19910715Technical Hearing Vol III.pdf

BETORE THE IDAHO PUBLIC UTILITIES COM}'IISSION
IN THE MATTER OE THE APPLICATION
F IDAHO POWER COMPANY FOR
PROVAL OF AN INTERCONNECTION CASE NO. IPC.E-g0-20
TARIFF FOR NON-UTILITY
GETIERATION-SCHEDULE 7 2 .
COIVIMISSIONER RALPH NELSON (Presiding)
COMIVIISSIONER DEAN J. MILLER
COIVI}'IISSIOIiIER I4ARSHA H. SMITH
PLACE Commission Hearing Room
472 West WashingtonBoise, Idaho
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NDATE: l{overnber 7, l-991 I
VOLUIvIE lil Pages 145 203
COURT REPORTING
537 W. Bonnock P.O. Box 578
Suite 205 Boise, ldoho 83701
(208) 336e208
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CNIC3$IAL
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BEFORE
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
APPEARANCES
For the Staff:SCOTT WOODBURY, Esq.
Deputy Attorney General
472 West WashingtonBoise, Idaho 83720
For Idaho Power
Company:
EVANS, KEANE, KOONTZ, BOYD
SIUKO 6. RIPLEYby BARTON L. KLINE, Esq.
Idaho First Plaza-Suite LTOL
LOl- South Capitol BoulevardBoise, Idaho 83702
For the Independent
Energy Producers
of Idaho:
DAVIS WRIGHT TREMAINEby PETER J. RICHARDSON, Esq.
702 West Idaho Street-Suite 7OOBoise, Idaho 83702
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APPEARANCES
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
INDEX
Robert M. Spann(Idaho Power)
Commissioner Miller L45
John H. Willmorth(Idaho Power)
Mr. Kline (Direct)
Prefiled Testimony
Cornmissioner Miller
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Don Reading
( rEPr )
l4r. Richardson (Direct-Reb)Prefiled Rebuttal TestimonyllIr. Woodbury (Cross-Reb)
Comnrissioner MiIIer
Commissioner Ne1sonMr. Richardson (Redirect-Reb)
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Thomas Faull
( staff )
Mr. Woodbury (Direct-Reb)Prefiled Rebuttal Testimony
Conmissioner Miller
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rNDEX
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
EXHIBITS
FOR THE INDEPENDENT ENERGY PRODUCERS OF IDAHO:
60l-. 604. Adnitted 202
F'OR THE STAFF
l_ol-. Lo5.Admitted 202
FOR IDAHO POWER COMPANY:
2. & 3.Adnitted 202
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EXHIBITS
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HEDRICK COURT REPORTTNGP.O. Box 578, Boise, ID 83701-
SPANN (Com)
Idaho Power Co.
BOISE, IDAHO, TIIURSDAY, NOVEMBER 7, ]-99]-, ]-:30 P. M.
COMMISSIONER NELSON: We,11 go back on the
record. When !'re recessed for lunch, why, Dr. Spann was on
the stand and I think Commissioner Miller was about to ask a
couple of questions.
ROBERT It{. SPANN,
produced as a witness at the instance of the Idaho Power
Company, having been previously duly sworn, resumed the
stand and was further examined and test,ified as follows:
EXAMINATION
BY COMMISSIONER MILLER:
a How are you, Doctor?
A Fine, how are you today? Itrs good to see you
again.
a It,s nice to have you back. Itrs always good
to have you. I always feel like I should at least ask you a
question while you're here, even though, ds with this one,
it isn't wildly insightful, but the way I'm thinking about
this problem right now is that, oD the one hand, w€ have
Dr. Reading's idear ds I understand it, that in attempting
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to arrive at a best proxy for an incremental cosL associated
with interconnection, dS a matter of judgrment, it,s
appropriate to remove administratj-ve and general costs,
because as a matter of judgrment, apparently, he concluded
that those costs don't vary as widely as others with respect
to interconnection.
On the other handr we have your point of view
that since administrative and gieneral costs are part of the
incremental or avoided costs that we pay to cogenerators
that kind of by parody of reasoning they should be on the
other side of the equation as well; so we have the opinions
of two highly-respected, competent economists on that point,
but at least as far as I can teII, we don,t have any
empirical evidence that would tip us one way or the other,
and neither of the propositions on their face seem more
intuitively correct than the other; so if that,s a correct
way to think about it and if you're a commissioner finding
yourself in that position, how would you reason your way
through that problem?
A How I would reason my way through it is, first
of all, I think the consistency point is important, because
I think it's worthwhile treating the same issue on both
sides of the equation the same way. With regTard to, sdy,
empirical evidence is essentially what Dr. Reading says is
A&G costs are fixed; so they don't vary when you
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
SPANN (com)
Idaho Power Co.
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interconnect one more QF.
You can make the same argument with regard to
the avoided costs that are paid QFs. When the Company goes
out and buysr sdy, a one megawatt -- power from a one
megrawatt QF, that single one megawatt power purchase doesn't
change their A&G cost a bit, probably, or not much at aII.
On the other hand, Lf they went out and bought a total of
1-OO megawatts of QF power, that would changTe their A&G
costsi so instead of looking at each individual one megawatt
QF, you say, we1I, if they bought a big enough block of it,
bought from several QFs, sdy, from l-00 one megawatt QFs, it
would change their A&G costs; so let's take how much their
A&G costs would have changed due to buying from 100
megawatts, divide by L0O megawatts and that gives you what
should be in the avoided cost rate for each megawatt.
A11 I'm saying is it makes sense to do the
same thing on the distribution side, like, for example, you
could conceivably do a study for each interconnection and
say because Idaho Power Company built a few hundred feet of
Iine to connect a QF, how much precisely did the A&G cost
change. Doing that study probably wouldn't be worth the
effort, because, similarly, it's clear if they interconnect
a sigrnificant number of QFs and build significant expansions
to their transmission and distribution system, you need less
supervisory personnel to supervise for a pair of crews if
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
SPANN (Com)
Idaho Power Co.
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you have a smaller distribution system; so while it would be
very costly to identify what would be a one megawatt change,
if you intereonnect enough of them and expand your system
enough, it's going to reduce your A&G eosts.
The other thing I would point to is the
Exhibit 705 of Dr. Peseau's testimony in the last case is
while it,s not clear you can use precise numbers from there,
they,re an indication that A&G costs do change when the
Company has a different size distribution and transmission
system. What he did is statistically look at the size of a
utility's A&G costs versus the total investment they have in
production, transmission and distribution, found that on
averagre utilities with more investment in production,
transmission and distribution had higher leve1s of A&G
expenses and that's all I'm saying here.
a But isn't Dr. Reading's -- let me start over.
To focus on Dr. Peseau's study or testimony that has become
quite an issue here, isn't it Dr. Reading's point that
Peseau's study proves the point that A&G expenses vary less
widely or less significantly with distribution and to the
point they do vary, he says, yeah, they do vary, but not as
much; so we ought to take them out?
A That's what he says, but that's not what
Peseau's exhibit says. What Peseau's exhibit does is he
looks Ert, and it might be helpful to look at the exhibit,
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
SPANN (Com)
Idaho Power Co.
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what he does is he looks at A&G expenses and how they relate
to two things: One is total investment in production,
transmission and distribution plant; and two is purchases of
power, and one question that could be asked using that
exhibit, which hras an issue in what we're calling the -Ll-
case, is that in setting the avoided cost rates for palrorents
to QFs, there are two A&G issues there.
One is do you include avoided A&G costs in the
cost of the surrogate avoided resource. Then what
Dr. Peseau was also addressing was a point the Company had
made is that there's another A&G issue, and that is when the
Company goes out and purchases power from QFs, that tends to
be an increase in its A&G costs. They have to have people
to administer the contracts and everything else.
One thing that Dr. Peseau said is that the
reduction in the A&G cost due to avoiding the SAR, the
surrogate avoided unit, exceeded the increase in A&G cost
due to purchasing the power. He's probably right on that.
Second of all-, that's more than reflected in the avoided
cost rates you set in that proceeding, because what you did
in that proceeding, you included aII of the A&G costs in the
surrogate avoided unit, but don't make any reduction in the
avoided cost for the expenses the Company incurs in
purchasing the QF power. Probably that's a reasonable
result if aII of the other numbers are reasonable.
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
SPANN (com)
Idaho Power Co.
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The issue here is different. The issue here
is if the Company goes out and expands its distribution
system to interconnect QFs, do its A&G costs go up. WeIl,
that is the same type of issue as the issue in the avoided
cost proceeding when you say if they had to build a power
plant instead of buying power from the QF, would they have
more A&G cost. The answer there is yes and the answer here
is the same.
a You directed us to Exhibit 705 and I suppose
this is a confession a Commissioner should never make, but
when we had this exhibit in the 89-l-l- case, I didn't
understand it and I don't understand it now. What can a
person learn from looking at this piece of paper?
A Okay, what a person can learn from looking at
this piece of paper is that the title is 'tRegression Output
for Administrative and General Expense and General P1ant
Statistical Analysis.rr What he is trying to do is determine
what happens to A&G expenses when the Company has more
production, transmission and distribution plant and what
happens to A&G expenses when they purchase more power. He's
trying to use the data from these utilities to estimate an
equation; so that the first Iine, rrDependent Variablertt is
!iAAI{DG.rr That's administrative and general expenses.
Then in the columns just down below where
there's rrNo.rr and you see ttl, 2, 3, Labelrf and then some
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
SPANN (com)
Idaho Power Co.
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other things, right near No. 2 you see rrPTDPLT.rr That's
production, transmission and distribution plant. The next
line, ttPURCHrtt is purchases of power. Going across two more
columns to the right where it says rrsignificance Levelrr and
then rtCoeff icient, tt you see numbers and they're positive
numbers. What that says is when the utility has more
production, transmission and distribution plant, its A&G
expenses are higher. Similarly when the utility has more
purchases of power, i-ts A&G expenses are higher.
What he then has to do is go plug in some
values for them to compare purchases versus the amount of
plant avoided, but basically what he's saying, if you
think -- one way to think of it, what he's done here
mathematically, suppose I had the data on amount of
production, transmission and plant investment for l-5
utilities and I also had their A&G expenses and I plotted
them on a graph, he's saying, is that plot such that it's
very clear that the utilities that have the most production,
transmission and distribution plant have the highest A&G
expenses and vice versa.
COMT,IISSIONER MILLER: ThanKs for that
clarification.
THE WITNESS: Okay.
COMMISSIONER MILLER: That,s all I have,
Mr. Chairman. Thank you, Doctor.
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HEDRICK COT'RT REPORTING
P.O. Box 578, Boise, fD 83701-
SPANN (com)
Idaho Power Co.
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HEDRTCK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
SPANN (com)
Idaho Power Co.
COMMISSIONER NELSON: Any questions?
COII{MISSIONER SMITH: That's enougth for me.
COMMISSIONER NELSON: Any redirect for
Dr. Spann?
MR. KLINE: I don't have any redirect,
I{r. Chairman
COMIIISSIONER NELSON: Dr. Spann, thank you for
coming
THE WITNESS: WeII, thank you for listening to
me.
(The witness left the stand. )
I[R. KLINE: That completes Idaho Power,s case,
direct case.
COMITIISSIONER NELSON: Dr. Willmorth didn't --
lm.. KLINE: Oh, I'm sorry, I do have one more
witness, I guess.
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
WTLLMORTH (Di )Idaho Pohrer Co.
JOHN H. WILLMORTH,
produced as a witness at the instance of the Idaho Power
company, having been first duly sworn, was examined and
testified as follows:
DIRECT EXAMINATION
BY I{R. KLINE:
a Would you please state your name and
occupation for the record?
A My name is John Willmorth. I'm employed with
Idaho Power Company at L22O Idaho Street, Boise.
A And what's your job with Idaho Power,
Dr. Willmorth?
A I'm director of resource planning.
a A11 right, have you previously caused prefiled
direct testimony to be filed in this case, Dt. Willmorth?
A Yes.
a And do you have any additions or corrections
that you'd like to make to that testimony at this time?
A NO.
a And did you have any exhibits that were
prefiled in this case?
A No.
a Dr. Willmorth, if I were to ask you the
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
WTLLMORTH (Di )Idaho Power Co.
questions that are contained in your prefiled testimony
today, would your answers be the same?
A Yes.
I[R. KLINE: With that, Ur. Chairman, I'd like
to have Dr. Willmorth's testimony spread on the record as if
read in its entirety.
COMMISSIONER NELSON: So ordered.
(The following prefiled testimony of
Dr. John Willmorth is spread upon the record. )
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Please state your name and occupation for the
record.
My name is John H. Wi11mort,h. I am employed as
Manager, Resource Planning by Idaho power
Company.
Please describe your educat,ional background and
professional experience.
I received my undergraduate educat,ion from
Princeton University, where f graduat.ed in L957
with a major in Electrical Engineering. In
addition I have received the degrees of Master of
Science in ElecErical Engineering and Doctor of
Philosophy from the University of Washington.
From 1959 to L975 I was a member of Lhe
faculty in t.he Physics Department of the College
of fdaho. In August, L975 I joined the staff of
t.he Idaho Public Utilities Commission and was
employed by the Commission unt.iI Apri1, 1981 when
r began work with Idaho Power.
I am a Registered Professional Engineer in
E.he State of f daho.
Please summarize your duties as Director,
Resource Planning for Idaho Power Company,
especially as they pertain to t.he Company's
Willmorth, Di-Rec.
Idaho Power Company
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purchase of cogeneration and smal1 power
production from PURPA qualifying facilities.
Since assuming direction of Resource Planning in
1981, f have been responsible for Ehe preparation
of resource studies including Idaho Power's long
range resource p1an, rate case net power supply
cosL determinations, and marginal resource cost
studies. fn connection with cogeneration and
sma1I power production, I am responsible for
preparation of the Company's resource avoided
costs and avoided cost rates, and have tesLified
in Case No. IPC-E-89-11 and prior avoided cost
proceedings.
What is the purpose of your t.estimony in Ehis
proceeding?
My testimony addresses (1) the avoided
interconnection costs payable to PURPA qualifying
facilit.ies (QFs) from which Idaho Power purchases
power, and (2) the recoflrmendation of SLaf f
witness Thomas Fau1l Lo "delevelize" the
Operation and Maintenance (O&M) costs charged to
QFs under fdaho Power's proposed tariff Schedule
72.
Please summarize your testimony on avoided
interconnect.ion cost .
Willmorth, Di-Rec.
Idaho Power Company
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The Public Utility Regulat,ory Policies Act
(PURPA), ds implemented by the FERC and this
Commission, provides that t.he costs of
int,erconnecting a QF to the ut,ility sysEem are
not Ehe responsibility of the utility, but of the
QF. The purchasing utility assumes the
obligation t.o pay an avoided resource cost to Ehe
QF whrch includes the cost of int,erconnect.ing
avoided alternative utility generation to the
utiliLy's syst.em. In the case of Idaho Power's
purchases from QFs in Idaho, that alt.ernative
generation is the coal-fired surrogate avoided
resource (Sanl established by this Commission for
setting Qf'' rates. By Commission order, SAR
interconnection costs are currently paid to QFs
by Idaho Power through the Company's approved
avoided cost rates.
Please summarize your conunents on Staf f wit.ness
Fau11's proposal to "de1eve1:-ze" t,he 0.78 and
0.48 interconnection O&M charges proposed by the
Company in Schedule 72.
The O&M costs proposed to be charged to QFs
t,hrough Schedule 72 do not ref 1ect, levelized
costs, but the current average O&M costs for
Idaho Power's distribution and transmission
Willmorth, Di-Rec.
Idaho Power Company
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facilit.ies. Schedule 72 proposes a monthly O&M
charge for distribution fac.ilities of 0.72 per
month multiplied by the actual interconnect,ion
investment. This percentage charge is subject to
change as Idaho Power's system-wide dist,ribution
O&M cost,s change. Implementing Mr. Fau11's
recommendation Eo "delevelize" the 0.72 and 0.42
charges would require separate O&M accounting for
every Qn based upon their individual on-line
dates, contract lengths and the Schedule 72 rat.e
in effect at. the time of the interconnection. To
avoid this unnecessary administ.rative complexity,
Mr. Fau11's recoflrmendaLion should not be adopted.
INTERCONNECTTON COSTS
O. Have you read the direct testimony of Staff
witness Thomas Fau1l in this case?
A. Yes, I have.
O. Do you agree with Mr. Faull's testimony and
conclusions related Lo the inclusion of
interconnection costs in Idaho Power's CSPP
rates ?
A. Yes, I do. I agree with Mr. Faul1's tesEimony
and Exhibit No. L02, which show that, Va1my
interconnection costs were ful1y represented in
Ehe calculation of SAR costs for avoided cost Qf
Willmorth, Di-Rec.
Idaho Power Company
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raE,es in Case No. U-1500-170. From his
Eestimony, f understand that a sma11 portion of
CoalsErip int.erconnections may have been omitted
f rom t.he calculation. rhis notwithstanding, I
agree wich Mr. FaulI's conclusion that. the
interconnection cost component of the generic
avoided costs determined in Case No. U-1500-170
(and carried forward into fdaho Power's Qn raEes
in Case No. IPC-E-89-11) is a just and reasonable
representat,ion of Eotal SAR interconnection
costs.
O&M CHARGES IN SCHEDULE 72
O. Have you read the testimony of the Staff
witnesses relat.ed to the O&M charges f or QF
interconnection facilities proposed in Schedule
72?
A. Yes. Mr. Hatt,away and Mr. Fau11 boCh conclude
thaL Lhe methodology and results of the Company's
proposed Schedule 72 are reasonable. However,
Mr. Fau11 recommends a "delevelization" of t,he
Schedule 72 O&M percentage rate so that each QF,
assuming a 0.7% monthly distribution O&M rate in
Schedule 72, would pay aL a rate less than 0.72
per month at the beginning of the contract Eerm
and above 0.72 per mont.h in lat,er contract years.
Willmorth, Di-Rec.
Idaho Power Company
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My understanding of his rationale is that, while
the Schedule 72 rate may be expected Eo remain
relatively flat over time because it is based on
Idaho Power's t.otaI distribution facilities, the
O&M costs for the QF's specific interconnection
facility should be lowest. at Ehe beginning when
the equipment is new and increase above 0.72 as
time goes on. The "delevelization" which he
recommends appears to be an attempt to charge O&M
costs to each QF somewhat in a manner consistent,
with t.he expected increasing O&M needs of thaE
QF's own interconnection facility, while
maint,aining consistency with Schedule 72 over t.he
fuI1 cont.ract term.
Do you disagree wieh ur. Fau11's recommendation?
In principle, Idaho Power would be revenue-
neuLral if gradually escalating O&M charges were
adopt,ed ge lono eg the 1eveI of those escalat,ing
charges results in equivalence with Ehe charges
proposed by ldaho Power in Schedule 72 over Ehe
fu1I cont.ract term.
In pract.ice, however, Mr. Fau1l's proposed
delevelization of O&M charges would be difficult
and costly to administer. First, separaEe
accounting would be required to maintain
Willmorth, Di-Rec.
Idaho Power Company
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individualized O&M charges for each QF. The
iniCial contract year, the contract term and t.he
'leve1n percentage O&M charge in ef f ect at t,he
time of the int,erconnection would each affect the
"delevelized" monthly O&M amounL to be charged.
Second, because the O&M rate in Schedule 72 is
not a levelized number or one Ehat. can
necessarily be expected to remain consEanE over
the 1if e of a QF contract, complicat.ed
adjustments to the individual O&M charges Eo each
QF could be required by fuEure changres in
Schedule 72 in order to maint.ain overall
consistency with t.he original Schedule 72. In
sunmary, ME. Faull's proposal negates much of the
administrative benefits of placing the O&M charge
in a tariff by requiring individualized
accounting for each QF which could be difficulE
to maintain consistent with Schedule 72.
fn my opinion, Lhe administrative burden
associaEed with maintaining separate Schedule 72
O&M account.s for each QF is unnecessary and would
outweigh any perceived benefits of delevelizat,ion
to the QF. The ability of QFs Eo pay O&M charges
at the current system average rate required by
Schedule 72 is enhanced by the fact that. fdaho
Willmorth, Di-Rec.
Idaho Power Company
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Power's avoided cosE rates paid
themselves subst,ant,ially levelized.
Does t,his conclude your tesEimony?
Yes, it does.
to QFs are
WilImorth, Di-Rec.
fdaho Power Company
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
WILLMORTH
Idaho Power Co.
(The following proceedings were had in
open hearing. )
MR. KLINE: And Dr. Willmorth will now be
available for cross-examination.
COMMISSIONER NELSON: Thank you.
Mr. Richardson.
l{R. RICHARDSON: No questions, Mr. Chairman.
COMIT{ISSIONER NELSON: ThanK you.
Mr. Woodbury.
I,IR. WOODBURY: Staff has no questions.
COMMISSIONER NELSON: Commissioner Miller.
COMIT{ISSIONER MILLER: Have we have had
Mr. Faull's rebuttal testimony?
Ir{R. WOODBURY: No, not yet.
COMMISSIONER MILLER: But Dr. Willmorth
doesn,t have rebuttal test,imony. This will be the only time
we'II see him?
MR. KLINE: That,s correct.
COMI,IISSIONER II{ILLER: I guess, Mf . Chairman,
unless anyone objects, I'd like to ask just a couple of
questions that really flow from the testimony of Mr. Faull
that isn't here yet, but just to get Dr. Willmorth's
response.
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
WILLMORTH (com)
Idaho Power Co.
EXAMINATION
BY COM},IISSIONER MILLER:
A So let me represent that when Mr. Faull's
testimony is filed, I think it will contain a couple of
points. One is Mr. Faull says that, in summary, that an
individualized accounting for all QFs will probably be
required in any event and that his tilting proposal won't
really be administratively burdensome because it will all be
handled by computer anlnray, and that was in response to your
testimony here that the administrative burden of following
his recommendation would be significant. He rejoins by
saying, nah, it won't; so I guess I'd like to see what you
say about that.
A I think that Idaho Power will be able to send
the correct bills to the QFs under whatever order you made
in this case. T don't see any real problem there. The
exhibit, Ur. Faull's exhibit, in direct, I don't remember
the number, but the exhibit that was discussed this morning
having the column showing percentages of the .7 percent
tariff rate that would be applied in each year of a
contract, under administration of that schedule as a
Schedule 72, I don't think that there would be any problem
in administering.
That schedule is not revenue neutral with the
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current implementation of Schedule 72, and in my direct
testimony, I was addressing the situation under the
assumption that revenue neutrality would be an objective.
If revenue neutrality with the current schedule and the t'ray
it would be implemented is an objective, then there would
have to be several other numbers individualized for each
contract and a more complicated schedule produced which
would, in addition, have in effect a schedule for each
contract length, and that would add some additional degree
of complexity to the development of a schedule, but I think
it could still be administered.
I think that the point that I would want to
make then is that all of the factors that would go into the
preparation of Schedule 72 to the extent that they are more
than just the percentage number which is now looked at would
have to be, I believe, reviewed by the Commission as those
factors changed in the same way that the 7/LO percent is now
and that there could be some more regulatory burden for
updating Schedule 72.
A And then the only other question I had is with
respect to the rationale for Mr. Faull's proposal.
Initially in your testimony, you indicated that your
perception was that the rationale was a more close tracking
on a year-by-year, month-to-month basis of costs as they
were incurred as opposed to just an average over the life of
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
WILLMORTH (com)
Idaho Power Co.
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HEDRICK COI'RT REPORTING
P.O. Box 578, Boise, ID 83701-
WILLMORTH (com)
Idaho Power Co.
the contract. In response, Mr. Faull says the rationale
behind the proposal is to, I think, more correctly capture
the effects of inflation upon the Company's prior
investment, something along those lines. I guess r just
wanted, also, to get your thoughts on the rationale behind
the tilting proposal.
A WeII, in reading the direct testimony, I came
to the understanding of that testimony that I did and to
which I responded. In Mr. FauII's rebuttal, he explained
more clearly to me the basis for his calculations and I have
no problem with that, I think, again, in administering that;
however, there's a need to remember thaL it is not a revenue
neutral proposal with respect to the current implementation
of Schedule 72.
COMI,IISSIONER MILLER: Thank you. Those are my
questions, Mr. Chairman.
COMII{ISSIONER NELSON: Okay, thank you.
COMIT{ISSIONER SII{ITH: No questions.
COMUISSIONER NELSON: Dr. Willmorth --
I[R. KLINE: Is everybody done?
COMMISSIONER NELSON: Unless you have
redirect.
I,IR. KLINE: I have no redirect, I'm sorry.
COMMISSIONER NBLSON: Okay, thank you.
(The witness left the stand. )
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HEDRICK COURT REPORTING
P.o. Box 578, Boise ID 83701-
READING (Di-Reb)
IEPI
I,IR. KLINE: Now we're done.
CO!{MISSIONER NELSON: Thank you.
Mr. Richardson, do you have rebuttal?
MR. RICHARDSON: I do, Mr. Chairman. The
Independent Energy Producers of Idaho calls Dr. Don
Reading.
DON READING,
produced as a rebuttal witness at the instance of the
Independent Energy Producers of Idaho, having been
previously duly sworn, resumed the stand and uras further
examined and testified as follows:
DTRECT EXAMTNATION
BY I[R. RICHARDSON:
a Are you the same Don Reading that prefiled
direct testimony and exhibits in this proceedings?
A Yes.
a And have you caused prepared testimony to be
filed on rebuttal in this proceeding?
A Yes.
a And do you have any corrections or additions
to make to your rebuttal testimony that you have prefiled?
A NO.
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HEDRICK COURT REPORTING
P.O. Box 578, Boise ID 8370L
READING (Di-Reb)
IEPI
a If I were to ask you the same questions today
that you were asked in your prepared rebuttal testimony,
would your answers be the same?
A YES.
MR. RICHARDSON: Mr. Chairman, I move that the
prepared rebuttal testimony of Dr. Don Reading be spread
upon the record as if it were read in fuII.
COMMISSIONER NELSON: So ordered.
(The following prefiled rebuttal testimony
of Dr. Don Reading is spread upon the record. )
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a. What is your name and address?
A. Don Reading, 1311 North 18th Street, Boise,
Idaho.
O. Are you the same Don Reading who earlier
presented direct testimony in this proceeding?
A. Yes, I am.
O. What is the purpose of your rebuttal testi-
mony?
A. I am here to respond to certain statements and
allegations appearing in the direct testimony (on
reconsideration) of Dr. Robert M. Spann, a witness in
this proceeding for Idaho Power Courpany. My prinary
purpose is to correct errors in Dr. Spann's representa-
tion and interpretation of incremental costs and of ury
direct testimony concerning that concept and its applica-
tion to the present case. I will also register ny
disagreement with his characterization of the Company,s
efforts at incremental cost analysis. Finally, I viII
point out serious omissions in Dr. Spann's references to
the testinony of Dr. Peseau in Case No. IPC-E-89-11. My
silence on other parts of Dr. Spann,s testimony does not
in any way imply my agreement.
a. First, would you explain what is erroneous in
Dr. Spann's description of your approach to incremental
costs?
READING (Di-Reb)
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A. Yes, hre were trying to determine the increnen-
ta1 costs to IPCo for PURPA interconnect facilities. It
was our hope to accomplish this task without forcing the
parties to undertake an expensive, detailed study that
sould, in the end, simply corroborate our conclusions.
AlI the data we used hrere those supplied by the Company.
They weren't perfect for the job (for example, the base
data used for the calculation of the monthly O&M charge
reflected the costs associated with total Company
overhead distribution lines rather than just the costs
for lines and interconnects for PTRPA polrer projects).
Howeverr w€ concluded that the figures were reasonable
for an approximation of the costs. In addition, the cost
to find the exact numbers would overvhelm the value of
the results. (In this same vein, it is interesting to
note the Company's witness Willrnorth rejected Staff
witness Faul's rtiltingtt proposal because it would create
rran administrative burden.rr [Willmorth Direct, p. 8.])
Dr. Spann says that [Both Idaho Power and Dr.
Reading are trying to estirnate the incremental annual O&M
expenses which are incurred by Idaho Power Company when
Idaho Power Company is interconnected to a CSPP. I' tp.
7.) He is only half right. I was trying to make such an
estiurate. But the Company came up not with incremental
costs but with average costs. The evidence is clear that
READING (Di-Reb)
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Idaho Power lras only attempting to use averagre costs.
For example:
The O&M charges proposed in Schedule 72 only
recover Idaho Power 's average cost of opera-
tion and maintenance ecruinment and facili-
ties of a similar size and type to those
provided to QF's. The O&M percentage charge
includes physical maintenance as weII as an
allocation for taxes, insurance, and other
overheads that are legitimate costs paid by
the Company.
[IPCo Reply Cornments, p. 3, emphasis added.]
ft was clear to us from this passage as well as
from our review of method that the Conpany was calculat-
ing nonthly O&M costs on an average, not an incremental
basis.
a. Dr. Spann claims you are, ttattempting to
divert attention fron the real issue by portraying the
dispute in theoretical terms .rr tp. 6.1 What is
your response?
A. Again, he is only half right. I am portraying
the dispute in theoretical terms -- average cost versus
incremental costs. But this is not a diversion.' The
difference between these two approaches is real enough.
READING (Di-Reb)
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There is a sad tendency these days to stretch the
meaning of words. I had hoped economics has yet to reach
this point. An economist cannot just define a figure as
rrincrementalrr without support. The terms rraverage costrr
and rincremental costrr are well defined by the discipline
of economics. They are terms of art. Proper use must
meet that standard. Although I have used the terms as
they are recognized by the economics profession, the
Company has not done so.
Because the Company's figuresr ds I have noted,
tere the ones we had to start with, the best proxy we
could find for fixed costs (which are included in average
costs but excluded from incremental costs) lrere the
Company's A&G cost figures. I was careful to point out
in my direct testj-mony that we used these figures not
because they would give us mathematically precise
incremental costs, and not because A&G costs are totally
unaffected by interconnection decisions, but because they
are less affected by those decisions than other costs and
thus removing them is the best available ruethod for
estimating incremental costs, short of doing an expensive
study. That is why I used relative and qualified terms
like |tmore consistentr and tressentially fixed.tt tp.9.l
a. Can you point to any support for this claim?
READING (Di-Reb) 4IEPI172
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A. Yes. Dr. Spann cites the testimony of Dr.
Peseau in Case No. IPC-E-89-11 to attack the exclusion of
A&G expenses from my increnental cost calculations. He
correctly notes that Dr. Peseau finds some increase in
A&G costs resulting from purchased power. What he fails
to note is that the increase is onlv about a third what
it would be if the same amount of power were added
internallv. That is, contrary to Dr. Spann's assertions,
Dr. Peseau's testimony supports mv claim that purchasing
from CSPPs saves the Companv monev in A&G exnenses.
According to Dr. Peseau, there is an avoided cost of
$44.13/kw (a reduction in A&G expense) and an increase in
A&G expense from an equivalent purchased power source of
$fS.75/kut. The net savings to the Company, if Dr.
Peseau's regressions are accepted (as Dr. Spann apparent-
Iy recommends), is $Ze.28lkn. So the Conpany saves 65t
of its A&G costs when it buys polrer from CSPPs. This is
the difference I was trying to capture by removing A&G
expenses from the incremental cost calculations. This is
also the difference the Company ignores when it charges
company-wide A&G costs to CSPPs.
a. Finally, do you agree with Dr. Spannrs claim
that his rrsurveyrt of NW pohrer companies supports fPCors
Ieve1 of charges for O&M expenses?
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A. No, Dr. Spann's survey does not tell us nuch.
Of the ten utilities included (the Conpany counts eleven,
but PP&L and UP&L are the same company), only three
charge at the same level as IPCo. One charges at a level
half of IPCo's, five charge at the actual cost level, and
one does not charge at aII. In short, 70* of the sample
does it differently. This is hardly overwhelming
support.
O. Does this conclude your rebuttal testimony,
prefiled on October 25, 1991?
A. Yes, it does.
READING (Di-Reb)
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(The following proceedings were had in
open hearing. )
MR. RICHARDSON: I don't want to presume
Dr. Reading is available for cross-examination.
CO!4MISSIONER NELSON: Okay, thank you. Would
you like to go first, !Ir. Kline?
UR. KLINE: I'11 be glad to. I don,t have any
questions.
COI!!,ISSIONER NELSON: Okay, thank you.
Mr. Woodbury.
I{R. WOODBIIRY: Thank your I,Ir. Chairman.
CROSS-EXAII{INATION
BY I{R. IIIOODBURY:
A Dr. Reading, oD Page L, around Line 20, you
indicate, and this type of statement always gives me a
little trouble, ttMy silence on other parts of Dr. Spann's
testimony does not in any way imply my agreement.tr Given
that we are looking for a reasoned analysis of the issues
before the Commission, would it be safe to say that your
silence on other parts of Dr. Spann's testimony would
indicate that those areas you deem to be immaterial and
irrelevant to this Commission's analysis and understanding
of the issues under consideration?
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A WeIl, to answer the question for the record,
yes. Why do we do that, something may pop up. It's a hedge
and at this time I can't think of anything.
O You weren't holding anything in reserve?
A No, there's no -- cYA.
a Regarding Idaho Power's survey of Northwest
power companies, have you performed an independent survey?
A No.
a Regarding your review of the testimony and
filings in Idaho Power Case E-89-Ll-, did you in preparation
for this case review aII of the filed testimony, including
relevant testimony on the issues of A&G filed by other
parties and all cross-examination?
A No, portions on1y.
I[R. WOODBURY: Mr. Chairman, I have no further
questions.
COMMISSIONER NELSON: Thank your
Mr. Woodbury. Commissioner Mi1ler.
EXAMINATION
BY COMMISSIONER MILLER:
a Wel1, it isn't much as a question as an
opportunity to comment. I guess ild just like to hear your
comments on Dr. Spann's answer to the question that I asked
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him while he was here, Lf you recall the question.
A Very much. In fact, I asked my attorney on
redirect if it didn't come up to be asked the same
question.
a Okay, it's been asked.
A As a witness, you always like to be asked what
would you do if you were a commissioner, and in listening to
Dr. Spann's argument and reviewing it, I think it would be
good to work through several points. First, I want to
compliment you because I think the question to him
synthesized or brought down together very well where the
arguments are and where we differ. Otherwise, I think it
cleared away, to paraphrase, not paraphrase to quote
Dr. Spann, the smoke that I allegedly sprinkled around on
this, and, of course, ds expert witnesses, we always differ
on who's blowing smoke.
I agree with Dr. Spann on many of the
contentions that he made, and the first one is when he says
if you go out and you take an individual cogenerator, be it,
a production piece of it or the interconnect piece of it,
and you hang it on the system, you're not going to affect
things very much. That's kind of checking and cheating and
we tend not to do it that \^ray. What economists tend to do,
and we love oxymorons as much as anybody, we calculate
average marginal cost, and that is, we take a certain
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increment of generation or a certain increment of
transmission or whatever and say that this block that's out
there and we hang that on the system and we look at what the
difference in cost is, and the example that he used was
LOO megawatts worth of cogeneration, and up to that point,
I,m in complete aqreement with what Dr. Spann is talking
about.
The next question is what happens to costs to
the power system, be it putting on production plant or being
put on distribution interconnect to CSPP, what happens to
the cost for that increment, be it l-00 meqawatts or 5O or
however that you're doing the study. What Dr. Peseau's
numbers that were worked through, what the regression
equations sdy, and I don't disagree at all with what
Dr. Spann said they did say even though as an economist it's
hard to explain these things often, what it does say that
taking production, transmission and distribution, you put
that on the system for the Company building its own
resource, A&G E1oes up, and according to Dr. Peseau, $44.L5
or something a kW.
You take the equivalent amount of purchased
power, production, transmission and distribution, and you
hang it on the system and A&G goes up $1-5.75; so it was
Dr. Peseau's point, to the extent I understand it, that the
A&G expenses go up significantly more when a company builds
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its own resources than it does when it goes out and gets
there with CSPP. That includes production, transmission,
distribution, aII of those things together,. all right?
That's the part that in Dr. Spann's
explanation I found missing, because the Commission seems
stuck in this case with a binomial. Either A&G should be,
is in both, should be in both and it should be aII included
or what I attempted to do, it should be eliminated and the
reason that it should be elirninated is that when the Company
goes out and puts transmission -- I mean, pardon me,
distribution on to interconnect a cogenerator, its A&G
expenditures do not go up nearly as much as when it does
transmission in general, because the data that was used to
calculate the percent is company-wide distribution
allocations; so you're stuck with kind of a binomial, an all
or nothing kind of a thing.
My position is that to the extent that
Dr. Peseau's information is correct, one-third of the way is
a lot closer than aII of it, a lot closer to zero than all
of it,. The second point is Dr. Spann has characterized what
the Company does as incremental study. We make our living
arguing about incremental study. Dr. Spann testified that
it,s industry practice or standard or whatever to do
marginal cost or incremental cost studies the way the
Company calculated this calculation.
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Having it standard the way the industry does
it doesn't impress me very much and I could bore you to
tears with dockets I've been involved in where I disagreed
with the way companies calculate marginal costs,
telecommunications as well as others. I don't think they
even attempted to do an incremental and I think they said it
in their pleadings. The stuff I quoted in my rebuttal says
they did it average; so what you're left, with now after I
got to do the core dump the way Dr. Spann got to do the core
dump and I think that's a fair question is that you're left
with do we include it or don't we include it. rn my
opinion, you should not include it and you should not
include it because no one in this docket has done a
complete, thorough, heavy-duty kind of incremental cost
study.
I don't think it would be worth it.
Dr. Spann, if I understood his testimony correctly, said
also he hadn't done it because he didn't think it, would
justify it; so you're left with trying to decide whether to
include it or whether not to include it. I think the
evidence in the record j-s that it tips or is much closer to
not including it than including the whole damn thing.
COMMISSIONER MILLER: Okay, thank you,
Mr. Chairman. That helps, thank you.
COMMISSfONER SMITH: I just had one comment
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HEDRICK COURT REPORTING
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READING (Com-Reb)
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for Dr. Reading I found very amusing on Page 4 in defense of
your profession.
THE WITNESS: It's mandatory. They'd puII my
Ph. D.
COMMISSIONER SMITH: In my estimation,
economics stiIl isn't a sciense, it's a black art.
THE WITNESS: I will only disagree with your
color characterization.
EXAMINATION
BY COMI{ISSIONER NELSON:
A A couple of questions. I thought I heard you
say when you were up before and it didn't get discussed much
after that that you were taking zero A&G because you thought
there were other changes in the numbers that didn't get
moved.
A Yeah, and that's potentially it. An example
of that would be engineering and supervision or something.
If you do a marginal cost study that's, again, standard
practice, and we're both talking about standard practice, is
you take whatever increment you want, you have your model,
you crank your system with it, you crank your system without
it, and if you tore apart all those accounts, there
potentially could be others buried in the accounting there
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that would not vary, that would be deemed to be taken out.
A So what you're saying is that because they,re
buying the power rather than producing it themselves, all
those expenses will go down some; so you just eliminated one
of them?
A Correct.
A Okay, what did you think of Mr. Faullrs tilted
rates?
A Boy, this one expert witness gets in trouble
because they haven't checked with their client; so I,1I just
be honest here.
a Is that for a change?
A I thought about the implication of that. I
would say more candid. You're always honest. It,s just you
don't say some things sometimes rather than say them. The
tilting makes some sense to me. I haven't worked through
the mechanics of it to know whether I would agree when it,s
mechanically applied the way Tom put it together. Irm not
sure I agree or disagree, but I haven't looked at that.
I think generically what I,m concerned with is
that the program, the PIJRPA program, purchase program, is
viable. I think that what Tom Faull did was attempt to sort
of front-end load or approximate actual O&M expenditures on
line more so that the entry cost is lower than the back-end
costs. If that's true, then that could tend to be more
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encouraging for PURPA power suppliers because it would mean
the time they have to pay off their debt, their monthly
expenditures, thej-r outflows or their costs, would tend to
be lower in the front end and that's what financiers and
bankers and loaners tend to want to do; so to the extent
that it would tend to encourage the independent or the small
power producers by lowering the front-end expense, I agree
with that theoretically.
COMIr{ISSIONER NELSON: Okay, thank you. Any
redirect, Mr. Richardson?
It{R. RICHARDSON: I can't resist.
REDIRECT EXAMTNATTON
BY I{R. RICHARDSON:
O To follow up on President Smith's question, is
it true, Dr. Reading, that an economist is like a broken
clock in that they're right twice a day?
A Exactly right. You're paraphrasing, that's
Commissioner Swisher's old one, and as I remember, I used it
when he was asking me questions and my answer was that
economists would -- it's better to be almost right on the
time all the time than to be a broken clock and be exactly
right only twice a day.
MR. RICHARDSON: That,s all I have,
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
FAULL (Di-Reb)
Staff
Mr. Chairman.
COMMISSIONER NELSON: Thank you. Thank your
Dr. Reading.
(The vritness left the stand. )
I[R. RICHARDSON: Mr. Chairman, that concludes
the direct and rebuttal case of the Independent Energy
Producers.
Mr. Richardson
Mr. Faull?
COIIMISSIONER NELSON: Thank you,
Mr. Woodbury, are you going to recall
MR. WOODBURY: Yes. St,aff would recall Tom
Faull.
THOUAS FAULL,
produced as a rebuttal witness at the instance of the Staff,
having been previously duly sworn, resumed the stand and was
further examined and testified as follows:
DIRECT EXAMINATION
BY MR. WOODBIIRY:
A Mr. FauII, in this particular case, being also
again under oath, did you prefile rebuttal testimony
consisting of ten pages?
A Yes, f did.
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HEDRICK COURT REPORTTNG
P.O. Box 578, Boise, ID 83701-
FAULL (Di-Reb)
Staff
A And have you had the opportunity to review
that rebuttal testimony before this hearing?
A Yes, I have.
a And if I were to ask you those questions,
would your answers be the same?
A Yes.
MR. WOODBIIRY: Mr. Chairman, I'd ask that the
testimony be spread on the record. There are no exhibits to
his rebuttal and I'd present him for cross-examination.
COMMISSIONER NELSON: We'd order Mr. Faull's
testimony spread on the record as if read.
(The following prefiled rebuttal testimony
of Mr. Thomas Faul1 is spread upon the record. )
1-85
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O. PIease state your name and busirress
address for the record.
A. My name is Thomas Faull and my business
address is 472 West Washington Street, Boise, Idaho.
a . By whom a re you emp loyed arrd i n wha t
capacity?
A. I am employecl by ttre Idaho Pub1ic
Utilities Commission as a Public Utilities Engineer.
a. Are you the same Tom Faull who
previously filed direct testimony in thjs case?
A. Yes.
a. On page B G 6-7 of his direct Lestimony
on reconsideration Dr. WiIImoith states that IPCo's
proposed ". . .O&M rate in Schedule 72 is not a levelized
number...." Do you agree with this statement?
A. Technically, yes. The methodology
selected by IPCo to compute O&M rates yields level
raLes, not "levelized" rates. However, even ttrough
the Schedule 72 rates are not calculated using a
present-value levelizing method, they are essenti.ally
Ievel rates because they are constant over the life of
the QF contract (subject to minor changes that may
resuIL as IPCo's O&14 costs ctrange over tirne relative
to changes in net asset costs). My proposal is simply
to convert the essentially level rate resultinq from
rPC-E-90-20
LO/24/9L 186 FAUL,L (Di-Reb) 1Staff
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IPCo's meLhodology to arr escalating raLe that reflects
the inflationary economy experienced over the past few
decades.
A. On page B e 14-18 of his reconsideration
testimony Dr. Willmorth states thaL your proposal
would "...negate much of the administrative benefits
of placirrg the O&M charge in a tariff by requiring
irrdividualized accounting for each QF...." Do you
agree with this statement?
A. No. First, ds I describe in more detail
be1ow, IPCo must use ' . . . individualized aceounting. . ."
to implement the Lariff it proposes. So the issue is
not wtrether the tariff requireS individual application
to each QF, but whether the increased costs and
difficulties of applying the non-level Lariff I
propose irr Iieu of Lhe level tariff proposed by IPCo
ar:e reasonable relative to the increased accuracy rny
proposal provides. As I show be1ow, the difference
between applying the two methods is negliqible.
A related issue raised by Dr. Willmortlr
is whether implemenLation of a changed O&t{ tariff
resulting f rom charrges in IPCo's O&M costs relative l-o
net asset costs wiIl be unduly burdensome under my
non-1eveI rate proposa I . I do not believe it would.
In f act, I believe tltat implementing changes to ttre
r PC-E-9 0-20l0/24/9 );.
FAULT (Di-Reb) 2Stafft87
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noll-leve1 rates I propose would be substantially ttre
same for IPCo as implementing changes Lo the level
rates proposed by IPCo. Either wdy, IPCo must make a
separate computation for each QF. A non-1eve1 o&M
rate similar to ttrat shown in Exhibit No. 105 of my
direct testimony could be published as part of
Schedule 72 just as easily as the level rates proposed
by IPCo could. For my non-leveI proposal, each time
relabive O&M costs change a new Schedule 72 rate sheeL
would be published. The new rates would apply directly
to each QF contract without requiring any manipulation
at a 11 . The ral-e sheet could be keyed into the
computer at a mininral cost differential over keying in
IPCo's proposed single level rate. BiIlinq non-IeveI
O&M rates would be rlo more complicated than payinq
non-levef QF rates.
0. Can you g ive an exarnple of lrow you
believe O&M charge computations could best be made for
a single QF under each rnettrodology?
A. Yes. I presume that billing corrrputatiorr
would be computerized regardless of methodology. For
the level methodology proposed by IPCo for the
Schedule 72 tariff (andl currently in use), the computer
program would access a data base for the QF tr>
determine the interconrrect cost associated with that
r PC-E-9 0-2 0
LO/24/9L
FAULL (Di-Reb) 3Staff188
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project. The program would Lhen multiply Lhat inter-
connect cost tinres the then current monLhly O&M rate,
thereby yielding the monthly O&t{ charge f or that QF.
Under the non-Ievel methodology that I
propose, the QF data base would include the QF's
on-line date as well as its interconnect cost. The
program would access the data base to delermine both
ttrose pieces of informabion. It would Lhen subLracl
the on-Iine year from the current year to determine
the appropriate "year of operation". The next step
would be for the computer to access a "look-up table"
of the then current O&M rate sheet that includes O&M
rates by year of operatiorr, and to select the
appropriate O&M rate for the QF's then current year of
operation as determined in the prior compuLer
operation. The computer would then multiply the QF's
interconnect cost times the selected rate to determine
the appropriate monttrly O&I,1 charge f or the QF.
Although there are more steps to the
non-leve1 operaLion, the orrly actual additional work
for IPCo would be to write a simple "do loop" and
"look-up" computer program, Lo input the on-1ine year
into the Qf data base (if they don't already do tirab
for other reasons), and t-o input a column of non-1eve1
rates into the look-up table. I f ind it unlikely l-hat-
rPC-E-9 0-20
L0/24/91
FAULL (Di-Reb)
Staff189
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the total direct cost increase for converting Lo
rron-Ieve1 O&M rates could exceed $fOO per year (in
1991 dollars) for all QF purchases combined.
a. Please explain when the O&I'1 rate would
change.
A. The O&M raLe would change whenever IPCo's
O&M costs change by more than about leo relative to
capital cosLs. This could happen in one of two ways:
Either the costs of Iabor and supplies (O&M componenLs)
could change at a different rate ttran the costs of
related capital equipment, or IPCo could beeome more
efficient or less efficient in the way it performs
O&M. In either case, however,'the cumulative change
in O&M costs woul.d have to exceed (or recede f rom) the
cumulative net capital costs by about 7\. The
probability of Lhis trappening is identical under boLh
IPCo's and my proposed methodologies, and it is
unlikely to happen more often than once in every
several years.
A. Is it the purt)ose of your recommendation,
as stated by Dr. WiIImorth (Di-Rec., pq. 7, G 9-14),
" . . . to charge O&M costs Lo each QF somewhat i rr a
manner consistent wittr the expected increasing o&14
needs of that QF' s owrr interconnection faci fi ty. . . " ?
rPC-E-90-20L0/24/9L
FAUTL (Di-Reb) s
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A. No, alttrough that is a secondary benef it
of my rnettrodology. The purpose of my recommendation
is to account for past inflation of capital costs in
the rat,e structure. As I staLed previously (FaulI
Di. , pg. 12 e 3-13. ) :
Although O&1,1 expenses are relaLivelycurrent ( i . e. , include IiLt le inf lat ioneffect) l-he related gross plant accountsinclude plant cosl-s incurred for aperiotl of over 30 years. Obviously,the amount i ne ltrrled f o r i nves tment s
made over 30 years alro vastly understatethe replacement value of the assets Lheyrepresent. Therefore, the rateestablished by IPCo's methodology is alevelized rate; applicable only over aperiod equal to the average plant lifefor each category of plant.
a
inflation
A
Can yolr please give an example of how
affects the O&M rate?
Yes. The easiest way to analyze IPCo's
inLerconnect O&It! methodology is to imagine an extremely
simple system. Eor example, imagine determining the
O&M rate for wood poles on a short distribution systern
having only three poles. The first pole was bought in
1970 at a cost of $fOO, the second in 1980 at $r50, and
the third in 1990 at $zzs (InflaLion = 50% every I0
years). To reflect IPCo's contention that O&M costs
increase as system cornponents d9€, the O&M costs itr
1991 were $2I.00 for the 1970 pole, $16.50 for tlre 19B0
rPc-E-9 0-20r0/24/9L FAUI,L (tli-Reb) 6
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poIe, and $I0.00 for the I990 pole. As shown in the
chart below, ttris yields a Lotal capital investment of
$475.00, a total 1991 o&M cost of $47.50, an average
capital investment of $r58.33 per poIe, drr average O&M
cost of $f S. g3 per poIe, and an O&M rate of IOeo of
capital investment.
YEAB
1990
I9 BO
r970
TOTAL =
CAPITAL
IN]LESI!{ENT
$22s. oo
150.00
_r_0 Q--0_0
$47s.00
ANNI',AL
o&M cos_I
$1o. oo
t_6.50
_2-r..0_Q
$az. so
AVERAGE '
O&M RATE =
$158.33/poIe $rs.B3lpole
$ql .50/$475.00 = ro%
Now imagine that in 1990 a QF came on the
same smalf distribution system and installed one wood
pole at a cost of $zzs.oo (the same as the cost of
IPCo's 1990 wood pole) . Aceording to the IPCo
methodology the QF's 1991 annual O&M payment would be
10% of iLs capital invesLment, or $zz. SO. This cosL
to the QF exceeds IPCo ' s actua I average O&I,1 cost by
42"6 ($zz .50/$I5 . B3 = L.42) , and exceeds rPCo's actua I
o&M cost for 1990 poles by L25\ (fi22.50/$10.00 = 2.25).
Obviously, the numbers in my example are fictitious.
But the implications are real and irrefutable QFs
rPC-E-90-20to/24/91
FAULL (Di-Reb) 7
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are disadvantaged in the early years of the contract
by IPCo's methodology.
A. WouIdn't QFs be disadvantaged over Lhe
entire Iife of the contract?
A. Not necessarily. Tf , f or exarnple, our
irnaginary IPCo 1970 pole is retired and replaced in
the year 2000 at a cost of $337.50 ($zzs.oO * 150% =
$a:2. SO) and the O&M rate continues to be 10% of
capi tal cost, then IPCo' s average O&M cost wi I I be
$7I.25 while the QF's o&PI charge remains $zz.so.
Because 50% inflation in ten years is
approximaLely equal to 4Z per year, t,he above scenario
is not unlikely, but the 'numbers are probably
exaggerated by the smaIl sample population.
As always wittr levelization, the question
is, "Who pays too much, when? " There are two
answers : ( 1) If the QF contract is shorter than ttre
average asset Iife, the QF pays too much, immediately;
and (2', if the QF contract is longer than the average
asset life, the ratepayer pays too much, eventually.
A. Are there any methods other than
delevelization that solve this problem?
A. Yes, there are at least two other methods
that solve the problern. They were discussed by Staff
witness Hattaway in his direct testimony, but I will
rPC-E-90-20
L0/24/9L
FAULL (Di-Reb) BStaff193
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restate them ltere. The f irst approach is to base O&lvl
rates on physical units rather tltan cost. Thus, li.ne
extension O&M would be staLed in dollars per mile,
meter costs in dollars per rneter, switchgear costs in
dollars per switch, etc. The problem wiLh this
approach is that it would require the utiliLy to
develop an ent.irely new accour)ting procedure l-o solve
a relaLively minor problem. Ttris seems unreasonably
burdensome.
The second obvious approach is to base
the O&M charge on replacement costs rather than actual
costs. Thus, for the example above, the O&M rate would
be:
REPLACEMENT COST = 3 * $ZZS.OO - $675.00
o&M RATE = $47.50 /$el 5.00 = 7% per year.
There are two problems with ttris approach: ( 1) A
methocl would have to be developed to estirnate replace-
ment cosLs for a large invenLory of equipment, and (2)
the interconnect O&M rale for each QF would have to be
recomputed periodically (annualLy?) by comparing IPCo's
Lhen current O&M costs with its updated inventory's
replacement cost at the time the QF came on line rather
Lhan in the then current year. This, too, seeills
unreasonably burdensoltte .
FAUTL (Di-Reb) eStaffr PC-E-9 0-20
L0/24/9I 794
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I'herefore, it appears to me that the most
practical rnethod of assuring equitable O&M rates is the
one I previously recommended requiring non-leve1
rates that reflect the approxirnate inflation raLe over
bhe average asset life of Lhe appropriate accounts. I
continue to reconunerrd adoption of this procedure.
A. Does this end your rebuttal testimony?
A. Yes.
rPC-E-9 A-20
L0/24/9L
FAUTLStaff195 (Di-Reb) 10
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
FAULL (Com-Reb)
Staff
(The following proceedings were had in
open hearing. )
COMMISSIONER NELSON: Mr. Kline.
!tR. KLINE: I don't have any questions for
this tvitness.
COMITIISSIONER NELSON: ThanK you.
Mr. Richardson.
I[R. RICHARDSON: No questions, Mr. Chairman.
COI,IMISSIONER NELSON: Commissioner Miller, do
you have questions?
EXAIIIINATION
BY COMIT{ISSIONER MILLER:
a What do you make of Dr. Willmorth's point that
the real burden associated with your reconmendation is not
as much an administrative burden as it is a regulatory
burden in that the Commission would be required to
periodically approve changes in the variables that you
introduce into the equation?
A It was my understanding that he based that on
the statement that in order to be revenue neutral, the
methodology would have to have some additional complexity
added to it and I don't know what complexity he's talking
about. I thought that what I'd done was relatively revenue
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neutral. I guess my response to that is we're talking about
a small part of an approximation that's an approximation in
itself, and if we're only talking about a minuscule
non-neutrality, I would ignore that in lieu of maintaining
the simplicity.
If it's a substantial lack of neutrality,
something I've completely overlooked that's major, then I
might have to concede that the administrative burden would
be excessive, but I believe that I'm very close to revenue
neutral and certainly as close as the approximation of the
basic methodology is.
O And at this point you don'E -- I guess you
really haven't been able to talk to Dr. Willmorth or don't
understand the magnitude of the perceived lack of revenue
neutrality?
A No, it comes as a surprise to me. I haven,t
had a chance to think about it and try and analyze where it,
might come from; so I don't know how substantial it is.
COMIr{ISSIONER MILLER: All right, thank you.
COMMISSIONER NELSON: Thank you.
COMMISSIONER SMITH: No questions.
COMUISSIONER NELSON: Nor do I. Any redirect
on that one question?
MR. WOODBURY: No, no redirect.
COMI,IISSIONER NELSON: Mr. Faull, thank you.
L97
HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
FAULL (Com-Reb)Staff
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(The witness left the stand. )
I[R. WOODBURY: Staff has no further rebuttal
witnesses.
COMMISSIONER NELSON: That brings us to the
end of our testimony. Is there anything further needed to
complete our record in this case?
MR. WOODBIIRY: I believe so. There seems to
be three things hanging. One, the Commission's proposed
treatment of the A. W. Brown testimony which was previously
submitted, the spreading of testimony, and intervenor or
utility objections to IEP Bxhibit 604, and the status of
Exhibit 705 which was attached to Idaho Power,s testimony
and that's an exhibit number in the E-89-l-1 case. Those
three things, I think, should be clarified.
Ir{R. RICHARDSON: One additional point,
Mr. Chairman. The question of Dr. Reading on the stand as
to what the position of the Independent Energy Producers of
fdaho is on Mr. FauII's testimony, if the Chair so desires,
we,d be happy to file a short statement with our official
position on that issue if you would like just as an
offering.
COMI,IISSIONER NELSON: Are you saying we didn't
get the official position?
It{R. RICHARDSON: I think it was clear from
Dr. Reading's testimony that he had not, discussed it, with
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 8370L
25
COLI,OQUY
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his clients and he was speaking generally from a technical
standpoint without having really conducted a thorough
analysis. If you were not satisfied with that, response,
werll be happy to augrment it. If you were, then, obviouslY,
we won't.
COMMISSfONER NELSON: WeIl, I think that we
are satisfied with that response. If you're not, then you
need to tell us, I gruess.
MR. RICHARDSON: No, I'm perfectly happy with
Dr. Reading's testimony.
coMMrssIoNER NELSON: Okay. Exhibit 504 is
the letter -- no, Exhibit 504 is
MR. RICHARDSON: Exhibit 604 is 27 pages of
Dr. Peseau's testimony.
COII{I{ISSIONER NELSON: A portion of
Dr. Peseau's testimony from the prior case. Is there any
objection to admitting this testimony?
MR. KLINE: No.
l[R. WOODBURY: Actually Staff -- well, Staff
would object to it. I don't want to give Dr. Peseau's
testimony any greater weight than it deserves, and without
identifying other party testimony on the issue of A&G and
relevant cross-examination, I think that it only presents
one part of the picture and it's rather slanted; so we would
ask that it be excluded.
L99
HEDRICK COI'RT REPORTING
P.O. Box 578, Boise, ID 8370L
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I[R. RICHARDSON: May I respond, Mr. Chairman?
COMMISSIONER NELSON: Yes.
I4R. RICHARDSON: Mr. Chairman, Staff had
nothing to say about this issue on cross-examination. I,m
surprised to hear them objecting to the admission of this
exhibit at this time. This exhibit augrments what Dr. Spann
included in his testimony, which I haven't heard an
objection from Staff to, in which Dr. Spann selected a very
short portion of Dr. Peseau's testimony and quoted from it,
selected an exhibit from Dr. Peseau's testimony and attached
it to his testimony without making it an exhibit itself;
therefore, it's before the Commission, the Commission has
seen it. It's not an exhibit. I have no opportunity to
object to it. A11 I've done for your aid is to attach, to
provide in exhibit form aII of Dr. Peseau's testimony on
this issue so that you could have a clear understanding of
what Dr. Peseau said. rf staff thinks
COMMISSIONER NELSON: Thank you,
Mr. Richardson. We'lI overrule the objection.
l[R. RICHARDSON: Thank your Mr. Chairman.
COMMISSIONER NELSON: As Io Exhibit 705
MR. RICHARDSON: That's included in
Exhibit 604.
COMII{ISSIONER NELSON: Okay; so we will pass
over that. In light of the fact that there is no one here
200
HEDRTCK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
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to sponsor Mr. Brown's testimony and nobody has offered to,
why, I think we will leave it where it is and it will not
become a part of the record.
MR. WOODBURY: I guess the Commission could
just view it as comments filed similar to unsupported public
testimony.
COMMISSIONER NELSON: WeII, I think it has a
different status than that.
I[R. KLINE: I guess I'd have to think it does,
too.
MR. WOODBIJRY: I don't want it part of the
transcript record, but it's already part of the Commission's
file record in this particular case.
COMIIISSIONER NELSON: I guess since we've read
it, it would be tough to absolutely ignore it, but it won't
be part of the transcript and I guess, hopefully, we'Il give
it the lessened weight that it would get.
COMII{ISSIONER MILLER: I guess f don't know,
Mr. Chairman, if it should be entitled to any weight. If
itrs not part of the hearing record, I don't know if we can
really consider it as part of the record for decision and
upon which we base our decision.
MR. KLINE: I think you would be perfectly
within the grounds of procedure to simply say you're going
to strike it and treat it as if it wasn't filed. I think
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HBDRTCK COURT REPORTING
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that would be appropriate under the circumstances, but I
agree with Commissioner Mil1er. Its status should be
COMMISSIONER NELSON: Do you want to make a
motion to that effect?
It{R. KLINE: Yes, I will so move that it be
stricken.
It{R. RICHARDSON: It hasn,t been offered,
Mr. Chairman. How can you strike something that hasnrt been
offered?
l{R. KLINE: It's been filed.
COMMISSIONER SUITH: You donrt even want it in
the file as if it were just a letter that had come in?
COMI,TISSIONER NELSON: We,II take it under
advisement.
I[R. KLINE: That's fine.
COMMISSIONER NELSON: Is there anything else
we need to cover before we adjourn our hearing today? If
not, thank you for coming. We'II issue a decision in due
course.
(A11 exhibits previously marked for
identification were admitted into evidence. )
(The Hearing adjourned at 2:3O p.m. )
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HEDRICK COURT REPORTING
P.O. Box 578, Boise, ID 83701-
AUTHENTICATION
This is to certify that the foregoing
proceedings held in the matter of the application of Idaho
Power Company for approval of an interconnection tariff for
non-utility generation - ScheduLe 72, commencing at
9:30 a.m., oD Thursday, November 7, l-991-, dt the Commission
Hearing Room, 472 WesE Washington, Boise, Idaho, is a true
and correct transcript of said proceedings and the original
thereof for the file of the Commission.
Accuracy of aII prefiled testimony as
originally submitted to the Reporter and incorporated herein
at the direction of the Commission is the sole
responsibility of the subnitting parties.
*S. BUCYied Shorthand Re
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AUTHENTICATION
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Case No. IPC-E-90-20
Exhibit l',10._(DR- l)
Schedule 1
Idaho Power Company
Components of CompanyProposd O&M Charge
Annual
Parcaotaga
Chaoe
Percent
ol
Descdptlon Tolal
Direct 0&M Expenses
Administrative & General
Payroll Tues
Propefi Taxes
4.548%
2.133'/,
0.211%
0.970%
57.9o/o
27.1Yc
2.71o
12.3Yo
Total 7.8f,20h 100.0%
Source: ldaho Power Company, Rosponsc to lEPl Ersl Prodrclion Request llo. 1.
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Case No. lPGf-90-20
bdibit No._(0R-1)
Schedule 2
Recommended O&MCharge
Descdpllon
Annual
Percontags Chargo
Direct 0&M Expenses
0lrect Payroll Tues
Property Taxes
Tohl
Monthly 0&M Charge: 0.57o
4.822To
.142
.970
5.934%
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Corponent: of 0&lt Charges
g\III\OIICHAREE.TOI
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cf
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0&ll Expenses
Adrinistrative & teneral
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!!, 03201 13:30 o' ,..r " ,.1 33,
I!tri-! n!\tlql,
r!:fla toriftn,
TO ALL PART]:ES OF RECORD
IPUC CASE iro. tPC-E-90-20
IDAITO PO\ATEI R. C O\/I PANY
toI. o. lottl, !o/lxo 3tr0-,
(2081 s|sa.3C Frrl
llovember 5, l99l
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t ooz,'ooz
Re: Idano Power tlitnesses at Hearing
Parties of ltecord:
During the dlscoyory phase of thir procoeding, Commlsslon Strff andthe Indepen(lent Energy Producers of Idaho directrd certain production requeststo ldaho Porer reglrdlng the assumptions andmethodology for computing the 0.7*
and 0.4I aonthly 0&+{ chrrges. In accordrnce with the Commlssion's Rulos of
Practice & Procedure, Idrho Power identifled Phil Obenchaln as r potential
xritness thr'l: could respond to qurstlons regerding the computatlon of the 0.71
and 0.t1f, anounts, The responses to the productlon requests rlso identified
ilonty l,lerlcle es a potentle'l witness to respond to questlons regaldlng the
englnrerlng lrpects of lnterconnections covered by the rbove-referenced
percentrge r:harges.
Subsequently, no party filed any testlnony or exhlblts chrllenglng
the baslc mrthodology supportlng the computatlon of the 0.73 and 0.4I charges.Dr. Readlng, tastlfylng on behalf of IEPI, does not chal'lenge the brslc
mathodologt but ls crltlcal of on'ly one essumptlon used ln conputlng the 0.7i
and 0.4t chrrges. Idrho Porer has f'lled dtrect testlnrony speclflcally rebuttlngDr. Readlng's testlmony on that slngle rssumption. No party filed any testinonyor exhlblts chrllenglng any of the englneering aspects of the lnterconnectlonsto whlch tho above-referenced percentage chuges would apply.
As a result, Idaho Power nill not ca'll either llr.Obenchain orHr. l'lericle as ritnesses at the hearing.
si t,
dJ
EE-a
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EXHIBIT
{oAA3TLTL
BLK: srk
Ba n L. Kllne
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Is thls assurnptlon made under uedlan water
plannlng?
Yg6.
ADT'{INISTRATIVE At{D GENERAL A}{D GENERAL PI,AI{T
EXPENSES
I{hy do you dlsagree with Dr. l{ilnorthr s
statement that Idaho Power hae lncluded A&c
expenses in its estimates of avolded costs?
In response to Request No. 11 of the
Independent Energilg Producers First Production
Request, Idaho Power states that the fixed O&M
expense number it uses is based on a number
calculated by Mr. Faull ln his direct testinony
in Case No. U-1500-170. They state that Mr.
FauII I s number was based on actual O&l.t costs
for the Va1ny plant contained ln Idaho Powerts
FERC Form I which contal.ned botlr Sl.erra Paclfic
and Idaho Power A&G er(penses. U!. Faull r s
numbers were taken from Page 403 of the FERC
Forn I from the table titled rrsteam-Electric
Generating Plant Statistics(Large Plants).i
The o&l.t costs in that table contain expenses
from FERC accounts 500 through 514. These
30.Peseau, Difndependent EnergryProducers of ldaho
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costs are EteaD power productlon expenses.
They are not A&G e)q)enae6. A&G elpenses are
contained ln FERC accounts 92O through 935.
The numbers in the table from which Mr. Faull
and Idaho Power base their fixed otM estluate
contain no e)qpenses fron PERC accounts 92O
through 935. Therefore, they contain no A&G
expenses. In fact, in the response to the data
reguest Idaho Power states that the A&c
expenses included in the fixed O&M flgure are
accunulated in FERC account 535, and then
allocated to FERC account 500. FERC account
535 is called fiHydraul5,c power GeneratJ.on,
Operation Supenrision and Engineeringx and FERC
account 500 is called rrsteam Power Generatlon,
Operation Supenision and Engineerlngrr. The
tltles nake no uentLon of A&G e:rpense.
Do e:q)enses in FERC accounts 92O through 935
vary with generation plant and power
generatJ.on?
Absolutely. It can be verlfled wlth
statistical analysis of A&G expense data from
a sample of western utllltles. It ls also an
31.
Peseau, DlIndependent EnergyProducers of Idaho
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A.
Q.
expensea lten that ls lncluded ln rates charged
by uttllties to each other for purchased porrer
and power wheeling seryices.
Do A&G e)q)enses vary as weII with purchased
power?
Yes, but to a much lesser extent. This can
also be verified with statistical analysis of
sanple utility data. A&G e:q)enses vary nuch
less wlth purchased poser than wlth generated
power. fherefore, A&G expenses are avoided
when purchased power replaces the utilityrs
generation. Avoided A&G expenses should be
included ln rates paid to QFrs for purchased
power, much Iike the inclusion of A&G e:<penses
in rates for power that utllities seIl to each
other.
Are A&G expensea the only overhead Lteus tbat
are avoided when power ls purchased rather than
generated?
No. Annual costs of general plant represent
additional overhead that is avoided by
purchasing polrer. Much like A&G exPenses,
general plant lE plant that cannot be
32.Peseau, DiIndependent EnergryProducers of Idaho
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deslgnated as production, transnisslon or
distribution plant, but ls necessary for the
purpose of generating, transnitting and
distributing power. It can be verified
statistically that llke A&c e{pense, general
plant does vary with generation.
Does general plant vary with purchases?
My Etatistical analysis suggests it does not.
Therefore, general plant and associated annual
costs are avoLded when porrer ls purchased
rather than generated. Avol,ded cost rates paid
to QFrs should include these avoided costs.
How do you knon that A&G e)q)enaes and general
plant eq)enses are charged by utlllties for
power purchased by each other?
I have exanined contracts for power sales and
wheellng senrlces for regional utllltles to
determine what costs are coumonly lncluded.
A&G e:rpenses and general plant annual costs are
cornmonly included. Attached to uy testinony as
E)(fiibit 7O4 are copJ.es of pages froru a power
sales contract between l{ashington Water Power
and Arl.zona PubIic SerrrLce Company, and an
33.Peseau, Dt
Independent Energy
Producers of Idaho
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Q.
A.
Intertle Agreement for transmlssion serrrices
between Paciflc Power and Light and Bonneville
Power Adrninistration. The page lncluded from
the WWP contract Ehows the derivatlon of a
fixed charge rate to be used in detemining the
prlce of power sold by Arizona Public Senrice
to I{l{P. As is clearly evident, the fixed
charge rate Lncludes at line (11) A&G expense
of 1.4It of capital lnvestment, and at llne
(19) general and intangible plant annual
expense of 1.24t of capital investnent.
Sinilarly, the pages included ln the Pacific
Intertie Agreenent determine the annual charge
component of wheellng rates to be charged to
BPA by Pacific. Item G. clearly lncludes an
A&G expense component in the annual charge.
How have you verlfied etatiEtlcally that A&G
expenses and general plant related annual costs
are avoided lf generation plant Ls avoided?
I exauined the relationship between A&G
expenses and general plant with generated and
purchased power and with production,
transmissl.on and dlstributlon plant using
34.
Peseau, Dt
Independent Energry
Producers of fdaho
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regressl.on analyala. The regresslon analysle
used A&G expenses, general plant lnvestment,
production, transmlssion and distrlbutlon plant
investment net generation and purchased power
data for the 1987 year for a sample of 16
western private utilLtles. The purpose of the
regression analysis was to deteruine the extent
to which additlonal investment in production,
transmission and distribution plant and
additional power purchases were associated with
greater IeveIE of A&G expenses and general
plant investment. If investment in production
plant causes higher levels of A&G expenses and
general plant investnent than equivalent
amounts of purchased porrer, then both A&G
expenses and general plant related annual coEts
rrl1l be avoLded wlth power purchases frorn
CSPPrs. llhe results of uy regresslon analysls
are shown in Exhlbit ?05.
l{hat do the regresslon results show?
Based on the sample of utilities, reduced
investment in production plant equal to the
cost of the SAR Resource will be associated
35.Peseau, DiIndependent EnergyProducers of Idaho
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with reduced A&G expenses of S4{.}3 or 2.43t of
the sAR cost of 9fafS7fw. Replacing that
investnent with an equivalent amount of porrer
purchased from QFrs wiII increase A&G expense
by $15.75 or .87t of the cost of the sAR
investuent. The net effect of replacing
generation with purchases from QFts will be a
net decrease in A&G expense of $28.28/bd, or
1.55 t of SAR cost. Sinllar1y, a reduction in
production plant investment equal to the SAR
cost of S18lg/kl, wilI reduce general plant
investment by between 579.23 to $9I.52, or
4.36t to 5.03t of SAR cost. There is no
corresponding increase in general plant
associated with replacing the investnent with
an equivalent amount of purchases fron CSPPrs.
llhese avoided A&G e:q)enses and general plant
annual costs should be included in the
calculation of annual capital carrylng charge
rates and thus Ln avoided cost.
Is there any other issue you wLsh to address
before summarizing your recommended rates?
36.
Peseau, DiIndependent Energy
ProducerE of ldaho
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A.Yes. I would request that the Cornrnisslon
conslder once again allowing the CSPP to have
the option to sign contracts for lengths up to
35 years.
I understand that the Cornmission has
allowed such contracts to be signed recently
for certain hydro projects. For such capital
intensive projects, with low variable costs, 35
year contracts provide reasonable lncentlves
and rlsks for both developers and ratepayer.
SI,MII{ARY OF PROPOSED AVOIDED COST RATES
Based upon your analysis, what level of rates
do you recoumend that the Coumissl.on adopt ln
this proceeding?
To sinpllfy ny presentatlon as nuch as
possible, I have lfunited the testlnony to two
key lssues: perJ.od of load-resource balance
and lncluslon of A&G and general plant costs Ln
the carrytng charge. My recomnended rates are
therefore based upon a deficlt year of L994,
rather than Idaho Powerrs 1999, and uy
adjustnent to carrying charge rates for A&G and
general plant.
37.
Peseau, Di
fndependent EnergyProducers of Idaho
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Q.
t{y Exhlblt 706, conslstlng of two pages,
shows ny reconmended rates. Page 1 of the
exhibit shows rates for contracts ranging from
1 to 20 years, a 1994 deficit and ny A&c and
general plant adjustnents. Page 2 of the
e:<hibit has siuilar infomation, but omits Dy
A&G and general plant adjustuent.
For exanple, from Page I of E)&tbit 706,
a ten year contract, beglnnlng ln 1990, shows
a rate of 41.6 nilIs per kllowatt hour as the
suD of the non-adJustable plus adJustable
portion of rates.
For a twenty year contract, under
sinilar circumstances, the total rate is 51.4
nills per kilowatt hour. I recomDend that the
Connission adopt the rates Ehown on page 1 of
ny Extribit 706.
P1ease explain your Exhlblt ?O7.
Exhibit 7O7 is a table which shows the
Conrnission the slgnificant difference in rates
which results from assuming different deficit
years. For example, the table shows that Idaho
Powerrs use of a 1999 deficit period results in
38.Peseau, DiIndependent EnergryProducers of Idaho
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lts proposed rate of 40.46 nills per kilowatt
hour for a twenty year contract beglnning ln
1990. If ldaho Powerrs costs are adJusted for
uy A&G and general plant proposal. A rate of
42.76 nills per kilowatt hour resultE.
AIso shown on this table are rates for
siuilar contracts based on ny assumed deficlt
year of 1994. These rates are 47.34 and 51.44
uills per kilowatt hour without and with the
A&G and general plant adJustnent, respectlvely.
For the ConmisELonts LnfomatLon, this
aame table includes sinilar information for aII
deficit years, 1993 through 1999.
How do your proposed rates compare with the New
Resource rates forecasted for ffuu energy
forecasted by Bonnevllle Power AdmLnistration?
BPArs twenty year levellzed rates are shovn on
uy E:<lriblt 708. In ny opinl.on, BPArs forecast
for this rate ls, and always has been, lou.
This ls due to the fact that sigrnlng a twenty
year contract under this rate Echedule does not
allow one to lock Lnto annual rates. These are
free to escalate fron rate case to rate case.
39.Peseau, Difndependent ,
Producers ofEnergy
Idaho
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Even Eo, the BPA rates are cons!.derably
hlgher than the rates which Idaho Power ls
proposing in this proceeding.
Does this conclude your testimony.
Yes.
40.
Peseau, DiIndependent EnergyProducers of Idaho
4')
IDAHO POWER COI.{PANY
RESOT'RCE ADDITIONS INCII'DED
BY IDAHO POWER COMPAI{Y
Resource Size (aMWl Tinincr
Jin Bridger (additional)
EMSllilner
Swan Falls RebuildFuture ExchangeTrrin Falls Expansion
Conservation
33
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24.2
30
L992
1993
L992
1993
1994 ,L9971995
Gradual
Total aMW &G7
>b0,1
toeulf n*" t-l;.ll a.ot
Exhibit 701
Case No. IPC-E-89-11Peseau, IEP
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Case No. IPC-E-89-11
Peseau, IEP
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TABLE 8
Regional Firr Energy Surpluses/Def icits
Assuoing Existing Contracts and
No Nerv Resource Acquisitions
Enerry in Average llegawatts
I 1993 199{ 1 1 7 1998
lligh Loads
lledirn-High Loads
llediur Loads
llediue-Lorv Loads
Low Loads
-818
226
383
1312
228r
-r571
-281
111
1113
2286
-2086
-51{
33
1119
2363
-2633
-805
-72
1066
2498
-3290
-1191
-2tr
929
2598
-3853
-15{1
-473
870
2676
-{186
-1692
-r73
1012
3032
-4860
-2156
-831
737
2889
-5{81
-2563
-1130
526
2806
-6202
-30s8
-1299
239
2613
2001 2007
.gh Loads -6812
Itedlur-High Loads -3{36
llediur Loads -1.57l
Xediurlow Loeds 53
low Loads 2587
-735a
-377t
-1857
-tt5
2516
-79{0
-r095
-2078
-28r
2508
-885r
-t75t
-2611
-728
2t9t
-9592 -t0zrt -10877 -tt647 -12237 -13037
-5206 -5565 -5935 -63{{ -6770 -7294
-2945 -3183 -3424 -3695 -3983 -a369
-958 -1111 -1273 -1261 -tl6? -1760
2097 2090 2068 2031 2139 2027
Ll Qperating year ((X) is the 12 rcnth period tuly 1 to tune 30.
exauple, 0Y 1991 is luly 1, 1990 through luae 30, 1991.
For
Exhtbit 703
Case No. IPC-E-89-11Peseau, fEP
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AGREE}TEM FOR SAIT OF ECONO}fl ENERGY
IEITEEN
ANIZONA Pt'BtIC SENVICE COMPANY
AND
fiE UASHINCIIN UATER POUER COITPANT
APS AGREEUENT NO. 195E2
By IERC ordcr/notlcr of lecGpt.Bcr 1o FERC Doclot No.
thir Agrcaocnt ers lcccptod for ftlta3 rnd poraitt.d to bocoac
cffectlve la accordeacc wltb Soctloa 5 bcrcof oa tb. day of
1990.
January 5, 1990
(rE66A)
r:'0.O)E re.' 9.t'
Exhibit 704
Case No. IPC-E-89-11Peseau, IEPPage 1 of 8
ATTACHUENT I
PAGE 2 OF 3
(1)(2)(3)({)
(5)
(6)
(7)
(8)
/t//L/
(e)
ro)
11)
12)
13)
(1{)
( 15)
( 16)(17)
(18)
ARTZONA PUBLTC SERVICE COMPA}IY
DERIVATION OF I.EVELTZED FIXED CIIARGE FACTOR
I,EVELIZED COST OF CTPITAL
ATTRIBUTABI.E TO THE CIIOIJA GENERATING STATION
I{EIGHTED COST OF CAPITAL
DEBT RATIO
BOND TNTEREST RATE
DEPRECIATION IJFE, IEAR!;INC. 8A)( RATE, COIiIPOSISE FED & STATE
!{EIGHTED BOND INTERES!, (2) X (3)
EQUTTY REflrnN, (1) (6)
EQUITy/COST oF CAPTTAL, (71/(Ll
11.0{ttl9.76t
9. {{t
29.3339.31t{.70t6.3{t57.43t
11. 5gt3.{1t
8. 17t{.69t
2.91t
ltl. tl9t1.{lt
2.721
0. 31t18.3lt
/Ll/L//L/
/2/
/4//5//6/
(1e)
( 20)
CAPITAL RECOVERY FAqIOR
DEPRECIATION PORTION
RETURN PORTION, (9) - (10)
EQUTTy PORTTON OF RETtRll, (8) X (11)
rNconE TAx, ((51/ tl-(5)l) x (12)
LEVELTZED CAPITAL COST, (9) + (13)
ADI{INISTRATTVE & GENERAL EXPENSE
AD VAIORET,T TAXES
DEFERRED TAXESsuBrcxrAL, (1{) + (15} + (16) (17)
AIJOCATION OF GENEBTL & INTNIGIBI,E PIANT
TOTAL FrXED COSTST (18) + (19)1.2ttt /7/
l3:33'
/L/
/2/
/3//4/
/5/
/6/
/7/
PER STATEUENTS AV tt{D u, PERTOD II, FERC DOCKET NO.
ER89-265-OOO. SEE ATTACHUENT EXIIIBITS I AND TI.
REPRESENTS THE @I{PA}TY'S COI{POSITE INCOI,TE TAX RATE.
SEE ATTACIIED EXIIIBIA ITIlt. 0{t,/ t 1-(1/ (1+11. O{t) ) ^BOOK I,IFEIRrrlo oF A&c EXPENSE (Pc. 323, 1988 FERC FORI| 1! TO PIANTIN SERVTCE (PG. 2OO, 1988 FERC FORtt 1!. SEE ATTACHED
EXTIIBIT TV.
RATIO OF AD VAIORE!! TAXES (PG. 11't, 1988 FERC FORIi 1) TOpr.ANT rN sERvrcE (PG. 200, 1988 EERC FORtt 1). SEE
ATTACHED EXIIIBIT V.
TAX BENEFITS FOR PT.ANT PI.ACED INTO SERVICE PRIOR TO 1977
IIERE ACCIUNTED FOR T'NDER THE TFIOI{ TIIROUGHII }TETHOD
RATIO OF GENERAL t INTN{GIBI.E PI.II{T TO PRODUqIION PIANTrN SERVTCE TrUES LINE 18. (GENERAL t TNTANGTBT.E PRODUSTTON
PIANT PER STATETTENT BK, PERIOD Ir, FERC DOCKET NO.
ER89-265-000, PRODUqTION pr.ANT pER 1988 FERC FORU 1, PG
2O7. ) SEE ATTACHED EXHIBTTS Vr Ar{D VIL Exhiblt 704
Case No. IPC-E-89-11Peseau, IEp
Page 2 of 8
EXHIBIT IV
ARIZONA PUBLTC SERVICE COI.TPAI{Y
I{ORKSHEET SUPPORTING DEITEI'PI{ENT OF
ADMINISTRATIVE A}ID GENERAL EXPENSE COI.IPONENT OF
I,EVELIZED FIXED CITARGE FACIOR
APPLICABI.E TO THE CHOIJA GENERATING STATTON
(1) ADMTNISTRATTVE A}{D GENERAL EXPENSE (sOOOl s83,504 /t/
(21 PIANT IN SERvrcE (9000)s5r906,597 /2/
(3) RATrO OF ADMTNTSTRATTVE AIID GENERf,L
EXPENSE TO PrANT IN SERVTCE (LN l)/(tN 2)1. {1t
/L//2/
PER 1988 FERC FORH 1, PAGE 323
PER 1988 FERC FORU 1, PAGE 2Oo
Exhibit 704
Case No. IPC-E-89-11Peseau, IEP
Page 3 of 8
l
u
t
I
L]
I
(1) GENERAL AND INTANGIBLE PI$TT
FUNqUONALTZED TO PRODUCrION
(21 TOTAL PRODUeTION PIA}{TIN SERVICE
( 3 ) RATrO PRODUCTION GENERAL A}rD
INTANGIBLE TO PRODUCTION PIANTrN sERvrcE (rN l)/(LN 2l
(4) FrXED CHARGE FAetOR EXCTTTDING
ALI.OCATION OF GENERAL AND
INTANGIB[.8
( 5 ) ALTpCATION OF GENERAL AtrD
TNTANGTBLE (LrNE {) I (LU{E 3)
ARIZONA PUBLIC SERVICE COI.IPAI{Y
GENERAL AND INTNIGIBIJ PI.AT{T
ALI'CATTON TO PRODUCTION
EXHIBIT VI
s252 ,753 rOOO /L/
s3 r 733 ,29O ,OOO /2/
6.771
19.31t
1.2{t
/t/
/2/
pER FERC DOCKET NO. ER89-265-000, PERTOD rr,
STATEUENT BK, PAGE 2c (SEE ATTACHED EXHIBIT vII)
PER 1988 FERC FORtt l, PAGE 207
Exhibit 704
Case No. IPC-E-89-11
Peseau, IEP
Page 4 of 8
I
I
n
ATIIEEflITCATD COPI
Contract l{o. DE-t'tS79-868P92299
7 t8t86
I}ITERTIE AGREEilEI{T
executed by the
UTIITED STATES OF A}IERICA
DEPARTI,IEIIT OF E}IERGY
rctlnE by and through the
BoilNEVILLE PO{ER IDHIlt!STRATIoN
and
PACIFIC POI{ER & LIGHT CO{PAI{Y
Index to Sectlons
Sectl on Paoe
Tern of Agreement..... 4
Exhlbtts... 4
4
AC lntartle Constructlon and Ounershtp up to Approxlmate'ly
4800 llll. ...... .......... 5
I
2
3
4
5.
6.
7.
8.
9.
t0.
12.
13.
14.
Rlghts of Use l4
Losses Zz
llal vers 22
Upgrades of the AC Intertle Above Planned Upgrade 21
Constructlon and Operatton of Parallel Facllltles 23
Sale or Assl gnment... . 24
Extenslon of Extstlng Agreements. 25
Executlon of Other Agreements 26
ll.
Arbttratton... 26
Exhibit 704
Case No. IpC-E-89-11Peseau, IEp
Page 5 of 8
Plan-of-Servlce for AC Intertle......... ....:.
I
I
I
Erhlbtt I, Page I of 3Contrrct llo. DE-HS79-868P92299
AI{NUAL CHARGE CO.IPONE}IT FOR TRAI{SHISSION
FACILITIES OI{iIED BY PACIFIC
A. Return on Investment.
!|,HIlr:|,,1[;T:':.i*li,$ ili"lnvestmnt Base ourupnett by the Rate I
l. The Investment Ease for deternlnlng return on lnvestment shall be theglosl lnltlal lnvestannt durlng thi lnttlal 12 rpnths of Uilltng-for-the faclllty and thereaftor thi net lnvestnent base it-the begtnningof the subsequent l2-rcnth perlqd. Such net lnvestmint base shall begross lntttal lnvestnent less aicumulated book Oepriciat|on andsalvage credtts. Such sarvage eredtts shall ue apitiiaote rtportlons of the lnltlal lnveitment are subsequentiy rennved orrepl aced.
2- The Rate of Return on lnvestment shall be the relghted ayerage of theconponent rates determlned pursuant to sublterr tr) belor for-long-terrn debt. subltern (b)'belor for prefrrred stoii.-andsublten (c) belor for comnon stock equity. t{etghilng-for eachconponent shall be lts respectlve proportlon of-Paclilc,s capttal.structure rt thr rnd of the nronth before the drte the facillly ls'ready for operailon.
(a) The long-terrr debt tnterest rate shall be the effecttve costrate to Paclflc of the nost recent lssue of long-term bonds,excludlng lnappltcable spcctal purpose debt lsiurs. ln thelS-rcnth pertod prtor to the oati thc faciltty ts riady foroperatlon. In th: cvent there are not bond lisucs rltirtn tnesald lS-nronth pertod, then an cstlantcd bond lnterest rate shallbe used ln the btlllngs unill such ilne as there ts a bonclssue. lt vhlch tloe ill prlor bllltnEs ustng the esttmited bondlnterrst shall be adJusted to reflect-the aciual ccst to Pactficof the flrst bond lsiue subsequent to the rtate thi faciitty tsready-for operatton. lf such bonds are refunded. the rate shallb: adJusted accordlngly.
(b) The preferred stock earnlngs rate shall be based on theeffectlve annual cost to pictftc of the apst recent tssue ofpreferred stock rtthln the lS-month perlod prlor to the date thefaclllty ts ready for operailon. In'thc event there are notpreferred stock lssues rithtn the satd lS-nrontn period, then anesttnated preferred stock rate shall be used tn itre utiltngsunttl such tlrne as there ls an lssuc. at yhlch tirni all priorblIItngs us|ng the esilnated preferred stock raie ititt beadJusted to reflect the actual cost to Paclflc.of the ftrst suchlssue subsequent to the date the facillty ls reioy rorExhibit 704
Case No. IPC-E-89-11Peseau, IEP
Page 6 of 8
I
I
B
Erhlblt I, Page 2 of 3
Contrect llo. DE-tlS79-868P92299
operatlon. If such preferred stock ls refunded subsequently.the rate shal I be rdJusted rccordlngly.
(c) Coomon stock equlty earnlngs shall be that naxlnum percentage
rllorable by the Oregon Publlc Utlllty Cocnlssloner rt the timebtlllng ls nade.
Book Depreclatlon
Eook depreclatlon charges shall be calculated on I stralght-llne rate
based on a ltfe of 45 years or such other ltfe rs may be rppltcablcto Paclflc's transmlsslon frctlltles ln Orcgon uttllzed hereunder.
c Income Tax.
Income tar requlrenents ettrlbutable to the Return on lnvestment
deterrnlned pursuant to tten A hereof shall be calculrted uslng the
fol I ovl ng:
I Actual Federal and state lncome tar rates ln rffect at the tlmebllllng ls nade.
Tax depreclatlon conputed ln the sane nanner as bbok
depreclatton and based on the ltfe assuttrptlon utlllzed for book
purposes.
2
3 Total lnlttal lnvestment for tax purposes deened to be equa'l tototal lnttlal book lnvestment, the entlre anount of rhlch ls
consldered to be drprectable.
D. Property Taxes.
Property taxes shall be estlmated for the current bllltng year.
AdJustment to actual tar rates ln the areas travcrsed by the
transmlsslon factlltles shall be nade then actual data ls knorn for
sald year.
E. Other Taxes.
Other tares related to the faclllty shall be esttmated for the
current btlllng year. AdJustnent to rctual tar rates shall be made
rhen actual data ls knorn for sald year.
F. Dlrect Operatlon and I'lalntenance Expense.
t
I
Dlrect operatlon and nalntenance expense shall be'that expense
lncurred, lncludtng approprlate rllocable costs not lncluded tn
ttern G belor. In the absence of actual operatlon and malntenance
Exhibit 704
Case No. IPC-E-89-11Peseau, IEpPage Z of 8
Exhlbtt B, Pa
Contract ilo.
ge3of3
0t-r.ts7g-868P92299
G
flgures lssoctated rlth the lnvestment tn each transnlsslon stailonor transmlsslon llne faclllty. operatlon and malntenance expense forthe respectlve type of lac!l!ty shall be determlned by nultiplytngthe lnvestarent ln such facllrtt by the railo that prciftc,s iotatsystem transmlsslon stailon or- trinsmlsslon llne operailon andnatntenance crpense, lncludlng approprlate allocabie cosis noitncluded ln ltem G beloy, bears to pactftc,s total systenr ortransmlsslon llne tnvestment for the year of bllllng. Such arrountsrlll be calculated on an estloated bisls untl'l rep5rttng-tni actualyear ls lvallable.
Admtnlstratlve and General Expense.
Admlnlstratlve and general expense shall be the sane percentage ofoperatlon and nralntenance expense determlned pursuant to ttem-F aboveas total lrstem adnlnlstratlve and general exiense, less tnsurancecosts tnclutled thereln, bears to tolal system'operittons andmalntenance-expense, ercludlng fuer, purihase pbuer. rheel lng andadmlnlstratlve and general expense, for the yeir of bllllng.-Esttnated enrounts vl I I be used unti I report ?or the actual year t savat I abl e.
l{orkt ng Capl tal Expense l
Horkllg capltal expense shall be 15.0 percent of the total of l/g ofannual operatlon and oralntenance expenie detennlned pursuant to
lteT F above, prlus natertal and supprres assoclated irttn tnefaclllttes for the npst recent yerr report-
Insurance Expense
Insurance expense shall be ectual lnsurance cxpense assoclateo' vlththe facllltles for the year of btllthg. or a reasonable allocation ofsuch expense to the faci I t il es.
Annua'l Charges for Addlilonal Investment.
Annual charges resultlng from capltal lnvestnents ln replacements orbetterments nade to a faclltty shall be computed tn accbrdance rith
l.tems .A.through I above. Ltfi for book deprectatton purposes vll'l be
deemed to be the shorter of: (l) the economic llfe oi tirereplacement or betterment: or (2) the remainlng ltfe of the orlginalfacl I t ty.
H.
I
J.
E)&ibit 704
Case No. IPC-E-99-11Peseau, IBpPage 8 of 8
(t{P-PKT-0672e)
I
I
IDA}TO POWER COI'TPA}{Y
REGRESSION OUTPUT FOR
ADMINISTRATIVE AND GENERAL EXPENSE
AND GENERAL PIAI{T STATTSTICAL AI.IALYSIS
DEPENDENT VARIABLE 1
TOTAL OBSERVATIONS 16
USABLE OBSERVATIONS 16R**2 .96744156ssR .383751528+16
DURBTN-WATSON 1. 91389965
O( 8)= 4-77255I,ABEL VAR I,AG******* ***
CONSTANT OPTDPLT 7PI'RCH 4
AAT{DGSKTPPED/MTSSING 0
DEGREES OF FREEDOI,T 13RBAR**2 .96243257sEE 17181195.
SIGNIFICN{CE LEVET .781587COEFFTCIENT STN{D. ERROR************ ************
-5040132. 6090299..2425796E-01 .19701608-O22.396557 L.252742
***
0
0
0
NO.***
1
2
3
T-STATISTIC******** ****
-.8289297
L2.31258
1.913049
DEPENDENT VARIABLE 2
TOTAL OBSERVATIONS 16
USABLE OBSERVATIONS 16R**2 .78394835ssR .10048666E+18
DURBIN-WATSON 1. 35520617
O ( 8) = 14 .9283I,ABEL VAR******* ***
CONSTANT OPTDPLT 7PI'RCH 4
GENPI,A}TTSKIPPED/MISSING O
DEGREES OF FREEDOI.T 13RBAR**2 .75070953sEE 87918956.
***
o
o
o
NO.***
1
2
3
SIGNIFICANCE LEVETI,AG COEFTICIENT I************
.20285058+08
.50342048-01
-1.738940
t .6055458-01
STA}ID. ERRORt***********.
.31113828+08
.10081638-01
6. 410483
T.STATISTIC****r*******
.6519946
4.993443
-.27L2650
Exhibit 705
Case No. IPC-E-89-11
Peseau, IEP
Page 1 of 1r
IDNIO POWER COMPN{Y
I,EVELIZED AVOIDED COST RATES
INCLUDTNG A & G AND GENERAL PI,ANT A}INUAL EXPENSE
I
I
I
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t
I
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57.6
iril
5:l
1
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3NTRACT
LENGTH
yEARS )
1
2
3
4
5
6
7
8
9
10
11
L2
13
,,e
L7
18
19
20
20. 1
20.6
21.0
2L.4
25.9
29.1
3L.7
33.7
35.5
37.L
38.4
39.7
40.8
41.9
42.8
43.8
44 .6
45.4
46.2
46.9
21. O2L.5
2L.9
27.8
31. 6
34.5
36.738.6
40.2
4L.7
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44.2
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49.850.6
51.3
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30. 635.2
38.2
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49.2
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53.0
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66.8
67.5
52 .353.554.6
55.7
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60. 0
61.0
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63.0
63.9
64.9
55.8
56. 6
67.5
68.3
69.1
69.9
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24.7
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25.5
25.9
30.4
33.7
36.2
38.3
40.0
41.6
43.0
44.2
45.4
46.4
47 .4
48.3
49.2
50.0
50.7
51.4
25.8
26.2
26.7
32.5
36.4
39.2
41.5
43.4
45.0
46.4
47.7
48.9
50. 0
51.0
52.O
52.9
53.7
54.5
55. 3
56. O
26.9
27.4
35. 640.1
43.2
45. 5
47.4
49. 1
50. 5
51. 8
53. O
54.1
55.2
56.2
57.1
58. O
58.8
59.6
60.4
61.1
28.L
40.9
45.8
48.9
50.9
52.7
54.2
55.5
56.7
57 .9
59.0
60.0
61.0
61.9
62.8
63.6
64 .4
65.2
65.0
66.7
55.4
56.5
58.7
59.7
60.7
61.9
62.9
63.7
64.7
65.5
66.5
67.4
68.3
69.1
69.9
70.7
7L.4
72.2
72.9
- - -NON-AL'USTABLE---- -1990 1991 L992 1993 1994 1995
---NON:-ADIT'STABLE + AL'T'STABIJ----1990 1991 L992 1993 1994 1995
59. 0
59.1
60. 3
61. 4
62.5
63.5
54.
65.
65.
67.
68.
69.
70.
7L.
72.
73.
73.
71.
75.
76.
E)(hibit 706
Case No. IPC-E-89-11Peseau, IEP
Page L of 2
I
I
I
T
:ilffir
IDNIO POWER COT'TPN{Y
LEVELIZED AVOIDED COST RATES
NOT INCLUDING A & G At{D GENERAL PIANT A}INUAL EXPENSE
--NON-ALTUSTABLE1990 1991 L992 1993 1994 1995
----NON-AA'T'STABLE + ADJUSTABLE- ---1990 1991 L992 1993 1994 1995
60.
2
2
6
4
9
2
4
4
4
4
3
1
0
7
5
2
9
6
255.
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t;
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6
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36.5
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39. 3
40. 1
40.8
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42.2
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21.0
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34. O
35.6
37.038.2
39.3
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41.342.2
43.O
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49.7
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Exhibit 706
Case No. IPC-E-89-11Peseau, IEPPage 2 of 2
IDNIO POWER COHPN{Y
AVOIDED COSTS FOR TWENTY YE.AR CONTRACT
BEGINNING IN 1990 FOR ALTERNATIVE DEFICTT PERIODS
Deficit
1999
1998
L997
L996
1995
1994
1993
$IithoutA&G,
General
40. 46
41.65
42.94
44.31
45.77
47.34
49.02
wirhA & G,
General
42.76
44.26
45.88
47.61
49.46
51. 44
53.56
Exhibit 707
Case No. IPC-E-89-11
Peseau, IEPPage 1 of 1
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IDNIO POWER COMPANY
TWENTY YEAR LEVELIZED RATE FOR
BpA NEW RESOURCET/SI RPLUS FIRU POWER
Beginning
Year
1990
1991
L992
1993
1994
1995
Twenty YearI-evelized BPA Rate
44 .8
47.7
50.7
53.7
56.9
60. 3
Exhibit 708
Case No. IPC-E-89-11Peseau, IEP
Page 1 of 1
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APPIIVDIX I
QUALrrrCArrOIrS
Preseat Occtrpation
a. IMEAT Ift YOIIR PRESET\I"r OCGUPATION?
A. I a.m a coasultin€ economlst vyitJr Ben.Iohnson Assoclates,
Inc., a firm of economic a,nd a.na\rtic consulte.nts specializing in
the area of public utillty regulation.
Educatlond Back6trou.nd.
a. WEAT Ift YOUR EDUCATTONAI BACKGROIIIID?
Epe@,l96&-1939.
BE}T E'OENBO}' ASSOCIA.IE}, INC.
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A. I 5paduated from IItaI Stat€ UniversitSr in l96e vritJr a
Bachelor of Science deglee ln economics. I eaaned the Master of
Science deglee ta economics at the UniversitSr of Onagon in 1964.
Final[r, I received a Ph.D. In economlcs from llta,h State Univen
sity in I9?3. The title of my doctoral d.l,sseftation was New Deal
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a. EA\rE YOU RECETVED AI\rr ACADEMIC EONORfI OR
AWARDS?
A. Yes. I a.m a member of Omicrpn Delta Epsilon, the na-
tional economlcs honor.arSr, and was awarded a National Sclence
Foundation Fellowship in 1967.
Clientg
a. u/EAT IYPES OF CLTEMTS EMpLOy YOIIR rIRM?
A. Much of our work is perform.ed on behalf of public ageu-
cies at everTr level of governm.ent involved ln utility re6lulatioa.
These a4lencles loclude stat€ regrlator:r commissions, publlc colur-
sels, attorneys geaeral, and local govem.D.ents, among otbers. We
are also smployed by varlous prlvate orglanizatlons a,nd flrms,
both reElr:lated and unreglrrlated.fhe diversifir oi our clientele is
illustrated below.
ReAulatorrr Commlssions
Alabama hrbllc Serrice Cornmlssloa - Publtc Staff for Utillty
Consuner Protectloa
Alaska Publlc Uti[ties Commisslon
Arlzona Corporatlon Commlssion
Blxr .roErBoI{ A88OCIA1[E8, INC.
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Arkansas Public Serwice Comm ission
District of Colum,bia Public Serrrice Commission
Idaho Rrblic Utilities Cornmission
IdaJro State f41g Qernmisslea
Kansas State Corporation Commission
Maine Public Utilities Qqrnmisgiea
Mlssourl Publtc Servlce Commisslon
North Q4petina Utilities Cormmlsslon - hrblic Staff
OklaJroma Cor?oratioa Semm isslea
Ontario lfinisfiy of Cu]ture and Commuaications
Texas Public Utilities Commisslon
Virgli:ria State Corporatioa Qemmlqslea
Washin$ton Utilities g.a{ fi'a.n sportation Com m i sslon
I\Iest Virglnia Public Serwice Qqmrnissien - Divieion of
Consu-mer Advocate
Wisconsin hrblic Service Comrnisslon
hrblic Counsels
Arizona Residentlal IItiUty Consumers Office
Colorado Offlce of Consumer Serrrices
Connecticrrt Consumer Counsel
Distrist of Cohrmbl,a Office of People's Counsel
Florida Public Counsel
Georgia Consr:mers' UtilitSr Counsel
REA.DING - I.5
aEl[ .roEIlBoIr A88@IATESi I]IC.
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READING - I-4
Tllinols Small Busiaess Utiltiy Advocate Office
Indiana Office of the Uti[ty Consumer Cor:nselor
Maryland Office of People's Counsel
Minnesota Offlce of Consumer Serwices
Missouri hrblic Counsel
New E4mpsbjre Consu:o,er Counsel
Ohlo Consumer Counsel
Pennsylvaala Offiee of Consum.er Advocate
UtaJr Department of Business Regrlatloa - Comraittee of
Consuner Senrlces
Attorneys General
Arkansas Attoraey Gieoeral
F"lorida Attorney Cl',eneral - Antitrust Division
Idaho Attorney Cleneral
Kenhrc$r Attorney Geaeral
Michlglan Attorne;r Clenenal
Twllmesota Attorney Gl,eneral
Nevada Attorney Clleneral's Office of Advocate for Grstomem of
Pubtic Utilitles
SoutJr CaroUaa Attorney Gieneral
Virglni'a Attorney Clieaeral
Washlngloa Attoraey Cieneral
BEII .'OENBOIT A88OGAIIE8, ItrC.
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CW of Austin, fJ(
City of Corpus Chtlstl, TX
CW of DaIIas, fX
City of El Paso, IX
City of Fort Worth., lIX
City of Galveston, IX
City of Eouston, IX
CW of Lubbock, fJ(
City of Norfolk, VA
City of Phoenix, AZ
City of Richmond., VA
City of San A-ntonio, TIK
City of Suffolk, VA
CW of Tucson, AZ
CountST of Au€usta, VA
County of Eenrlco, VA
County of York, VA
Town of Ash'land, VA
Town of Blacksburg, VA
Town of Pecos City, IX
RIIADING - I.5
BEII arOENEOr rSSOCIAIES' lNC.
Local Governments
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Other Government AAencies
Canada - Department of Com:nunlcations
United States Department of clustice - Aatitrust Divieion
State of tr'lorida - Deparbment of General Serwices
Provincial Ci',overnments of Canada
ReArlated Firms
Am.ericall LDC, Inc.
E. Ritter Telephone Compa.n5r
Florida Association of Conceraed Telephoae Companies, Inc.
Eol5rwell, Ino.
Loulsiana/Mississlppl Resellers A*ssoclatlon
Madisoa CountSr Telephone Compan5r
Mountaln Vlew Telephone CompanSr
Nevada Power Compangr
Network f, Ino.
North Anerlca,n. Telephone Compa.n;r
North Carollea Iong Dlsta,nce Associatlon
Pan-Alberta Clas, Ltd.
Peninsula Communlcatlons, Inc.
RDM Telephone Systems
South Carolina I,ong Distaace Associatlon
Sta.nton Telephone
BE}I AIOEIIBO]r AA8@IAIIE8, ITC.
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READING -T-7
Teleconnect CompaaSr
Transamericall, Inc.
Yelcot Telephone Compangr, IDG.
OtJrer Private OrAanizatlons
Arizona Center for Law ta tJre Public Interest
Casco Bank and Trust
Citizens' Utility Board of Wisconsfio'
Colorado Energy AdvocacSr Office
East Malne Med.ical Center
Creor5[.a Legal Serrices Pro$ra,m
Eaxris Corporation
Interstate Securities Corporation
cI.R. Simplot Compangr
Merrill Tnrst Compangr
PenBay Memorial Eospita"I
HorErperieace
a. BEFORE BECOMTNG A CONSIILTAI\rr, W:mRE WERE YOU
PROIESSIONALTY EMPLOED, AI$D IN WEA1T CAPACMIES?
A. tr?om 198f to 1986 I was Economlst a.nd Director of
Policy and Administratioa for tJre Ida,ho hrblic Utilitiee
BEIX rrOEtrSOU A88OG{IE8, II[C.
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READINC} - I.8
gemmlssion. My duties at the IPUC includecl, ln addition to mJr t€s-
timony, the preparation of special reports in the areas of fonecest'
ing, demaad sttrdies, and, economlc ana\ysis. As Staff Director I
was charged with overseeing tJre personnel a,nd budglet fi:notions,
and with representinElf,[s Qommission before the state leglsla-
ture, at the €lovern.or's offlce, before tJre utility comrnissions of
otJrer st€,tes and before zuch federal and re1$onal entlties as the
Bonneville Power Adninistnation, the Northwest Powen Plao:rin€
Councll, a,nd the hrbltc Power Council.
Before tJrat time I taught economics at Middle Tennessee
Stat€ Universit5r (Assi,stant Professor, 196&70), Idaho State IIni-
versity (Assistaut and Associate Professon, 197HO), a,nd tJre
UniversitSr of Eawail at ElIo (Associate Prof,essor, I98Hl). Sub-
jects taught included ecouomic theory and historXr, qua.atitative
ana{rsis, econometrics, stati:stics, Iabor ecor:romics, fina,nclal
institutions, a.D.d interna,tlonal econorn ics.
In addition, between I97O and 1986 I prepared reports
and experb testinony on loss of ea.rnlngp 1o a numben of legal ac.
tions respecbinglwrpn€ful irUury and wron€ful death. Although
ma.nJr of tJrese ca,sies were settled witJrout ttrial, I gave expert
testimony in court oo nt'unerolu occasions.
BEI erOEl[8O]I ASSOCIAIIH!' IfC.
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a. EA\rE YOU TESTTI'IED PRSVIOUSLY AS Alr EXPERT
IWMIESS IN TEE AX,EA OF PITBTIC IIIILIIY NSGI]I,ATION?
A. Yes. I have provided or n.m preparing expert testi:m.ony ou
19 occasions in proceedin€ls before re€lulatory commissions in
Alaska, California, Colorado, Distrlct of Columbia, Idalro, Nevada,
Texas, Ut€b., a.nd Washin5lton, a,n'd before the Intersta,te
Commercs Qgmmlssion. In addltion, I have served as a hearln€
examiner In ldaJro.
My testi:moDy in tJrese proceerlings dealt vvith electric
power p'lannln€l a,nd forecasting, power supply models, avoided
costs, dema,ad elasticity models, regional economlc condltlons
affec,bin€lpublic utilities, a.nd cost of service.
a. Do You EAVE arvy PRoFESSToNAL PTTBLTCATTONS?
A. Yes. I have authoned or co-authorrd more tha,n I5 books
and artlc1es, inclurring tJre follovringf:
"PoSbPURPA vlews," PrpceedlnEls of tJre NARUC Biennlal
Re$rlator:r Confergnce, September I 982.
Aa' Input-Output Analysirs of tJre Tmoa.ct from Ppooosed Minin4 in
the Challls Area (lvith R. Davies), Ptrblic Pollcy Research Center,
Ida.ho State Unlversit5r, Febnrar5r f 980.
Bl[I .rOEI[8O!I A8SOCf,ArE8' IICC.
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"The Paradox of Votin8,"@ 10 (April 1979): E9-4I
"Index of Prices Received by Idaho Farmers," Id.a.ho Economlc
Indicators, clubr I978 (also continuing series published monthly).
"Income Dlstribution in Idaho Countles," Idaho Bustness and
Economics Review.
tr\rture'Gram, 'C' Series: Cument Tnends a.nd Forecasts, 'C' Series
(with R. Foster, et a1.), Goverrrment Research rnstitute of Idaho
State Universit5r and the Southeast Idaho Council of Govenrments,
Pocatello, Idah.o, .Iuae L977.
An Emptrical Analvsis of Predictors of Income Distribution Effects
of Water Quality Controls cI. Keith, et a1.), Uta^b Water Re-
search Laboratory, Utah State Unlversit5r, Lo5la.n, Utah,
September 1976.
Redonal Clrowth and Impact ln Southeast Idaho v.
EJeln et a1.), Governmeut Research rnstlttrte of Idaho State Uni-
versity a,nd tb.e Southeast IdaJro Cor,rncil of Governments,
Pocatello, Idaho, clanuarlr 1976.
Phosphate qq! Eoulh€ast: A Socio Economic A-nalysis .I.
EJree et a1.), Goverumeat Research rnstitute of IdaJro Stato
BEIT .'OEM!ON As{'@IATE', IilC.
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University and the Southeast lda.ho Council of Governments,
Pocatello, Idaho, Au€Ust 1975.
Estimatin€ General tr\rnd Revenues of the State of Idaho (with 8.
Ghazanfar and D. Holley), Center for Business and Economic
Research, Boise State Universit5r, elune 1975.
"Pocatello/Bannock County Ecouomlc Impact tbrcu€h 1978" (lvith
R. R. .;rshnsoD), fi:nded by tJre CitSr of Pocatello (A Re€F.onaI Input'
Output Model), December 1975.
"A Note on the Distribution of Federal E:rpenditures: An Inter.
state Comparison, I965-1959 and 1961-1965," America,n
Economist 1 8, no. 2 (Fatt lg74): Ie5-1e8.
"New Deal Activity and the States, I955-1959," elourrral of
Economic Eistorw 55 @ecember I975): 792-81O.
"Utab's Steel Lndustry" (witJr Reid R. Drrtschl and Bartell
Jensen), Utab State Unlvensit5r Research Paper, I965.
B8N JOENEO}I ASSOGAIIEL ItrC.
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QUALIHCATIONSOF
fiIOMA,S G. FAT]LL, P.E.
OF ITIE
IDAHO PT'BLIC UILITIES COMMISSION
Mr. Faull received a Bachelor of Science degree from
the University of Idaho in 1970. His major was Mechanical
Engineering with emphasis on Nuclear Engineering and Stress
AnaIysis. His minor was Business Administration with emphasis
on Economics and Management.
PROF:ESSIIONAL BEGISItsA:fIONS AI{D EONORII:
Mr. FauII is a member of Sigma Tau, the collegiate
engineering honorary society. He has received registration to
practice Professional Engineering in the following states:
19742
1975:
L977 z
L9792
Idaho; MechanicalColorado; General
New Mexico; General
Oregon; Civil
He is also registered to practice before the U.S. Office of
Patents and Trademarks as a Patent Agent.
PROEBSSTIONAL Ef,PERIEIICE:
From 1970 through L978, Mr. Faull worked for the U.S.
Bureau of Reclamation in the capacities of Mechanical Engineer,
Contract Administrator and Resident Engineer. As a l,lechanical
Engineer, he provided quality control for mechanical,
electrical and civil works at major hydroelectric construction
projects. As a Contract Administrator, he analyzed and made
IDAHO POWER COMPANY
Caee No. IPC-E-91-20
ExhibiE No. 101T. Fau11, Staff
8lL9/9L Page 1 of 3
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recommendations pertaining to claims for additional compensation
under contracts to build and supply equipment for major hydro-
electric and irrigation projects, negotiated settlements
thereto, and wrote contract addenda to reflect negotiated
settlements. As a Resident Engineer, he supervised up to 50
engineers, surveyors and technicians providing quality control
of electrical, mechanical and civil works of a 100,000 acre
irrigation project; including roads, highways, canals, pumping
plants, pipelines substations, and a 115kV transmission line.
From 1978 through 1985, Mr. FauIl worked in various
capacities of consulting engineering. As such, he did (or
supervised) financial feasibility analyses, design, construction
management, construction, and start-up of chemical, water and
energy projects, including PURPA hydro, coal, and MSW projects.
He also did business development, biIling, personnel manage-
ment and hiring./f iring.
From 1987 through the present, Mr. Faull has served
as a Utilities Engineer at the Idaho Public Utilities
Commission. In that capacity, he has analyzed Cogeneration and
SmaII Power Producers' (CSPPs') projects; developed computer
models to represent utilities' Avoided Costs, power supplies,
cash flows and other features; testified in electric avoided
cost cases; authored Proposed Orders pertaining to avoided
costs, CSPPs ' security arrangements , ut i Iity surcha rges , and
utilities' conservation,/least-cost planning programs; and
IDAHO POWER COMPANY
Case No. IPC-E-91-20
Exhibit No. 101
T. Fau11, Staff
8lL9l9L Page 2 of 3
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authored proposed Idaho eomments to Federal Notices of Proposed
Rulemaking. He has also attended several related training
programs and conf erences, including the NARUC 1987 t^Iestern
Utility Rate Seminar, the NARUC L987 19th AnnuaI Williamsburg
Regulatory Conference, the 1988 First Annual Utility
Least-Cost-Planning Conference, the 6th NARUC Biennial
Regulatory Information Conference, a NARUC Conference on
Transmission Issues in Washington D.C., two privately sponsored
conferences on CSPP regulation, and one privately sponsored
conference on bidding for CSPP power.
PT'BLICATIONS:
Mr. FauIl has authored and presented three papers
that were published in the "Proceedings of the Sixth NARUC
Biennial Information Conference". The papers were entitled:
"Irreconcilable Conflicts of InterestInherent in Vertically IntegratedElectric Utilities",
"Solving the Overpayment Dilemma forLevelized Rate PURPA Contracts", and
"Bid Price and Reserve Margin: Chickenand Egg? An Approach to Pricing Powerin the Post-SpiraI World".
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IDAHO POWER COMPAI{Y
Case No. IPC-E-91-20
E:rhibit No. 101
T. Faull, Staff8ll9l9l Page 3 of 3
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IOAHO POWER, COMPANY
VALIIY CENERATINC STATIONlnvestment as of Dccambcr 31, l9lt1
Toul Plant lPCo's 501 Share
Number of Gcncntorslnstallcd Capacity - Namc Platc Rating- Nam. Platc Rating- Ectimatcd Maximun Capacity
Cost pcr KW Estimetcd Meximum Capacity
Cost pcr KW Namr Pl.ta Rating
INVESTMENT
Acct
No Account Titlc
I
308.000 KVA
253,920 KW
253,920 KW
r 54, 000
1 26, 950
r 25, 960
s982
5962
KVA
KW
Kiv
3t0
31r
312
314
3r5
315
Staem Plent
L.ncl and lend rights
Structurrs rnd improv.m.nts
Boihr plent rquipm.ntTurbogcnrntor units
Accrrrory rlectric rguipment
Mlrcrllenrous pow.r pltnt cquipmrnt
Totel Stom Plent
Amount
s c53,448.00
27,339,279. 1 4
61, r87,318.95
15,899,262.74
1 5, 799, 892. 3 s
1.502.977. l8
5122,182,178.37
--
,2,q8r, 259. 80
tl2t,.f38.t7
tr- I t-2,
Stro-Uo Eouiotnnt3S3 Statiqt GlutPrrnt
ToAl lnvrstn.nt
Commrrice! lOElrqllEn 9!l!r:
Unit I
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IDAHO POWER COMPAI{Y
Case No. IPC-E-90-20
E>rhibit No. 102T. Faull, StaffslLeteL
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FROM:
DATE:
SUBJECT:
WORKING FILE;
WORKING FILE;
SCOTT WOODBURY
BRAD PURDY
MEI'IORANDUU
rPC-E-90-20
IPC-E-9L-02
TOI,I FAULL
MAY 2, t99l
Interconnect Costs in Avoided Cost Rates; A.w.Complaint; Review of the Records of Casesu-1500-170, rPC-E-89-lI, PPL-E-89-3/UPL-E-89-5,
wwP-E-89-6 aE Scott's Request:
B rown
NoS.
and
In my review I was able to find only one specific
reference that interconnect costs are included in the avoided
cost rates. However, I did find a statement by Prekages
indicating that Ehey were not specifically included in the
transmission costs (attached). My review of the FERC Uniform
SEandard of Accounts (USAc) indicates that they should not have
been included in the plant costs as reported in the FERC Form
ls. Therefore, it appears that part of the interconnect costs
may have been inadvertently left out of the avoided cost
estimates.
However, it is clear that iE was the intent of all parties
that interconnect costs be included in avoided costs. In
conErast of Prekages statement that he did not know if step-up
IDAIIO POWER COMPAI.IY
Case No. IPC-E-90-20
Exhibit No. 103
T. Faull, Staff8/L9l9L Page 1 of 6
d.,ta-ATt
EXHIBIT
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(Fau11; 05-02-9I)I
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tralsformation was included in plant costs, Durick clearly
staEes in his Exhibit No. 6 (aEtached) ttrat he believes they are
so included. It is my vague recollection thaE I contacted
someone aE wwP (Norwood?) who confirmed informally that
substation costs are included in pIanE costs. On Thursday (l,lay
2,1991) I cal1ed Dr. John WiIlmorth (IPCo) and Kelly Norwood
(9{wP) to get their views on the issue. Dr. willmorth confirmed
that inEerconnect costs were definitely included in plant
costs. Mr. Norwood did not specifically remember where the
costs were included, but confirmed that iE gras wWP's inEent and
understanding that they $rere included in either the plant costs
or the transmission costs. He advised me that wwP could do the
research necessary to det6rmine whether the costs were actually
included in the plant costs, but it would be difficult and time
consuming. HistoricaIly, interconnect costs have been included
as part of the SAR in Idaho and developers have paid for
interconnection of their QF projects.
SEill, the step-up substaEion costs do not show up as line
items in the plant costs, they are supposed to be recorded as
transmission coltt according to the USAc, and they were
specifically ercluded from the transmission costs included in
the avoided cost calculation. Therefore, it is technical ly
feasible to argue that the costs EtI have been partiaTly
left out of the avoided costs. However, tts you may remember,
IDAHO POWER COMPANY
Case No. IPC-E-90-20Exhibit No. 103T. Faul1, Staff8/L9/91 Page 2 of 6(Fau11; 05-02-91)2
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the plant cost ($I,450/kw) included in avoided cost computations
is a rounded of.f estimate of the average of Colstrip and Valmy
costs, while IPCo's transmission costs ($256/kW) was determined
by multiplying a rough estimate of 475 miles of transmission
times a rate selected from a "reasonable range" of between 62
and 36 mills per kW-mi1e. Typically, substation costs for a
Iarge plant are about $10/kW (my estimate, corroborated by a hrwP
transmission engineer via Norwood), or 0.61 of avoided capital
costs. Using the auEhorized availability factor of 75?., this
amounts to about 0,2 milIs/kwh of avoided cost in 35 year
contracts, and less in shorter conEracts. (Note: Had the
Commission selected an availability factor of 74?^ rather than
751, the 35 year carrying cost of the ordered SAR costs would
have been reduced by 0 . 5 mi 11s/ktrth. Clear ly, the a l leged
failure to specifically include substation costs is negliqible.)
In light of the fact that it was the Commission's and
parEies' understanding that all interconnect costs were included
in avoided costs, and that the magnitude of the alleged
overlooked costs is insignificant in comparison to the
estimaEing accuracy involved in reaching Ehose rates, I believe
it would be inappropriate to require IPCo to absorb inEerconnecE
costs or to adjust avoided costs to reflect their inclusion.
However, of those two options I believe the latEer would be the
most appropriate. Otherwise, it would be economica I Iy
IDAHO POWER COMPANY
Case No. IPC-E-90-20Exhibit No. 103T. Fau11r Staff8lL9l9L Page 3 of 6(Faull; 05-02-91)3
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reasonable for a developer to build a smaII pIanE in a remote
area and to requi re IPCo to interconnect the plant at a cost
exceeding the plant's cost.
In sununary, I believe that interconnect costs are included
in avoided costs as part of the SAR plant costs. I further
believe that this should be Ehe Staff position in the A.w. Brown
complainE action. However, even if these costs were
inadvertently left out of one or both of the estimates, the
practical effect on avoided costs is negligible (far less than
many of Ehe associated rounding errors) so no change in rates or
policy should result.
IDAEO POWER COMPAI{Y
Case No. IPC-E-90-20
Exhibit No. 103T. Faull, Staff8/l9l9l Page 4 of 6(Fau11; 05-02-91)4
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lc .7:u :w whai :s ::1al'JdaC !n lh es! 1!na:.s.'
A Yes. thcse are t!ansmiss:cn l::e c:s:s cril7,
:hat is. r:owers' .onductors. insulat.as' I addeC to thcse
lcs:s S6O nr.illl:n ro r?presrnr: sr:at:?: equ:?r''nt tlat we
would need to install on what wr cons:dered an appropria:e
nur-".ber of stat::ns '
Q Substation QqulPnent?
A Subttatlon equlparent, clrsuit breakars,
reactort, shunt c.Pacltort.
Q AnY voltegr tuPPort cquiPECnt?
A The volt.g! tuPPort egulPnQnt, the reactors
and thr rerlGr c.Prqltgtr provldc voltago contro13. Wc did
95
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HEDRICX COUR? RIPOR?ITG
P.O. Bor 3?6, Bolt., ID t3701
PREXEGIS (X)
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n^t includc tran3tortnrtlon and I dld not reviGw tha
3urrogatc plant cort to cce lf tho!. coltr includod step-uF
tranrtornttlon. Ha conrldcrad rtap-dornr trrnstornatlon and
contr,d.red thet axttttng trrnrforrttton wer in place !o that
th.t woufd not n..d to b. lncludrd ln thaa. cortr.
a And you rould rgr.. thrt thor rddrrr th.t you
Jurt !.ntton.d rould hrvr to bo conrld.r.d?
A Yo, thor routd br ptrt of tsullalrrlon cost!
for r Llnd of ryrt.r thrt ro propord. lor othor klnds of
ryrt.r., thcy rould vrry drgrndtng on th. rprclflcr end I
brllrvr th. eortr r.rv. lneludod rl. rpptoprlrt. tnd
rdrguetr for thr n..dt.
IDAHO POWER COMPAI,IY
Case No. IPC-E-90-20Exhibit No. 103T. Faull, Staff8ll9/9t Page 5 of 6
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SURROGAIE AVOIOED CCSI RESOURCE iRANSMISSIOII
Povoer Rrvcr 500 kV Iransmrssron Sysienr CostCcsi : n Ihousands
l, zcwoer llver Subsla!ron
A r Siat ton cos! rnc ludcd ln gcncrat lon cost
3 ) i*o 500 kV 200 l,lvar shunL rcactors
t 0
6,820
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l I ,055
----->
1c Povoer Rrvcr - Jim Bridgcr 500 kV I incs
A) 2 r 225 milcr of 500 kv trtnsnigston linc8) Ivo 500 kV 380 tlvrr 3.r!.3 cap.cltors
351 conprnsrtion at 1500 [vr
( ( o?nJ vtUse
258 ,565
31,570
287 ,408
I I ,660
laaaaaa!at 596,024
Erhtbit llo.5Cuo Xo. IPC-E-89-ll
Our ick. IPC
Prgr 2 of 3
3) Jim Eridgcr Subtt.tion MditionsA) Fivr 500 kY pou.r circuit br..l.r38) Ivo 500 kY 200 ltvrr 3hunt r..ctors
C ) Ivo 500 kV 225 llvrr 3hunt r..ctors
0) Onc 500/345 kY 1500 llvr auto-trtnsformlr
E) Ons 345 kV pov.r circuit br..r.r
4) Jim Eridg.r - Borrh 500 kY linrr
A) 2 r 250 nilor of 300 kV trrntri33ion linr
8) Tro 500 fV 120 rv.r 3.ri.3 ctptcltorl
35t corern3.t'lon rt ll00 l{vr
5 ) Borrh Sulrtrt'lon Addlt lonr
A) Thrro 500 kV Dou.r cl?cult br..l.r3
8) Tvo 500 kV 225 Fvrr thunt r..ctort
7 ,480
5 ,820
7 ,480
8 ,800
990
275,000
12 ,10t
180
180
4
7
Iotr I
Ihr cort p.r rllr for 300 kY trraullrlon urd ln prlpring this.3tin t. ir t500,000 9r nilo.
IDAITO POWER COMPAI'IY
Case No. IPC-E-90-20
Exhibit No. 103
T. Faullr Staff
StLgtgL Page 6 of 6
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IDAHO POWER COMPANY
Case No. IPC-E-90-20
Exhlbit No. 104T. Faull, Staff
8/L9l9L
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IDAEO POWER COMPAI.IY
Case No. IPC-E-90-20Exhibit No. 105T. Faull, Staffslt9let
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IDAHO POWER COMPANY
Caee No. IPC-E-90-20
E>rhibtt No. 106
T. Faull, Staff
8lL9l9L Page 1 of 2
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IDAHO POWER COMPA}IY
Case No. IPC-E-90-20
E:<hibit No. 106
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Ph.D.
B.S.
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Economics and Statistics, North Carolina 51n1s flniversity
Economics, North Carolina State University
Dr. Spann is a senior consuitant to CRA He works with CRA on projects in the
areas of regulatory economics, energy, insurance, strategic planning and anti-trust. He
has over seventeen years of consulting experience involving regulated industries,
enerry, communications, insurance, and anti-trust. This experience has included
testirying before state and federal administrative agencies, boards of arbitration, and
the courts.
Prior to affiliating with CRA in May of 1989, Dr. Spann was a Senior Vice President
and Member of the Board of Directors of ICF Incolporated. He has also held
academic positions on the faculties of George Washington University, Virginia
Polytechnic Institute, the University of Chicago, North Carolina State University and
Montana State University.
PLIBLICATIONS
A. Electric Utilit-v Economics
"Rate of Return Regulation and Efficiency in Production: An Empirical test of
the Averch-Johnson Thesis," Bell Journal of Economics and Management
Science, Vol. 5, No. 1, 1974.
"Strategic Planning for Power System Reliability and Vulnerability: An
Optimization Model for Resource Planning Under Uncertainty" (with
I.H.Shavel and A.P. Sanghvi), IEEE Transactions on Power Apparatus and
Systems, Volume 9, No. 2,1982.
ROBERT M. SPAI\TI\
Chorles
River
Associotes
EXHTBTT 2 (RHS-r)
cAsE N0. IPC-E-90-20
SPANN, IPCo
Page I of 6
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EXHIBIT
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River
Associotes
"The Effect of Electric Rate Design on Solar Heating" (with K.P.Linder and E.
Wessler), in Enerry and Communications in Transition, MSU Public Utility
Papers, 1981.
"Econometric Estimation of Peak Electric Utility Demands" (with E.G.Beauvais),
Journal of Economics, Volume 9,1979.
"The Demand for Eiectricity in Virginia" (with M.P. Murray, L.Puney, and E.G.
Beauvais), The Review of Economics and Statistics. Volume 60, No. 4,
November 1978.
"The Regulatory Cobweb: An Analysis of Inflation, Deflation, and Alternative
Administrative Rules in Public Utilities," Southern Economic Journal, July
1976.
"A Note on the Regulated Firm's Cost Function," Industrial Organization Review,
Vol. 3, No. 3, 1975.
"Restructuring the Electric Utility Industry: A Framework for Evaluating Public
Policy Options in Electric Utilities," in W.H. Shaker and W. Steffy (editors),
Electric Power Reform: The Alternative for Michigan. Ann Arbor:
University of Michigan Institute of Science and Technology, 1976.
"Industrial and Commercial Rate Structures and Econometric Estimation of the
Demand for Electricity," in James Boyd (ed.), Proceedings of the Electric
Power Research Institute Conference on Time of Day and Seasonal Load
Forecasting. Palo Alto: EPRI, 1976.
B. Petroleum Economics
The Supply of Natural Resources: The Case of Oil and Natural Gas, New
York: The Arno Press, 1979.
"Supply Response in a Regulated Industry: The Case of Natural Gas" (with E.W.
Erickson), Bell Journal of Economics and lvlanagement Science, Vol. 2, No.
1,1970.
EXHTBTT 2 (RMS-
CASE NO. IPC-E-
SPANN, IPCO
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'The Political Economy of Crude Oil Price Conrrols" (with E.W. Erickson, W.L.
Peters, P.J. Tese), Natural Resources Journal, Vol. 18, No. 4, October 1.978.
"A-lternative Strategies for Dealing with the Natural Gas Shortage" (with P.
Staratt), in E.W. Erickson and L. Waverman (eds.), The Energy Ouestion.
Toronto: The University of Toronto Press, 1974.
"Oil Imports, the Wellhead Price of Natural Gas, National Energy Policy and
Joint Costs in Oii and Gas Exploration" (with E.W. Erickson), in D. Limaye
(ed.) Energy Poliry Evaluation. Lexington: lrxington Books, 1974.
"An Economic Analysis of Substitution and Usage Effects in Industrial Energy
Demand" (with E.W. Ericlson and R. Ciiiano), in D. Limaye (ed.) Energy
Policy Evaluation. Lexington: Lexington Books, 1974.
"Substitution and Usage in Energy Demand: An Econometric Estimation of
Long-Run and Short-Run Effect" (with E.W. Erickson and R. Ciliano), in
Milton F. Searl (ed.), Energy Modeling: Art. Science. Practice. Washington:
Resources for the Future, 1973.
"Joint Costs and Separability in Oil and Gas Exploration" (with E.W. Erickson),in Milton F. Searl (ed.), Energv Modeling: Art. Science. Practice.
Washington: Resources for the Future, 1973.
"Balancing the Supply and Demand for Narurai Gas" (with E.W. Erickson), in
Balancing the Supply and Demand for Energv in the United States. Denver:
University of Denver, 1972.
"Price, Regulation and the Supply of Natural Gas in the United States" (with E.W.
Erickson), in Keith Brown (ed.), Regulation of the Narural Gas Producing
Industry. Washington: Resources for the Future, 1972.
"Natural Gas Prices, Crude Oil Prices and the Supply of Natural Gas" (with E.W.
Erickson). Written testimony for the U.S. Senate, Committee on Interior and
Insular Affairs, 91st Congress. Washington, D.C.: U.S. Government Printing
Office, 1972.
Chorles
RiverAssociotes
EXHTBTT 2 (RMS-l)
CASE NO. IPC-E-90-20
SPANN, IPCO
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C. Taxation
"Oil Supply and Ta.:< Incentives'' (with E.W. Erickson and S.W. Millsaps),
Brookings Papers on Economic Activiry. No. 2, 1974.
'Ta,x Revenue and Economic Effects of Ta,x Exempt State and Local Bonds: A
General Equilibrium Approach of Ta,r Poliry Analysis," Conference on Tax
Research. Washington: U.S. Treasury, Office of Ta,x Analysis, 1977.
"Percentage Depletion and the Price and Output of Domestic Crude Oii" (with
E.W. Erickon and S.W. Millsaps). U.S. Congress, House Ways and Means
Committee, Tar< Reform Hearings, Natural Resources, February 8,1973.
"Ta.:<ation and the Petroleum Industry" (with E.W. Erickon, D.N. Hyman and
S.W. Millsaps), in The Petroleum Industry's Ta:r Burden. Compendium
prepared for the U.S. House Ways and Means Committee and U.S. Senate
Committee on Finance. Washington, D.C.: Taxation with Representation,
1973.
"Tanation, Regulation, Electric Utility Pricing and the Efficient Allocation of
Energy Resources," h C. Cicchetti and J. Jurewitz (eds.), Studies in Electric
Utilitv Regulation. Cambridge: Ballinger Books, 1975.
'Ta,r Incentives in the Petroleum Industry" (with E.W. Erickson and S.W.
Millsaps), in E.W. Erickon and L. Waverman (eds.), The Energv Ouestion.
Toronto: The University of Toronto Press, 1974.
D. Industrial Organization and Antitrust Economics
"The Economics of Railroading: The Beginning of Cartelization and Regulation"
(with E.W. Erickson), Bell Journal of Economics and Management Science,
Vol. 1., No.2, 1970.
"Mergers Involving Firms in Financial Decline: a Conceptual Model" (with C.H.
Ufen), Southern Journal of Business, July 1970.
EXHTBTT 2 (RMS-
CASE NO. IPC.E-
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"Competition, Prices and Ta-:< Poliry for the Petroleum Industry" (with E.W.
Erickson and S.W. Millsaps). Statement submitted to the United States
Senate Committee on Finance, November 28, 1973.
"Competition in the Field Markets for New Natural Gas Supplies" (with E.W.
Erickson and S.W. Millsaps). Statement submitted to the United States
Senate Committee on Finance, November 28,1973.
E. Public Sector Economics
"Macroeconomics of Unbalanced Growth and the Expanding Public Sector: Some
Simple Tests of a Model of Government Growth," Journal of Public
Economics, Volume 8, No. 3, December 1977.
"The Effects of Public Spending on the Divisibility of Public Outputs in
Consumption, Bureaucratic Power and the Size of the Ta;r Sharing Group"
(with T.E. Borcherding and W. Busch) in T.E. Borcherding (ed.), Budgets and
Bureaucrats: The Sources of Government Growth. Durham: Duke
University Press, 1977.
"Public vs. Private Production of Governmental Services," in T.E. Borcherding
(ed.), Budgets and Bureaucrats: The Sources of Government Growth.
Durham: Duke University Press, 1977.
"Rates of Productiviry Change and the Growth of State and Local Government
Expenditures" in T.E. Borcherding (ed.) Budgets and Bureaucrats: The
Sources of Government Growth. Durham: Duke University Press, 1977.
"Coilective Consumption of Private Goods," Public Choice, Vol. 2},Winter 1974.
Chorles
RiverAssociotes
EXHTBTT 2 (RMS-l)
cAsE N0. iPC-E-90-20
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"An Analysis of the Competitive Effects of Joint Ventures in the Bidding for
Tracts in OCS Offshore Lease Sales," in Hearings Before the Special
Subcommittee on Integrated Oil Operations of the Senate Committee on
Interior and Insular Affairs, Market Performance and Competition in the
Petroleum Industry (with E.W. Erickson). Washington, D.C: Government
Printing Office, 1974.
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F. Telecommunications
"Pricing Within Urban Telephone Networks: Welfare, Allocative and
Distributional Effects of Alternative Pricing Policies" in C.F. Phillips, Jr.
(editor), Expanding Economic Concepts of Regulation in Health. Postal and
Telecommunications Services. Lexington, Va.: Washington & ke University,
1977.
Prior Testimony Before:
Arizona Corporation Commission
Connecticut Department of Public Utilities
Georgia Public Service Commission
Federal Energy Regulatory Commission
Postal Rate Commission
International Chamber of Commerce Arbitration Panel
North Carolina Utilities Commission
Idaho Public Utilities Commission
South Carolina Public Service Commission
Georgia Public Service Commission
Florida Public Service Commission
New York Pubiic Service Commission
Montana Public Service Commission
Pennsylvania Public Utilities Commission
Virginia State Corporation Commission
Illinois Department of Insurance
Federal Bankruptry Court, Manchester, NH
Delaware Public Service Commission
District of Columbia Public Service Commission
Maryland Public Service Commission
Kansas Corporation Commission
New Jersey Board of Public Utilities
Travis County District Court, Austin Texas
Ohio Public Utilities Commission
Arkansas Public Service Commission
Chorles
RiverAssociotes
EXHTBTT 2 (RMS-1)
cAsE N0. IPC-E-90-20
SPANN, IPCO
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