20120420IPC to Micron 22,25,27,38,57,58,67,68.pdf

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IDAHO
RE CE WP An IDACORP Company
0 LII 3:
JASON B. WILLIAMS
Corporate Counsel TILT COML ,9 williams(idahopower.com
April 20, 2012
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-12-08
IN THE MATTER OF IDAHO POWER COMPANY'S APPLICATION TO
INCREASE ITS RATES DUE TO REVISED DEPRECIATION RATES FOR
ELECTRIC PLANT-IN-SERVICE
Dear Ms. Jewell:
Enclosed for filing are an original and three (3) copies of Idaho Power Company's
Second Response to the First Production Request of Micron Technology, Inc. ("Micron") to
Idaho Power Company in the above matter.
Also enclosed are four (4) copies of a non-confidential disk containing information
being produced in response to Micron's First Production Request.
If you have any questions about the enclosed documents, please do not hesitate to
contact me.
Very truly yoLff
son B. Williams
J BW :csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
JASON B. WILLIAMS (ISB No. 8718)
LISA D. NORDSTROM (ISB No. 5733)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
iwilliamsidahopower.com
lnordstromcidahopower.com
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2Z2 APR 2O PM 3:52
UTtLITIES COMMISSJQH
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO
INCREASE ITS RATES DUE TO
REVISED DEPRECIATION RATES
FOR ELECTRIC PLANT-IN-SERVICE
CASE NO. IPC-E-12-08
IDAHO POWER COMPANY'S
SECOND RESPONSE TO THE
FIRST PRODUCTION REQUEST
OF MICRON TECHNOLOGY, INC.,
TO IDAHO POWER COMPANY
COMES NOW, Idaho Power Company ("Idaho Power" or "Company"), and in
response to the First Production Request of Micron Technology, Inc. ("Micron"), to Idaho
Power Company dated April 9, 2012, herewith submits the following information:
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -1
PRODUCTION REQUEST NO. 22: [Data] - As it relates to references that
service life and net salvage estimates contained in the Gannett Fleming study are
based on informed judgment which incorporates analysis of historical data, review of
Company practices and outlooks, considerations of current practices in the industry,
and knowledge of estimates used by others, please provide the following:
a.A detailed narrative identifying and justifying each separate practice
or outlook of the Company that had an impact on life estimates, by account.
b.A detailed narrative identifying and justifying each separate practice
or outlook of the Company that had an impact on net salvage estimates, by account.
C. A detailed narrative identifying and justifying each current practice
in the electric utility industry that has an impact on life estimates, by account.
d.A detailed narrative identifying and justifying each current practice
in the electric utility industry that has an impact on net salvage estimates, by account.
e.A detailed narrative identifying and justifying estimates used for
other electric utility properties as it relates to the establishment of service life by
account.
f.A detailed narrative identifying and justifying estimates used for
other electric utility properties as it relates to net salvage, by account.
For each subpart above, provide all workpapers, assumptions, considerations, and
material reviewed and/or relied upon in sufficient detail to permit verification of the
reasonableness of the response.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -2
RESPONSE TO PRODUCTION REQUEST NO. 22:
a.Some specific Company practices that had an impact on life estimates are
as follows: (1) there is no program to change out all electro-mechanical control
equipment at substations; however, if replacements are needed, then the station will get
upgraded with new microprocessor equipment; (2) there are no system-wide
replacement programs for replacement of oil breakers; however, an increase in the next
few years for oil breaker replacement is expected due to age and maintenance costs of
the assets (Accounts 353 and 362); (3) there are Advanced Metering Infrastructure
meters being installed in areas of the system, with the plan to completely replace all
standard meters in the near future; and (4) there is a plan in place to retire the
Boardman facility by 2020 due to the operating partner's decision to cease coal-fired
operations at Boardman in 2020.
b.There was one major practice change that affected the net salvage
percents for all accounts. Within the last six or seven years, the practice of recording
cost of removal and gross salvage on all retirement orders has changed. The change
requires a better identification of costs to each account than the previous allocation
practice. This is particularly evident in Account 368, Line Transformers, and
subaccounts of Account 370, Meters. Additionally, the outlook for Account 365,
Overhead Conductor and Services, is much less gross salvage in the future due to the
lack of copper to be retired. Because aluminum has less scrap value than copper, it will
reduce the overall gross salvage value for these accounts on a going-forward basis.
C. Some practices in the electric industry that have an impact on life
estimates would be as follows: (1) many assets within an account are more technology
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -3
based, so forces of retirement related to obsolescence is more dominant (affects a large
numbers of accounts); (2) regulations within the production assets require higher
degrees of change out of assets to meet requirements (Accounts 311-316); (3) the size
of a pole and the treatment practices of poles affect the life of poles (Accounts 355 and
364); (4) the change to new technology meters is a major change in meter life (Account
370); and (5) substation structures are more commonly built as modular units instead of
the large masonry structures (Accounts 352 and 361).
d.Some practices in the electric industry that have an impact on net salvage
estimates would be as follows: (1) copper conductor is seldom installed; therefore,
future gross salvage will be less (Accounts 356 and 365); (2) the environmental
requirements to remove assets increases the overall cost of removal (affects a large
numbers of accounts); (3) the longer some assets stay in service, which is a trend, the
less likely to reuse or receive scrap value (affects a large numbers of accounts); and (4)
the more steel utilized for poles, instead of wood, will increase both cost to remove and
gross salvage (Accounts 355 and 364).
e.The life estimates utilized by other electric utilities is an important factor in
understanding reasonable life characteristics of each asset class. However, the
parameters cannot be utilized effectively unless the underlying determination of the life
estimate of each utility is understood. Through the conduct of numerous depreciation
studies and my professional experience, a thorough understanding of each utility's
practices and policies allowed for the effective use of industry parameters in preparing
the Company's study.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -4
f. The net salvage estimates utilized by other electric utilities is an important
factor in understanding reasonable net salvage percents of each asset class. However,
the net salvage percents cannot be utilized effectively without understanding the
practices and accounting procedures of each utility. Through the conduct of numerous
depreciation studies and my professional experience, a thorough understanding of each
utility's practices and policies allows for the effective use of industry parameters in
preparing the Company's study.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -5
PRODUCTION REQUEST NO. 25: [Net Salvage] - Please provide a detailed
narrative and step-by-step process including the specific inputs and supplemental
information from Company personnel that resulted in each specific net salvage value
proposed by account for Accounts 310 through 356. The response should include all
workpapers, assumptions, considerations, and material reviewed and/or relied upon, by
account, in sufficient detail to demonstrate how each component, item of information,
estimation, or trends, etc. resulted in the specific value proposed in the Gannett Fleming
study.
RESPONSE TO PRODUCTION REQUEST NO. 25: The process for
determining the net salvage percent for the study is described on pages 11-29 through II-
31 of Exhibit No. 1. This process applies to Accounts 310 through 356. As stated on
pages 11-29 through 11-31, the determination of each net salvage percent is a
combination of the statistical analyses, estimates of other electric utilities, the current
estimate of the Company, future expectations with respect to future removal
requirements and markets for retired equipment and materials, and professional
informed judgment.
I will use Account 353, Station Equipment, as a representative example to
illustrate the process and determination of each net salvage percent.
The detailed analyses are set forth on pages 111-200 through 111-202 for the period
1954 through 2010. The overall net salvage percent for the 57-year period is negative 6
percent. The most recent five-year period, 2006-2010, supports a negative 7 percent
net salvage. Similar to most asset classes, the cost of removal exceeds the gross
salvage each year since the mid-1 980s, when most utilities commonly experienced the
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -6
change over from positive salvage to negative net salvage. The industry range for
substation equipment is positive 5 percent to negative 20 percent; however, the majority
of the electric utilities are using negative 5 percent to negative 15 percent. This account
has a wide range of property units such as transformers, circuit breakers, bus work,
control equipment, switchgear, etc. There is very little future market value for any of the
property units, with the exception of large transformers, which in some cases can
receive reasonable scrap value or be sold. However, not all transformers will receive a
large salvage value without also experiencing a comparable cost to remove. The
control and switchgear equipment has minimal salvage value and cost to remove as a
percentage of assets being retired is not very high, but does exceed the salvage value.
The cost to remove breakers is at a moderate level compared to the retirement cost,
and salvage is quite low. The bus work has some salvage value and some cost of
removal, which overall nets close to zero.
Therefore, given the 57 years of historical data, the future expectations of net
salvage percents for the various asset classes, the primary industry range of negative 5
to negative 15 percent, the currently approved net salvage percent of negative 5, and
the Company's outlook that net salvage values for these assets will continue as
experienced historically, the negative 5 percent net salvage for Account 353 was
recommended.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -7
PRODUCTION REQUEST NO. 27: [Net Salvage] - Regarding the statement on
page 1-4 of Exhibit No. 1, that an understanding of the function of the plant and
information with respect to reasons for past retirements was obtained, please provide:
a.The specific understanding of the function, by account, and how
such specific understanding of the function resulted in the proposed net salvage value,
by account.
b.Each major or meaningful reason of past retirement, specifically
identified by account and how each specific reason for past retirements impacted the
ultimate proposed level of net salvage, by account.
C. Each specific future expectation associated with retirements, by
account, and how each specific expectation impacted the ultimate proposed net salvage
value proposed, by account.
As it relates to the response of each of the subparts above, please provide all
workpapers, assumptions, considerations, and material reviewed and/or relied upon, in
sufficient detail to permit verification of the accuracy of the response.
RESPONSE TO PRODUCTION REQUEST NO. 27: The discussion referenced
on page 1-4 of Exhibit No. I related primarily to life characteristics, more so than net
salvage value; therefore, an account by account discussion is not applicable.
a. An example of understanding the function of an asset and how that would
affect the net salvage value for an account is described below. I will use station
equipment and, specifically, transformers. If the transformer is utilized at high load
levels on a regular basis and the Company's practice is to utilize the transformers until
they no longer are efficient, then the salvage value at retirement is very low. However,
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -8
if the transformer is not used at a high load level and gets replaced due to increased
capacity needs at the station, then the salvage value or sale value is much higher.
Consequently, understanding how transformers are used by the Company could affect
the net salvage percent.
b. The majority of all retirements have been for wear and tear, periodic
overhaul or upgrade, capacity change, technology improvements, or failure. In general,
these types of retirements are periodic or recurring, which would emphasize the
historical indications as a good indicator of the future. Any catastrophic event or major
failure that is considered non-recurring would be appropriately weighted or excluded
from the determination of the net salvage percent. No such event has occurred in the
last 10 years.
C. Any known future expectation was considered in the determination of the
proposed net salvage percent. For example, the net salvage percent for transmission
poles and fixtures would be more negative for Idaho Power than many others in the
industry, but the historical levels of 92 percent of plant retired and, most recently,
negative 116 percent would not continue. Therefore, the proposed estimate is negative
80 percent.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -9
PRODUCTION REQUEST NO. 38: [Account 333] - Please provide a detailed
narrative explanation of what retired, by year, and the corresponding dollars of
retirement, by year that resulted in a $236,926 cost of removal in 2010 for Account 333
as set forth on page 111-1 88 of Exhibit No. 1. Further, provide a detailed narrative that
explains and supports why such level of cost of removal is considered predictive and
reasonable for the remaining investment in the account in the future. Finally, provide all
workpapers, assumptions, considerations, and material reviewed and/or relied upon in
sufficient detail to permit verification of the reasonableness of the response.
RESPONSE TO PRODUCTION REQUEST NO. 38: Please see the attached
Excel file setting forth what retired for the years 2009 and 2010 and the corresponding
retirement amount by year. The retirements in these two years relate to the $236,926
cost of removal amount in 2010 for Account 333 as set forth on page 111-1 88 of Exhibit
No. 1.
As shown in the Excel file, the majority of the $236,926 in cost of removal related
to the turbine and governor for Unit 3 at Upper Salmon B and the turbine runner
replacement for Unit #1 at C J Strike. These entries were all recorded in the Company's
records and the replaced assets were identified during the field visit.
The cost of removals within a specific year is not necessarily indicative of future
levels of removal costs.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -10
PRODUCTION REQUEST NO. 57: [Account 312] - Please provide a detailed
narrative identifying what retired and the corresponding dollars of retirement activity by
generating unit, corresponding to the retirement activity in age brackets 1.5, 27.5, 28.5,
34.5, and 35.5 years for Account 312, as set forth on page 111-19 of Exhibit No. 1. For
each major item of retirement, specifically state what caused the retirement (e.g.
catastrophic failure, change out of investment to meet new environmental concerns,
etc.).
RESPONSE TO PRODUCTION REQUEST NO. 57: Please see the attached
Excel file setting forth the dollars retired by generating facility for each age interval 1.5,
27.5, 28.5, 34.5, and 35.5 for Account 312.20 as set forth on page 111-19 of Exhibit No. I
The description of each retirement or location is set forth on each entry. The
retirements were the cause of normal wear and tear as well as needed upgrades.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -11
PRODUCTION REQUEST NO. 58: [Account 314] - Please provide a detailed
narrative identifying what retired by year and the cause of retirement by generating unit
corresponding to the retirement activity for age brackets 16.5, 23.5, 27.5, and 29.5
years for Account 314 as set forth on page 111-23 of Exhibit No. 1.
RESPONSE TO PRODUCTION REQUEST NO. 58: Please see the attached
Excel file setting forth the dollars retired by generating facility for each age interval 16.5,
23.5, 27.5, and 29.5 for Account 314 as set forth on page 111-23 of Exhibit No. 1.
The description of each retirement or location is set forth on each entry. The
retirements were the cause of normal wear and tear as well as needed upgrades.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B.
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -12
PRODUCTION REQUEST NO. 67: [Account 391.2] - Please provide all
support and justification for the selection of a 5SQ life-curve combination for Account
391.2. The response should specifically address and explain why a longer life-curve
combination or a different dispersion pattern is not more appropriate given the surviving
plant for account as set forth on page 111-423 of Exhibit No. 1.
RESPONSE TO PRODUCTION REQUEST NO. 67: Account 391.2, Office
Furniture and Equipment - EDP Equipment - Computers, is an amortized account. The
5-year amortization period is the most commonly used amortization period for these
assets and has been approved by this Commission since the 2001 depreciation study.
The SQ type curve represents the dispersion pattern of amortized accounts.
The surviving plant balance on page 111-423 of Exhibit No. I shows 98.7 percent
of the investment within the amortization period; therefore, the 5-year life is quite
indicative of the life. It should be noted that amortization retirements occur at the end of
the year; therefore, the 2006 vintage has not been retired as yet given the June 30,
2011, test year. The remaining vintages, 2001 and 2002, which combined equal
$300,497.52 of the surviving $23,840,038.91, have been properly reclassified as a
result of the PeopleSoft conversion and exist within the amortization period vintages.
The response to this Request was prepared by John J. Spanos, Vice President
of the Valuation and Rate Division, Gannett Fleming, Inc., in consultation with Jason B
Williams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -13
PRODUCTION REQUEST NO. 68: [Account 391.2] - Please provide the dollar
level of retirement for Account 391.2 on a monthly basis subsequent to June 30, 2011.
Further, identify the vintage year of addition associated with each of the retirements.
RESPONSE TO PRODUCTION REQUEST NO. 68: Please see the attached
Excel file for Category 39120 retirement from June 30, 2011, through December 31,
2011. General plant assets are retired annually based on the vintage of the asset
according to Commission Order No. 26937 issued in Case No. IPC-E-97-04.
The response to this Request was prepared by Larry Tuckness, Business Unit
Finance Team Leader, Idaho Power Company, in consultation with Jason B. Williams,
Corporate Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 20 th day of April 2012. 1
N4. 'WILLIAMS
ttorney for Idaho Power Company
IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 20" day of April 2012 I served a true and
correct copy of IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST
PRODUCTION REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER
COMPANY upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Donald L. Howell, II
Karl T. Klein
Deputy Attorneys General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
Micron Technology, Inc.
Thorvald A. Nelson
Frederick J. Schmidt
Sara K. Rundell
HOLLAND & HART, LLP
6380 South Fiddlers Green Circle, Suite 500
Greenwood Village, Colorado 80111
Richard E. Malmgren
Senior Assistant General Counsel
Micron Technology, Inc.
800 South Federal Way
Boise, Idaho 83716
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IDAHO POWER COMPANY'S SECOND RESPONSE TO THE FIRST PRODUCTION
REQUEST OF MICRON TECHNOLOGY, INC., TO IDAHO POWER COMPANY -15