Action Foundation on federal energy policy
24 and electric utility issues, including providing
25 assistance to state environmental and consumer
494 Hirsh, Di 1
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20
21
22
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1 organizations working on utility resource planning. I
2 have made numerous presentations to national and state
3 audiences on the importance of least cost resource
4 planning and the role of energy efficiency and renewable
5 energy resource development in keeping utility customer
6 bills affordable.
7 Q.Have you previously testified before the Idaho
8 Public Utility Commissions or Commissions in other
9 states?
10 A.I have presented testimony in the 2004 Idaho
11 Power rate case and the 2010 Idaho Power DSR Recovery
12 docket. In addition, I have testified before the Public
13 Utility Commission of Oregon and the Washington Utilities
14 and Transportation Commission as well the District of
15 Columbia and Georgia Public Service Commissions.
16 /
17 /
18 /
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495 Hirsh, Di la
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1 Q.Please describe the purpose of your testimony
2 in this case.
3 A.I offer this testimony on behalf of the NW
4 Energy Coalition, the Idaho Conservation League, and the
5 Snake River Alliance - collectively the Conservation
6 Parties - for two reasons. First, I explain our support
7 for the stipulation submitted by Idaho Power and signed
8 by most parties to this case. Second, I address two of
9 the unresolved issues-funding for the low-income
10 Weatherization Assistance for Qualified Customers program
11 and the adequacy of the Energy Efficiency Rider Tariff.
12 The overriding purpose of my testimony is to demonstrate
13 that in times of rising electric rates good public policy
14 and utility management requires that ratepayers have
15 access to powerful tools to control their energy bills
16 through programs that promote energy efficiency.
17 Q.Please explain the Conservation Parties'
18 posi tion on the Stipulation.
19 A.We support the stipulation as a reasonable
20 balance of the competing interests in this case. The
21 Conservation Parties reviewed Idaho Power's pre filed
22 direct testimony and participated in the settlement
23 negotiations in this case. The overall revenue
24 requirement contained in the stipulation is less than one
25 half of Idaho Power's original request. This is a clear
496 Hirsh, Di 2
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1 benefi t to all ratepayers. However, a sizeable portion
2 of the revenue requirement not included in the
3 stipulation Idaho Power attributes to power purchases
4 under the Public Utility Regulatory and Policy Act of
5 1978 ("PURPA"). Instead of collecting these costs
6 prospectively through rates, they will be collected
7 through the Power Cost Adjustment (PCA). This balances
8 reducing the immediate impact to ratepayers with Idaho
9 Power's need to timely recover the costs of this largely
10 carbon-free generation resource. But this resolution of
11 the issue also sets up ratepayers for potentially a large
12 increase in future PCA adjustments. Consequently, now
13 more than ever customers need programs and incentives to
14 reduce energy bills through efficiency investments.
15 /
16 /
17 /
18
19
20
21
22
23
24
25
497 Hirsh, Di 2a
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1 In terms of the cost of service methodology, the
2 Conservation Parties agree with the Company and Staff
3 that the filed methodology is sound. The filed
4 methodology demonstrates that, all else being equal,
5 residential rates should increase less than rates for the
6 irrigation, large commercial, industrial, and special
7 contract customers. In the spirit of compromise, the
8 Conservation Parties agree to the stipulated increase
9 being spread equally across all customer classes for this
10 specific filing. This shifting of cost recovery onto
11 residential customers provides a significant benefit to
12 these other customer groups but should not set a
13 precedent for future cost allocation. As stated earlier,
14 any increase in rates should be coupled with aggressive
15 energy efficiency opportunities. This cost allocation
16 agreement highlights even more the immediate impact on
17 low-income customers and the fact that all
18 non-residential classes could face even higher rates in
19 future rate proceedings. Maintaining strong energy
20 efficiency programs that accelerate cost-effective
21 savings will serve those customer groups well.
22 We also support the rate design changes proposed by
23 Idaho Power and included in the stipulation. While we
24 continue to believe that low residential customer charges
25 provide an appropriate conservation price signal, raising
498 Hirsh, Di 3
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1 the rate to $5. 00 per month preserves this signal and
2 aligns the rate with other Idaho investor owned
3 utilities. This level also recognizes the differing
4 perspecti ve on which cost components properly belong in
5 the customer charge. Additionally, we appreciate Idaho
6 Power's proposal to limit the application of the rate
7 increase to the wintertime third energy block. Until
8 more refined data is available, we join the Company and
9 others in assuming this will mitigate rate impacts to
10 electrically heated homes during times when the risks of
11 reducing usage could be high. However, this points again
12 to the need to target energy efficiency programs to
13 increase energy and bill savings even when the costs of
14 energy production may be modest. Lastly, we support
15 Idaho Power's proposal to expand the voluntary
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1 opportuni ties to use time variant pricing in the near
2 future and look forward to the "separate filing prior to
3 that time explaining the details of the proposed pilot. "1
4 Q.The stipulation indicates Idaho Power will
5 ini tiate a separate proceeding to review the Fixed Cost
6 Adjustment. Please explain the Conservation Parties
7 position on this term.
8 A.We appreciate the Staff and Company agreeing to
9 resol ve the Fixed Cost Adj ustment in a focused and timely
10 fashion. The Conservation Parties believe implementing a
11 permanent mechanism to decouple revenue from energy sales
12 is sound policy and in the public interest. While we
13 believe the current pilot could be made permanent in this
14 rate case, we recognize the need of some parties to
15 separate out this complex issue into a focused
16 proceeding. Until Idaho Power does not see a
17 disincentive to reduce energy sales, we cannot expect
18 them to pursue energy efficiency with the full vigor the
19 public deserves. We look forward to addressing the
20 precise design of this mechanism in the separate
21 proceeding.
22 Q.The stipulation indicates the parties could not
23 resolve three issues including the level of funding for
24 low-income weatherizatiòn and the level of the energy
25 efficiency rider. What is the Conservation Parties'
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1 position on these issues?
2 We believe that as electric rates increase soA.
3 must the funding for energy efficiency. Of course, this
4 funding must only go towards cost effective energy
5 efficiency. But repeatedly Idaho Power's own studies
6 indicate that, despite strong gains in efficiency over
7 the years, substantial potential remains yet to be
8 realized. The Conservation Parties believe that the best
9 method to determine the appropriate level of funding for
10 efficiency is to compare the documented level of cost
11 effective potential with the funding necessary to acquire
12 this potential. For both low-income
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24 i Direct Testimony of Mike Youngblood at 11 (June 1, 2011).
25
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1 weatherization and energy efficiency generally, the
2 potential is large and customers deserve continued access
3 to these powerful tools to reduce energy bills.
4 Q.In regards to low-income weatherization, do you
5 have any specific recommendation on the appropriate
6 funding level?
7 The Conservation Parties defer to theA.
8 experience and expertise of the Community Action
9 Partnership Association of Idaho (CAPAI) on the specific
10 level of funding. I believe that CAPAI recommends
11 increasing funding from approximately $1.2 million
12 annually to $2. 7 million annually.
13 We believe this level of funding is appropriate
14 given that Idaho Power's most recent cost benefit
15 analysis of its weatherization program proves it is cost
16 effective and the CAPAI agencies have a large and growing
17 backlog of potential proj ects. The 2010 DSM Annual
18 Report reveals that Weatherization Assistance for
19 Qualified Customers (WAQC) had a benefit/cost ratio
20 greater than 1 under each of three rate tests. 2 While
21 Idaho Power contributes some funding for this program,
22 the CAPAI agencies receive additional funding from the
23 U. S. Department of Energy (DOE). DOE requires the CAPAI
24 agencies to audit each weatherized home pre- and
25 post-installation to verify that the projects are robust,
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1 properly installed, and result in verifiable energy
2 savings. Because the program passes all the benefit/cost
3 tests Idaho ratepayers can rest assured that funding
4 low-income weatherization doesn't just help those folks
5 on the margin, it results in savings for all utility
6 customers.
7 Moreover, the potential for cost effective energy
8 efficiency continues to rise and CAPAI continues to see a
9 growing backlog of eligible program participants all
10 while federal stimulus program funding declines . Given
11 the increased customer need, the opportunity for
12 increased savings and the impending rate increase, Idaho
13 Power should provide adequate funding to
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24 2 Idaho Power 2010 DSM Annual Report Supplement 1 at 45.
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1 acquire this cost effective potential. Faced with this
2 reality the Conservation Parties urge the Commission to
3 adopt CAPAI' s recommended level of funding.
4 Please expand on the underlying policy reasonsQ.
5 for your position.
6 A. Low-income weatherization is not a social
7 program. It is a cost effective energy savings program
8 that provides economic and energy benefits to both the
9 customer and the utility. Electricity is not an optional
10 service in today' s society. Electrici ty powers
11 refrigeration, heating, cooling, lighting, and home
12 medical equipment. Without lights to do their homework
13 by, children will struggle in school. Faced with
14 increasing energy bills, low and fixed income folks may
15 turn to alternative heating and lighting methods, such as
16 candles, open oven, and space heaters, which can pose
17 serious health and safety problems. According to the
18 National Association of Regulatory Utility Commissioners
19 (NARUC), the average household pays 5% of their income
20 for energy bills; meanwhile low-income households pay 16%
21 or more. 3 Faced with this heavy energy burden, these
22 families must chose between heating their home,
23 purchasing needed medicine, or putting food on the table.
24 Well-marketed and operated weatherization programs
25 can significantly reduce the energy burden on low and
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.1 fixed income families. In particular, targeting
2 weatherization services to customers with high usage and
3 those receiving LIHEAP bill assistance funds will ensure
4 that weatherization services assist those with the
5 greatest need. The same NARUC resolution goes on to find
6 weatherized homes can save between $300-400 each year,
7 allowing these households a better opportunity to pay
8 future energy bills while meeting their other needs. But
9 these savings can only be realized if the program
10 administrators have sufficient funding to meet the demand
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24.25
11 for their essential, cost effective services.
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3 Resolution Supporting Adequte Funding for the Weatherization
Assistance Program, Adopted by NARUC Board of Directs February
21, 2007.
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1 Q.What are the benefits to the utility?
2 A.Idaho Power and all ratepayers save money from
3 effective low-income weatherization programs by reducing
4 unpaid bills and avoiding the costs of disconnecting and
5 reconnecting customers. Weatherization measures that
6 lower a customer's bill make it more likely that the
7 customer will make some payment on current and past due
8 bills. In addition, low-income weatherization provides
9 the same benefits of other residential efficiency
10 programs-peak load reduction and deferring or avoiding
11 more costly new generating resources. 4
12 In a 2002 report submitted to then-president George
13 Bush, the Entergy Corporation in Economics of Low-Income
14 Electricity Efficiency Investment concluded: "Nationwide,
15 a one mill per kWh investment will conservatively return
16 more than $26B over the average 16-year life of the
17 investment, a benefit: cost ratio of about 7. "5 More
18 specifically the report described some of the utility
19 benefits as:
20 Arrearage reduction (cost of money, uncollectibles,
collection costs). A review of studies of arrearage21 reduction benefits conducted for the Boston Edison
Settlement Board by the Tellus Institute shows that22 energy efficiency programs generate reductions in
arrearages ranging from $0 to $469 per participating
23 household. An Oak Ridge National Laboratory study,
for example, found an average reduced arrearage
24 value of $32 per weatherized low-income household
relative to program costs of $1,550. Similarly, a25 study of a Pacific Gas and Electric low-income
506 Hirsh, Di 7Conservation Parties
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weatherization and education program found that
reduced carrying charges on arrearages rangè between
$4 and $63 per weatherized household.
In Colorado, write-offs dropped 18 percent at
weatherized homes. Further, arrearages dropped 26
percent, emergency gas assistance calls dropped 74
percent, and bills were reduced 22 percent. Total
annual benefit to the utility is estimated at $30.56
per participating household on a $2417 per household
cost, not counting reductions in complaints and
collection costs, increases in comfort and health,
and increases in discretionary income. Another study
found that all benefits associated with reduced
uncollectibles range between $16 and $58 per
weatherized household.
/
/
/
4 Economic Opportunity Studies, How Do Utility Residential
Energy Efficiency Programs for Low- and Moderate-Income
Consumers Work Now? What Makes Them Effective? at 5-6,
(October 3, 2008).
5 Jerrold Oppenheim & Theo MacGregor, Economics of Low-Income
Electricity Efficiency Investment, at 5-6, (January 2002)
available at
http://www.democracyandregulation.com/detail . cfm?artid=14&row
=0
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1 Site visits for terminations, reconnect ions . At
least two site visits are required each time a
customer is terminated for non-payment and then
reconnected. Typically, such site visits cost at
least $35. Total savings, then, are the number of
terminations avoided as a result of the program
times $35. Massachusetts Electric Co. assumes the
incidence of low-income termination is twice that of
other residential customers, which is 3 percent.
Thus, we compute this benefit (per average
participant) ás 6 percent times $35, or $2.10.
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6
7 Interestingly, despite these documented benefits to
8 all utility ratepayers, when Idaho Power calculates the
9 cost/benefit ratio of their program, WAQC, it only
10 includes direct costs and energy savings. 6 Accordingly,
11 the WAQC program is cost effective from an energy saving
12 standpoint, and extremely cost effective when one factors
13 in the total benefits to the utility and all ratepayers.
14 Q. How does the level of funding you propose for
15 Idaho Power compare to similar programs funded by
16 investor owned utilities in the region?
17 A.Idaho Power currently spends about $3.21 per
18 residential customer for its low-income program WAQC.7
19 In Washington, Avista serves about 238,050 electric
20 customers and invests over $1.3 million in limited income
21 weatherization, or $5.46 per customer.8 Puget Sound
22 Energy serves about 961,872 residential electric
23 customers and invests $4.7 million per year in low-income
24 weatherization, or $4.87 per customer. PacifiCorp's
25 roughly 120,000 Washington residential customers have
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1 access to almost $1 million per year for low-income
2 weatherization, or $8.33 per customer. In Oregon,
3 PacifiCorp and Portland General Electric customers pay a
4 state mandated Public Purpose Fund to the Energy Trust of
5 Oregon and the Oregon Housing and Community Services
6 agency. PacifiCorp serves 421,000 customers and
7 contributes $3.4 million.
8 /
9 /
22 6 Idaho Power Company, Weatherization Assistance for Qualified
Customers 2010 Annual Report (April 1, 2011).
23 7 See Exhibit 801, Idaho Power Company; s Respohnse to CAPAI
Discovery request No.5.
24 8 Avista 2011 IRP at 2-6; Avista DSM 2010 Annual Report at 19.
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509 Hirsh, Di 8a
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1 Portland General Electric serves 717,719 residential
2 customers and contributes $11.6 million. 9 Each PGE and
3 PacifiCorp residential customer invests about $8.00 in
4 low-income weatherization. ECONorthwest evaluated the
5 weatherization programs in Oregon and concluded customers
6 in weatherized houses saved over 3,000 kWh per year. 10
7 In Montana, NorthWestern Energy invests at least $1.8
8 million per year and has 300,000 residential customers,
9 an investment of $6.00 per customer. For an example
10 outside of the region, San Diego Gas and Electric doubled
11 their low-income energy efficiency and weatherization
12 program between 2007 and 2010. Funding went from $11
13 million to $20 million while doubling the number of
14 households served to 22,500.11 This dramatic increase was
15 dri ven by the growing need for weatherization services
16 among eligible households.
17 Idaho Power has a strong WAQC program that is
18 effectively and efficiently administered by local
19 community action agencies. The need for services is on
20 the rise and Idaho Power's investment in this successful
21 program is not keeping pace with the need in its service
22 terri tory as the other investor owned utili ties in the
23 region are doing.
24 Q. Turning to the second unresolved issue the level
25 of the energy efficiency rider, did Idaho Power propose
510 Hirsh, Di 9
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1 any changes in their Application or prefiled testimony?
2 A. No. The last time Idaho Power asked to adjust
3 the rider level was in May of 2009, where it requested an
4 increase to the current 4. 75%.12
5 Q. Are the conservation parties requesting to
6 increase the rider level in this case?
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21 9 ECONorthwest, Report to the Legislative Assembly on Public
Purpose Expenditures January 2009-December 2010, at 25, (March
22 2011) (showing Total Low Income Weatherization funding.)
10 Id., at 33.
23 11 Gregg Lawless, San Diego Gas and Electric, Broadening
Weatherization Programs and Partnerships, Affordable Comfort
24 Conference, (June 12-14, 2011).
12 See Order No. 30184, IPC-E-09-05.
25
511 Hirsh, Di 9a
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1 A. No. The Conservation Parties merely ask the.2 Commission to maintain the current rider level.
3 Q. Why does the stipulation leave the energy
4 efficiency rider as an unresolved issue?
5 A. The stipulation does include a term that moves
6 demand response incentives out of the energy efficiency
7 budget and tracks these payments through the power supply
8 cost adj ustment. The Commission initially considered
9 this accounting change in a prior case, IPC-E-I0-27. At
10 the conclusion of that case, the Commission authorized
11 Idaho Power to collect $10,000,000 of the back balance in
12 energy efficiency funding through the power cost
13 adjustment in 2011. In the current rate case, Idaho.14 Power asked to make this a permanent change, something
15 the parties all agree to in the stipulation. Going
16 forward demand response incentives will be collected and
17 tracked through the power supply cost adj ustment
18 mechanism. The stipulation establishes a base level of
19 incentive payments of $11,252,265. In the next PCA case,
20 Idaho Power will report the actual incentive payments and
21 collect or return any difference through the 2012 PCA
22 rate. In short, ratepayers will pay no more and no less
23 than actual demand response incentives.
24 While not included in this rate case, the prior.25 case, IPC-E-I0-27, also included a change in accounting
512 Hirsh, Di 10
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1 for the Custom Efficiency program incentives. Instead of
2 collecting this expense through the energy efficiency
3 rider, these incentives will accumulate as a regulatory
4 asset to be recovered through rates in a future
5 proceeding. 13
6 The Conservation Parties join the Staff and Idaho
7 Power in specifically endorsing the treatment of demand
8 response incentives as power supply costs. We believe
9 this accurately recognizes demand response as a power
10 supply issue, not a long-term on going energy savings
11 investment. Up until now, recovering demand response
12 incenti ve payments through the energy efficiency rider
13 resul ted in significant funding pressure on the rider
14 balancing account, due to the
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24 13 See Direct Testimony of Greg Said at 24-25, (June 1, 2011).
25
513 Hirsh, Di lOa
Conservation Parties
.1 amount of the incentive payments. This change to a more
2 accurate accounting of demand response will reduce this
3 pressure to some extent.
4 Other Parties to the settlement made the case that
5 since the demand response incentives will be recovered in
6 the PCA, the rider should be reduced. The Conservation
7 Parties did not agree with this argument and as such, the
8 level of the rider became an "unresolved issue."
9 Q. In Rocky Mountain Power's 2010 rate case the
10 Commission made a similar change and moved the Irrigation
11 Load Control Program incentives out of RMP' s energy
12 efficiency rider and into power costs as a system
.13 resource. Along with this change, the Commission reduced
14 the energy efficiency rider level. Why shouldn't the
15 Commission do the same thing in this case?
16 A. Because, as I will explain below, the facts in
17 this case are different and they support expanding the
18 total funding for energy efficiency at Idaho Power.
19 While I was not a party to the Rocky Mountain Power 2010
20 rate case, I have reviewed the final order and some of
21 the filings by the parties. Based on my review I did not
22 see any discussion of the level of cost effective energy
23 efficiency potential and the funding required to achieve
24 this potential. As such, I cannot comment on whether.25
.
reducing the rider level due to a change in accounting
514 Hirsh, Di 11
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1 was appropriate. But the record in this Idaho Power case
2 will be different. Again, the Conservation Parties
3 believe that the best method to determine the appropriate
4 level of funding for efficiency is to compare the
5 documented level of cost effective potential with the
6 funding necessary to acquire this potential.
7 Q. Why did Idaho Power propose to move demand
8 response payments out of the energy efficiency rider and
9 into power costs?
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1 A. According to Idaho Power's testimony in the
2 IPC-E-I0-27 case, the Company requested this change to
3 address the growing negative balance in the energy
4 efficiency rider. 14 This issue of funding pressure on the
5 energy efficiency rider did not appear in the Rocky
6 Mountain Power rate case. By contrast, Idaho Power
7 continues to follow the directives repeated by this
8 Commission to pursue all costeffecti ve energy
9 efficiency. Because the available potential is quite
10 large, Idaho Power continues to experience pressure on
11 the energy efficiency rider to provide sufficient funding
12 to meet this Commission directive.
13 . Q. How much cost effective potential for energy
14 efficiency exists?
15 A.Energy efficiency potential is analyzed in
16 three tiers - overall technical potential, economic
17 potential, and then achievable economic potential.
18 Technical potential gives the absolute opportunity with
19 no regard for the cost of the measure. Economic
20 potential is a subset of technical potential that zeros
21 in on cost-effectiveness. Achievable economic potential
22 narrows the scope even more by applying expected customer
23 participation rates given conventional incentive levels.
24 In Idaho Power's most recent DSM Potential Study the gap
25 between economic potential and achievable economic
516 Hirsh, Di 12
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1 potential is huge. 15 The Study calculates there was 945
2 GWh of economic, or cost effective, potential available
3 in 2009, with increasing amounts going forward.16
4 Allowing for a substantial margin of error, 30% of this
5 potential is 283.5 GWh or 2% of energy sales. In 2010,
6 Idaho Power acquired 187.6 GWh, or 1.39% of sales.17
7 While a laudable achievement, this is less than Idaho
8 Power's proj ection of future demand growth from their
9 latest IRP, which averages 1.4% with the peak growing at
10 1.8% annually. ls Current funding levels are
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18
19
20 14 See Direct testimony of Rick Gale at 17, IPC-E-10-27
(October 22, 2010).
21 15 Nexant, Idaho Power Demand Side Management Potential Study -
Volume 1, (August 14, 2009).
22 16 Id. at Figure 3.1, Figure 4.1, and Figure 5.1.
17 Savings shown in Idaho Power 2010 DSM Annual Report at 3
23 (including NEEA); Percentage of sales is based on 2010
kilowatt hour sales of 13,492 GWh used in the 2011 PCA,
24 IPC-E-11-06.
lS 2011 IRP at 62, table 6.2 (Average) and p. 61, table 6.1
25 (Peak) .
517 Hirsh, Di 12a
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1 sufficient to acquire less than 20% of the cost effective
2 energy efficiency potential available to Idaho Power. It
3 is important to note that a significant portion of the
4 DSM funding has been for demand response programs, which
5 are not included in the economic potential of 945 GWh.
6 Current funding is not sufficient to actually avoid new
7 supply side generation, merely defer it for a few years.
8 The Conservation Parties believe the public interest is
9 best served by avoiding new, expensive supply side
10 resources. The first step to doing so is to ensure Idaho
11 Power has sufficient funding to pursue all cost effective
12 energy efficiency.
13 Q. Doesn't moving demand response incentives into
14 power costs reduce the pressure on the energy efficiency
15 rider budget?
16 A. The stipulation does reduce some pressure on the
17 energy efficiency rider account by moving certain costs
18 into rates. But significant pressure remains based on
19 our analysis of the funding necessary to support existing
20 programs, recover the prudently incurred back balance,
21 and provide a reasonable amount of headroom for both
22 planned growth to achieve more of the identified economic
23 potential and meeting increased expectations to improve
24 marketing, recordkeeping, and EM&V. Reducing the rider
25 percentage now is not supported by the facts and is bad
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1 public policy.
2 Q. Gi ven that Idaho Power's rates are increasing,
3 won't reducing the rider level mitigate this impact to
4 ratepayers?
5 A. Reducing the rider level will have a negligible
6 impact to each individual ratepayer, but a sizable impact
7 to Idaho Power's overall energy efficiency budget.
8 Assuming the growth in sales from actual 2011 to the 2012
9 forecast used in this rate case, maintaining a 4.75%
10 rider will
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519 Hirsh, Di 13a
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.1 generate an additional $1,597,640 for Idaho Power's
2 energy efficiency programs. 19 When spread across all
3 customers, maintaining a 4. 75% rider has a negligible
4 impact of less than $3.36 per customer annually in 2012.
5 By contrast, the total revenue increase of $33,999,992
6 spread across all 475,697 customers means each ratepayer
7 will see their annual bills increase by $71.47. While
8 this is an average across all ratepayers and actual
9 numbers will vary, I believe it puts energy efficiency
10 investments into perspective. Maintaining the rider at
11 4. 75% is lost in the noise of the overall rate increase
12 for each ratepayer but has a measurable impact on Idaho
.13
14
Power's energy efficiency investments.
Q. Over the past few years Idaho Power DSM
15 investments have increased rapidly. What is the harm in
16 slowing down the growth in DSM investments now?
17 A. Energy efficiency investments are the only part
18 of utility rates that directly empowers customers to take
19 control of their energy bills. In the face of rising
20 electric rates, now is not the time to slow the growth of
21 energy efficiency investments. Rather, as explained by
22 the Commission in 2008 upon increasing the tariff to
23 2.5%: "When the Commission approved the initial rider, we
24 described conservation and DSM programs as powerful tools.25 customers can use to mitigate the impact of rate
520 Hirsh, Di 14
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1 increases. "20 In 2009, on the heels of a $27 million rate
2 increase, the Commission again raised the rider to
3 4. 75%.21 In doing so, the Commissioners acknowledged that
4 "administration of energy efficiency programs adds to
5 utility costs .." but "cost-effective DSM including
6 energy efficiency programs and load management programs,
7 helps customers control their utility bills, reduces the
8 need for higher-cost, supply-side resources, and
9 increases
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12 /
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19 19 2010-2011 firm Idaho sales of 812,166,191 from Direct
Testimony of Noe, Exhibit 26, p. 1, line 9. Test year sales of
20 845,800,709 from Idaho Power Motion in Support of the
Stipulation, Exibit 2, page 1, line 23 minus line 19 (Hoku
21 first block sales) .
20 Order No. 30560 at 6, IPC-E-08-03 (May 30, 2008) (citing
22 Order No. 29026, p. 20, Case No. IPC-02-2 and IPC-02-3 (May
13, 2002))).
23 21 Order No. 30722, IPC-E-08-10 (January 30, 2009) (approving a
$20,878,884 increase); Order No. 30754, IPC-E-08-10 (March 19,
24 2009) (approving a $6,138,581 increase).
25
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1 system reliability. "22 This statement reinforces the
2 Commission's thinking from 2008: "Even if the Company's
3 DSM program costs increase, all cost-effective DSM
4 programs will delay the need to construct new, costly
5 generating facilities. This delay in new investment and
6 facilities will benefit all Idaho Power customers. "23
7 When electric rates rise, DSM funding is the only utility
8 investment that helps customers control their electric
9 bills. To limit this "powerful tool" runs counter to the
10 public interest.
11 Q. The stipulation includes moving demand response
12 incentives into the power costs and custom efficiency
13 incentives into a regulatory asset account. Doesn't this
14 create enough headroom in the energy efficiency budget
15 between expected collections and expected expenses to
16 sufficiently support Idaho Power's programs?
17 A. While these changes do relieve some of the
18 pressure on the energy efficiency budget, the
19 Conservation Parties believe several factors will quickly
20 and appropriately consume any headroom in the energy
21 efficiency budget. Below we describe our specific
22 analysis, but first a simple analogy for our concerns
23 might be helpful. Imagine DSM funding as a pie. This
24 pie feeds the suite of DSM programs, both energy
25 efficiency and demand response, as well as other expenses
522 Hirsh, Di 15
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1 like marketing, evaluation, measurement, and
2 verification. Currently this pie consists of a single
3 slice, the DSM tariff rider. When the Commission
4 increased the rider to 4.75% the staff "recognized,
5 however, that the proposed increase may be insufficient
6 to both fund on-going DSM expenses and recover the
7 current Rider balance deficit. "24
8 The stipulation does create a second slice by
9 collecting certain expenses through rates thereby
10 enlarging the DSM funding pie. But the demand for DSM
11 investments continues to grow as Idaho Power follows the
12 Commission' s directive to pursue all cost effective
13 energy
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16 /
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22 Order No. 30184 at 8, IPC-E-09-05 (May 29, 2009).
23 Order No. 30506 at 5, IPC-E-08-03 (May 30, 2008).
24 Staff Comments at 5, IPC-E-09-05.
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1 efficiency and meet the Staff and other parties'
2 expectations to increase marketing, expand residential
3 programs, improve recordkeeping and increase evaluation,
4 measurement and verification. The single slice of the
5 DSM rider funding is no longer sufficient. After
6 considering all of the factors, we believe the need for
7 DSM program funding justifies a fully funded pie with a
8 reasonable amount of headroom for growth.
9 The tables below quantify our concerns. Using round
10 numbers, in 2010 the DSM expenses in Idaho were $42.4
11 million. 25 Table 1 shows the increase in DSM rider
12 generated revenues from 2010 actuals to the forecast for
13 2012 - the original slice of the pie at $41 million.
14 Table 2 shows the total level of DSM funding including
15 the new slice of the pie at $57 million.
16 Table 1: Rider Funding
17 Proposed
$845,800,709
4.75%
$40,175,534
$1,149,706
$41,325,240
2010
$812, 166, 191
4.75%
$38,577,894
18
Revenue
DSM Tariff Rider
DSM Collections
Hoku Block 1 DSM
Total Rider Funding $38,577,894
19
20
21 Table 2:
DSM Funding
22
23
Demand Response Incentives
Custom Efficiency Incentives
Total DSM Funding in Rates
DSM Rider Funding
Total DSM funding
$11,252,265
$5,193,650
$16,445,915
$41,325,240
$57,771,155
24
25
524 Hirsh, Di 16
Conservation Parties
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1 Taken alone these tables shows the overall pie for
2 DSM funding is larger. But that is only part of the
3 story. The more important part is to compare funding
4 with proj ected DSM investments. Table 3 tells the rest.
5 Removing the costs for demand response and custom
6 efficiency incentives of $16.4 million leaves $26 million
7 in expenses. In addition, ratepayers owe the Company $8
8 million in prudently incurred expenses from 2010.
9 Because the Commission has already determined these are
10 prudently incurred expenses, the Conservation Parties
11 believe
12 /
13 /
14 /
15
16
17
18
19
25 2010 DSM Report at 128.
525 Hirsh, Di 16a
Conservation Parties
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1 Idaho Power has the right to collect this amount in a
2 single year. Combined, proj ected expenses to maintain
3 DSM activities at 2010 levels and return the back balance
4 brings the needed funding for 2012 to $34 million.
5 Remember, this is the funding necessary to maintain
6 energy efficiency acquisitions and EM&V activities at
7 2010 levels. Any growth requires more money.
8 Table 3:
DSM Expenses
9
10
Idaho Rider Funded DSM Programs 2010
Remove DSM Expenses Collected Rates
in 2012
Remaining Energy Efficiency
Only Expense
Prudent DSM Back Balance as of
August 2011
Funding Needed in 2012 to Maintain
2010 ProgramLevels and Recover Back
Balance $34,033,777
$42,479,692
$ (16,445,915)11
12 $26,033,777
$8,000,00013
14
15
16 The important measure of whether the energy
17 efficiency rider will provide sufficient funding is
18 comparing the projected rider revenue in 2012 with the
19 forecast of program expenses. Table 1 shows the
20 projected revenue is $41 million. Table 3 shows that to
21 maintain 2010 program activities requires $34 million.
22 This creates headroom for growth of $7 million.
23 Growth will come in several areas including
24 acquiring additional energy savings as identified in the
25 2009 DSM Potential Study and the 2011 IRP, as well as
526 Hirsh, Di 17
Conservation Parties
1 responding to the Staff and other parties' requests for.2 increased marketing, recordkeeping, and EM&V. The
3 Commission has steadfastly instructed Idaho Power to
4 pursue all cost effective DSM. 26 PUC staff and others
5 have repeatedly admonished the Company to increase its
6 marketing and EM&V efforts. 27 These efforts are not
7 free.
8 /
9 /
10 /
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20 26 Order No. 32331 at 10, IPC-E-11-05 (August 18, 2011); Order
No. 32113 at 8, IPC-E-10-09 (November 16, 2010) (citing Order
21 No. 29784 IPC-E-04-29 (May 13, 2005), Order No. 29952,
RMP-E-05-10) (January 12, 2006) (authorizing RMP to initiate DSM
22 programs and cost recovery))).
27 Order No. 32113 at 9, IPC-E-10-09 (November 16, 2010); Staff
23 Comments at 6-7, ICIP Comments at 14-15, (September 13, 2010);
Order No. 32331 at 4-5, IPC-E-11-05 (August 18, 2011); Staff
24 Comments at 6-8, ICIP Comments at 8-9, IPC-E-11-05 (July 18,
2011) .
25.
527 Hirsh, Di 17a
Conservation Parties
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1 Just increasing spending on EM&V to meet the
2 expressed expectations of Staff and others will increase
3 the pressure on the DSM budget. Currently Idaho Power
4 spends $ 698,890 on accounting and analysis, which is less
5 than 2% of the DSM budget.Other utili ties spend 3-5%,
6 which for Idaho Power is $1.27 million - $2.1 million.
7 It simply is unfair to ask the Company to invest more in
8 EM&V and then refuse to provide sufficient funding to
9 support this investment.
10 As stated earlier in my testimony, Idaho Power
11 current DSM program achievements are laudable, but not
12 sufficient to capture all the economic potential energy
13 savings available in the service terri tory. Achieving
14 just 30% of the 945 GWH of economic potential identified
15 in the 2009 DSM Potential Study, 283.5 GWh or roughly 2%
16 of 2010 sales, is a reasonable target for future years.
17 In 2010, Idaho Power acquired 178.2 Gwh, or 1.32% of
18 sales. The 2011 IRP proj ects annual load growth of 1.4%
19 and peak growth of 1.8%. Growing to 2.0% of sales is 59%
20 greater than present levels, which requires energy
21 efficiency spending to increase by roughly $8 million.
22 This alone swallows the entire headroom generated by a
23 4.75% rider. Energy efficiency acquisition levels should
24 aspire to offset load growth and capture all cost
25 effecti ve savings. A reduction in the level of energy
528 Hirsh, Di 18
Conservation Parties
1 efficiency rider puts these efforts in jeopardy and will.2 resul t in higher costs in the future.
3 Q. Does the 2011 Idaho Power Integrated Resource
4 Plan show increased program growth despite reduced
5 avoided costs?
6 /
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8 /
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12
13.14
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18
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20 28 2010 DSM Report at 128 Appendix 2.
29 Schiller, Steve, Energy Efficiency Evaluation, Measurement
21 and Verification, Issues and Opportunities, at 41 (January 4,
2011); (Idaho Power DSM spending of
22 $42,479,695*3%=$1,274,390.76; $42,479,695*5%=$2,123,984.60)
30 Based on 2010 kilowatt hour sales of 13,492 GWh used in the
23 2011 PCA, IPC-E-11-06.
31 2011 IRP at 62, table 6.2 (Average) and p. 61, table 6.1
24 (Peak) ..25
529 Hirsh, Di 18a
Conservation Parties
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1 A. Yes. Idaho Power is on the path to increase
2 energy savings. Current programs have grown at roughly
3 38% per year from 2006-2010.32 The 2011 IRP plans for
4 existing programs to expand by 122,640,000 kilowatt hours
5 and new energy efficiency acquisitions of 26,280,000
6 kilowatt hours annually. 33 Even using the 2011 IRP costs,
7 current and future DSM programs remain cost effective,
8 wi th an overall total resource cost ratio of 2.3 and
9 utility cost ratio of 4.4.34 So even with reduced avoided
10 costs Idaho Power has identified and analyzed cost
11 effective energy efficiency potential that will require
12 increased program funding compared to 2010 levels.
13 Q. Are there other identified programs that might
14 further increase cost effective energy efficiency and
15 require increased program funding?
16 A. Yes. The Commission recently approved an
17 agreement between Idaho Power and the Office of Energy
18 Resources concerning the K-12 Energy Efficiency Proj ect. 35
19 Under this agreement, OER may be eligible to collect
20 efficiency incentives through Idaho Power programs. The
21 Staff commented that under this agreement "the additional
22 $ 9.6 million potentially invested by OER through the
23 three eligible DSM programs will exceed previous program
24 demand forecasts and therefore significantly increase the
25 number of projects incented" and consequently the need
530 Hirsh, Di 19
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1 for additional program funding. 36 While some of these
2 proj ects may qualify for the Custom Efficiency program,
3 and the incentives will come from rates, most projects
4 are likely to increase the pressure on existing DSM
5 rider-funded budgets.
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8 /
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19
20 34 2010 DSM Report at p. 4 figure 2.
33 2011 IRP at 38-41; See also 2010 DSM Report at 12; 2011 IRP
21 Appendix C at 72, table DSM 5 (existing energy efficiency
portfolio) and 74, table DSM-10 (new energy efficiency22 portfolio) .
34 2011 IRP at 39, table 4.2.
23 35 Order No. 32368, IPC-E-11-16 (September 29, 2011).
36 Staff Comments at 3, IPC-E-11-16 (September 20, 2011).
24
25
531 Hirsh, Di 19a
Conservation Parties
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1 Q. Will parties and the Commission have the
2 opportuni ty to review these expanded DSM programs in the
3 future?
4 A. Yes. Maintaining adequate funding today does
5 not foreclose parties from reviewing the prudency of
6 Company spending tomorrow. Instead, maintaining the
7 rider funding level now provides the opportunity to meet
8 expectations for increased administrative costs and
9 acquire savings from existing programs and clearly
10 identified new measures that are preliminarily shown to
11 be cost effective.
12 Q. In the past Idaho Power has spent more on DSM
13 programs than the rider supplied in funding. Why not
14 continue this cycle of accumulating back balances and
15 increasing funding later?
16 A. It is true the Commission has regularly allowed
17 Idaho Power to collect money spent on energy efficiency
18 when program expenses exceed program funding. In fact,
19 the Commission recently specifically rejected the
20 argument of the Industrial Customers of Idaho Power that
21 the utility should cap DSM programs at the level
22 supported by current rider funding. 37 But the
23 Conservation Parties believe that providing adequate
24 funding with reasonable room for growth reaffirms the
25 directi ve to pursue all cost effective energy efficiency.
532 Hirsh, Di 20
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1 Further, constant changes to the energy efficiency rider
2 level are confusing to the public and trade allies
3 providing efficiency services and programs. Finally,
4 Idaho Power is currently using rider funding to recover
5 an approved back balance. Until they do so, we believe
6 the Commission should support adequate funding to prevent
7 the back balance from continuing to grow and allow for
8 timely recovery of new programs and expectations for
9 increased marketing, record keeping, and EM&V.
10 /
11 /
12 /
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24 37 Order No. 32245 at 5, IPC-E-10-27 (May 17, 2011).25
533 Hirsh, Di 20a
Conservation Parties
.1 Q. Please summarize your recommendations.
2 A. The Conservation Parties believe the proposed
3 Stipulation should be approved. In addition, we believe
4 the best method to evaluate funding levels for energy
5 efficiency programs is to compare the potential for
6 acquiring all cost effective efficiency with the funds
7 necessary to achieve this full potential. The Commission
8 should adopt the low- income weatherization program
9 funding recommended by the CAPAI Agencies. Also, the
10 Commission should maintain the current energy efficiency
11 rider level.
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Q. Does this conclude your testimony?
A. Yes it does.
534 Hirsh, Di 21
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1 Q. Please state your name and reason for this
2 testimony.
3 A. My name is Nancy Hirsh and I am the Policy
4 Director for the NW Energy Coalition. I filed direct
5 testimony in this case on behalf of the NW Energy
6 Coalition, the Idaho Conservation League, and the Snake
7 River Alliance - collectively the Conservation Parties -
8 on October 7, 2011. I offer this rebuttal testimony to
9 respond to the prefiled direct testimony of Mr. Higgins
10 of the Kroger Company, and Dr. Reading of the Industrial
11 Customers of Idaho Power, and Mr. Lobb and Mr. English of
12 the Idaho Commission Staff.
13
14
15
Q. Please respond to Mr. Higgins' direct
testimony.
A. Mr. Higgins recommends the Commission reduce
16 funding for energy efficiency from the current rider
17 level of 4. 75% to 3.4%. Mr. Higgins explains that
18 because the stipulation moves $11.2 million of demand
19 response payments into base rates, the rider must be
20 reduced by an equivalent amount to avoid "an unreasonable
21 cost burden on customers. "1 He supports this
22 recommendation with two reasons. First, he calculates
23 that applying a 3.4% rider to the rate increase proposed
24 in the stipulation results in a $1.2 million increase
25 " relative to pro forma levels. "2 Second, Mr. Higgins
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1 compares a 3.4% rider to a selection of other western
2 utili ties. Nei ther of these reasons is persuasive.
3 In regards to the level of funding, Mr. Higgins does
4 not provide any analysis of whether his proposed level is
5 sufficient to meet expected increases in program activity
6 levels to acquire cost effective energy efficiency on
7 behalf of customers. Idaho Power's 2011 IRP plans to
8 increase energy efficiency savings by 15 - 17 aMW through
9 2021.3 Also, Mr. Higgins does not address the
10 /
11 /
12 /
13
14
15
16
17
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19
i Higgins Direct at p. 5 In. 5-7.
2 Higgins Direct at p. 3 In. 11 - lS.
3 Idaho Power 2011 IRP, Table DSM-15 in Appendix C at page
77 (showing the annual forecasted operational targets from all
existing and new energy e£ficiency programs) .
Case No. IPC-E-II-08
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1 $7,592,938 back balance of prudent DSM spending Idaho
2 Power may recover for prior programs. 4 Nor does he
3 acknowledge the expected increases in Evaluation,
4 Measurement and Verification efforts pursuant to the 2009
5 Memorandum of Understanding. Instead of recognizing
6 these planned increases in funding needs, Mr. Higgin' s
7 proposes to leave DSM funding at 2010 levels.
8 Mr. Higgin' s comparison to other western utili ties
9 is not valid as the sole basis to establish funding
10 levels for Idaho Power energy efficiency programs.
11 Instead, a valid process to establish funding levels must
12 consider the potential for cost effective energy
13 efficiency in the service terri tory.Comparing rider
14 levels to other utili ties without considering the
15 potential for cost effective energy efficiency does not
16 provide any useful insight to appropriate DSM funding
17 levels.
18 Q. Please respond to Dr. Reading's direct
19 testimony.
20 A. Dr. Reading states that reducing the rider level
21 from the current 4.75% to 3.8% "may be an equitable and
22 justifiable path," but then joins the Staff
23 recommendation to reduce the rider to
24 4.0%.5 He provides two reasons for his recommendation,
25 nei ther of which is persuasive. Mr. Reading notes the
Case No. IPC-E-II-08
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Conservation Parties
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1 Commission made a similar reduction in the Rocky Mountain
2 Power 2010 rate case. Also, Dr. Reading explains that
3 because $11.3 million in demand response costs maybe
4 moved into base rates the Commission should make a dollar
5 for dollar reduction in the rider level to avoid an
6 overall increase in DSM funding. 6 Neither reason is
7 persuasive.
8 Dr. Reading is correct that in Rocky Mowl tain
9 Power's 2010 rate case the Commission, in its final
10 order, reduced the rider level in concert with moving
11 demand response incentives into power costs. But the
12 facts in this Idaho Power case are distinct from that
13 Rocky Mountain case.
14 /
15 /
16 /
17
18
19
20
21 4 See Exhibit 802, Idaho Power's Response to the First
Production Requests of the Idaho Conservation League, N. W.
22 Energy Coalition, and Snake River Alliance at Request No 4a.
5 Reading Direct at p. 31 In. 20 - p. 32 In. 3.
23 6 Reading Direct at p. 31 In. 11 - 17. Dr Reading refers to
Idaho Power's application for the $11.3 million amount. The
24 Stipulation filed in this case moves $11,252.265 in demand
response incentive payments into base rates.
25
Case No. IPC-E-II-08
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.1 The record in the Rocky Mountain case did not include any
2 information about the level of DSM funding necessary to
3 support existing and planed new programs. In contrast,
4 my direct and rebuttal testimony in this case provides
5 factual support to increase the overall size of the Idaho
6 Power's DSM funding pie by shifting some costs into
7 rates while maintaining current rider level. Just like
8 Mr. Higgins, Dr. Reading does not provide evidence that
9 his recommendation provides sufficient funding to meet
10 planned DSM program activities. A dollar for dollar
11 reduction results in overall DSM funding remaining at
12 2010 levels despite plans to increase program activities
13 identified in the 2011 IRP, increase EM&V, and recover
14 the back balance owed to Idaho Power. In fact, Dr.
15 Reading calculates that maintaining the rider at 4.75%
16 will generate an additional $7.5 million for energy
17 efficiency programs. This is roughly equal to the
18 remaining back balance owed to Idaho Power--a balance
19 customers pay a 1% interest rate on.7
20 Dr. Reading's recommendation to reduce the rider
21 level is not supported by persuasive analysis nor is it
22 in the public interest. In fact, Dr Reading's testimony
23 provides another reason for maintaining the current
24 rider level-it allows Idaho Power to collect the back
25 balance so that ratepayers do not incur a 1% interest
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1 charge.
2 Q. Please respond to Mr. Lobb' s direct testimony.
3 A.Mr. Lobb recommends the Commission reduce the
4 current rider level from 4.75% to 4.0% for two reasons.
5 He explains that DSM funding through both base rates and
6 the tariff rider at 4.0% "will be significantly greater
7 than needed to support existing Company DSM programs. 8
8 Mr. Lobb then defers to staff witness Donn English for
9 this analysis. I will review Mr. English's
10 testimony later. Mr. Lobb also explains repeatedly that
11 reducing the tariff rider "helps mitigate the
12 /
13 /
14 /
15
16
17
24 7 See Exhibit 802, at Request 4b.
8 Lobb Direct at p. 19 In. 25 - p. 20 In. 3.
25
Case No. IPC-E-II-08
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1 increase in base rates (. J "9 While mitigating base rate
2 increases is a laudable goal, reducing energy efficiency
3 funding is not an appropriate means to achieve this end.
4 As the Commission has stated before energy efficiency
5 funding provides "powerful tools customers can use to
6 mitigate the impact of rate increases. "10 Instead of
7 reducing funding for these tools, the Company's current
8 application to return $30 million to ratepayers under
9 the accumulated deferred investment tax credits mechanism
10 is an appropriate, and far larger, tool to mitigate base
11 rate increases. 11
12 Q. Please respond to Mr. English's direct
13 testimony.
14 A. Mr. English does provide some analysis to
15 support the staff's recommendation to reduce the rider
16 level, but this analysis is not persuasive. The main
17 flaw in Mr. English's analysis is that he compares 2010
18 DSM funding levels, not expense levels. Mr. English
19 explains "Staff understands the need to provide the
20 Company with a consistent revenue stream to better match
21 the expenses charged to the Energy Efficiency Rider
22 account. "12 Moving demand response and custom
23 efficiency payments into base rates is a solid first step
24 because it provides a means to track revenues and
25 expenses going forward for these programs.But
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1 maintaining the rider at 4. 75% is another critical step.2 to better match revenues with actual and expected
3 expenses for cost effective energy efficiency and
4 related acti vi ties.
5 Mr. English states in his testimony "Idaho Power has
6 routinely spent more on DSM programs than it has
7 collected through the DSM Rider. "13 Despite this
8 recogni tion, he then calculates that, after removing
9 expenses for demand response and custom efficiency
10 incentives,
11 /
12 /
13 /
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18
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20
9 Lobb Direct at p. 2 In. 15-17, p. 19 In. 17-18, p. 20 In.
21 11-14 and In. 19-23; English Direct at p. 6 1n. 20-22.
10 Order No. 30560 at 6, IPC-E-08-03 (citing Order No. 29026 at
22 20)
11 See Order No. 32394, IPC-E-11-22 Notice of Idaho Power's
23 Application for an Extended and Modified Accounting Order to
Amortize Addi tional Accumula ted Deferred Income Tax Credi ts.24 12 English Direct at p. 6 In. 9 - 12.
13 English Direct at p. 5 In 13-14.
25.
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1 the rider, in 2010, provided funding of $18,159,357. But
2 Idaho Power spent over $26,000,000.14 Mr. English also
3 notes several additional expenses that will be charged to
4 the energy efficiency rider account, including $8 million
5 in the unrecovered back balance. 15 This brings the
6 revenue stream needed to match expenses to $34 million
7 just to maintain 2010 program levels. Mr. English goes
8 on to explain that a 4.0% would generate $34.8 million in
9 2011.16 This leaves roughly $800,000 in headroom for
10 expected growth in cost effective DSM programs and
11 related acti vi ties. One area of growing costs is
12 increasing levels of evaluation measurement and
13 verification. In response to discovery requests, the
14 Staff states they "lack sufficient information from which
15 to quantify the cost of retaining a third party
16 evaluator. "17 Idaho Power intends to increase spending on
17 third party evaluators by $145,000 in 2011.18 Mr.
18 English properly notes another source for growing
19 costs--increasing participation in existing and new
20 programs identified in the 2011 IRP. 19 In a discovery
21 response, the Staff explains that Idaho Power has
22 increased program expenses by $740,951 in only the first
23 three quarter of 2011.20 Further, Idaho Power's
24 2011 IRP plans to increase energy efficiency gains by
25 roughly 15 aMW per year. 21
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Conservation Parties
1 Since the current rider revenue does not match.2 current expenses that provided 21 aMW in 201022,
3 maintaining the rider at 4. 75% in a critical step to
4 providing a consistent revenue stream to better match
5 expenses charged to the energy efficiency rider account.
6 Any "headroom" created by the staff proposal is already
7 swallowed by maintaining 2010 program levels, returning
8 the back
9 /
10 /
11 /
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19 14 English Direct at p. 5 In 14-17.
15 English Direct at p. 5 In. 5-7.
20 16 English Direct at p. 5 In. 17-18.
17 See Exhibit 803 Staff Response to the First Production
21 Requests of ICL, NWEC, and SNA at Request No. 3c.
18 See Exhibit 803 at Request No 2.
22 19 English Direct at p. 5 In. 24 - p. 6 In. 6.
20 See Exhibit 803, at Request No 1.
23 21 Idaho Power 2011 IRP, Table DSM-15 Appendix C at p. 77
(showing the annual forecasted operational targets from all
24 existing and new energy efficiency programs)
22 Idaho Power 2010 DSM Annual Report at p. 8 (system numer) .
25.
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1 balance, increasing EM&V spending, and supporting
2 already incurred and further expected program growth in
3 2011 and 2012.
4 Q.Do you have any concluding remarks?
5 A.The testimony of Mr. Higgins and Dr. Reading do
6 not provide analytical or factual support for their
7 recommendations. The Staff witnesses do provide some
8 analysis, but their recommendation does not "provide
9 ample revenue for expansion of DSM programs as claimed by
10 Mr. English, nor is it "significantly greater than
11 needed to support existing Company DSM programs" as
12 claimed by Mr. Lobb. Accordingly, the Commission should
13 maintain the rider level at 4.75% as this level, along
14 with moving certain costs into base rates, does provide a
15 consistent revenue stream to better match forecasted DSM
16 expenses.
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1
2 open hearing.)
(The following proceedings were had in
MR. OTTO: Thank you. With that, the
4 wi tness is available for cross.
3
5 COMMISSIONER SMITH: Thank you. Mr.
6 Richardson, do you have questions?
17
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16 BY MR. PURDY:
Q
MR. RICHARDSON: I do not, Madam Chair.
COMMISSIONER SMITH: Mr. Nelson.
MR. NELSON: No questions. Thank you.
COMMISSIONER SMITH: Olsen?
MR. OLSEN: No questions.
COMMISSIONER SMITH: Mr. Purdy.
CROSS-EXAMINATION
I have one clarification question and I'm
18 sorry if you just covered this and I didn't hear, but on
19 page 8 of your direct testimony, Ms. Hirsh, line 16, do
20 you see where you testify that Idaho Power currently
21 funds $3.21 per residential customer for its WAQC
22 program?
23
24
25
A
Q
Yes.
Have you reviewed Ms. Teri Ottens'
testimony, both direct and surrebuttal, in this case?
CSB REPORTING
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546 HIRSH (X)Conservation Parties
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2
A I have.
Q Did you see the point in her direct
3 testimony where she corrected this and lowered the actual
4 number comparing apples to apples and removing Idaho
5 Power's internal administrative cost lowers it down to
6 $3.06, and do you agree with that?
7 A Yes, I did see that and I have not gone
8 through the calculations myself. The number I got comes
9 from Idaho Power's response to our data request and I do
10 believe that it is reasonable to remove certain
11 administrati ve costs. It depends on how you calculate
18
12 it.
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19 BY MR. MILLER:
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Q
A
Q
A
Q
25 page 16?
MR. PURDY: Understood. Thank you.
COMMISSIONER SMITH: Mr. Miller?
MR. MILLER: I do have a few.
CROSS-EXAMINATION
Good afternoon, Ms. Hirsh.
Good afternoon.
Do you have your testimony with you?
Yes.
Can I start by directing your attention to
CSB REPORTING
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547 HIRSH (X)Conservation Parties
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A Okay, I'm there.
Q Following line 9, you have a table that,
3 as I understand it, shows projected rider funding at the
4 proposed rates of $41 million plus; is that correct?
5 A That's correct.
Then on the next page, Table 3, that table
7 shows DSM expenditures at 2010 levels of $34,000 plus or
6 Q
8 $34 million plus; is that correct?
9 A The bottom line includes the recovery of
Right; so the difference between the 41
12 million in revenue and the 34 million in 2010 expenses, .
10 the back balance.
11 Q
13 including the back recovery, is about 7 million; is that
18
14 right?
That is correct.
That's what you say at line 14.
Yes.
And you label the 7 million as providing
19 headroom for growth. As I did a quick calculation and
15 A
20 divided 7 million by 34 million, that's about 20 percent,
16 Q
17 A
Q
21 approximately.
22
23
A
Q
I'll trust your calculation.
So what you're suggesting is a 20 percent
24 allowance for what you call headroom for growth over 2010
25 expense levels?
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548 HIRSH (X)
Conservation Parties
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A That is correct.
Q Were you present this morning during the
3 testimony of Ms. Drake?
4 A I was.
Q Did you hear her testify that the level of5
6 future DSM expenditures is not known and measurable as
7 that term is usually used?
8 A We often forecast out our future energy
9 efficiency budgets and proj ections, so we do a
10 conservation potential assessment.
11 Q You did hear that testimony?
Yès, I did.
And did you disagree with her statement
14 that those future expenditures are not known and
16 A
12 A
15 measurable as that term is usually used?
13 Q
Yes.
The DSM expense, this point is obvious, is
18 only one category of regulated expense of the utility;
17 Q
19 correct? There are other expense categories?
20
21
A
Q
Correct.
Are you aware of any other expense
22 category that receives a 20 percent headroom adjustment
23 for future expenditures that are not known and
24 measurable?
25 A I'm not familiar with all of the way the
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549 HIRSH (X)Conservation Parties
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1 utili ty does their cost analysis.
2 Q
3 category that receives a 20 percent headroom allowance?
So you aren't aware of any other expense
4 A
5 so I'm not an expert in that, so I wouldn't be able to
I don't analyze their books in that way,
18
6 comment on it.
7 Q That's fine. Have you read the testimony
I have.
Do you happen to have it with you?
Yes. Actually, I believe I only have her
That would be exactly what I'm looking
Okay.
Could you go to page 21?
I'm there.
And specifically, the question on line 8,
19 she is asked, "What if over time this level of funding
8 of Ms. Drake?
9 A
20 does not adequately support energy efficiency at Idaho
10 Q
21 Power?" And then would you just read to yourself the
11 A
22 answer at lines 10 through 15?
23
24
12 rebuttal with me.
13 Q
Okay, I've read it.
Áll right, let me I'LL characterize my
14 for.
25 understanding of that answer and then you can agree or
15 A
16 Q
17 A
Q
A
Q
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550 HIRSH (X)Conservation Parties
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16
1 disagree.
2 A Okay.
3 Q My characterization of the answer is that
4 in order to engage in energy efficiency spending, Idaho
5 Power does not believe it needs to receive a 20 percent
6 headroom adj ustment over historic expense in order to
7 induce it to pursue those expenses. Would you disagree
8 or agree with that characterization?
9 A I would say that is an accurate
10 characterization of the language here.
11 MR. MILLER: All right, very good. That's
12 all I had, Madam Chairman.
13 COMMISSIONER SMITH: Thank you,
14 Mr. Miller. Ms. Kyler?
15 MS. KYLER: No questions.
17 Staff?
COMMISSIONER SMITH: How about from the
18
19
MR. HOWELL: No questions.
20 How about from the Company? Ms. Nordstrom.
COMMISSIONER SMITH: Did I forget anyone?
21
22
23
24
25
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551 HIRSH (X)Conservation Parties
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1 CROSS-EXAMINATION
2
3 BY MS. NORDSTROM:
4 Q Ms. Hirsh, were you in the room earlier
5 when Ms. Drake testified?
6 A Yes.
7 Q And did you hear her response in regards
8 to the adequacy of funding of Mr. Higgins' proposal to
9 set the rider level at 3.4 percent?
10 A I don't know that I could recall it
11 directly. There's been a lot of intervening voices from
12 this morning, between this morning and now.
13 Q Based on your understanding of Ms. Drake's
14 testimony, including the subsequent Q&A, do you believe
15 that a 3.4 percent rider in the opinion of the Company
16 would be adequate to support --
17 MR. NELSON: Madam Chair, I'm going to
18 obj ect to this question as friendly cross-examination.
19 The lawyer for the Company is asking the witness both of
20 whom share an objection to the evidence that was offered
21 by Kroger and Mr. Higgins, and I think this
22 cross-examination is not appropriate.
23 COMMISSIONER SMITH: Ms. Nordstrom.
24 MS. NORDSTROM: I would disagree. I think
25 in response to a prior question, it's not clear to me
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552 HIRSH (X)Conservation Parties
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1 what the position of this witness is any longer and
2 that's what I' mtrying to ascertain.
3 COMMISSIONER SMITH: I'm going to overrule
4 the obj ection. I see the potential for what you're
5 objecting to, but I don't think it's gone far enough to
6 actually get there, so go ahead, Ms. Nordstrom.
7 THE WITNESS: When I look at the proposal
8 by Kroger and Hoku for reducing the rider to 3.4 percent
9 and I look at the future potential for energy efficiency
10 spending by the Company, I believe that that "headroom"
11 will be very short-lived and that the opportunity as
12 identified in the 2011 IRP, the 2009 conservation
13 potential, the MOU on evaluation, measurement and
14 verification, and the commitment of the Company to expand
15 its residential programs will absorb quite a bit of that
16 funding very quickly.
17 MS. NORDSTROM: No further questions.
18 COMMISSIONER SMITH: Do we have any
19 questions from the Commissioners? Nor I.
20
21
22
23
24
25
Redirect, Mr. Otto?
MR. OTTO: I do just have one question.
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553 HIRSH (X)
Conservation Parties
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1 REDIRECT EXAINATION
2
3 BY MR. OTTO:
4 Q And this is in regards to a question from
5 Mr. Miller, he asked you about Ms. Drake's rebuttal
6 testimony, page 21, and it was about does the Company
7 need headroom to go out and have the incentive to go out
8 and acquire savings. Do you recall that conversation?
9 A Yes.
10 Q And I believe your response was -- he
11 characterized the position of the Company and did you
12 understand that characterization?
13 A Yeah, I think the Company says they don't
14 need the headroom and their customers, according to the
15 testimony their customers, would prefer they not
16 over-collect in advance of spending.
17 Q And I believe you responded that that's a
18 correct interpretation of what this paper says.
19
20
A Of what this one quote says, yes.
Q Do you think that that is the appropriate
21 public policy to ask the Company to go first or do you
22 think better public policy is to provide money up
23 front?
24
25
A Well, I believe that in this circumstance
the Company has in the past collected more from its
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554 HIRSH (Di)Conservation Parties
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17
18
1 customers before as it was ramping up its programs, and I
2 don't believe that this is a flagrant collection of
3 funds, particularly when there are very measurable and
4 specific expenditures planned by the Company that will
5 grow their investment in energy efficiency and reduce
6 customers' bills.
7 MR. OTTO: Thanks. That's all I have.
8 COMMISSIONER SMITH: Thank you for your
9 help, Ms. Hirsh.
10 (The witness left the stand.)
11 COMMISSIONER SMITH: Let's go at ease for
12 a moment.
13 (Pause in proceedings.)
14 COMMISSIONER SMITH: Let's go back on the
15 record. We'll go to Mr. Howell.
16 MR. KLEIN: Mr. Klein.
COMMISSIONER SMITH: I'm sorry, Mr. Klein.
19 next time.
MR. KLEIN: We'll color code it for you
20
21
COMMISSIONER SMITH: Thank you.
22 to the stand.
MR. KLEIN: Staff would call Donn English
23
24
25
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555 HIRSH (Di)Conservation Parties
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1
2
DONN ENGLISH,
produced as a witness at the instance of the Staff,
3 having been first duly sworn, was examined and testified
4 as follows:
5
6
7
8 BY MR. KLEIN:
9 Q
DIRECT EXAINATION
Good afternoon, Mr. English. Could you
10 please state your full name and spell your last name for
11 the record?
12 A Donn English, E-n-g-l-i-s-h.
By whom are you employed and in what
16 Commission as a senior auditor.
I'm employed by the Idaho Public Utili ties
17
13 Q
Are you the same Donn English who filed
18 direct and rebuttal testimony in this matter, including
14 capacity?
15 A
Q
19 Exhibit 103?
20
21
A
Q
22 testimony?
23
24
A
Q
Yes, I am.
Do you have any changes to your
No, I do not.
If I were to ask you the same questions as
25 set forth in your direct and rebuttal testimony, would
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556 ENGLISH (Di)
Staff
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13
. 14
15
16
17
18
19
20
21
22
23
24
25.
1 your answers be the same today?
2 A Yes, they would.
3 MR. KLEIN: Madam Chairman, I move that
4 Mr. English's direct and rebuttal testimony and Exhibit
5 No. 103 be spread upon the record as if read and Exhibit
6 103 be marked for identification.
7 COMMISSIONER SMITH: Seeing no obj ection,
8 it is so ordered.
9 MR. KLEIN: Thank you.
10 (The following prefiled direct and
11 rebuttal testimony of Mr. Donn English is spread upon the
12 record. )
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557 ENGLISH (Di)Staff
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1 Q.Please state your name and business address for
2 the record.
3 A.My name is Donn English. My business address
4 is 472 W. Washington, Boise, Idaho 83702.
5 Q.By whom are you employed and in what capacity?
6 A.I am employed by the Idaho Public Utili ties
7 Commission as a senior auditor in the Utili ties Division.
8 Q.What is your educational and experience
9 background?
10 A.I graduated from Boise State University in 1998
11 with a BBA degree in Accounting. Following my
12 graduation, I accepted a position as a Trust Accountant
13 with a pension administration, actuarial and consulting
14 firm in Boise. As a Trust Accountant, my primary duties
15 were to audit the day-to-day financial transactions of
16 numerous qualified retirement plans. In 1999, I was
17 promoted to Pension Administrator. As a Pension
18 Administrator, my responsibilities included calculating
19 pension and profit sharing contributions, performing
20 required non-discrimination testing and filing the annual
21 returns (Form 5500 and attachments). In May of 2001, I
22 became a designated member of the American Society of
23 Pension Professionals and Actuaries (ASPPA). I was the
24 first person in Idaho to receive the Qualified 401 (k)
25 Administrator certification and I am one of approximately
CASE NO. IPC-E-11-8
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1 ten people in Idaho who have earned the Qualified Pension
2 Administrator certification. In 2001, I was promoted to
3 a Pension Consultant, a position I held until 2003 when I
4 joined the Commission Staff.
5 Wi th the ASPPA, I served on the Education and
6 Examination Committee for two years. On this committee I
7 was responsible for writing and reviewing exam questions
8 and study materials for the PA-l and PA-2 exams
9 (Introduction to Pension Administration Courses), DC-l,
10 DC-2 and DC-3 exams (Administrative Issues of Defined
11 Contribution Plans - Basic Concepts, Compliance Concepts
12 and Advanced Concepts) and the DB exam (Administrative
13 Issues of Defined Benefit Plans). I have also regularly
14 attended conferences and training seminars throughout the
15 country on numerous pension issues.
16 While with the Commission, I have audited a number
17 of utilities including electric, water and gas companies
18 and provided comments and testimony in several cases that
19 dealt with general rates, accounting issues, pension
20 issues and other regulatory issues. In 2004, I attended
21 the 46th Annual Regulatory Studies Program at the
22 Institute of Public Utilities at Michigan State
23 Uni versi ty sponsored by the National Association of
24 Regulatory Utility Commissioners (NARUC). Since then I
25 have regularly attended NARUC conferences and meetings,
primarily the
CASE NO. IPC-E-11-8
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1 meetings of the Subcommittee of Accounting and Finance.
2 Q.What is the purpose of your testimony in this
3 proceeding?
4 A.The purpose of my testimony in this case is to
5 present Staff's recommendation regarding the level of the
6 Schedule 91 Energy Efficiency Rider (Energy Efficiency
7 Rider, DSM Rider) .
8 Q.Are you sponsoring any Exhibits with your
9 testimony?
10 A.Yes, I am sponsoring Exhibit No. 103.
11 Q.What does Staff propose in regard to the Energy
12 Efficiency Rider?
13 A.Staff proposes reducing the DSM Rider rate from
14 its current level of 4. 75% of billed revenue to 4.0% of
15 billed revenue.
16 Q.Does Staff propose reducing revenue available
17 for DSM programs?
18 A.Absolutely not. Staff's proposal actually
19 provides an additional $16.6 million in DSM Rider revenue
20 over 2010 levels. This is a 92% increase in available
21 DSM funds after moving the incentive payments for Demand
22 Response programs and incentives paid under the Custom
23 Efficiency program from DSM Rider funding into base
24 rates.
25 In 2010, Idaho Power collected approximately $34.6
million in DSM Rider revenue. A 4.0% DSM Rider based
CASE NO. IPC-E-11-8
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'.
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1 on 2011 weather normalized loads yields $34.8 million.
2 However, Section 6 (a) of the Stipulation proposes that
3 $11.3 million of incentive payments associated with the
4 Company's Demand Response programs be moved from DSM
5 Rider funding and placed into Net Power Supply Expense.
6 Additionally, in Order No. 32245, the Commission
7 allowed Idaho Power to begin accounting for incentives
8 paid through the Custom Efficiency program as a
9 regulatory asset beginning January 1, 2011. This
10 effectively makes available another $5.1 million (based
11 on 2010 levels) in DSM Rider revenue. Exhibit No. 103
12 shows how Staff's proposed 4.0% DSM Rider and the removal
13 of the previously discussed incentive payments will
14 result in an additional $16.6 million in DSM Rider
15 revenue over 2010 levels.
16 Q.What level of DSM Rider funding would be
17 necessary to provide the same level of revenue collected
18 for DSM programs in 2010, after removing incentive
19 payments for Demand Response programs and incentive
20 payments made under the Custom Efficiency program?
21 A.The Company would have to generate
22 approximately $18.2 million to maintain the same level of
23 funding for its remaining programs funded through the DSM
24 Rider as in 2010, which would be approximately 2.1% of
25 normalized revenues instead of the 4.0% proposed by
CASE NO. IPC-E-11-8
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1 Staff..2 Q.Why shouldn't the DSM Rider be decreased
3 further
4 /
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-11-8 562 ENGLISH,D.(Di)4a10/07/11 STAFF
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1 to account for the DSM programs that will no longer be
2 funded by the DSM Rider?
3 A.While a lower DSM Rider could be argued as
4 reasonable, it could falsely signal that Staff and the
5 Commission do not support Idaho Power's DSM efforts.
6 Also, Idaho Power is currently carrying an underfunded
7 deferral balance over $8 million. This deferral balance
8 is from DSM Rider expenditures that the Commission has
9 already deemed prudent. The deferral balance is,
10 therefore, recoverable from ratepayers. Idaho Power
11 should be allowed to recover the deferral balance and
12 remove this regulatory asset from its books.
13 Also, Idaho Power has routinely spent more on DSM
14 programs than it has collected through the DSM Rider. In
15 2010, DSM Rider funded expenses were $42.4 million ($26
16 million after removing incentives for Demand Response and
17 Custom Efficiency programs). Staff's proposal provides
18 approximately $34.8 million in DSM Rider revenue. When
19 combined with the other programs moved into base rates,
20 total DSM funding would be approximately $51.2 million.
21 A 4.0% DSM Rider provides enough revenue to sufficiently
22 fund the current level of expenses and recover the
23 deferral balance.
24 Furthermore, Idaho Power's 2010 Demand-Side
25 Management Annual Report states that the Company plans to
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1 increase participation, energy savings, and demand
2 reduction above existing energy efficiency and Demand
3 Response programs. Additionally, the Company will add
4 measures (as identified in the 2011 IRP) to its existing
5 programs and continue to expand its efforts in energy
6 efficiency education. Though the Commission has ordered
7 the Company as recently as May 17 of this year (Order
8 No. 32245) to pursue all cost-effective DSM - even beyond
9 Energy Efficiency Rider revenues - Staff understands the
10 need to provide the Company with a consistent revenue
11 stream to better match the expenses charged to the Energy
12 Efficiency Rider account.
13 Q.Do you have any additional comments?
14 A.I would like to reaffirm Staff's support of
15 Idaho Power's DSM program acti vi ties and its pursuit of
16 all cost-effective DSM. A DSM Rider of 4.0% of base
17 revenues will supply sufficient funding to eliminate the
18 balance in the DSM Rider account in less than one year,
19 and provide ample revenue for expansion of DSM programs.
20 As programs expand, the DSM Rider rate can be
21 reevaluated. Finally, reducing the DSM Rider from 4. 75%
22 to 4.0% provides additional rate relief to almost all
23 customers.
24 Q.proceeding?Does this conclude your testimony in this
25
A.Yes, it does.
CASE NO. IPC-E-11-8
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1 Q.Please state your name and business address for
2 the record.
3 A.My name is Donn English and my business address
4 is 472 W. 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 as a senior auditor.
8 Q.Are you the same Donn English that previously
9 submitted testimony in this proceeding?
10 A.Yes. I submitted direct testimony presenting
11 Staff's recommendation to set the Energy Efficiency
12 Tariff Rider ("Tariff Rider") rate at 4.0% of revenues.
13 Q.What is the purpose of your rebuttal testimony?
14 A.The purpose of my rebuttal testimony is to
15 correct or clarify statements made by other witnesses
16 filing testimony in this case regarding the appropriate
17 level of the Tariff Rider.
18 Q.Is there specific testimony filed in this case
19 that you will be refuting?
20 A.Yes, I will refute testimony provided by the
21 Conservation Parties' witness, Nancy Hirsh, and clarify
22 calculations made by Industrial Customers of Idaho Power
23 witness, Dr. Don Reading. Finally, I will reiterate my
24 pre-filed direct testimony and illustrate how a 4.0%
25 Tariff Rider will sufficiently fund DSM programs going
forward.
CASE NO. IPC-E-11-8
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1 Q.What specific arguments from Nancy Hirsh do you
2 disagree with?
3 A.On page 4, line 18 of Ms. Hirsh's direct
4 testimony, Ms. Hirsh states that the Conservation Parties
5 "believe that as electric rates increase so must the
6 funding for energy efficiency." Ms. Hirsh seemingly
7 implies , incorrectly, that funding for energy efficiency
8 has not kept up with recent general rate increases. As
9 my Exhibit No. 103 illustrates, Staff's proposed funding
10 level for Demand Side Management (DSM) programs funded
11 through the Energy Efficiency Tariff Rider is an increase
12 of 92% over 2010 tariff rider revenue levels.
13 Furthermore, as discussed later in my rebuttal testimony,
14 a 4.0% Tariff Rider would generate an extra $9.3 million
15 over 2010 expense levels.
16 Q.On pages 13-14 of Ms. Hirsh's direct testimony,
17 Ms. Hirsh states that:
18 Reducing the rider level will have a negligible
impact to each individual ratepayer, but a sizeable19 impact to Idaho Power's overall energy efficiency
budget. Assuming the growth in sales from actual20 2011 to the 2012 forecast used in this rate case,
maintaining a 4. 75% rider will generate an21 additional $1,597,640 for Idaho Power's energy
efficiency programs. When spread across all22 customers, maintaining a 4. 75% rider has a
negligible impact of less than $3.36 per customer23 annually in 2012.
24 Do you agree with Ms. Hirsh's statement?
25 A.No. I am unable to duplicate Ms. Hirsh's math.
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1 However, if one calculates the revenue generated by a
2 4.75% Tariff Rider on the stipulated weather normalized
3 revenue of $870,005,052, one finds that such a Tariff
4 Rider would generate approximately $41.3 million. A 4.0%
5 Tariff Rider would generate $34.8 million, saving
6 customers approximately $ 6.5 million while increasing the
7 funding available for DSM programs. The average annual
8 impact per customer of the O. 75% difference is $13. 72
9 instead of the $3.36 claimed by Ms. Hirsh.
10 Q.Are there any other points of clarification you
11 would like to make to Ms. Hirsh's testimony?
12 A.Yes. On page 20, line 17, Ms. Hirsh
13 incorrectly implies that the Commission has directed
14 Idaho Power to acquire all cost-effective energy
15 efficiency. In actuality, in Order No. 32245, the
16 Commission directed Idaho Power to continue to pursue all
17 cost-effective energy efficiency. I believe that Idaho
18 Power has made a good faith effort at pursuing all
19 cost-effective energy efficiency.
20 Q.Did other witnesses file testimony in this case
21 that you believe needs correction or clarification?
22 A.Yes. Industrial Customers of Idaho Power
23 wi tness, Dr. Don Reading, states in his direct testimony
24 on page 31, lines 13-17 that:
25
CASE NO. IPC-E-11-8
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1
2
If the EE Rider is left at 4.75%, and the demand
response programs are moved to base rates,
customers would be effectively paying the
equivalent of a 6.1% EE Rider. A dollar for
dollar reduction in the rider from removing the
$11.3 million demand response incentive programs
would equal an EE Rider of approximately 3.8%.
3
4
5 Dr. Reading's statement is technically correct. However,
6 it fails to consider the $5.2 million of incentive
\7 payments made through the custom efficiency program that
8 the Commission allowed Idaho Power to account for as a
9 regulatory asset in Order No. 32245. The equivalent
10 Energy Efficiency Tariff Rider, after accounting for the
11 $11.3 million demand response incentives and the $5.2
12 million custom efficiency incentives, would be 6.7%. A
13 dollar for dollar reduction of the $16.5 million
14 incenti ve payments would result in a 2.9% Tariff Rider.
15 Q.How much did Idaho Power spend on DSM programs
16 through the Idaho Tariff Rider in 2010?
17 A.The Idaho Power Demand-Side Management 2010
18 Annual Report indicates that Idaho Power expensed
19 $42,479,692 through the Idaho Tariff Rider in 2010.
20 However, the Company inadvertently charged $526,781 of
21 that amount to the Idaho Tariff Rider when that amount
22 should have been directly assigned to the Oregon
23 jurisdiction. Accordingly, in Order No. 32331, the
24 Commission declared that the Company only had prudently
25 incurred $41,952,911 in Tariff Rider expense.
CASE NO. IPC-E-11-8
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1 Q.In your direct testimony, you recommended the
2 Commission adjust the Tariff Rider funding level from
3 4 ~ 75% of revenues to 4.0% of revenues. Does the 4.0%
4 Tariff Rider level provide Idaho Power with sufficient
5 funding to continue with the same level of DSM expenses?
6 A.Yes, it would actually provide an extra $ 9.3
7 million over 2010 expense levels. Section 6 (a) of the
8 Stipulation filed in this case sets an $11,252,265 base
9 level of demand response incentive payments as Net Power
10 Supply Expenses to be included in base rates. The Tariff
11 Rider has historically funded these incentive payments.
12 Additionally, in Order No. 32245 the Commission allowed
13 Idaho Power to begin accounting for incentive payments
14 made through the Custom Efficiency program as a
15 regulatory asset effective January 1, 2011. During 2010,
16 the Tariff Rider funded Idaho Power's $5,193,650 in
17 incenti ve payments under the Custom Efficiency program.
18 In total, the proposed funding changes discussed above
19 would remove approximately $16.5 million of DSM incentive
20 payments from the Idaho Tariff Rider and place the
21 funding for the incentive payments into base rates. The
22 table below illustrates the available funding for DSM
23 programs if the Idaho Tariff Rider level were to be set
24 at 4.0%:
2.5
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16
17
1 Weather Normalized Revenues $870,005,052
2 Proposed DSM Tariff Rider 4.0%
3 DSM Tariff Rider Revenue $34,800,202
4 Incenti ve Payments in Base Rates $16,445,915
5 Total Funds Available for DSM $51,246,117
6 Additionally, the Company's Weatherization Assistance for
7 Qualified Customers program administered through the
8 local CAP agencies is also funded through base rates,
9 which increases the total amount available for DSM
10 programs.
11 Q.Have you reviewed the DSM expense levels for
12 2011?
13 A.Yes. Financial information through September
14 30, 2011 was provided to members of the Company's Energy
15 Efficiency Advisory Group at an October 14, 2011 meeting.
Q.How do the 2011 DSM expenses compare to 2010?
A.Through September 30, 2011 the Company spent
18 approximately $36.1 million on its DSM programs, which is
19 about 2% greater than what it spent during the same time
20 period the previous year. It appears that 2011 proj ected
21 expenses through December 31, 2011 will be roughly
22 equivalent to 2010 levels. Additionally, through
23 September 30, 2011 the Company has collected $28.8
24 million through the Idaho Tariff Rider while expensing
25 $29.2 million, which shows that the Company is currently
CASE NO. IPC-E-11-8
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1 expensing approximately the same amount that it is.2 currently collecting through the
3 /
4 /
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-11-8 571 ENGLISH,D.(Reb)6a11/16/11 STAFF
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.
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20
21
22
23
24
25
1 Tariff Rider.
2 Q.Is there currently a balance in the Tariff
3 Rider account?
4 A.Yes, as of September 30, 2011 the Tariff Rider
5 account had a negative balance of $8,013,786. This
6 balance had accumulated over previous years.
7 Q.Is there anything you would like to add to your
8 rebuttal testimony?
9 A.I would just like to restate Staff's original
10 position that setting the Tariff Rider level at 4.0%
11 provides the Company with sufficient funding to recover
12 the negative balance in the Tariff Rider account while
13 continuing to expand the Company's DSM programs.
14 Q.Does this conclude your rebuttal testimony in
15 this proceeding?
16 A.Yes, it does.
17
18
19
CASE NO. IPC-E-11-8
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1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: And Mr. English is
4 available for cross. Mr. Miller, do you have questions?
3
5
6
7
8
9
10
11
MR. MILLER: I do not. Thank you.
COMMISSIONER SMITH: Ms. Kyler.
MS. KYLER: No questions.
COMMISSIONER SMITH: Mr. Olsen.
MR. OLSEN: No questions.
COMMISSIONER SMITH: Okay, Nelson.
MR. NELSON: Yes. Thank you, Madam Chair.
12 I just have one area.
17
18
19
13
14
15
16 BY MR. NELSON:
Q
A
Q
CROSS-EXAINATION
Good afternoon, Mr. English.
Good afternoon.
I'd like you to refer to your direct
20 testimony on page 5. Are you there, sir?
21
22
A
Q
Yes, I am.
And I'd like to call your attention
23 specifically to the answer that begins on the top of page
24 5, starting on line 3, where you say, "While a lower DSM
25 Rider could be argued as reasonable, it could falsely
CSB REPORTING
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573 ENGLISH (X)
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1 signal that Staff and the Commission do not support Idaho
2 Power's DSM efforts." Do you see that, sir?
3 A Yes, I do.
4 Q Okay. Mr. English, are you concerned
5 about sending a signal to customers that it is reasonable
6 for the Company to collect more money from customers than
7 they expect to spend for demand side management
8 programs?
9 A Yes, that's always a concern.
10 Q And if the Commission were to set a rate
11 based on the approved demand side management programs
12 that they have occasion to review from time to time and
13 if that rate were to be set so as to collect the amount
14 of money that is spent by Idaho Power, I'm struggling to
15 understand how setting a rate that meets the cost that
16 the Commission has approved sends a signal that the Staff
17 and the Commission do not support Idaho Power's DSM
18 efforts. Can you help me with that?
19 A Well, I think what you need to take into
20 account was at the time of this testimony, Idaho Power
21 had close to an $8 million back balance, so we're not
22 only looking to cover future expenses, but also to return
23 money to the Company that had been previously spent.
24
25
Q Okay, but assume with me that a lower rate
covers the back balances and covers the expenses going
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1 forward, do you have that assumption in mind?
2 A Well, it depends on how long you want to
3 take to recover the back balance, but...
4 Q Okay, fair enough. We've seen some tables
5 that run through 2014. Do you recall that testimony from
6 earlier today?
7 A Yes, I do.
8 Q Okay; so assume that the back balances are
9 addressed and the expenses are covered up through the
10 2014 time frame. Do you have that in mind?
11 A Yes.
12 Q Would you agree with me that setting a
13 rate consistent with the level of expenses actually made
14 by the Company would not send a signal that the
15 Commission doesn't support Idaho Power's DSM efforts?
16 A I think I was following. Could you repeat
17 that, please, though?
18 Q Sure. If the Commission sets a rate so
19 that the Company could fully recover both its back
20 balance and its authorized expenditures going forward,
21 would you agree with me that by virtue of setting that
22 rate there's nothing inherent in that that would suggest
23 that the Commission does not fully support Idaho Power's
24 DSM efforts?
25 A Yes, I'd agree with you.
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1
2 questions.
MR. NELSON: Thank you. I have no further
COMMISSIONER SMITH: Thank you. Mr.
MR. RICHARDSON: I have no questions,
COMMISSIONER SMITH: Mr. Otto.
MR. OTTO: Yes, ma' am, I do have a few
CROSS-EXAINATION
Good afternoon, Mr. English.
Good afternoon.
We've had you iced on the bench all day.
17 Actually, I want to follow up on a line of questioning
3
4 Richardson.
5
6 Madam Chairman.
7
8
9 questions.
10
11
12
13 BY MR. OTTO:
Q
A
Q
18 that Mr. Nelson took you through and one of those is
19 about the back balance.
20
21
A
Q
Yes.
22 balance amount is?
What's your understanding of what the back
23
24
25
A
Q
A
Numerically or --
Numerically, yeah.
At the time of this filing, it was
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576 ENGLISH (X)Staff
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1 approximately $8 million, although on Ms. Drake's Exhibit
2 51, I believe, it projects a back balance of about 6.2
3 million as of the end of 2011. That might be Exhibit 50.
4 I don't recall the number. It is Exhibit 50.
5 50, that's great. Did you reviewQ the
6 Conservation Parties asked some discovery questions of
7 the Company and one was about back balance. Did you
8 review those responses?
9 A I reviewed them when they came in. I
10 don't recall them off the top of my head.
11 Q And I think -- well, actually, it doesn't
12 really matter. You would agree that we're in kind of the
13 6.2 million, maybe plus or minus --
14 A Sure.
15 Q -- some range?
16 A Sure.
Q And those are dollars for programs that
18 have been deemed prudently-incurred dollars?
19
20
A That's correct.
Q Okay, is it your position the Company
21 should be able to collect those dollars in one year or
22 more than one year?
23 A I believe the length of time that the
24 Company should collect that money back is dependent on
25 Commission decision. Under my proposal, the Company
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1 collects it back in roughly a year.
2 Q Okay, thanks for that; so then did you
3 review the actual expenses for 2011 for energy
4 efficiency?
5 A In summary, I have reviewed the expense
6 levels for the first three quarters of 2011.
7 Q What's your understanding of those
8 levels?
9 A The Company is spending approximately the
10 same amount that it has been collecting so far this
11 year.
12 Q And do you know the dollar figure?
13 A I have them with me, actually. All right,
14 through September 30th, 2011, the expenditures were
15 $29,220,435 and the funding amount was $28,799,587, so
16 there's roughly a half a million dollar difference.
17 Q Now, and I've looked at these same
18 numbers, too, and I think I figured them out, but based
19 on your understanding of those numbers; does that include
20 all energy efficiency or all demand side management, so
21 that would be efficiency and demand response?
22 A These numbers include all demand side
23 management. They were prepared prior to the proposal
24 included in the -- actually, I take that back. In a
25 previous Order this year, the Commission had allowed
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1 Idaho Power to account for the incentive payments under
2 the custom efficiency program as a regulatory asset, so I
3 believe that these numbers do not include the incentive
4 payments that are accounted for as a regulatory asset,
5 but they do include the demand response payments that are
6 proposed to be moved to the power supply expenses in this
7 case.
8 Q And that was my -- that's how I understood
9 it, too, so there's at least two of us in the room. I
10 got so lost in the math, I forgot what question I was
11 going to ask. One moment, please.
12 (Pause in proceedings.)
13 Q BY MR. OTTO: So Mr. English, now I want
14 to kind of turn to what we think might happen in the
15 future, which is always a guess.
A I don't know.
17 Q Right; so would you agree that really what
18 we're talking about here is what's going to happen in
19 2012 and 2013 for energy efficiency funding?
A I think what we're talking about here is
21 roughly 12 months out.
22 Q Yeah; so in making your suggestions, did
23 you review the potential for energy efficiency that's out
24 there?
25 A I have reviewed the potential in the past
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1 and glanced over ita few times recently.
2
3
Q What sources did you review?
A Oh, the 2009 conservation potential study
4 that was based on 2007 data.
5 Q And have you reviewed, let's say, the most
6 recent 2010 demand side management annual report?
7
8
A Yes, I have.
Q Would you agree that there's a difference
9 between what's being achieved and what's been identified
10 as the potential?
11 A Nominally.
Could you --
Well, when that report, the conservation
14 potential study, was made based on 2007 data, Idaho Power
Q
22 efficiency?
12 Q
13 A
15 had achieved quite a bit more since then, so it would be
16 a false analogy to assume that that potential still
17 remains, but I do believe that Idaho Power has achieved
18 quite a bit of DSM.
19 And I would agree with you there. I guess
20 my question is so you reviewed the potential study, did
21 you review the economic potential for energy
23 A
24 study, yes.
25 Q
Economic potential is a portion of that
Do you recall what that number was for,
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580 ENGLISH (X)Staff
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1 say, 2009, the first year?
2 A I do not recall.
3 Q Are you willing, subj ect to check, that
4 it's 954 gigawatt-hours?
5 A Subj ect to check.
6 Q Okay, would you be willing, subj ect to
7 check, that 30 percent of that number is about 270
8 gigawatt-hours?
9 A Well, I've learned not to trust your math,
10 but I will this time.
11 Q That's a good lesson learned, and in
12 fact -- well, we're close enough. Do you recall what
13 Idaho Power acquired in 2010?
14 A Not off the top of my head, but I'm
15 showing approximately 188,000 megawatt-hours.
Q Right, that's the number I had, too, so to
17 recap, we had in 2010 188,000 megawatt-hours achieved and
18 then from the conservation potential, there's a __
19 economic potential and 30 percent of that number is in
20 the 250,000 megawatt-hour range, so based on those
21 numbers, do you think Idaho Power, while doing a good
22 job, do you think there's still a potential out there
23 to--
24 A Well, there is. I think when you're
25 looking at potential, there's economic potential and
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581 ENGLISH (X)Staff
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1 there's actual achievable potential which takes into
2 consideration a little more than just what could be cost
3 effective. It takes into consideration participation
4 rates and so although economic potential can serve as a
5 useful tool, it's not necessarily the potential that I
6 would suggest that people look at.
7 Q That's true, there are various factors
8 that go into figuring the achievable potential. Would
9 you agree that one of those factors is program funding
10 levels?
11 A No.
12 Q Are you sure?
13 A Well, I think Idaho Power has been ordered
14 to pursue cost-effective DSM and regardless of their
15 funding, they're going to go out there and pursue it.
16 Q Fair enough. The last question is about
17 Ms. Drake's Exhibit No. 51, which was the customer
18 relationship index and is your -- I'm sorry, I' 11 give
19 you a minute.
20 A I'm there.
21 Q I'm just going to ask about the orange
22 boxes there. I hope everybody has a color copy.
23 A I have a black and white copy.
24 Q Well, it's the Percent in Group line.
25 A Oh, okay.
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1 Q Would you agree with me that the 36
2 percent number is the number of folks surveyed who had
4 A
3 actually participated in the programs?
5 Q
That's what this exhibit shows.
Does that indicate there's more room for
Yes, but, you know, with any DSM program,
8 you're not going to have 100 percent participation and I
6 participation?
7 A
9 think that 36 percent participation rate is probably
10 about average.
11 Q And that's based on --
12 A General knowledge of the DSM programs that
13 we review. I have nothing to document that.
14
15
16 Ms. Nordstrom.
17
18
MR. OTTO: Okay. That's all I have.
COMMISSIONER SMITH: Thank you, Mr. Otto.
MS. NORDSTROM: No questions.
19 questions from the Commissioners?
COMMISSIONER SMITH: Do we have any
20
21 me to.
22
COMMISSIONER REDFORD: No, unless you want
COMMISSIONER SMITH: Nor do I. Do you
2 3 have any redirect?
24
25
MR. KLEIN: No.
COMMISSIONER SMITH: Thank you for your
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1 help. We appreciate it, Mr~ English.
2 THE WITNESS: Thank you.
3 (The witness left the stand.)
4 COMMISSIONER SMITH: All right, we're
5 going to call it quits for the night. We still have
6 three witnesses left by my calculation, Ms. Donohue, Mr.
7 Lobb, and Ms. Ottens.
8 Does the Company know yet if it intends to
9 recall any rebuttal witnesses?
10 MS. NORDSTROM: No.
11 COMMISSIONER SMITH: Three witnesses,
12 let's start at 9: 30. We can probably still finish by
13 noon, so we'll see you all at 9: 30 in the morning.
14 MR. MILLER: Madam Chairman?
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: Just one question.
17 Procedurally, was the Commission thinking of allowing
18 anything in the nature of concluding statements tomorrow
19 or just take the record as is and do your best?
20 COMMISSIONER SMITH: Well, Mr. Miller, I
21 guess I always ask if people see the need for that and I
22 would be happy to entertain brief concluding statements
23 if parties would like to make them, so that's a
24 possibility, and I would also announce in case I forget
25 to read my sticky note to myself tomorrow that we would
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584 COLLOQUY
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1 request that any Intervenor funding requests be made
2 within seven days of tomorrow, which is when we
3 anticipate closing the record in this hearing.
4 MR. NELSON: Commissioner Smith?
5 COMMISSIONER SMITH: yes.
6 MR. NELSON: If could I ask a follow-up
7 question to Mr. Miller's, what about briefs posthearing?
8 Is that something the Commission intends to request in
9 this case or it would not be expected?
10 COMMISSIONER SMITH: I don't think the
11 Commission well, in rare cases if there is a legal
12 issue that remains~ we request briefs on legal issues.
13 MR. NELSON: Okay.
14 COMMISSIONER SMITH: However, we never
15 have requested summaries of testimony and cross. We're
16 perfectly capable of doing that ourselves.
17
18
MR. NELSON: Very good.
COMMISSIONER SMITH: So if you think
19 there's a legal issue that is in doubt and needs to be
20 briefed, you should bring that up. Personally, I haven't
21 seen any.
22
23 think that's correct.
MR. NELSON: I don't dispute that. I
24
25
COMMISSIONER SMITH: Any other questions
from any of the parties? If not, we'll see you at -- no,
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585 COLLOQUY
1 some of you we may see at 7: 00 p.m.this evening for our.2 public hearing;otherwise,everybody else,we'll see you
3 at 9: 30.
4 (The Hearing recessed at 5: 20 p.m.)
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