PUC72398.docx

1 BOISE, IDAHO, THURSDAY, JULY 23, 1998, 9:20 A. M.
2
3
4 COMMISSIONER NELSON: Good morning. Thank
5 you for your patience this morning. This is the time and
6 place set for a prehearing conference in Cases
7 IPC-E-98-2, UPL-E-98-01 and WWP-E-98-01. As you'll
8 recall, we had a prehearing conference in this case in
9 February and set some further scheduling with a second
10 prehearing today to determine where we are in this case
11 and so after we get the appearances of the parties, why,
12 I think I'll ask for comments on where you think we are
13 and where we should be going, but maybe we could start
14 with the parties with you, Mr. Ward.
15 MR. WARD: Thank you. Conley Ward of the
16 firm Givens, Pursley for Potlatch Corporation and FMC.
17 COMMISSIONER NELSON: Thank you.
18 Mr. Purdy.
19 MR. PURDY: Brad Purdy, Deputy Attorney
20 General, appearing on behalf of the Commission Staff.
21 COMMISSIONER NELSON: Mr. Ripley.
22 MR. RIPLEY: Larry Ripley appearing on
23 behalf of Idaho Power Company.
24 COMMISSIONER NELSON: Mr. Budge.
25 MR. BUDGE: Randy Budge appearing on behalf
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1 of the Idaho Irrigation Pumpers Association and also
2 Solutia/Monsanto.
3 COMMISSIONER NELSON: Mr. Williams.
4 MR. WILLIAMS: Ronald L. Williams appearing
5 on behalf of the Commercial Utility Customers.
6 MS. HOBSON: Mary S. Hobson from Stoel
7 Rives appearing on behalf of Utah Power & Light and I'm
8 substituting for my partner John Eriksson today.
9 MR. STRONG: Blair Strong of the firm of
10 Paine, Hamblen, Coffin, Brooke and Miller appearing on
11 behalf of The Washington Water Power Company.
12 COMMISSIONER NELSON: Thank you. Have we
13 missed anyone today?
14 MR. PESEAU: Commissioner, this is Denny
15 Peseau. Can you hear me?
16 COMMISSIONER NELSON: Yes, I can,
17 Mr. Peseau.
18 MR. PESEAU: Pete Richardson and I spoke
19 about 8:00 o'clock and he is under the impression
20 apparently that the hearing begins at 8:00 -- excuse me,
21 9:30 your time. I'm in Seattle now, so if he's not
22 there, he's on his way.
23 COMMISSIONER NELSON: Okay, we'll --
24 MR. PESEAU: We can talk about him in the
25 interim.
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1 COMMISSIONER SMITH: Mr. Chairman, I would
2 just note that no hearing should begin before 9:30,
3 especially when the irrigation water is on.
4 COMMISSIONER NELSON: We'll note your
5 appearance, Mr. Peseau, and then I'm sure that
6 Mr. Richardson will be here shortly. Okay, as you're all
7 aware, we recently had some testimony filed in this case
8 by all the parties and that testimony discussed both
9 unbundling costs and, in some instances, went further and
10 discussed cost of service issues and I guess in our mind
11 there's an issue about how far this case should go and
12 perhaps we could hear from you today about whether you
13 think we've accomplished what we need to in this case in
14 terms of unbundling costs or whether we need to go
15 further and I think we have some decisions to make in
16 that area, so I guess while I know pretty much what some
17 of these comments are going to be, maybe, Mr. Ripley, we
18 could start with you about where you think we are in this
19 case.
20 MR. RIPLEY: Sure. Do you want to do that
21 before Mr. Richardson arrives or do you want to take
22 five?
23 COMMISSIONER NELSON: I thought if we could
24 finish in five minutes.
25 MR. RIPLEY: Well, I move to strike
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1 Richardson's testimony. No, seriously, what's your
2 druthers? I don't care.
3 COMMISSIONER NELSON: Well, I think
4 Mr. Richardson is going to be able to give us a pretty
5 good idea of what his views are without -- I don't know.
6 If it doesn't bother anybody to wait five minutes, maybe
7 we ought to wait five minutes.
8 MR. PURDY: Mr. Chairman?
9 COMMISSIONER NELSON: Mr. Purdy.
10 MR. PURDY: I guess one alternative would
11 be to start with Washington Water Power because I believe
12 the ICIP has not filed testimony in that case if you
13 would like to get something done.
14 COMMISSIONER NELSON: We certainly could do
15 that. Mr. Strong, do you have comments you'd care to
16 give us this morning? Yeah, if you could touch the
17 button on your mikes when it's your turn to speak so that
18 little red light comes on, why, that would be helpful.
19 Mr. Jauregui?
20 MR. JAUREGUI: Mr. Chairman, I'm having
21 difficulty hearing the Chairman.
22 COMMISSIONER NELSON: You're having trouble
23 hearing me?
24 MR. JAUREGUI: Yes.
25 COMMISSIONER NELSON: I'm sorry, I'll try
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1 to speak up into this mike. We'll try this.
2 Mr. Strong?
3 MR. STRONG: Well, Mr. Chairman, there was
4 only one set of testimony outside of Staff filed in our
5 case and that was Mr. Eberle on behalf of the Commercial
6 Utility Customers and I paraphrase his testimony,
7 hopefully correctly, that he was recommending in his
8 testimony an expansion of the proceedings and he listed a
9 number of factors that he wanted or recommended be
10 addressed in that expansion and I think it would be The
11 Washington Water Power's response that it is not
12 appropriate or necessarily called for by the Act that the
13 proceedings be expanded to go into the level of detail of
14 those issues which he had raised.
15 In particular, he talked about an in-depth
16 review of labor allocators and an examination of public
17 purpose costs with a separate cost classification for
18 them and identification and separation of cross subsidies
19 between rate classes. He recommended a new cost account
20 for non-generation universal service and wanted
21 comparisons of unbundled allocated costs to existing
22 rates and, of course, he filed parallel testimony in the
23 other companies' proceedings as well.
24 We would suggest that to the extent that
25 these issues go to rate design issues, they are more
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1 appropriately dealt with in a general rate case and not
2 in the abstract of this proceeding, and as we all know
3 from experience, there's a relationship between the
4 categories and the numbers and the costs that you're
5 looking at when you're looking at them in the abstract
6 may appear one way, when you're actually looking at the
7 numbers, they may appear another way and at least the
8 magnitude of the categories is expressed by the dollars
9 and it's difficult to deal with these categories without
10 knowing the magnitude of the issue with which you're
11 dealing and that can only be done in a general rate case
12 and we would oppose the idea of expanding this proceeding
13 by increments into a quasi general rate case or a
14 surreptitious general rate case. That would not seem to
15 be appropriate and the recommendation we would make would
16 be that the report of the Commission as amended, if
17 necessary, and as appended, if necessary, to include the
18 testimony of the intervenors there so that their comments
19 could be seen by the legislature, that all of that could
20 be wrapped up and sent to the legislature and this
21 proceeding could be concluded and the charge to the
22 Commission and to the parties would have been performed.
23 COMMISSIONER NELSON: Okay, thank you. Do
24 we have any questions from my colleagues?
25 COMMISSIONER HANSEN: I have a question.
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1 COMMISSIONER NELSON: Commissioner Hansen.
2 COMMISSIONER HANSEN: Mr. Strong, I guess
3 you stated there that you felt like the testimonies that
4 have been given should be made part of the record, is
5 that correct, and I guess my question would be if that
6 was correct, then do you think parties should be allowed,
7 then, for rebuttal of those testimonies?
8 MR. STRONG: I'm suggesting that there is
9 no need for the Commission to resolve those issues that
10 are raised in the testimony and I'm not quite sure, we
11 have not, at least I have not, participated in any
12 in-depth analysis of some of these issues, so I don't
13 know how the company would respond on some of the
14 recommendations that are made.
15 I don't believe that the company would have
16 any objection to making the testimony a part of the
17 record which is transmitted to the legislature and I
18 guess I would have to ask my client whether they would
19 like to have a further opportunity to respond in some
20 fashion and they may wish to have that opportunity, but I
21 would not suggest that it need be in the form of formal
22 testimony and the issues need not be resolved by way of a
23 live hearing before the Commission. The Commission
24 doesn't need to resolve these issues. It's simply enough
25 that these issues are identified and spoken to and not
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1 having talked to my client here, I guess I'd recommend
2 that they ask for an opportunity so they would have the
3 opportunity if they wanted to utilize it to provide a
4 written response to those issues that they think are
5 appropriate and that could become part of the record
6 that's transmitted to the legislature.
7 COMMISSIONER HANSEN: Thank you. That's
8 all.
9 MR. STRONG: Is that responsive,
10 Commissioner?
11 COMMISSIONER HANSEN: Yes.
12 COMMISSIONER SMITH: Well, I guess I have a
13 question, a comment and then a question, and I think I'll
14 ask it successively to each of the companies. It seems
15 to me there's two separate issues here and one is what
16 are our obligations to the legislature and the
17 legislative interim committee and the questions they've
18 asked and have we fulfilled what the statute asked us to
19 do and perhaps one could look at what we've done and say
20 yes, but I think we have a further obligation to look at
21 what's good public policy and what's the obligation of
22 the Commission given the changes that the industry is
23 going through as a whole and that many anticipate will
24 happen here, and I guess I'm especially cognizant of this
25 because I feel like past Commissions exercised good
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1 stewardship and left us with a great legacy on the gas
2 side by attending to the matters of allocation of costs
3 among classes in a responsible fashion so that when the
4 ultimate deregulation came, we weren't in as much pain as
5 other commissions who hadn't paid as careful attention to
6 those matters and hadn't been as conscientious, so I
7 guess my question is maybe we've done enough for the
8 legislature that we could close the case and pat
9 ourselves on the back, but what I want to know with
10 regard to what's good public policy and given with
11 Washington Water Power it's especially been a
12 considerable amount of time since we've done any kind of
13 a rate proceeding or rate design/cost of service
14 proceeding, do we need to be attending to those matters
15 at this point in time, whether it's in this case or
16 whether we start a new case? That was a question.
17 MR. STRONG: May I respond?
18 COMMISSIONER SMITH: That was a question,
19 Mr. Strong.
20 MR. STRONG: I think you raise several
21 valid points, but we don't believe that this proceeding
22 is the appropriate proceeding in which to do that.
23 COMMISSIONER SMITH: All right, fine. Is
24 it time to start another proceeding? I guess my question
25 is we could close this if all we intended with this is to
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1 accomplish what the legislature asked us to do and we've
2 done that, but is it time to pay attention to cost of
3 service issues and allocation of costs among classes and
4 open a case for your company to concern ourselves with
5 those issues so that we're not caught in a year or two in
6 a real bad spot?
7 MR. STRONG: I guess my answer to your
8 response is we really don't know the appropriateness of
9 the timing of when to start that process. You may be
10 right, the time may be coming when it's appropriate to do
11 that. We're not today prepared to make a recommendation
12 as to when that particular sort of process should begin,
13 but I think we all recognize that it's going to come
14 sooner or later. That's not very responsive, I
15 understand, but I appreciate your concern and the company
16 has similar concerns.
17 COMMISSIONER SMITH: Apparently,
18 Mr. Strong's crystal ball isn't any better than mine.
19 COMMISSIONER NELSON: Well, maybe it would
20 be appropriate since Mr. Strong was speaking to
21 Mr. Eberle's testimony, Mr. Williams, maybe we could go
22 to you for comments and a response.
23 MR. WILLIAMS: Thank you, Mr. Chairman,
24 Commissioners. Before coming today, I looked back at
25 some of the Commission and legislative history on what
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1 got us here today and I think it helps us understand
2 where we are and maybe helps answer some of the questions
3 that Commissioner Smith was raising.
4 Order No. 27111 was the Order that wrapped
5 up what I call the first phase of these proceedings in a
6 different docket and stated that we will open three new
7 dockets to address the issues raised by FMC/Potlatch and
8 examine, and I emphasize the words, in detail the cost
9 data provided by the three utilities.
10 The Commercial Utility Customers have now
11 examined in detail those cost filings and it made five
12 specific recommendations to further examine some of the
13 details of those unbundling studies, and to briefly
14 summarize those recommendations, they were to look more
15 closely at the allocation methodologies, especially the
16 labor allocations of Idaho Power and PacifiCorp, to
17 review and identify in greater detail public purpose
18 costs, to look at cost unbundling by rate class, to
19 identify interclass subsidies that may exist on an
20 unbundled cost basis and, finally, to compare one, two or
21 three or however many number of unbundled cost analyses
22 back to the existing rates.
23 The Commercial Utility Customers are not in
24 this case looking at it as a rate case. They're not
25 asking for rate relief. They're not asking for any rate
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1 adjustments, but they are here for a greater
2 understanding of the cost structures that will affect
3 them in a potentially restructured utility environment.
4 On the allocation issue, take, for example,
5 Idaho Power allocating almost $50 million of general
6 plant, administrative and general costs. There's been no
7 opportunity so far to review the base labor studies that
8 make these allocations and I would point you to one
9 example in the abstract and another in an exhibit. The
10 first is marketing costs have been assigned and allocated
11 some to the distribution function, but if distribution is
12 going to remain a natural monopoly, then is it
13 appropriate for some marketing of generation functions to
14 be allocated to the distribution class or would it be
15 more appropriate to look at some direct assignments of
16 some of those costs.
17 Another example and one that Dr. Eberle has
18 in Exhibit 1002 simply takes the costs identified by the
19 three utilities for providing a monthly billing service.
20 For Idaho Power it's $4.08, for PacifiCorp $8.49 and for
21 Washington Water Power $2.87. The same service can be
22 acquired today on the open market at about $.52 a month,
23 so there's either a resource allocation problem or
24 probably more appropriately there's something in the
25 allocation systems that is misallocating costs into that
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1 particular category.
2 The second thing Dr. Eberle identified is
3 that there is no adjustment mechanism in place for
4 changing labor pools as they are bound to change as
5 restructuring pressures come to bear on the utilities, so
6 if we move into a restructured environment, yet we've
7 made cost allocations based on labor studies on a 1996
8 test year, then potentially we've locked in allocation
9 methodologies that have a dissipating relevance as we go
10 through time.
11 The second point that the CUC identifies is
12 public purposes. Order No. 27111 on page 4 discusses
13 those and says, "It has been noted that it will be
14 difficult to identify costs that belong to fish
15 mitigation category. The utilities have agreed to make
16 their best effort at providing this information. It was
17 also agreed that there are currently no universal service
18 costs for electric providers. The category can remain as
19 a placeholder for future costs that may materialize."
20 Only Washington Water Power identified any
21 fish mitigation costs. We assume that fish mitigation
22 costs for the other two utilities are classified as
23 generation. While we don't have any argument at this
24 point with classification of those costs as generation,
25 we still think it's important in this context, especially
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1 in light of the significant fish mitigation and
2 relicensing costs that are being incurred by one or both
3 of the other two utilities, that the public, we in
4 setting public policy on this issue, needs to explore
5 that issue.
6 Dr. Eberle makes a particular
7 recommendation that we begin the reclassification and
8 possibly moving some of these into some type of a
9 universal service type of charge. We would like to see
10 what the utilities have to say in response to that
11 recommendation.
12 If there's been a reoccurring theme of the
13 Commercial Utility Customers in this hearing, it has
14 involved interclass rate subsidies and the ever attempt
15 to identify what the true costs are. The cost unbundling
16 studies presented by the Commission ignore both the
17 existence of any existing interclass rate subsidies and
18 even goes so far as to potentially create even new and
19 larger rate subsidies when you do unbundling by voltage
20 level.
21 If the Commission in this case or in a
22 subsequent case to follow fails to study this issue and
23 the policy makers later lock in existing rate subsidies
24 as has been proposed in some of the legislation floating
25 around, then restructured electric markets will carry
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1 into them these embedded subsidies and that can have
2 potential harm not only to the groups that are paying
3 those, but as they move to a potentially competitive
4 market or alternative options, you have the situation at
5 that point of stranding that subsidy and harming the
6 group that was intended to be helped by it.
7 The second point is that if you look at
8 Exhibit 1001 by Dr. Eberle, he made a rudimentary attempt
9 to address some of the subsidy issues by separating the
10 irrigation class of Idaho Power and PacifiCorp out of the
11 secondary voltage class and he identifies both categories
12 of customer charge and kilowatt and demand charge that
13 change when you start looking at unbundling by just
14 simply separating one rate class out.
15 We're not here saying that this is what the
16 charges should be or what rates should go to or that it's
17 even necessarily the most accurate representation of this
18 issue, but in a general sense, it's the first step that
19 I've seen in any of these proceedings to address that
20 issue. Again, the point here is not to reset rates, but
21 the point is to show the impact of grouping different
22 types of customers together by voltage class, and, again,
23 the interclass rate subsidy issue loops back to, I think,
24 the debate that needs to occur on the appropriateness of
25 some type of universal service charge, and finally, the
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1 last point is that the Commercial Utility Customers feel
2 that it's mandatory in this case to compare unbundled
3 costs to the existing costs that are within the rate
4 classes.
5 If you go back to House Bill 399 that
6 started this whole process, Section 1 has the finding of
7 the legislature, Section A, that it is necessary and
8 appropriate for the legislature to analyze the many
9 impacts upon the citizens of restructuring electric
10 services within Idaho. Section B says that such analysis
11 by the legislature cannot be completed without first
12 obtaining information concerning the, and I emphasize the
13 words, relevant costs, so what the CUC wants in this case
14 is what Section A says. It wants to know the impact upon
15 them of restructuring electrical services in the state
16 and, secondly, the only relevant cost that it really can
17 be compared to is existing rates.
18 Now, Washington Water Power earlier said
19 that -- first, they mischaracterized ours as rate
20 arguments, which they are not, they are cost arguments,
21 but he says it's inappropriate to bring those issues into
22 the -- not in the abstract of this case. Well, if all
23 this case is is an abstract exercise that has no
24 relevance, then it doesn't even meet its statutory
25 obligations. If costs can't be translated through by
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1 rate class so that relevant comparisons can be made, then
2 the PUC I believe will have failed to satisfy the
3 statutory mandates of House Bill 399 and so,
4 Commissioner Smith, in answer to your questions, the
5 first question have you met your obligations to the
6 legislature and I believe at this point in time without
7 taking these incremental steps, no, that you have not met
8 that obligation, but more importantly, as you suggest, I
9 believe that it's now time in this body to start the
10 public policy process similar to what the gas industry
11 went through in trying to determine what the future is.
12 None of us may have the appropriate crystal
13 ball, but I don't think that is necessarily a reason why
14 we shouldn't start delving into these issues, and then
15 your final question, is it time to look at rate design
16 and cost of service issues so that a year or two down the
17 road we're not caught in a bad spot, I believe our
18 testimony in this case speaks to that. I read the other
19 testimony from other intervenors in this case as all
20 basically making the same points, so whether in the
21 context of this case or in new docket numbers that get
22 started, that's more a question of, I think, time over
23 substance. I believe, nonetheless, it's time to move in
24 that direction.
25 COMMISSIONER NELSON: Thank you. I guess
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1 at one point you said you thought we should be examining
2 those costs I thought in this case and then your last
3 comments were that whether it was this case or a separate
4 case, cost of service and rate design needed to be
5 examined, but in my mind personally, I'm thinking that
6 that would be a new case and, if so, does the testimony
7 that Mr. Eberle had prepared, is that wasted or can that
8 be incorporated into a new case?
9 MR. WILLIAMS: Well, Mr. Commissioner,
10 speaking to, I guess, meeting the legislative mandate and
11 wrapping this up and presenting a report to the
12 legislature, I think it would probably be the most
13 efficient thing to keep this case going. I think the
14 Commission has not only the discretion but really the
15 mandate from the legislature to investigate this issue,
16 so you have a case going, testimony has been filed, the
17 parties are here. I think in order to meet your
18 deadlines, I think it probably should be kept in this
19 case, but if the sentiment of the Commission was that it
20 needed to open different docket numbers for what purpose
21 I'm not clear, then the same issues could be held in the
22 second case and we'd refile the testimony. I just don't
23 see what that would necessarily gain and what I see is a
24 loss of time because you get back into your own rules
25 that have notices and filing dates and response dates, so
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1 I just think that would be kind of a waste at this point.
2 COMMISSIONER NELSON: Okay, thank you.
3 This is a different type of prehearing conference, so I
4 guess I get to choose the order and it will appear
5 orderly no matter how I do it. Maybe we could go to Utah
6 Power and see if you have any comments and then go to
7 your intervenors.
8 MS. HOBSON: Thank you, Chairman Nelson.
9 It appears to me that if you were going to be asked to
10 cover a prehearing conference for someone, this would be
11 the one that you should be asked to cover since you're
12 going to be cross-examined by Commissioners and whatnot,
13 what fun, so the remarks you are about to hear are
14 primarily mine and probably may not advance this debate
15 very far.
16 From the perspective of Utah Power & Light,
17 however, this Commission has already accomplished
18 everything it was charged to do by the legislature. Of
19 course, a report has been filed and in the last 1998
20 legislative session, the legislature had the opportunity
21 to provide further direction to the Commission and to the
22 industry and it declined to do so. We can only conclude
23 from that that the legislature did not perceive there
24 being a pressing need at this point for further concrete
25 steps, so that brings us to the question of what is this
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1 docket now, what purpose is it now serving.
2 Utah Power is well aware that numerous
3 parties have expended a lot of time and effort preparing
4 and filing testimony here and ordinarily that would
5 suggest that there are contested issues of fact or
6 questions of policy which require resolution so that the
7 Commission can enter an order and either grant or deny
8 some relief, set rates, perhaps promulgate rules or set
9 industry policy, but frankly, we are at a loss to
10 understand exactly what a final order in this case would
11 look like. We respectfully --
12 COMMISSIONER NELSON: Mr. Purdy is going to
13 tell us.
14 MS. HOBSON: We suggest, therefore, that
15 it's the Commission's guidance that we need at this point
16 to tell us, to inform us, what your intentions are for
17 accomplishing further steps in this docket. If the
18 parties have prepared testimony on issues that you don't
19 intend to reach, then that's an unfortunate state of
20 affairs, but it's not going to improve matters to draw
21 these proceedings on and ask people to attend hearings
22 and spread testimony if the Commission is not prepared or
23 is not in the right context to meet those issues.
24 In other words, Utah Power believes it
25 would be a mistake to permit the parameters of this
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1 proceeding to be drawn simply to accommodate the subjects
2 which various parties have decided they'd like to talk
3 about. In this respect, then, although it is the
4 Commission's call, Utah Power does object to the concept
5 of taking up some of the issues that have been raised in
6 the testimonies and this is somewhat similar to the
7 remarks that Mr. Strong made earlier.
8 First, there appears to be at least among
9 some of the parties a push to unbundle the rates
10 themselves. Utah Power submits that that is a worthless
11 exercise at this juncture in light of the fact that the
12 services that underlie those rates are not themselves
13 unbundled.
14 Other areas that have been discussed or
15 suggest that the Commission attempt to make a
16 determination about the cross subsidies between classes
17 of service. Again, we feel that that is an issue that
18 can only be addressed within the context of a rate
19 proceeding or a rate design proceeding and, finally, the
20 suggestion that the Commission create a new unbundled
21 cost account for non-generation universal service support
22 is also well beyond the scope of what we perceive to be
23 the scope of these proceedings.
24 We think all of those matters, if they need
25 to be taken up at all, need to be taken up in the context
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1 of a specific rate proceeding. It is up to the
2 Commission, therefore, to state whether there are
3 additional issues that you feel can be successfully
4 resolved here. Certainly, I don't have any personal
5 crystal ball whatsoever, but it appears to us that this
6 proceeding may not be well structured to address the big
7 policy issues that Commissioner Smith is suggesting need
8 to be talked about, nor does it have the kind of
9 precision that needs to be developed to evolve into, and
10 I guess no one is really suggesting this, that it evolve
11 into a rate proceeding for the individual utilities.
12 Obviously, a different kind of record needs to be
13 established to reach those issues, so our simple proposal
14 is that we close this proceeding and await for the
15 Commission's direction as to how we further proceed on
16 the general issue of restructuring.
17 COMMISSIONER NELSON: Thank you. I guess
18 the issue that gets raised or at least comes to mind when
19 we think of your company in particular and perhaps Water
20 Power is that it has been an awful long time since we had
21 a rate case, maybe '86 or '85, and if there is any
22 restructuring on the horizon, why, before that happens
23 it's probably time to take a look at that along with a
24 cost of service case. I guess that can either be a
25 comment or a question.
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1 MS. HOBSON: My understanding,
2 Mr. Commissioner, is that the Staff and the company have
3 had those discussions. I'm certainly not at liberty to
4 suggest that we're ready to file, but I know that those
5 discussions are ongoing.
6 COMMISSIONER NELSON: Thank you. Any
7 questions?
8 COMMISSIONER SMITH: Just one comment.
9 Ms. Hobson, your comment that you don't think the
10 legislature is evidencing any pressing need for further
11 steps, I would just ask whether you have attended any of
12 the legislative interim committee meetings on electric
13 industry restructuring.
14 MS. HOBSON: No, Commissioner Smith, I
15 haven't. I am acting strictly on information and beliefs
16 this morning.
17 COMMISSIONER NELSON: Maybe it would be
18 appropriate to go to Mr. Budge for comments. He's pretty
19 involved with the Utah Power case.
20 MR. BUDGE: Thank you, Mr. Chairman. On
21 behalf of Monsanto/Solutia, they have not filed testimony
22 and are simply monitoring these proceedings and will
23 continue to do so. On behalf of the Idaho Irrigation
24 Pumpers Association, we certainly are not asking for a
25 general rate case at this point in time and we do feel
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1 that it would not be appropriate in this particular
2 proceeding to get into the examination of rate design,
3 cost of service-type issues. That would certainly appear
4 to be a general rate case-type matter.
5 We're not saying that that shouldn't be
6 appropriate for PacifiCorp, perhaps. We know that there
7 are general rate proceedings going on in some of their
8 other jurisdictions and we know from the testimony of the
9 Staff witness that some audit had been performed, but the
10 audit didn't appear to go so far as to determine whether
11 or not any of the utilities were above or below their
12 authorized rate of return, but in any event, that would
13 seem to be beyond the scope of these proceedings.
14 One of the questions that seems to exist is
15 what the legislative charge has been and has that mandate
16 been satisfied. It appears to us that the charge to this
17 Commission is to go further than we are right now. As I
18 recall in sitting through some of those legislative
19 meetings, there seemed to be a question on the initial
20 reports that went back to the legislature as to whether
21 or not they were sufficient and should they be
22 scrutinized in greater detail. I think the reason being
23 the initial report essentially was a request for
24 information from the utilities. It was kind of
25 repackaged and submitted back to the legislature without
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1 the normal type of detail and scrutiny that would go on
2 in a rate case, so it appeared that the charge was that
3 these unbundled cost numbers provided by the utilities
4 that was reported back to the legislature should be
5 scrutinized in some greater detail and it doesn't take
6 long in trying to compare what those three utilities
7 submitted to realize that there's not a lot of
8 standardization on how they put their material together
9 and further that the methodologies that the companies
10 used are different in such a manner that some of the
11 results appear to be surprising and some of those were
12 addressed by Dr. Peseau in his testimony, some by
13 Dr. Yankel and there are some of the unbundled costs in
14 there that one would not expect to be because of the
15 differences in methodology, so when we go through this,
16 the Irrigators submitted some testimony, I'm not going to
17 go through and burden the record with the details of
18 that, it's summarized on page 5 of Yankel's testimony, we
19 think Dr. Peseau made some good points that are
20 summarized, I believe, on page 25 of his testimony and
21 other witnesses have done the same thing and we think
22 that the bottom line effect of that testimony is to raise
23 some issues that need to be addressed.
24 We've begun to take some of those up with
25 PacifiCorp. Some of the issues we've raised they've
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1 agreed with, some they haven't agreed with and others
2 might be resolved. We've suggested that we continue
3 these proceedings with some type of a technical
4 conference. I think Dr. Peseau has requested further
5 proceedings to address his issues and we think part of
6 the charge of this proceeding would be for the Commission
7 to provide some guidance and some leadership and
8 direction as to which issues are important, which issues
9 are not important and decide that they should be
10 addressed and set some kind of a time frame for doing
11 this. I'm not sure that this initially requires formal
12 hearings. A technical conference appeared to be more
13 appropriate at this point in time.
14 I think clearly this unbundling cost is an
15 evolving-type process. There isn't going to be a set
16 answer that doesn't change down the road due to changes
17 at the FERC level and accounting procedures and the like,
18 but I think we all recognize in Idaho one of the biggest
19 challenges is going to be to maintain the benefits of our
20 existing low-cost hydro system while not falling behind
21 as the other states around us deregulate, and there are
22 going to be some advantages in that competitive system
23 that we might be able to work into our regulated
24 environment and this seems to be an important piece of
25 that overall puzzle that Idaho stay on top of it and so
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1 we think some further scrutiny is necessary.
2 When you look at it from the perspective of
3 Idaho Power, I think the argument that you hear from some
4 that we're trying to address an issue in a vacuum in the
5 sense that it has no real world application today because
6 Idaho is not deregulating, that argument makes some
7 sense. From the Irrigators' perspective, we do have a
8 real world concern. We've had ongoing discussions with
9 PacifiCorp, we've had verbal commitments from them that
10 they would proceed with a pilot program on the Utah Power
11 system in eastern Idaho, and part of the reason that has
12 been delayed another year is to try to get some more
13 accurate unbundled cost numbers in this particular
14 proceeding to set the stage for what we hope to be a
15 pilot program that would be successful and we're left in
16 a real paradoxical situation.
17 We're here in Idaho in the Utah Power
18 system facing a loss of the BPA credit and with the
19 pending matter before the Commission, it would basically
20 provide an 8 percent per year over the next three years
21 increase in irrigation rates as the BPA credit is phased
22 out. At the end of that period, which is about the
23 beginning of the year 2000 irrigation season, we will be
24 in a situation that the rates paid by irrigators in
25 eastern Idaho are approximately 50 percent greater than
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1 their neighbor across the road pays on the Idaho Power
2 system, and that's a difficult situation for us to be in
3 in a state where we tout ourselves as having the lowest
4 costs in the nation, yet the irrigation rates on the
5 PacifiCorp system will essentially be the same as the
6 national average and so we don't know what the solution
7 is to that.
8 There are a lot of different angles, but
9 one is we do feel at this point is that there is some
10 importance to be able to pursue pilot programs so we can
11 determine whether or not there may be some benefits in
12 market access or not.
13 We don't know whether our irrigators can
14 effectively take advantage of lower rates that may be
15 available in a time of day situation if they go off peak,
16 which is why we really want to push this pilot thing and
17 so we think from the PacifiCorp standpoint there is some
18 significance to continue the examination of the unbundled
19 costs, to address the issues we raise that will have a
20 significant impact on the viability of that particular
21 pilot program, so I just think in conclusion we would
22 appreciate some direction from the Commission to identify
23 some of the issues raised by the parties that are
24 significant to address and then create some type of a
25 forum, whether it be by technical workshop or otherwise,
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1 that they be addressed in a timely fashion so we have
2 some basic number before the end of this year, by the end
3 of the year that could be relied upon in a real world
4 application of our pilot program to be developed for next
5 year, hopefully.
6 Thank you.
7 COMMISSIONER NELSON: Thank you.
8 Mr. Ripley. Oh, Commissioner Hansen.
9 COMMISSIONER HANSEN: Yes, Mr. Budge, I
10 just had a question and I kind of gather that you feel
11 like that we definitely probably should open maybe a new
12 docket or dockets to proceed on in some of these areas.
13 If that's correct, I guess on the other hand, I kind of
14 heard a little reluctancy in that you really didn't
15 support going as far as maybe to a complete rate design
16 or cost allocation, that far; is that correct?
17 MR. BUDGE: Well, I think in part. I think
18 in this particular proceeding that we're already in, I'm
19 not sure that a new docket is needed to address the cost
20 unbundling issues that have been raised. I think we can
21 simply continue in this docket to take a step further. I
22 don't think we're to the point of appropriate closure.
23 As far as opening -- and as we continue this proceeding,
24 we really don't feel that one of the issues that ought to
25 be identified to address is a full cost of service-type
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1 case. We think it ought to be limited to unbundling the
2 utilities' costs, not getting into customer rate design,
3 cost of service issues.
4 If there is a desire to go into general
5 rate case-type issues, then we feel it would be
6 appropriate that that indeed be in a separate case or a
7 separate docket. We're not necessarily advocating that,
8 although there may be reason in the PacifiCorp system to
9 look carefully at it.
10 COMMISSIONER HANSEN: That's all I have.
11 COMMISSIONER NELSON: Mr. Ripley.
12 MR. RIPLEY: I guess I view these
13 proceedings somewhat differently than those that have
14 preceded me. I go back again to the comments that we
15 made when the original generic docket was opened up and
16 that was we believed that all that the Commission could
17 obtain out of these proceedings is general cost
18 information and we believe that is what the Idaho
19 legislature was looking for as far as the Idaho Power
20 Company system was concerned; what is the general cost
21 breakdown between generation and transmission and
22 distribution, and they were looking for cost information,
23 certainly not rate information, and I think it's readily
24 apparent, at least from our standpoint, as to why the
25 Idaho legislature desired that information and that is
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1 indeed, as we know, there is an interim committee
2 studying whether we should have restructuring at all, and
3 one of the prime issues that that legislative committee
4 has to address is that if our costs are significantly
5 below the market generation costs, does it make sense for
6 Idaho Power and the Idaho legislature in the State of
7 Idaho to proceed with some type of cost restructuring, so
8 what you have provided to the Idaho legislature is indeed
9 the general cost information.
10 Now, there were a number of parties in that
11 proceeding that said, oh, we think there should be some
12 additional analysis and we have some additional comments
13 and so you closed the generic docket and opened three
14 individual dockets because, I am assuming, you believed
15 that the positions of the various utilities might not be
16 the same, so in answer to the first question have you
17 already provided to the Idaho legislature the generic
18 cost information that you believed is appropriate, I
19 think you answered that yourselves when you said here's
20 our report and now we're going to have three individual
21 dockets to look at the three individual utilities to look
22 at particular issues that might be affected by those
23 three utilities, so my comments from this point on are,
24 of course, Idaho Power Company comments.
25 Now, how does Idaho Power Company comments
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1 view the present proceeding, the one that we are
2 currently before the Commission on? Quite frankly, we
3 were somewhat disappointed in the type of testimony that
4 was filed by the parties, and I don't want to get into
5 what we agree or disagree with, but simply that there was
6 nothing of a definitive nature that was filed by any of
7 the parties. There were just additional, broad claims on
8 policy matters and an urging by various witnesses that we
9 proceed with additional hearings, which somehow now the
10 burden is on Idaho Power Company to take the general
11 comments of these various witnesses and now come up with
12 a more definitive cost analysis.
13 Now, if we're going to go down the road,
14 then we need additional time, obviously, because we don't
15 agree necessarily with what's been advanced by the
16 witnesses. We may desire discovery, et cetera, so I
17 can't tell you that we're going to proceed rapidly to
18 some conclusion of the various issues raised by the
19 parties. We think most of them are inappropriate and I
20 will get to that.
21 So I answered the first question that
22 Commissioner Smith posed, and I'm assuming it's the same
23 question that the other two Commissioners have on their
24 minds, have we fulfilled the obligation to the Idaho
25 legislature for cost information. I believe that as far
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1 as Idaho Power Company is concerned, the answer is a
2 resounding yes. I have received not one criticism from
3 any individual on the interim committee or from any
4 legislator and I'm not aware of anyone in Idaho Power
5 Company that has received any criticism at all from the
6 legislature as to the cost information that Idaho Power
7 Company filed for the Idaho Power Company system, and I
8 don't believe that the -- and I've attended a good number
9 of those legislative committee sessions and I have not
10 seen any criticism leveled at the three Commissioners
11 that you're doing anything wrong as far as the Idaho
12 Power Company system is concerned.
13 So the next thing that I call to your
14 attention and one which is near and dear to my heart and
15 that is we have received, and I want to choose my word
16 carefully because it's not criticism and it's not
17 warnings, but it is certainly a high level of concern
18 that Idaho Power Company and the Idaho Commission get too
19 far out front of the Idaho legislature. That came up in
20 the FMC/Idaho Power Company contract and it's come up at
21 various other times.
22 A number of the issues raised in the
23 testimony of the witnesses that have been filed are
24 restructuring type of questions, policy-type questions
25 which I submit to you the Idaho legislature is not
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1 prepared or not ready or not desirous of examining as far
2 as the Idaho Power Company system is concerned and
3 accordingly, your opening a docket to consider those
4 policy questions I think is inappropriate and is not
5 certainly what the Idaho legislature envisions for the
6 Idaho Power Company system, such as stranded costs, such
7 as some type of universal fund, so I think you can answer
8 the Idaho legislature's concerns in Idaho Power Company,
9 here's the general cost information and we await further
10 instructions from you as to what should be done in the
11 general policy areas.
12 Now, that doesn't mean to say that you
13 should just sit over here and do nothing, but as far as a
14 good number of the issues raised in the testimony of the
15 intervenors, I think they are inappropriate.
16 Now, the other thing I think we have to
17 keep in mind in this proceeding, which I am assuming is a
18 spin-off of the generic proceeding, there is, of course,
19 a statute that expires January 1, 1999, and so we have a
20 little over five months under that statute that then
21 becomes null and void, and I was also involved, at least
22 on the peripheral edges, of why that statute was drafted
23 in that way. As I'm sure the Commission is aware, it had
24 an obligation to provide cost information for not only
25 the private utilities but the publics, the munis and the
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1 co-ops as well, and that expires as well on January 1,
2 1999.
3 Frankly, Idaho Power Company is not too
4 eager to go proceeding down too far the road of
5 restructuring with proceedings before this Commission
6 which only involve the private utilities without having
7 the public utilities also involved in that debate, which
8 again puts us back to the Idaho legislature, at least as
9 far as some legislation is concerned, so I think you may
10 be induced into holding some hearings and after you have
11 held the hearings you'll say, my, God, what am I supposed
12 to do with this, do I really have the authority to make
13 any pronouncements in this area and I submit to you that
14 you at best look at your authority before you proceed
15 down the road as to what's contained in the testimony
16 that's been filed in this proceeding.
17 Now, a lot of the witnesses, again I've
18 expressed my disappointment, say, well, we should examine
19 in further detail. We can't dispute that anything should
20 be examined in further detail and the Commission should
21 keep on top of it, but I don't think that takes a formal
22 evidentiary proceeding out of which I have difficulty as
23 I have had throughout this proceeding envisioning an
24 order that says it's herewith ordered that A, B, C and D
25 will occur. I don't think that's what the Idaho
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1 legislature had in mind. I don't think that if you look
2 at the statute that's what is intended. What was
3 intended was a report and I don't think a report rises to
4 the same level as an order.
5 I think you can file a report as to what's
6 going on with your three utilities if that's what you
7 desire. You certainly have unique issues that may be
8 pertinent to one of the utilities that may be different
9 from the other utilities and you can certainly proceed
10 with those, but your report can satisfy what the Idaho
11 legislature had in mind and you can certainly refer to
12 the comments that have been raised by the various parties
13 so that the Idaho legislature is aware of them. I'm not
14 so naive to think that the Idaho legislature won't get
15 that testimony anyway, so put it in your report. I
16 wouldn't tack it to the back. I would make some general
17 comments as your obligation to report to the legislature
18 would decree, but I don't think that you've got to make
19 findings or issue an order or say this is part of this
20 gigantic record. I think, quite frankly, that what the
21 intervenors and the parties desired, at least in the
22 initial proceedings in this proceeding, simply did not
23 occur. There's nothing definitive in any of the
24 proposals of the intervenors, so I don't see the need to
25 proceed any further.
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1 Now, obviously, we do not agree with some
2 of the comments of the intervenors and the parties, but I
3 don't think an evidentiary proceeding is going to change
4 any of that, so I would sum up Idaho Power Company's
5 position in this matter this way; that you're operating
6 under a statute which expires January 1, 1999, you are
7 required to provide cost information which you have
8 provided to the Idaho legislature. As far as Idaho Power
9 Company is concerned, I've heard nothing back that
10 criticizes that cost information or that it was
11 incomplete or they desired more and I dare say I've
12 attended most of the interim legislative committee
13 meetings where this has come up, so I think you have
14 fulfilled your obligation.
15 I think a second report, and I underline
16 the term report, to the Idaho legislature is in order to
17 simply point out here are some areas that various
18 individuals raised. If restructuring were to go forward,
19 these would have to be areas that you would have to look
20 at, but I don't think you have to make a determination as
21 to what should occur as far as those various areas are
22 concerned. You can fulfill your obligation of advice to
23 the regulatory agency without entering decrees or orders,
24 and as far as the public policy issues are concerned in
25 restructuring, I do not believe insofar as Idaho Power
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1 Company is concerned you should get out in front. I
2 think if you do there will be a considerable amount of
3 criticism advanced to you, because I think that's exactly
4 what the Idaho legislature does not want, at least that's
5 how I hear it, and the criticisms that we have received
6 is that we're moving too fast, not too slow, as far as
7 restructuring is concerned, again as far as Idaho Power
8 Company is concerned.
9 Now, I don't think I would be totally
10 candid unless I also addressed Commissioner Smith's
11 question, oh, my, God, shouldn't we prepare ourselves for
12 in the event that restructuring occurs so we don't have a
13 mess on our hands as far as rates are concerned. Well,
14 again, as I've told the Idaho legislature on a number of
15 occasions, Idaho Power Company believes that it is in a
16 very fortunate position because it doesn't think that you
17 have to do a lot with its rates in order to bring
18 yourself into compliance as to what would happen with
19 restructuring. I think we're pretty much there and we're
20 very pleased about it.
21 Now, yes, we do have the issue that the
22 Commercial Customers raise and the Irrigation customers
23 raise as to whether or not there's a cross subsidy
24 between those two classes, but I point out to you that
25 the Idaho Supreme Court has also commented several times
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1 on the fact that our irrigation rates and our commercial
2 rates meet the tests that currently exist as far as rates
3 in Idaho are concerned, so if you want to do something in
4 that area, as you have commented in our prior rate cases,
5 a moving slowly towards some perceived goal, that's your
6 choice, but I don't think you need to embark upon some
7 big, exhaustive study which will be fraught with public
8 policy issues as far as Idaho Power Company is concerned,
9 so we would urge that you file your final report, close
10 this docket and then follow it up with whatever you
11 desire to do as far as internal reporting, et cetera is
12 concerned, but we don't see the need to further this
13 proceeding.
14 COMMISSIONER NELSON: Thank you.
15 Mr. Ripley, we, of course, have the, I think, the
16 necessity to make some decisions rather quickly because
17 you have rebuttal testimony that's due at least as this
18 docket is currently scheduled.
19 MR. RIPLEY: Well, but there's no time set
20 for when that rebuttal is due, that's our point. If you
21 want that, then we're going to have to get a couple of
22 months, because these are big issues that some of them
23 raise if you're going to dive into that morass, but,
24 again, I think there is a difference between your issuing
25 a procedural order and a substantive order. The
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1 substantive order you'd have to address all the various
2 issues. A procedural order to end this docket would
3 simply say we believe we have obtained out of this docket
4 the information necessary to complete our report to the
5 Idaho legislature. That would be a procedural order, not
6 a substantive, and I think that's what you should do in
7 my humble opinion.
8 COMMISSIONER NELSON: Okay,
9 Commissioner Hansen had a question.
10 COMMISSIONER HANSEN: Mr. Ripley, I agree
11 with you in part that the legislature in their
12 legislation did want a report from us which we did
13 provide, but then the input that we received back is many
14 members in the legislature questioned the reliability of
15 those numbers and in my mind, I felt the obligation that
16 we needed to pursue further and verify the reliability of
17 those numbers and I think in the discussions I've had
18 with legislators, that is the main concern they have is
19 how reliable are the numbers in this report and they do
20 have questions in certain areas, and so my question to
21 you is how far do you think the Commission really needs
22 to go to satisfy that particular question or concern of
23 the reliability of the numbers that have been provided?
24 MR. RIPLEY: Obviously, I am dancing around
25 one issue, Commissioner Hansen, that I don't like to
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1 throw dirt on my brother in utilities, but I think I have
2 to just a tiny bit here in order to answer your question
3 and that is I saw a higher degree of concern as to the
4 numbers insofar as they applied to Utah Power & Light
5 than I did to Idaho Power Company and so if those
6 legislators that you're speaking about came from
7 southeastern Idaho, then you might want to proceed with
8 something. I'm not suggesting what, I don't think that's
9 my call, but as far as Idaho Power Company is concerned,
10 you conducted an audit, your Staff conducted an audit,
11 and the audit report is filed. Again, we take minor
12 exceptions as to some of those audit reports, but, again,
13 I think the numbers that you have, even if you review the
14 testimony of the various intervenors that presented
15 testimony, no one is seriously challenging the numbers
16 that are in this proceeding.
17 Now, they're saying you might allocate them
18 a little bit differently and some of those issues can
19 only be resolved in restructuring, so I think what you've
20 got, Commissioner, as far as Idaho Power Company is
21 concerned, I think those numbers are certainly well
22 within the ball park, which is all you're ever going to
23 obtain unless you go to a general revenue requirement
24 proceeding and say, all right, we're going to use the
25 test year 199-blank and we're going to proceed with a
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1 general revenue requirement proceeding and out of that
2 general revenue requirement proceeding will come
3 up-to-date pricing, cost determinations which I don't
4 think you need to do, so I think you're there as far as
5 Idaho Power Company is concerned with the audit of the
6 Staff.
7 COMMISSIONER HANSEN: Do you think that you
8 can take one investor-owned utility and pursue in more
9 depth the allocations of their costs in those particular
10 categories without involving the other two; is that what
11 you're saying?
12 MR. RIPLEY: Of course, you can. This
13 Commission has the statutory right to proceed with an
14 investigation at any time it desires of any of the
15 utilities that are under its jurisdiction, so --
16 COMMISSIONER HANSEN: No, but what I'm
17 asking is if what you're saying is correct, if it's in
18 regard to, say, one particular utility, which you
19 suggested could be over in southeastern Idaho and it's
20 not Idaho Power, my question is how could the Commission
21 go on and fairly evaluate the issue of the one
22 investor-owned utility without it affecting the report or
23 the information already submitted from the others?
24 MR. RIPLEY: Well, that's exactly what
25 you've done, the Commission has done, since it's been in
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1 existence. It has taken each utility in a general
2 revenue requirement proceeding and looked at that utility
3 and made determinations that are pertinent only to that
4 utility. Cost allocation, for example, is different for
5 each of the three utilities, so immediately, I mean, you
6 don't even open the book up and you've got different
7 issues for different utilities. You have different
8 make-ups as to the types of customers that we have. The
9 type of irrigator on the Utah system may be entirely
10 different than the type of irrigator on the Idaho Power
11 system. All of those issues as to a specific utility can
12 only be addressed with the specific information that
13 pertains to that utility, so I have to say that you have
14 more than enough authority if there is a utility in your
15 jurisdiction that is causing concerns from the Idaho
16 legislature, you don't have to look at the other two
17 utilities to say, okay, I'm going to go in and do an
18 in-depth analysis and study of that utility and, again, I
19 don't like to say these things, but, I mean, as a lawyer
20 to you, I have to tell you, I just don't see your
21 concerns.
22 COMMISSIONER NELSON: Commissioner Smith.
23 COMMISSIONER SMITH: Oh, just one comment,
24 Mr. Ripley. I appreciate your view that you haven't
25 noticed any criticism of the Commission by the
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1 legislative interim committee, but I have to tell you
2 every time I've stood up there I felt like they wanted
3 more than I gave them, especially in the area of stranded
4 costs, so just an observation that I think they are
5 expecting something more from us than they have and I'm
6 not sure how to get it to them.
7 MR. RIPLEY: Well, and I can't answer that
8 either because our dilemma is the same as yours. You
9 tell me when and how you're going to restructure and then
10 I can start exploring stranded costs, but until I have
11 the first two answers, I can't give you the third because
12 I'm just dealing in conjecture.
13 COMMISSIONER SMITH: I think you've just
14 paraphrased my testimony before the legislative interim
15 committee, but I do think there is some sense of
16 dissatisfaction with the Commission and I'm not sure how
17 to exactly put my finger on what it is we should do.
18 MR. RIPLEY: I agree, but I also don't
19 believe that you should build up false hopes or create an
20 image that, oh, yeah. I think in the long run, I'll
21 always put my position even practicing before this
22 Commission, you tell it like it is and in the long run
23 you're going to be better off than trying to create
24 something that's not accurate. I think that's where you
25 are, because stranded cost is going to be a very bitter
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1 and contentious proceeding insofar as our company is
2 concerned, I would envision, depending on what occurs.
3 COMMISSIONER SMITH: My only other comment
4 was my remarks with regard to cost of service and
5 allocation among customer classes, I think, were mainly
6 directed to Water Power and Utah Power & Light because
7 with Idaho Power, we have recently had a rate case in
8 which those issues were explored and I agree with your
9 assessment that I think we're close, real close, so I
10 think my concerns with those regards were mainly with the
11 two utilities who have not had those type of proceedings
12 for over a decade.
13 MR. RIPLEY: And that's part of our
14 problem. Obviously, we are the biggest utility in the
15 state, but if you have some problems with the others,
16 then we're not too excited about getting involved when
17 they're not our problems and enough said.
18 COMMISSIONER NELSON: Mr. Richardson, would
19 you like to just adopt Mr. Ripley's comments as your
20 own?
21 MR. PESEAU: No, Pete.
22 MR. RICHARDSON: I'm glad you're still
23 there, Denny. Thank you, Mr. Chairman. Mr. Chairman, I
24 must confess to a great deal of surprise at Mr. Ripley's
25 comments and in particular, his suggestion that the
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1 unbundling report that they offered to you is a final
2 product and I'll just quote you from that report itself
3 suggesting just the opposite. Idaho Power in its
4 unbundling report states at page 2, "Unbundling any
5 utility company's costs will necessarily be an
6 evolutionary process. Separating costs by business
7 function will spark interest and further division and
8 analysis of each initial result in more detail. It is
9 expected that many iterations of cost analysis will
10 follow."
11 And quite frankly, we took our cue from
12 Idaho Power in filing our testimony as an invitation to
13 refine and provide new iterations of their cost
14 analysis. That's why I'm surprised at Mr. Ripley's
15 suggestion that what he gave to you, what the company
16 filed, is a final product. It's clearly not a final
17 product and all you need to do to realize that is examine
18 the testimony filed by the intervenors in this case.
19 They've suggested many specific, some
20 technical and some more global suggestions for
21 improvement, not criticisms, but Idaho Power says in its
22 study this is a first step and in that spirit, we went
23 forward and offered suggestions for step two, step three,
24 et cetera, and we frankly feel a little saddened that
25 Idaho Power believes that this thing is over, because
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1 they said it wasn't over when they initiated the process
2 by filing this unbundling study with the clear disclaimer
3 that this is just the beginning.
4 COMMISSIONER NELSON: If I could interrupt
5 you just a second there, many of the things you suggest
6 might be appropriate in a further examination of rates,
7 but is it necessary for this case, for this report to the
8 legislature?
9 MR. RICHARDSON: I believe it is,
10 Mr. Chairman. The legislature also contemplated periodic
11 reports and it clearly understood that there's not a
12 single snapshot at which you know all. This proceeding
13 is not, we're not going down the road to restructuring.
14 We're not circumventing policy decisions by the
15 legislature. We're going down the road to knowledge.
16 We're going down the road to understand what the costs
17 are.
18 COMMISSIONER HANSEN: Mr. Chairman, would
19 it be appropriate, could I just ask Mr. Richardson a
20 question?
21 COMMISSIONER NELSON: Commissioner Hansen.
22 COMMISSIONER HANSEN: The question I had is
23 you said the legislature in their legislation required
24 periodic reports, but also it sunsets in January the 1st
25 of 1999. Is it your view that that would end at January
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1 of '99, then, those reports?
2 MR. RICHARDSON: No, it's not,
3 Commissioner Hansen, and I'll tell you why. It relates
4 to Commissioner Smith's second question when she
5 initiated things this morning and that is what is your
6 policy responsibility and I think your policy
7 responsibility goes beyond January 1st of 1999 to provide
8 information not only to the legislature but to the
9 public. We have an obligation here to help people
10 understand what it costs these utilities to provide
11 service, to understand it in a meaningful way, and that
12 obligation certainly wouldn't terminate on an arbitrary
13 date on January 1st. Your continuing oversight authority
14 doesn't expire on January 1st, 1999.
15 I think your obligation would have existed
16 to provide this information independent of the
17 legislation requiring you to initiate the generic docket
18 out of which these three sub-dockets came, and as I
19 noted, we're not proceeding necessarily down the road to
20 restructuring, that may or may not happen, but even
21 counsel for Water Power said it is inevitable. Most
22 observers think some sort of restructuring is going to
23 happen and it may happen by forces outside of the
24 boundaries of the State of Idaho.
25 If we put our heads in the sand and pretend
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1 that's not going to happen, I think we've abrogated our
2 responsibilities, as Commissioner Smith very
3 appropriately noted, and I said that we're proceeding
4 down the road to knowledge and that's all, and how do you
5 get there, you get there through an iterative process.
6 In our testimony we don't ask for a
7 contested hearing. We don't think that's the most
8 efficient way to proceed here. We've made some very
9 concrete suggestions, some of which were based upon what
10 FERC is doing now in terms of allocating transmission and
11 distribution costs and that's the law of the land when it
12 comes to federal jurisdiction. Allocation between
13 distribution and transmission is done by [inaudible]
14 seven criteria now, not by an arbitrary kV number, so we
15 think that that's a good start, so a formal evidentiary
16 proceeding is not necessary. We agree with Mr. Ripley on
17 that. We don't think that's necessary.
18 We think that the suggestions we make on
19 improving the study should be incorporated by Idaho Power
20 in their study, then the parties get together again,
21 examine what the new study looks like and proceed from
22 there. It is truly an iterative and I think a
23 cooperative process.
24 MR. PESEAU: Pete, can I respond?
25 MR. RICHARDSON: Certainly.
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1 MR. PESEAU: This is Denny Peseau again.
2 MR. RIPLEY: I'm going to object. I don't
3 think we need to have experts now throwing in their
4 opinions.
5 MR. RICHARDSON: Mr. Chairman, prehearing
6 conferences are traditionally informal proceedings where
7 Dr. Peseau is not under oath, he's making an
8 observation. I think more information is better, not
9 less.
10 COMMISSIONER NELSON: We are in a position
11 here where everybody else has their experts at their ear
12 and can whisper in their ear and Dr. Peseau is somewhat
13 at a disadvantage there and so while I don't want this to
14 get out of hand, I think I'll let him make a suggestion.
15 Dr. Peseau?
16 MR. PESEAU: And I'll try to keep this just
17 very specific, but first, I don't see this study or the
18 recommendations that anyone has made as sort of a field
19 of dreams study where if we complete it and unbundle
20 everything that competition is going to come. I agree
21 that in Idaho, and especially with Idaho Power, there are
22 enough unique, at least, cost considerations that these
23 things have to be studied before you should decide
24 whether competition is good, but one thing we ought to
25 keep in mind is that it may very well be that certain
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1 sectors, such as generation, may be low cost; whereas,
2 competition would only be served, for example, for
3 residentials maybe on distribution services and if we
4 don't -- we do not have any ability now to determine
5 potentially competitive distribution services from those
6 that will stay regulated, so if the legislature, for
7 example, wanted to go competitive only in distribution,
8 we're not there and we're not yet able to get there, but
9 perhaps more importantly for this January 1, '99, we
10 wrote our testimony with that in mind and we've given on
11 page 25 of my testimony and again on Exhibit 306, we have
12 a schedule.
13 Mr. Ripley said that intervenors had just
14 broad claims. We make some broad claims, but we make
15 three specific suggestions that I think are required in
16 order to make this responsive to the legislators'
17 desires. In my opinion, the fixes that we need, the
18 three that I suggest, aren't great big and can be
19 accomplished in a month or two and I would suggest that
20 outside of a formal hearing they wouldn't be
21 controversial with respect to the utilities themselves.
22 I think they use these same techniques elsewhere, such as
23 marginal cost studies, but I don't think the study Idaho
24 Power has done, I think it complies with what it was told
25 to do and that was use the previous method approved in
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1 the last rate case.
2 Since that's happened, as Pete pointed out,
3 there are some changes that FERC will require of Idaho
4 Power for the demarcation of transmission and
5 distribution when it files its next transmission
6 regulated rate and I think we ought to anticipate that
7 and I see no harm to the company or anybody else by
8 implementing that now rather than going to the
9 legislature and say we've done this because we followed
10 the Uniform System of Accounts and then have someone
11 point out that FERC itself no longer uses the Uniform
12 System of Accounts in functionalizing transmission,
13 generation and distribution, it has other criteria and I
14 don't think it's a great big thing. I think it's a short
15 order thing to do the three things that we suggest.
16 I think that would comply, then, as all
17 parties have pointed out, I think we need to continue to
18 go further, but in terms of getting us off the hook for
19 the January 1, I don't agree with some of the utilities
20 that think that if we plop down the original studies that
21 no one is going to point out that FERC itself has changed
22 and, therefore, the studies are a little bit stale.
23 That's all I've got to say.
24 COMMISSIONER NELSON: Thank you. Well, I
25 think that Mr. Ripley pointed out that if we didn't
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1 include these suggested comments in our report other
2 people would do it for us.
3 MR. PESEAU: Right.
4 MR. RICHARDSON: Mr. Chairman, I might
5 address that and Ms. Hobson made the same suggestion and
6 so did Mr. Strong and Mr. Ripley that just simply attach
7 the testimony that has been filed to another report to
8 the legislature or summarize them and call it good, but
9 the problem with that is that the comments and testimony
10 that are filed suggests that improvements be made in the
11 study and by sending these comments and testimonies to
12 the legislature is simply moving the controversy to the
13 legislature over what the study should be and you're
14 asked to do the study, not send it back to the
15 legislature for them to do it, and the reason we filed
16 our comments is so that we can improve the study that
17 gets filed or submitted to the legislature and made
18 available to the public.
19 In terms of Mr. Ripley's suggestions that
20 you're going to open yourselves up to criticism because
21 you're getting ahead of the legislature, I've attended a
22 number of the restructuring committee meetings and I've
23 sensed a frustration on the legislators' part in terms of
24 what the universe of knowledge is and what the
25 ramifications of their decisions possibly could be and
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1 that's why I think it's important to go down the road and
2 examine all of the impacts of restructuring, including
3 stranded costs and there's a lot of ways you can look at
4 stranded costs and I think we should explore those and
5 explore the options and see what the possible
6 consequences are. Rather than saying we don't know how
7 to do it because you haven't told us how to do it just
8 begs the question. We were asked to tell the legislature
9 what ways you can do it and what are the possible
10 consequences and that's very doable.
11 Stranded costs are being addressed all the
12 over the country. There's lots of different ways to do
13 it. We could define that universe and apply the
14 different methodologies to Idaho and see what comes out
15 and provide that information to the legislature. Rather
16 than saying we're not going to talk about stranded costs,
17 I think we should talk about stranded costs. I think we
18 should understand what they potentially are and how we
19 can potentially address them. That's our job.
20 I mean, this body is the expert body on
21 these issues. The legislature says, well, how do we do
22 it and particularly on stranded costs and I think there
23 are methodologies, there are ways to plug in existing
24 numbers into those methodologies and see what the results
25 are and then tell the legislature what the potential
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1 results of their decisions could be and it's not frankly
2 that difficult, so I don't think you're getting ahead of
3 the legislature by talking about these issues. I think
4 the legislature specifically asked you to talk about
5 these issues and that's, I think, your obligation to do
6 that and our obligation to do that, and, again, we're not
7 asking for more hearings. We're asking for Idaho Power
8 to take the suggestions that are made by the parties, do
9 another iteration of their study, like they said that
10 they anticipated they would do from day one and get the
11 parties back together and go forward.
12 We're not going asking for contested
13 proceedings or this Commission to issue a definitive
14 order, but to explore all the issues and putting our
15 heads in the sand now I think would abrogate not only our
16 responsibility to the legislature given the legislation
17 we're working under, but abrogate our responsibility to
18 all the ratepayers.
19 Thank you.
20 COMMISSIONER NELSON: Thank you. Would you
21 agree that our responsibility today is to take your
22 comments under advisement and try to quickly give you
23 some direction about where we're going?
24 MR. RICHARDSON: Well, I think all the
25 parties are looking to you for some direction here and I
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1 don't think it's as Draconian as Idaho Power suggests in
2 that we're asking for a contested hearing. All we're
3 asking is that you tell Idaho Power take these comments,
4 these suggestions, revise your study and then get back
5 together and see what comes of it, and Idaho Power is
6 uniquely capable of fulfilling the suggestions we made in
7 our testimony as well as the other parties and then
8 coming back with another iteration of their unbundling
9 study. It's a process.
10 COMMISSIONER NELSON: Okay, thank you.
11 Do we have any questions for
12 Mr. Richardson?
13 If not, why, Mr. Ward, do you have comments
14 for us?
15 MR. WARD: Well, I think most of the issues
16 have been addressed here, so I won't spend too long
17 giving you my take on this. From my client's point of
18 view, we have always thought from the beginning that what
19 the legislature was asking the Commission to do is to
20 perform cost studies to the degree necessary to allow the
21 Commission or to allow the legislature to resolve some of
22 the factual arguments in front of them.
23 When we get to discussions of
24 restructuring, virtually every time it becomes a, it will
25 be good, it won't be good, it's so, it's not so and
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1 there's been no cost analysis to determine whether in
2 fact particular customer classes or particular utility
3 customers would benefit or not benefit from
4 restructuring.
5 Now, having said that, I think actually
6 both views of what the legislature is saying are
7 correct. I think the legislature wants more information
8 from the Commission. All the rest of us have an ax to
9 grind. They may recognize expertise, but they're not
10 going to recognize that it's unbiased and it's not. You
11 are their unbiased experts and I think they want your
12 advice on what in general the economics of restructuring
13 might look like, but Mr. Ripley is equally correct that
14 it's very clear they don't want the Commission making
15 that decision as to whether we're going to restructure,
16 at least not at this point, and so I think both views of
17 what the legislature has asked of you are correct and I
18 have to say that puts you in a very delicate position,
19 but I think you can resolve it.
20 I think we should go farther. I think we
21 should examine the issues that Dr. Peseau in particular
22 has raised and the other intervenors and I think perhaps
23 the way you resolve that is after you've satisfied
24 yourself that you have enough information to resolve the,
25 I'm going to call them, contested issues, maybe it's not
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1 a case contest, but after you resolve the contested
2 issues or at least have listened to the debate, then I
3 think you can issue a report to the legislature that says
4 we're not necessarily going to issue an order that says
5 the costs are X, Y and Z for the various categories, but
6 we can tell you, we can tell the legislature, that here
7 are two or three scenarios; in other words, if you
8 accept, let's say you accept, Dr. Peseau's argument about
9 the functionalization of transmission, the change in cost
10 is the following amount, and then I think the tough one
11 is you're going to have to deal with stranded costs and
12 stranded benefits. I just don't see any way around it.
13 It is the issue on which restructuring
14 turns or doesn't turn or at least the benefits of
15 restructuring and I think you may have to give that to
16 the legislature in the form of under theory A, there is X
17 benefits or X costs; under theory B, describe what it is,
18 the numbers are different in the following regard, but I
19 think trying to finesse that issue in order to not look
20 like you're taking sides in the restructuring debate I
21 think is not going to give the legislature what it
22 wants.
23 I think you can stay, if you choose,
24 neutral on the merits of restructuring, but give the
25 legislature what it needs to make its decision and I
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1 really think they -- I can't overemphasize my view of how
2 strongly they're relying on the Commission for factual
3 information. I don't know who else they would rely on.
4 I think that's very sensible, so I think we should go
5 forward. I think we should examine the issues that the
6 intervenors raised. I don't think you necessarily have
7 to change rates or even take up rate cases, but then, of
8 course, in my client's case we're not affected, so maybe
9 I don't have an unbiased view there, but I do think
10 you're going to have to go farther and I think you're
11 going to have to resolve the stranded cost issue or not
12 resolve it. You're going to have to put some dollar
13 figures on that issue and that would be my best advice,
14 but, obviously, I don't envy you the situation. It's
15 much easier where it's clearly your charge to resolve an
16 issue, issue an order and that's that. This is not quite
17 that easy.
18 That's all I have.
19 COMMISSIONER NELSON: Thank you. Any
20 questions?
21 Mr. Purdy, do you want to wrap this up for
22 us?
23 MR. PURDY: Sure, thank you. Mr. Chairman,
24 all my points have been made at least once, so for the
25 purpose of the record, I guess I'll just briefly
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1 summarize Staff's position. As you are, of course,
2 aware, Staff did conduct an audit of the data provided by
3 the three utilities in these cases and Staff's conclusion
4 is that, with the exception of some items related to
5 UP&L, the data that has been provided is reasonably
6 accurate. It provides meaningful information and
7 satisfies the letter of the statute which mandated this,
8 these reports, in the first place.
9 Staff is aware, of course, of the fact that
10 this is an evolutionary process. These numbers change
11 and the financial position and whatnot of the utilities
12 change and functionalization categorization changes as
13 well, but that, as the statute anticipates, we have to
14 have, to borrow a popular psychology term, we have to
15 have closure at some point, at least to one aspect of
16 this and I think that the suggestions made that we issue
17 essentially three reports, utility specific reports, are
18 good ones and that's what we should do and that we should
19 close out this case or these three cases.
20 I think that having reviewed the
21 testimonies that were filed, I think that certainly some
22 good issues were raised, but I also think that many of
23 those issues, in my opinion, fall outside the scope that
24 was intended for these proceedings. They pertain to more
25 cost of service matters or to restructuring, which is a
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1 bit of a presumption because, of course, we have not
2 restructured yet, we have not deregulated and as for now,
3 this book right here is still the law. Title 61 says
4 that you shall regulate utilities and you shall do it
5 under the existing paradigm until told otherwise. I
6 think, therefore, that to the extent that there are still
7 issues extant pertaining to specific utilities that the
8 best method for dealing with those issues would be
9 through the course some type of a rate proceeding.
10 Of course, Idaho Power is still under a
11 rate moratorium for another year or so and, as
12 Commissioner Smith noted, their rates were examined most
13 recently. Water Power and PacifiCorp, of course, are not
14 under any type of rate moratorium and it has been some
15 time since we've examined those rates and I think that
16 the best thing you can do for yourselves and for the
17 customers, the electric customers, of the state would be
18 to consider taking a look at those utilities' rates in
19 the manner that we always have, reassess the cost
20 allocation and the rate design and things of that nature,
21 so I guess to conclude, I think that we should close this
22 case up and to the extent that you feel it is necessary
23 to examine some utility specific issues or to examine
24 stranded costs or to examine anything else, then let's
25 initiate proceedings forthwith for that purpose.
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1 COMMISSIONER NELSON: Thank you. Do you
2 think that we'd have time to examine some of the issues
3 raised in some of the testimony, say Dr. Peseau's
4 testimony, before it was time to issue a report in this
5 case?
6 MR. PURDY: Well, and I think Mr. Ripley
7 touched on this, the problem is some of these issues are
8 pretty far reaching and fairly complicated. I think
9 theoretically, sure, we could conduct a hearing in the
10 next couple of months, allow the utilities the
11 opportunity to file rebuttal testimony and we could
12 conduct a hearing, if that's necessary, or if you don't
13 want to do a hearing, we could conduct a date by which
14 Idaho Power has to come up with another iteration, as
15 Mr. Richardson suggests, of its report, but then that
16 just begs further questions and further responses and I
17 guess I don't see an end to that process.
18 It is an evolutionary process and so, yes,
19 you could accomplish something along those lines prior to
20 January 1st of 1999, but I don't know what the point
21 would be of doing it in this case. I think at some point
22 we have to tell the legislature here's the data that has
23 been provided, here's what we think of it, and now we
24 recognize perhaps that there are other issues and we're
25 going to move on toward resolving those issues, but to
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1 require the utilities at this point to engage in what I
2 would have to assume are time-consuming, costly studies
3 based on the premise there will be deregulation or
4 restructuring is subject to question.
5 COMMISSIONER NELSON: Okay, thank you.
6 Any questions for Mr. Purdy? If not,
7 why --
8 COMMISSIONER SMITH: I have one.
9 COMMISSIONER NELSON: Yes.
10 COMMISSIONER SMITH: Actually, it's not a
11 question for Mr. Purdy, it's a question for everyone.
12 Mr. Budge raised the idea of having some kind of
13 technical conferences or meetings as opposed to our
14 traditional kind of Commission hearings and I guess I
15 would like feedback from those who would be affected on
16 is there merit to that idea and, if so, what would you
17 hope to accomplish? Would you combine that with
18 Mr. Richardson and Dr. Peseau's thoughts that companies
19 ought to look at the suggestions and incorporate some of
20 them and do runs and is a technical conference better
21 suited to that kind of activity than a Commission hearing
22 or it a terrible idea, one you wouldn't even consider,
23 and I guess I would appreciate some thoughts as to
24 whether that's the way to go about addressing some of the
25 concerns that have been raised with the companies'
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1 filings.
2 COMMISSIONER NELSON: Let's take a
3 five-minute break and get some responses to that.
4 (Recess.)
5 COMMISSIONER NELSON: Okay, we'll come to
6 order. I think maybe the best procedure I can think of
7 to get an answer to the question is to maybe just go
8 around, take them in order and see if that satisfies
9 Commissioner Smith.
10 Mr. Ripley.
11 MR. RIPLEY: Let me paraphrase the question
12 to make sure that I'm answering it. The question is
13 whether or not some of the technical issues raised by the
14 intervenors in their testimony can best be addressed in
15 technical workshops? I'll answer that by postulating
16 three issues. No. 1, if it is a cooperative effort, I
17 definitely believe that having it under a docket is the
18 wrong way to go. It immediately becomes adversarial. We
19 get information requests, we get requests for information
20 and it just doesn't work, so we're opposed to it being
21 done by a docket.
22 If it is truly a cooperative effort where
23 there is no docket and the parties have simply pledged
24 their desire to work on some of these issues and in the
25 event that doesn't work then it's reported back and a
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1 docket is opened, then I think that has some merit.
2 That's what we suggested in this proceeding and, again,
3 without trying to affront anyone, we went to two
4 workshops where the answer from the intervenors was
5 essentially, well, we're not prepared yet to really
6 discuss those issues, so we're obviously prepared and are
7 always prepared.
8 The collaborative process is the right way
9 to go but without the threat of a gun to our head, so it
10 shouldn't be a docket so, therefore, all of the formal
11 discovery procedures should not be invoked and we can try
12 to work through some of these things.
13 Now, in reference to time, I think I have
14 to comment that it is August 1 and some of our key
15 personnel take vacations. I know that's terrible for
16 utilities to say and August is the month when a lot of
17 those vacations occur, including my own, and I don't want
18 to say that we can proceed with a fast determination on a
19 lot of issues in time for a report, we may or may not,
20 but I think you've got to look at least at holding those
21 type of proceedings sometime in September and I haven't
22 talked to Mr. Gale and he usually kicks me at about this
23 time, but anyway, that's it.
24 COMMISSIONER NELSON: Okay, thank you.
25 Mr. Purdy?
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1 MR. PURDY: Yes, thank you. My response is
2 that I would have all the same concerns about that type
3 of process that I've already identified. I think that
4 Mr. Budge's suggestion certainly has merit and I don't
5 mean to criticize that and I also wanted to add that some
6 of the ideas that the Commercial Utility Customers and
7 the ICIP came up with, I didn't mean to suggest that you
8 couldn't get useful information out of doing further
9 iterations and further studies. My only point was we
10 begin cases and we end cases, these are formal cases. As
11 Mr. Ripley has pointed out, that brings about certain
12 requirements, one of which is that you end them at some
13 point and it's usually statutorily defined as it is in
14 this case, so I'm just concerned that we don't drag this
15 on and on and on and I think that if we want to resolve
16 some of these issues that we need to be very careful in
17 the future about defining the issues very specifically
18 and making them utility specific as much as we can so
19 that we don't flounder, so that we don't try and attempt
20 to solve all of the generic issues that are facing the
21 electric industry at one time in one proceeding and I
22 think that's where we've gotten into trouble in the
23 past.
24 I think that moving forward we need to be
25 more refined in how we approach these, so my response is
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1 a workshop could be of some use. Let's be very careful,
2 though, in how we structure it and let's get some closure
3 to these three dockets that we now have pending before
4 you.
5 COMMISSIONER NELSON: Thank you.
6 Mr. Ward.
7 MR. WARD: Well, I'm probably going to be
8 the minority view, maybe singular minority, in suggesting
9 that while workshops in a cooperative process probably
10 will help you a little bit, perhaps there are areas where
11 the utility would agree in response to suggestions of the
12 intervenors and then it's just a matter of working out
13 the numbers and that can be a cooperative effort, but
14 when we get to the issues where there is a disagreement
15 among the parties, it's been my experience that a
16 workshop approach is pretty much worthless.
17 You don't get anything resolved. All
18 parties come, reiterate their position and nothing
19 happens, so if you want to get to the answer to a
20 legislator of what kind of market price would my
21 irrigator in my district have to have in order to be
22 ahead under restructuring, to me you have so many
23 contentious issues to resolve to answer that question
24 that you're going to have to do it in a hearing. As I
25 say, I may be a minority of one, but that's what I think.
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1 COMMISSIONER NELSON: Mr. Richardson.
2 MR. RICHARDSON: Thank you, Mr. Chairman.
3 As we pointed out in Dr. Peseau's testimony, we believe a
4 workshop is appropriate, but the necessary prerequisite
5 to a workshop is for Idaho Power to incorporate the
6 suggestions of the parties in another iteration of its
7 study and then have another workshop to discuss and move
8 on to the next step, but a workshop at this point when we
9 all have had the opportunity to say all right, here are
10 the fixes that we think should be made to the study that
11 we have in front of us would be redundant.
12 We've essentially accomplished what we
13 would have in a workshop with what's in front of us. Now
14 it's time for the next iteration to be drafted by the
15 power companies and then have a workshop, but I also
16 share Conley's concern that workshops can fail because of
17 inertia or whatever and so I think it is important to
18 still maintain some structure in terms of having an open
19 docket, an umbrella under which the workshops would
20 proceed.
21 COMMISSIONER NELSON: It sounds like you're
22 saying that we would have to define what that next
23 iteration would include.
24 MR. RICHARDSON: I don't think you need to
25 issue an order necessarily defining in particular. I
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1 think you could issue an order or a direction from the
2 Bench saying incorporate the suggestions of the parties
3 to the best extent you can and then republish your report
4 and then have another workshop, have a workshop where the
5 technical folks can get together and have had an
6 opportunity to review the next iteration before the
7 workshop so that it can be productive, but, yeah, I think
8 you do need to give some direction to the utilities, but
9 I don't think you need to issue an order saying we hereby
10 find that you must do X, Y and Z.
11 COMMISSIONER NELSON: Thank you.
12 Mr. Budge?
13 MR. BUDGE: Mr. Chairman, I don't disagree
14 with the comments of Mr. Ward. I think the workshop we
15 envision would come as a logical step within the existing
16 docket. If you don't have that, then there's no real
17 opportunity for closure and the information to come to
18 the Commission that could be appropriately included in
19 the report and undoubtedly, there -- while, hopefully,
20 the workshop would narrow and focus the issues and permit
21 a number of them to be resolved, there undoubtedly will
22 be some areas of disagreement, that you may not
23 necessarily resolve that disagreement, but you'll be able
24 to identify it for purposes of further reports, so I
25 think within the existing docket we should continue on
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1 with some type of technical workshop and see if we can
2 get some benefit from it, because we really haven't had
3 but a week or so with all the issues on the table and it
4 will take some time to identify them and work through
5 them.
6 I certainly don't disagree with some of
7 Mr. Ripley's comments that Idaho Power may not
8 necessarily be a party to all of those issues and it
9 would seem that it would be helpful for the Commission to
10 provide some guidance to us in approaching the workshop
11 on identifying the parameters of the issues that should
12 be addressed in a workshop and we continue to feel if
13 we're going to be successful within the time constraints
14 and in a workshop-type scenario that we address those
15 that truly relate to the cost unbundling issues and not
16 attempt to stray into cost of service, rate design, those
17 types of issues that I think are beyond the scope of this
18 proceeding.
19 Thank you.
20 COMMISSIONER NELSON: Thank you.
21 Mr. Williams.
22 MR. WILLIAMS: Mr. Chairman, we would echo
23 many of the same comments of Mr. Ward and Mr. Budge. I
24 think for workshops to be successful they have to be
25 delineated specifically on the issues that they're going
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1 to address and that needs to come from the Commission.
2 That are several issues, such as the allocation labor
3 studies and the economics of unbundling, that if those
4 are going to be issues that we address going forward,
5 which we've recommended, then this Commission needs to
6 order that those issues be addressed and that the
7 utilities provide the next iteration and then a workshop
8 can step in and maybe help shorten some of the discovery
9 process.
10 If, on the other hand, the Commission just
11 says, well, we're going to wrap things up and everything
12 is going to go into a workshop format, I would agree with
13 Mr. Ripley that that would accomplish very little.
14 COMMISSIONER NELSON: Ms. Hobson.
15 MS. HOBSON: Thank you, Mr. Chairman. I am
16 told and Mr. Ripley confirms the fact that this process
17 apparently has been tried earlier in this proceeding
18 without great success. It's Utah Power & Light's view
19 that if we were to go ahead with workshops at this time,
20 as Mr. Williams just said, those workshops, the scope of
21 them, should be carefully delineated so that the parties
22 understand what it is that they are about.
23 We believe that the issues that can
24 appropriately be addressed in those workshops should be
25 pretty much limited to procedures for functional
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1 separations, the pros and cons of different approaches
2 and those sorts of issues. We do not believe that the
3 workshop is the place to address the kinds of things that
4 were raised in Dr. Yankel's testimony about the cost
5 allocation issues between classes, the rate design issues
6 and so forth and if I correctly understood Mr. Budge, I
7 think maybe he agrees with that or at least part of
8 that.
9 We are also concerned, as Mr. Ward is, that
10 if we are going to be talking about global policy issues
11 in those workshops that we will find ourselves simply
12 debating the same positions that we've debated elsewhere
13 without really making any progress, so we think it's a
14 fairly limited scope of issues that can successfully be
15 addressed. We would need your delineation of those
16 issues.
17 COMMISSIONER NELSON: Thank you.
18 Mr. Strong.
19 MR. STRONG: Mr. Chairman, I'm in the
20 unusual position of joining the minority of one of
21 Mr. Ward over here. Washington Water Power historically,
22 I should preface this, has always had a very open
23 attitude in my experience and always been quite willing
24 to talk to people about a whole range of issues and from
25 a lawyer's perspective has been quite generous in what it
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1 has revealed to inquiring parties about its company, but
2 with that preface, we have just gotten through this
3 process in the State of Washington, had some workshops in
4 which all the utilities and intervening parties
5 participated and it was not a particular productive
6 exercise, I understand, and part of the reason is that
7 such exercises aren't productive unless you can outline,
8 as Conley alluded to, some particular scenarios; however,
9 embedded in those scenarios are implied policy judgments
10 and stranded cost is a good example because it starts
11 with an implied policy judgment about who pays stranded
12 costs if there are determined to be any and it just gets
13 worse from that point forward.
14 I mean, you start talking about the
15 customer billing costs, you know, is it $.52 or is it
16 some other number, does it imply some degree of service
17 that isn't there. You get into the sorts of discussions
18 that have been going on in the telephone industry. I
19 mean, the problem is without, I think as the other
20 parties suggested, without an extremely strong structure
21 to those sorts of workshops it dissolves into what's been
22 going on here, kind of a philosophical discussion or a
23 discussion which revolves around the agenda that
24 particular parties have and no meaningful numbers come
25 out of it or categories or ways of looking at the issue,
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1 so we're somewhat skeptical, maybe that's even an
2 understatement, highly skeptical, about the usefulness of
3 that sort of process.
4 In that sense, I guess I would agree with
5 Staff that at some point we've got to say this proceeding
6 is going to come to an end and we've done as much as we
7 can in the context of this proceeding and close the
8 dockets in these proceedings.
9 COMMISSIONER NELSON: Okay, thank you.
10 Well, at this point I think the ball is clearly in our
11 court to give you some direction on where we're going
12 from here. I certainly would like to thank you for your
13 comments today and for the testimony you've filed. I
14 think that it gives us a lot to think about and to
15 discuss about where we do go from here, so with that, I
16 think I'll adjourn this prehearing conference and the
17 parties will be advised as to further scheduling, unless
18 there's something I've missed.
19 Okay, thank you very much.
20 (The prehearing conference adjourned
21 at 11:27 a.m.)
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1 AUTHENTICATION
2
3
4 This is to certify that the foregoing
5 prehearing conference held in the matter of the
6 Commission's own investigation into the costs of
7 providing electric service of Idaho Power Company, Utah
8 Power & Light Company and The Washington Water Power
9 Company, commencing at 9:20 a.m., on Thursday, July 23,
10 1998, at the Commission Hearing Room, 472 West
11 Washington, Boise, Idaho, is a true and correct
12 transcript of said prehearing conference and the original
13 thereof for the file of the Commission.
14
15
16
17
CONSTANCE S. BUCY
18 Certified Shorthand Reporter #187
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