20020910Boise Hearing - Vol 1.pdf

1 BOISE, IDAHO, TUESDAY, SEPTEMBER 10, 2002, 9:30 A. M.

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4 COMMISSIONER SMITH: Good morning, ladies

5 and gentlemen. This is the time and place set for

6 hearing on reconsideration in Case No. PAC-E-02-1,

7 further identified as in the matter of the application of

8 PacifiCorp dba Utah Power & Light Company for approval of

9 changes to its electric service schedules.

10 We'll begin this morning by taking the

11 appearances of the parties beginning with PacifiCorp.

12 MR. FELL: My name is James Fell. I'm with

13 Stoel Rives and I represent PacifiCorp.

14 COMMISSIONER SMITH: And the Commission

15 Staff.

16 MR. WOODBURY: Scott Woodbury, Deputy

17 Attorney General.

18 COMMISSIONER SMITH: And I understand that

19 Intervenor Timothy Shurtz is present by telephone.

20 MR. SHURTZ: Yes, I am.

21 COMMISSIONER SMITH: Okay, and is there

22 anyone representing the Irrigation Pumpers? I see no

23 one. Or is there anyone representing Monsanto? I

24 believe those are the other intervenors in our case and

25 the record will show that they are not participating in

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CSB REPORTING COLLOQUY
Wilder, Idaho 83676

1 today's reconsideration hearing.

2 Are there any preliminary matters that need

3 to come before the Commission before we take the case up

4 this morning?

5 MR. WOODBURY: None that I'm aware of.

6 MR. FELL: No, thank you.

7 COMMISSIONER SMITH: Mr. Fell, we'll go to

8 you, then.

9 MR. FELL: Thank you, Madam Chair. We have

10 three witnesses and our first witness is Mr. Douglas

11 Larson.

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13 D. DOUGLAS LARSON,

14 produced as a witness at the instance of PacifiCorp,

15 having been first duly sworn, was examined and testified

16 as follows:

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18 DIRECT EXAMINATION

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20 BY MR. FELL:

21 Q Mr. Larson, will you please state your name

22 and position with PacifiCorp?

23 A Yes, D. Douglas Larson and I am the vice

24 president of regulation for PacifiCorp.

25 Q Mr. Larson, have you prepared prefiled

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CSB REPORTING LARSON (Di)
Wilder, Idaho 83676 PacifiCorp

1 testimony for this reconsideration hearing?

2 A I have.

3 Q And have you also -- are you also

4 sponsoring Exhibit Nos. 26 through 30?

5 A I am.

6 Q Mr. Larson, if I were to ask you today the

7 questions that are contained in your prefiled testimony,

8 would your answers be the same?

9 A They would.

10 MR. FELL: We move that Mr. Larson's

11 prefiled testimony be spread on the record as if read.

12 COMMISSIONER SMITH: If there's no

13 objection, it's so ordered.

14 MR. FELL: And we move for the admission of

15 Exhibits 26 through 30.

16 COMMISSIONER SMITH: Without objection,

17 those exhibits will be admitted.

18 (PacifiCorp Exhibit Nos. 26 - 30 were

19 admitted into evidence.)

20 (The following prefiled testimony of

21 Mr. D. Douglas Larson is spread upon the record.)

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CSB REPORTING LARSON (Di)
Wilder, Idaho 83676 PacifiCorp

1 Q Please state your name, occupation and

2 business address.

3 A My name is D. Douglas Larson. My business

4 address is One Utah Center, Suite 2300, 201 South Main

5 Street, Salt Lake City, Utah 84140-2300. I am the Vice

6 President of Regulation for PacifiCorp (or the "Company").

7 Introduction

8 Q Are you the same D. Douglas Larson who

9 submitted direct testimony in this proceeding?

10 A Yes.

11 Purpose of Testimony

12 Q What is the purpose of your testimony on

13 reconsideration?

14 A The purpose of my testimony is to respond

15 to the Commission's decisions in Order No. 29034 that

16 Rule 102 of the Commission's Utility Customer Information

17 Rules applied to the Company's Application to recover its

18 deferred excess power costs and that the Company should

19 pay a credit to each customer of $20.00, or a total of

20 $1,087,720, as a penalty for failure to comply with that

21 Rule. Rule 102 requires that a utility provide customers

22 with individual billing notice of an application for a

23 general or tracker rate change and issue a press release

24 containing the same information required in the billing

25 notice. I will describe generally the role that the

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1 Regulation Department plays with respect to customer

2 communications in the context of regulatory filings and

3 the efforts we make to fully and clearly inform our

4 customers of pending and approved rate changes. I will

5 explain that at the time of the filing in this case the

6 Company consulted with

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1 counsel about the applicability of Rule 102 and based on

2 counsel's advice determined that it did not apply. I

3 will then offer as exhibits the press releases, comments

4 and other materials on file with the Commission

5 demonstrating that customers were made aware of this

6 filing. In addition, I will introduce the other Company

7 witnesses on reconsideration and briefly discuss the

8 issues they will address.

9 Introduction of Witnesses

10 Q Please list the other Company witnesses on

11 reconsideration and provide a brief description of the

12 subjects they will cover.

13 A The Company witnesses on reconsideration

14 will be:

15 David Eskelsen, who discusses the Company's

16 customer communications strategy both in general and with

17 respect to this proceeding specifically. Mr. Eskelsen

18 will also address the direct customer communications that

19 took place in this proceeding by way of local news media

20 contacts and articles and editorials resulting from those

21 contacts.

22 Glen Pond, who describes direct customer

23 communications that took place in connection with this

24 proceeding by way of informational meetings and other

25 local activities.

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1 Regulation Departments Role Generally Respecting Customer

2 Communications

3 Q Does the Regulation department take any

4 actions prior to a regulatory filing to incorporate

5 customer communications into the filing plan?

6 A Yes. At least one month before the planned

7 filing date for a significant regulatory

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1 matter, the Regulation department consults with the

2 Corporate Communications department regarding the

3 communications plan specific to that filing. The two

4 departments then work closely together throughout that

5 proceeding to develop and implement that communications

6 plan.

7 Q What are the objectives of the

8 communications plan?

9 A The communications plan is intended to

10 fully and clearly inform customers of the rate filing.

11 Obviously, we cannot include in a press release or other

12 customer communication the amount of detail we include in

13 our rate filing, but we summarize the major features of

14 the filing.

15 Q What role does the Regulation department

16 generally play with respect to implementation of a

17 communications plan?

18 A Before a filing is made, the Regulation

19 department generally makes an effort to contact customer

20 groups to provide them with information about the

21 proposed filing. Regulation also consults with legal

22 counsel to ensure compliance with the relevant state

23 regulatory notice requirements. In addition, we help

24 draft information regarding the filing that is provided

25 to the Company's call centers to use in response to

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PacifiCorp

1 customer telephone calls. Finally, once a filing has

2 been made, representatives of the Regulation department

3 often follow up with specific customer groups regarding

4 the impact of that filing as it relates to them.

5 Q Aside from Commission Rules, does the

6 Company have its own reasons for informing customer

7 groups of planned rate filings?

8 A Yes. In the first place, customers have

9 told us they need this information for

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PacifiCorp

1 budgeting and business planning purposes. Cooperating

2 with them in this way improves our customer and community

3 relations. Also, when we inform them in advance of a

4 filing we find it is easier to work with them in

5 fashioning settlements of their issues. We communicate

6 with our customers because it is in our own self-interest

7 to do so. Among other things, it gives us an opportunity

8 to talk to them about our customer service and explain

9 why the proposed changes to customer rates are necessary.

10 Company Contact with Interested Parties Regarding This

11 Filing

12 Q Did you have contact with interested

13 parties before this particular filing was made?

14 A Yes. On November 19, 2001, Glen Pond and I

15 met in Boise with several representatives of the

16 irrigation class, Commission staff representatives, and

17 others to discuss generally the background and context of

18 the proposed filing. Representative Dell Raybould also

19 attended this meeting.

20 Q What was the purpose of the November 19

21 meeting?

22 A The meeting was conducted as a workshop.

23 In addition to general information about the proposed

24 filing, the Company presented its proposal with respect

25 to rate design changes for its irrigation customers.

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PacifiCorp

1 Those in attendance at the meeting were invited to

2 comment and make recommendations.

3 Q Did the Regulation department arrange other

4 contacts with customer groups about this filing?

5 A Yes. Glen Pond and Robert Smead, our local

6 representatives in southeastern

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1 Idaho, had several information meetings with customers

2 regarding this case both before and after it was filed.

3 In addition, before the case was filed, Mr. Pond and Bob

4 Lively, manager of the Regulation department, met with

5 the Company's Customer Advisory Group and discussed the

6 filing in the context of a discussion regarding the

7 Company's excess power costs that were then being

8 deferred. Mr. Pond will testify about these meetings.

9 Company's Efforts to Comply with Notice Requirements

10 Q Prior to filing its Application in this

11 proceeding, what action did the Company take to ensure

12 compliance with the Commission's notice requirements?

13 A Before the Application was filed,

14 PacifiCorp consulted with its counsel regarding the

15 applicability of Idaho Rule of Procedure 122, which

16 requires 60 days advance notice of intent to file a

17 general rate case. Counsel advised PacifiCorp that Rule

18 122 did not apply to this filing because the filing did

19 not meet the definition of a general rate case.

20 Q What notice did the Company provide upon

21 filing its Application?

22 A The Company complied with the notice

23 requirements prescribed by Rule of Procedure 123 and

24 Idaho Code Section 61-307, which require that the

25 proposed schedules be filed with the Commission at least

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1 30 days before their effective date and be kept open for

2 public inspection at the Company's local offices. In

3 addition, the Company issued a press release on January

4 7, 2002 describing the Application. This press release

5 is included in Exhibit 31 to the testimony of Mr.

6 Eskelsen. The press release separately explained the

7 increase in the BPA

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1 exchange credit, the request for a surcharge to recovery

2 deferred excess power costs and the amount of excess

3 power costs sought to be recovered. The press release

4 also explained the proposed cost of service changes and

5 rate mitigation plan. The rate mitigation plan, if

6 adopted as proposed, would have ensured that no customer

7 class would receive a rate increase during the period of

8 the power cost surcharge. On a net basis, the rate

9 filing did not propose a rate increase for any customer

10 class.

11 Q Did the Company consider whether any other

12 notice was required in this proceeding?

13 A Yes. Within a few days after filing its

14 Application, the Company consulted with counsel regarding

15 the applicability of Rule 102 of the Commission's Utility

16 Customer Information Rules. Counsel advised the Company

17 that, because this filing did not meet the definition of

18 either a general or a tracker rate case, bill-stuffer

19 notice under Rule 102 was not required. Exhibit No. 26

20 is a copy of the e-mail correspondence regarding this

21 advice.

22 Q Did the Company rely on that advice?

23 A Yes. Based on that advice, the Company did

24 not provide bill-stuffer notice to customers regarding

25 its Application. However, as explained in more detail by

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PacifiCorp

1 Mr. Eskelsen, although PacifiCorp understood that

2 bill-stuffer notice was not required, the Company

3 nevertheless considered whether and when to provide

4 customers with individual notice of its rate change. In

5 our experience, customers can be confused by multiple

6 notices regarding the same rate filing. With each

7 notice,

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1 they believe there is a new rate change. This is a

2 situation where we run into a conflict between providing

3 early communication to our customers and providing clear

4 communication. When multiple communications are

5 understood by customers as multiple rate changes, the

6 clarity of the communications is compromised. Because

7 the Company was planning to provide individual customer

8 notice of the final, approved rate change, we decided not

9 to provide individual notice in advance of the change.

10 We chose to focus the individual notice on the approved

11 change because that change would not be subject to

12 adjustment - as filed changes are - and the new rates

13 would soon be reflected in customers' bills.

14 Q Did PacifiCorp notify customers after the

15 Commission approved the proposed Stipulation and

16 Settlement in this proceeding?

17 A Yes. The Commission Order approving the

18 proposed Stipulation and Settlement in this proceeding

19 was issued on June 7, 2002 and, as a result, customers'

20 rates were changed effective with service on and after

21 June 8, 2002. PacifiCorp notified customers individually

22 regarding the nature of those changes by way of a message

23 printed directly on their bills.

24 Amount of Penalty

25 Q If the Commission decides that Rule 102

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1 applied in this case, do you believe the amount of the

2 penalty assessed is reasonable under the circumstances?

3 A No. The circumstances of this case do not

4 warrant assessment of a penalty, particularly not a large

5 one. The Company did not ignore the Commission's

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PacifiCorp

1 Customer Information Rules or take lightly its

2 responsibility to communicate with customers about this

3 filing. We sought and followed the advice of counsel

4 regarding legal notice requirements, we developed and

5 followed a customer communication plan for this filing,

6 we issued press releases and met with customer groups,

7 and there was significant public comment on this filing

8 and participation in the public hearings. If there was a

9 violation of Rule 102, it was the result of a good faith

10 misreading of the Rule, not the result of indifference to

11 the Commission's Rules or customer communications. Also,

12 the lack of individual notice did not deprive the

13 Commission of a full airing of the proposed rate change

14 and the issues that change presented. Clearly, customers

15 knew about this filing and expressed themselves both by

16 way of written comments and protests at the public

17 hearings. No one has claimed that because of the lack of

18 individual notice, a material issue did not get raised or

19 considered.

20 Moreover, to my knowledge, the Commission has never

21 before treated a utility so harshly for a violation of

22 its Rules, or even for a violation of the utility's own

23 tariffs and the public utility statutes. The largest

24 penalty of which I am aware is $75,000 assessed against

25 Washington Water Power for failing to comply with its own

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PacifiCorp

1 line extension tariffs for a period of 41 months. The

2 difference in size of these penalties is striking and

3 something I cannot understand or explain.

4 Exhibits

5 Q Are there any exhibits you would like to

6 introduce into the record?

7 A Yes. Each of the following exhibits

8 contains information obtained from the

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1 Commission's file in this proceeding.

2 Q Please describe Exhibit No. 27.

3 A Exhibit No. 27 includes all of the press

4 releases issued by the Commission in this proceeding.

5 These press releases are in addition to the press

6 releases that were issued by the Company as described in

7 Mr. Eskelsen's testimony. The first of these Commission

8 press releases was issued on January 16, 2002. It

9 announces and describes the Company's Application for

10 recovery of its excess power costs, the increase in the

11 BPA exchange credit, and the overall percentage change

12 from current rates that would result if the Application

13 were approved as filed. The January 16 release also

14 announces the procedural schedule set at that time for

15 expedited consideration of implementation of the BPA

16 credit and for separate consideration of the remainder of

17 the Company's filing, as well as the means by which the

18 public could participate and/or comment on the

19 Application. The second release, issued on January 31,

20 2002, announced the implementation of the BPA credit as

21 of February 1 and reiterated that the remainder of the

22 Company's filing was still under review by the

23 Commission. On February 27, 2002, the Commission issued

24 a third press release that described again the components

25 of the Company's filing that remained outstanding. The

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1 February 27 release also explained that settlement

2 negotiations were underway among the parties and

3 announced the preliminary hearing dates that had been

4 scheduled in the case. On April 12, 2002, a fourth press

5 release was issued describing the Commission's decision

6 that PacifiCorp's Application did not violate the rate

7 increase

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1 moratorium in the Commission's Order on the ScottishPower

2 merger. Ten days later, on April 22, 2002, the

3 Commission issued a fifth press release announcing

4 specific information regarding the dates, times and

5 locations that workshops and public hearings would be

6 held regarding the settlement that had been reached among

7 the parties. Finally, on June 6, 2002, the Commission

8 issued its final press release in this proceeding

9 announcing its decision to approve the settlement and

10 explaining the overall impact the surcharge, BPA credit,

11 and modified rate mitigation adjustment would have on

12 customer rates.

13 Q Please describe Exhibit No. 28.

14 A Exhibit No. 28 includes all of the written

15 public comments submitted to the Commission regarding the

16 Company's rate filing. The Commission received

17 approximately 30 written comments in this proceeding from

18 PacifiCorp residential, industrial and irrigation

19 customers, as well as their legislative representatives.

20 The letters demonstrate that customers were well aware of

21 the pending request for recovery of excess power costs

22 and the other major issues presented by the Company's

23 Application.

24 Q Please describe Exhibit No. 29.

25 A Exhibit No. 29 includes the lists of public

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1 witnesses that testified at the May 6 and 7, 2002 public

2 hearings in this proceeding. As the Commission is aware,

3 more customers attended these hearings than signed up to

4 testify. The fact that these hearings were well attended

5 by customers and their legislative representatives

6 further demonstrates that customers were well aware of

7 the pending request for

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1 recovery of excess power costs and the other major issues

2 presented.

3 Q Please describe Exhibit No. 30.

4 A Exhibit No. 30 is a copy of intervenor

5 Timothy Shurtz's request for intervenor funding in this

6 proceeding. In that request, Mr. Shurtz describes his

7 activities in communicating with PacifiCorp customers

8 about the pending rate change. Mr. Shurtz and others

9 were active in stimulating interest in this case and

10 particularly in opposing the Company's recovery of its

11 excess power costs.

12 Q Does this conclude your testimony?

13 A Yes.

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1 (The following proceedings were had in

2 open hearing.)

3 MR. FELL: Mr. Larson is available for

4 cross-examination.

5 COMMISSIONER SMITH: Mr. Woodbury, do you

6 have any questions?

7 MR. WOODBURY: Thank you, Madam Chair.

8

9 CROSS-EXAMINATION

10

11 BY MR. WOODBURY:

12 Q Mr. Larson, you're the vice president of

13 regulation for PacifiCorp?

14 A Yes.

15 Q And how long have you held that position?

16 A About 18 months.

17 Q Eighteen months? As vice president of

18 regulation, is it one of your duties and responsibilities

19 to assure that the Company's rate filings comply with the

20 requirements of the Commission's rules and regulations?

21 A It is.

22 Q And one of those sets of rules are the

23 Commission's customer information rules?

24 A It is.

25 Q And you're familiar with the Commission's

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 customer information rules?

2 A I am.

3 Q You characterize the Company's application

4 on page 1, line 13 as an application to recover its

5 deferred excess power costs. Wasn't it also an

6 application to pass along a BPA exchange credit?

7 A The application consisted of three parts:

8 the excess power costs, the BPA credit and some

9 realignment to the class cost of service.

10 Q You presented also a cost of service study

11 and a realignment of all of the customer classes or just

12 the irrigation class?

13 A I think the cost of service study had

14 adjustments that related to all of the various classes.

15 Q And your application also included a rate

16 mitigation plan?

17 A That was one of the elements of looking at

18 all three of the components that I talked about

19 previously.

20 Q In your opinion, does Rule 102 of the

21 Commission's customer information rules require only

22 advance notice to customers of general rate cases and

23 trackers?

24 A That is my reading of it and as I stated in

25 my testimony and also in Exhibit 26, I didn't solely rely

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 on my personal reading of that, but I sought advice from

2 legal counsel and Exhibit 26 shows those correspondences

3 from legal counsel where I was advised that this case was

4 neither a general rate case or a tracker filing and,

5 therefore, we were not required to file a bill stuffer

6 notice.

7 Q Wouldn't you agree that the title of

8 Rule 102 is more general in that it says notices to

9 customers of proposed changes in rates? Yes?

10 MR. FELL: Madam Chair, could counsel for

11 the Staff show Mr. Larson what he is referring to?

12 (Ms. Barker approached the witness.)

13 MR. FELL: Madam Chair, I'd like to

14 interpose an objection that this not go too far. The

15 witness is not a lawyer and relied on counsel for the

16 interpretation of the rule. He can give his own opinion

17 based on his experience in his position.

18 COMMISSIONER SMITH: And he can certainly

19 read the title.

20 Q BY MR. WOODBURY: What is the title to

21 Rule 102?

22 A "Notices to Customers of Proposed Changes

23 in Rates" and then obviously right below that underlined

24 is "Customer Notice of General Rate Cases and" --

25 Q Let's go down to the purposes and effects

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 of the rule. Under 102.05, does it state that the stated

2 purposes and effects of the rule are to encourage wide

3 dissemination to customers of information concerning

4 proposed rate changes for utility services?

5 A That's correct.

6 Q And it says "proposed rate changes,"

7 doesn't it?

8 A Proposed rate changes, yes.

9 Q Yes. To your knowledge, did Avista and

10 Idaho Power ask for recovery of deferred excess power

11 costs incurred during 2000-2001?

12 A I'd like to go back and I guess just try to

13 add a couple of things to my answer of your previous

14 question and that is that --

15 Q I think you answered my question. I think

16 you have counsel who can ask you questions on redirect.

17 A Okay.

18 Q We're moving on. To your knowledge, did

19 Avista and Idaho Power ask for recovery of their excess

20 power costs?

21 A I think Idaho Power asked for recovery of

22 theirs through a PCA mechanism and I'm not familiar with

23 exactly how Avista --

24 Q Does PacifiCorp have a PCA mechanism?

25 A It does not.

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 Q And has it requested approval of such a

2 recovery mechanism?

3 A We have a filing before the Commission

4 related to a PCA mechanism and some IRP issues, yes.

5 Q And do you know the status of that case?

6 A It's still pending.

7 Q Would you agree that the Company's filing

8 in this case was a regulatory filing?

9 A Could you define "regulatory"? I mean,

10 certainly, it was a filing made to a regulatory

11 Commission if that's what your question is.

12 Q Do you consider the Company's filing in

13 this case to be a significant regulatory matter?

14 A Certainly.

15 Q The BPA exchange credit that you were

16 attempting to pass along was in fact of historic

17 proportions, was it not?

18 A It was an extremely large price reduction.

19 Q The deferred power costs that you were

20 seeking to recover were also of historic proportions,

21 were they not?

22 A Probably the single largest increase in

23 power costs that I'm aware of.

24 Q Would you agree that it's very unusual to

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 rate case?

2 A Actually, we have done that on, I think, at

3 least one, if not two, other occasions before this

4 Commission, but generally cost of service studies are

5 with general rate cases, but this certainly wouldn't be

6 the first time we've done a cost of service study outside

7 of a general rate case.

8 Q On page 2 of your filed testimony you

9 state, "At least one month before the planned filing date

10 for a significant regulatory matter, the Regulation

11 department consults with the Corporate Communications

12 department regarding the communications plan specific to

13 that filing," and we have agreed that this was a

14 significant regulatory matter. Do you agree also that

15 this was a rate filing?

16 A Define -- I mean, I guess what do you mean

17 by a "rate filing"? It was unique in that it wasn't a

18 general rate case and it wasn't a tracker. I mean, it

19 was a BPA exchange credit filing. It was a --

20 Q Is that a rate tariff of the Company?

21 A It's a tariff, yes, so if that's what your

22 definition of a rate filing is, then, yes, it was that.

23 Q The corporate communications department for

24 PacifiCorp is structured how?

25 A Well, there would be a vice president in

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 charge of corporate communications and then actual

2 communications representatives for each of the individual

3 states that we do business in. Mr. Eskelsen is the lead

4 communications representative for regulatory and other

5 general communications issues for Utah, Wyoming and Idaho

6 and he's presented testimony in this proceeding.

7 Q When the -- prior to this filing, did the

8 regulation department initiate consultations with the

9 communications department?

10 A Yes.

11 Q And is that done in writing or simply by

12 telephone?

13 A No, it was done through a context of

14 writing and also phone calls and that included

15 Mr. Eskelsen, that included Mr. Eriksson, an attorney

16 that was helping represent us on this proceeding, it

17 represented our state manager for this filing, Mr. Hedman

18 who then was replaced by Mr. Lively who testified in this

19 proceeding, and then myself that all took a look at this

20 filing, sought advice from Mr. Eriksson as to whether or

21 not Rule 102 was applicable, and in addition to that, as

22 part of the overall communications plan, we as a team sat

23 down and were developing a communications plan to our

24 customers exclusive of whether or not Rule 102 applied,

25 going through and looking at intervenors that had been in

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 previous Utah Power & Light cases and others and that was

2 part of the overall written communications plan that was

3 developed to communicate with customers.

4 Q There was a communications plan developed

5 in this case and that plan was written?

6 A That plan was written, yes.

7 Q And do you have a copy of that plan with

8 you?

9 A I don't believe I've got a copy of that

10 plan, but it's certainly --

11 Q And I don't believe that that plan was

12 submitted as an exhibit by the Company in this case

13 either, was it?

14 A I don't believe that the exact plan was

15 submitted. Certainly components of the plan, the press

16 releases that are in Mr. Eskelsen's testimony, all of the

17 other items that were part of the overall communications

18 plan are probably here. The actual plan document itself

19 I don't believe is included here, but certainly it could

20 be provided if that would be helpful.

21 Q Does the Company have a written guideline,

22 do they have written guidelines for preparation of

23 communication plans?

24 A I think that would probably be better asked

25 of Mr. Eskelsen. I am not aware of any written

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1 guidelines on general rate cases, tracker rate cases or

2 other rate case-type, regulatory-type filings of a

3 specific document. Each of them are so different that we

4 look at the state that the plan would be developed for

5 and we also look at the issues that are involved in

6 developing a communications plan.

7 For example, if it were simply a filing

8 that would affect one class of customers, that

9 communications plan would more focus directly on the set

10 of customers that would be affected as opposed to an

11 issue like this that would be broader.

12 Q As you indicated on page 3 of your

13 testimony, the communication plan is intended to fully

14 and clearly inform customers of the rate filing.

15 A That's correct.

16 Q That's the purpose?

17 A Absolutely.

18 Q You state before the filing, which occurred

19 in this case on January 7th, the regulation department

20 generally makes an effort to contact customer groups to

21 provide them information. What customer groups does

22 PacifiCorp have in southeast Idaho?

23 A Well, we have a variety of customer groups

24 and obviously, there is a large industrial customer

25 Monsanto that is an intervenor in the rate cases. There

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1 are the irrigation customers that are represented and

2 usually involved in all of the general rate cases.

3 Commission Staff is an intervenor and represents the

4 entire base of customers and generally is the voice for

5 residential customers specifically and the other

6 customers and, you know, obviously, there are a wide

7 variety of other customers, but those are the broad

8 categories of customers.

9 Q Is there a representative of the

10 residential class that you communicate with?

11 A Well, in general what -- as Mr. Pond

12 describes in his testimony, I think in great detail, the

13 number of meetings that we had with various groups that

14 represent residential customers, there is a customer

15 advisory board that's described in detail in Mr. Pond's

16 testimony and those folks are selected for that advisory

17 committee to be informed of issues that go on, not just

18 issues related to regulatory matters, but issues related

19 to Utah Power in Idaho that they can take back to the

20 citizens that they represent as, you know, opinion

21 leaders in the various segments of the service territory

22 that we serve. In addition, Mr. Pond talks about

23 meetings that were held with various citizens in the

24 community, mayors, other folks like that.

25 Q Are you involved at all in the make-up of

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1 the customer advisory board?

2 A Am I personally?

3 Q Yes.

4 A No, those were -- the members of the

5 advisory board in Idaho were, I think, put together by

6 Mr. Pond and he could go into detail as to exactly how

7 they were selected.

8 Q And do you select a different advisory

9 board for -- did you select a different advisory board

10 for this particular case or did you use one that was

11 already in place?

12 A No, we have an advisory board in Idaho that

13 members will rotate on and off of it, but there is not

14 separate advisory boards for different types of issues.

15 Q Who selects who can participate on that

16 board?

17 A Mr. Pond could give you the detail of how

18 it was put together. It's not something that I

19 personally put together.

20 Q Before the filing you state that regulation

21 also consults with legal counsel to ensure compliance

22 with the relevant state regulatory notice requirements.

23 A That is correct.

24 Q Is the substance of the Company's

25 consultation with legal counsel set forth in your

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1 Exhibit 26?

2 A That is one of the written communications.

3 It certainly does not entail all of the verbal

4 communications that I had with Mr. Eriksson.

5 Q Have you attempted to detail the verbal

6 communications that you had with Mr. Eriksson regarding

7 notice in this case in your testimony?

8 A Well, generally it's stated in my testimony

9 and then also in the petition for reconsideration and I

10 also submitted a signed affidavit stating my

11 communication with legal counsel regarding this.

12 Q So you're stating that there is information

13 relevant to this issue that is not -- has not been

14 presented by the Company in its testimony, but we will

15 have to refer to the application in order to discover

16 more?

17 MR. FELL: Objection. The question is

18 vague. I frankly don't understand it. Could

19 Mr. Woodbury start that one over again?

20 COMMISSIONER SMITH: Mr. Woodbury?

21 MR. WOODBURY: I believe my question to

22 Mr. Larson was whether or not his testimony reflected all

23 of the contacts that he had regarding notice with legal

24 counsel and I think --

25 COMMISSIONER SMITH: Is that your

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1 question?

2 MR. WOODBURY: That was my question and I

3 think that his response was that in general terms, but

4 there were more specific terms in the application.

5 COMMISSIONER SMITH: We can let the witness

6 respond. Was that question unclear to you, Mr. Fell?

7 MR. FELL: That question is clear, yes,

8 thank you.

9 COMMISSIONER SMITH: Does the witness have

10 the question in mind?

11 THE WITNESS: I do.

12 COMMISSIONER SMITH: Thank you.

13 THE WITNESS: The answer is that my

14 testimony contains the statements related to my

15 conversations with legal counsel. Now, there are

16 supplemental pieces related to it, but it's not a

17 different conversation with legal counsel. I just wanted

18 to make you aware and make the Commission aware that also

19 in the petition for reconsideration it describes that

20 same conversation or conversations with legal counsel and

21 there is also a signed affidavit that describes that,

22 also.

23 Q BY MR. WOODBURY: Did you -- do you know

24 whether there were any conversations between the Company

25 and Commission Staff regarding notice in this case that

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1 took place prior to the filing?

2 A I believe there were conversations, but I

3 do not recall.

4 Q Were you a party to those conversations?

5 A I think I was a party to those

6 conversations, but I don't recall exactly what the

7 outcome was.

8 Q Do you know what particular type of notice

9 was discussed?

10 A I just don't recall.

11 Q On page 4 you state that when you inform

12 customer groups in advance of a filing, you find it

13 easier to work with them in fashioning a settlement of

14 their issues. This case was resolved by a settlement,

15 was it not?

16 A It was a settlement by, I think, all of the

17 parties to the proceeding except one. I don't think

18 Mr. Shurtz --

19 Q Is that Mr. Shurtz? Regarding your

20 November 19th, 2001 meeting with interested parties,

21 Staff, representatives of the irrigation class, you

22 state, and others, what others are you referring to?

23 This is on page 4, line 11.

24 A I think Representative Dell Raybould was

25 also present at that meeting.

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1 Q And I think you mentioned him, are there

2 others, also? Did you take notes during that meeting?

3 A I didn't take notes and I don't know that

4 there was a sheet that was handed around. I know there

5 were several representatives of the irrigation class,

6 Staff was there, several Company representatives were

7 there.

8 Q Any other customer classes represented at

9 that meeting?

10 A You know, I can't remember whether or not

11 an attorney representing Monsanto was there. I mean, at

12 the time Monsanto/the irrigators had not, I think,

13 delineated between who was going to be counsel for

14 Monsanto versus who was going to be counsel for the

15 irrigation customers. My recollection is that Mr. Budge

16 was at that meeting and in addition to that, prior to the

17 filing, Mr. Pond and I also met with Mr. Budge and he had

18 Mr. Olsen come along within that same time frame to talk

19 about the issues of the filing and the purpose of, you

20 know, the November 19th filing, one of the things that we

21 find very helpful as a Company is to have meetings before

22 we actually make a filing so that we can get input and

23 this really was about six weeks before we were making the

24 filing with the Commission and the irrigation customers

25 were a class of customers that was most heavily impacted

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1 by the cost of service study.

2 They were also interested in this issue of

3 interruptibility and had had some frustrations with that

4 and so one of the issues of meeting with these classes

5 ahead of time was to get some of their input and if there

6 were issues that really they could bring out that would

7 make some sense for us to put into the filing, then we

8 could get that information from them correctly and

9 perhaps tailor a filing in a way that more met what

10 customers were looking for, and I think a good example of

11 that is this issue of irrigation and interruptibility and

12 the fact that it couldn't get resolved to their liking

13 and to what they needed in the context of this case, but

14 we are scheduled to meet with them and essentially put

15 together a proposal that can be in place for the next

16 irrigation season, so I think that's the purpose of these

17 meetings.

18 Q In describing the Company's efforts to

19 comply with notice requirements, you state before the

20 filing the Company consulted with counsel regarding the

21 applicability of Rule 122 of the Commission's rules of

22 procedure and that particular rule, I think as you

23 describe it, is regarding the 60 days advance notice of

24 intent to file a general rate case. That conversation

25 was with who as legal counsel?

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1 A Mr. Eriksson, I believe.

2 Q And was that conversation with you?

3 A Yes.

4 Q And did you ask him anything --

5 essentially, what did you ask him? In your testimony

6 it's at page 5.

7 A Right, I was just reading through the

8 testimony. My conversation with Mr. Eriksson was whether

9 or not this rule was applicable and whether there needed

10 to be 60 days advance notice and his response back to me

11 was that it was not a general rate case and, therefore,

12 the rule did not --

13 Q What information did Mr. Eriksson have

14 before him? Did he have a copy of the Company's filing?

15 A No. At that point Mr. Eriksson would not

16 have had a copy of the entire proposed filing. What he

17 would have had was basically the facts related to the

18 components that were going into the filing. We were

19 still in the process of preparing testimony and exhibits

20 related to the filing, so he would have known about,

21 obviously, the deferred -- the excess deferred power

22 costs that were on the books, the BPA credit which

23 already was sitting on the Company's books and he would

24 have seen a copy of the class cost of service study, so

25 he would have had all of those components.

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1 The only thing probably that wasn't

2 finalized up at that point was the actual combining of

3 all of that together and looking at what the impacts, the

4 actual impacts, would be schedule by schedule, but he'd

5 have a complete make-up of the filing at that point.

6 Q He was aware also of the Company's proposed

7 rate mitigation plan?

8 A I don't know whether or not at the point,

9 at that point whether the rate mitigation plan was

10 available to Mr. Eriksson.

11 Q And when you say he was aware of the

12 components, how did the Company make him aware of that?

13 Did he participate in the development of the Company's

14 filing?

15 A No, he didn't actually do any of the

16 calculations, but as legal counsel, he's involved in all

17 of the meetings when we discuss the case, the filing of

18 the case and so he certainly was aware that the Company

19 had deferred $38 million related to excess power costs.

20 He was aware of that in the meetings. He was aware of

21 the BPA settlement and what the impact of that was and he

22 was also aware of the completed class cost of service

23 study.

24 Q When did these conversations with

25 Mr. Eriksson take place? Prior to 60 days -- 60 days

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Wilder, Idaho 83676 PacifiCorp

1 prior to your filing, before then?

2 A Yeah, prior to that.

3 Q Was that initial discussion just regarding

4 Rule 122?

5 A I think --

6 Q Did the Company at that time inquire of its

7 counsel as to the applicability of Rule 123 that you

8 reference on page 5, also, and 61-307, Idaho Code?

9 A I certainly know that we had the

10 conversation on Rule 122 prior to 60 days. I don't

11 recall whether or not 123 was talked about at that time.

12 I mean, we had in the sequence of things, the materials,

13 it was about probably six weeks out when we actually had

14 the meeting on November 19th where we shared the

15 materials with the intervening parties, Representative

16 Raybould, others that were at that meeting. It was

17 probably three or four weeks before that that I consulted

18 with Mr. Eriksson as well as others involved in the case.

19 Q On page 6 -- well, the answer to my

20 question, then, was you don't recall whether those other

21 issues were discussed?

22 A I don't recall whether those other issues

23 were discussed at the same time.

24 Q Would it be the standard practice of the

25 Company to inquire of its counsel as to the applicability

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1 of those -- another Commission rule, Rule 123 and the

2 Idaho Code section which required that -- you know, one

3 is schedules filed 30 days in advance of effective date

4 and the other is copies available at local office for

5 public inspection?

6 A Right, and I think --

7 Q Is it an assumption that those do apply?

8 A Well, it depends on the type of case and as

9 I state in my testimony, essentially 60 days out and it

10 was probably in excess of 60 days out, that I had the

11 conversation with Mr. Eriksson that do we need to file

12 this 60 days in advance, you know, this really is not a

13 general rate case, it's not a tracker case, Mr. Eriksson

14 looked at --

15 Q Excuse me, is that the way you framed it to

16 Mr. Eriksson, do we need to really file this 60 days out,

17 it's not really a rate case and it's not really a tracker

18 case?

19 A I asked Mr. Eriksson -- you know, it was

20 not just me and Mr. Eriksson, I mean it was actually a

21 case meeting related to the Idaho case what the

22 requirements are related to the various components of

23 putting together a case, regulatory filing in Idaho, and

24 the first issue that we had to deal with was this issue

25 related to whether or not this Rule 122 applied and so

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1 that was a question that was posed to Mr. Eriksson.

2 Q But it seems to me that the way you framed

3 the question, you'd already in your own mind resolved

4 whether or not Rule 122 was applicable and you were just

5 running it by him.

6 A I certainly myself had my own impressions,

7 but I would not make an interpretation of the Idaho rules

8 of procedure without advice of legal counsel as to

9 whether or not my lay interpretation of a rule was

10 applicable. I mean, I in my own mind had made the

11 determination that clearly this was not a general rate

12 case and we were not filing a tracker. It was an anomaly

13 case. I mean, it was related to deferred excess power

14 costs.

15 Q Let's talk about the applicability of

16 Rule 123, schedules filed 30 days in advance of effective

17 date. When did the Company make its filing in this case?

18 A The Company made its filing, I think,

19 January 7th.

20 Q And when did the Company request that the

21 BPA credit be effective?

22 A I can't remember.

23 MR. FELL: Madam Chair, does Mr. Woodbury

24 have the answer to that? It's a matter of record.

25 MR. WOODBURY: February 1st.

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1 THE WITNESS: Okay.

2 Q BY MR. WOODBURY: That's less than 30 days?

3 A That's correct.

4 Q And so can we assume that you discussed

5 with counsel the fact that you weren't complying with the

6 Commission's rule and do you recall that conversation?

7 A I don't recall a conversation related to

8 that.

9 Q Could we assume the opposite, the fact that

10 the Company filed it on January 7th and requested less

11 than 30 days that perhaps you didn't consult with

12 counsel?

13 A I would -- you know, I don't know, but

14 Mr. Hedman was also involved in this case and I know that

15 he was in contact and at each step along the way we

16 consulted legal counsel as to what the applicability of

17 the various Commission rules were related to this filing.

18 Q On page 6, line 6 you state, "On a net

19 basis, the rate filing did not propose a rate increase

20 for any customer class."

21 A That's correct.

22 Q How relevant is that fact in the Company's

23 decisions regarding notice?

24 A I guess it's somewhat relevant but not

25 totally. I mean, I think the rules that are applicable

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CSB REPORTING LARSON (X)
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1 talk about rate changes. Obviously, the --

2 Q Wouldn't you agree that one of the purposes

3 of notice provided to customers and the information

4 provided to them is to enable them to provide written

5 comment and/or testimony prior to that change taking

6 effect?

7 A Uh-huh.

8 Q Do you recall in any conversations with

9 Mr. Eriksson that you were discussing the net basis of

10 the filing as being a factor as to whether or not notice

11 was required?

12 A There could have been discussions. I'm not

13 aware of them. I know that one of the issues related to

14 the BPA piece. We made the filing on January 7th, one of

15 the concerns, the BPA credit, if my memory serves me,

16 basically started accruing in October of the previous

17 year and one of the provisions that we negotiated in the

18 overall BPA settlement was that we had a bit of time to

19 deal with this and get it implemented in Idaho and one of

20 the things that was a concern is that we get the dollars

21 flowing and passed back to customers as quickly as

22 possible so that there wasn't such a buildup of these

23 dollars.

24 I mean, to the extent that we waited, it

25 continued to build up and you couldn't get those dollars

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1 back quickly enough and there was some potential that

2 dollars if you waited too long could get lost and that

3 was the rationale for us asking for an implementation of

4 the BPA credit as quickly as possible knowing that the

5 Commission was going to hear the remainder of all of

6 these issues and render a decision related to the

7 finalization of the BPA credit, the rate mitigation issue

8 that we presented, the class cost of service study and

9 the power costs, all of those were going to be dealt with

10 in the context of the regulatory filing made.

11 Q The regulatory filing that was made was

12 essentially -- that filing, you had final approval over

13 how it was structured; is that correct?

14 A I personally had the final, yes.

15 Q On page 6 of your testimony, you state

16 regarding the applicability of Rule 102, customer

17 information rules, "Within a few days after the filing,

18 the Company consulted with counsel regarding the

19 applicability of Rule 102." Was the timing of this

20 request of counsel in accordance with the communications

21 plan that was adopted in this case?

22 A I don't know that the communications plan

23 line itemed out Rule 102.

24 Q Was there a conscious decision made by the

25 regulatory department to not inquire of its counsel until

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1 after the filing regarding Rule 102 requirements?

2 A Well, there was communication, there was

3 verbal communication.

4 Q Is this a standard practice regarding

5 regulatory filings to not consult with counsel until

6 after the filing as to Rule 102 notice?

7 A No. I mean, it's not a standard practice

8 to do that. There were and I think if you look at

9 this -- if you look at Exhibit 26, obviously the actual

10 e-mail trail of all of this stuff is --

11 Q Let's refer to Exhibit 26.

12 A Yeah.

13 Q And I have some questions just for

14 clarification as to the identity of parties. Who is

15 Peggy Ryan?

16 A Peggy Ryan is a regulatory analyst that

17 works in the operations, regulatory operations, group

18 which is responsible for putting together the final

19 phases of the -- any of the rate filings that we would

20 make in any of the six states.

21 Q She's part of the regulatory department

22 under you?

23 A Right.

24 Q Who is Jan Mitchell?

25 A Jan Mitchell is in charge of corporate

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1 communications and she would work with Dave Eskelsen.

2 Q And who is Jennifer Moffatt Kelly?

3 A Jennifer is someone that -- is a woman that

4 works in the -- I'm trying to recall whether she works in

5 the communications department or whether she's actually

6 over in the -- where we actually put together the bill

7 stuffers. I think Mr. Eskelsen actually works more

8 closely with her.

9 Q She's in the communications department?

10 A No, I don't think she's in the

11 communications. I think she actually works as part of

12 the customer service organization, but at the break I'll

13 verify exactly which group she works with.

14 Q Is she part of Company management?

15 A She's not part of Company management.

16 She's certainly an employee that works --

17 Q Is she an attorney?

18 A No.

19 Q She's the one that stuffs the envelopes?

20 A I don't think she stuffs envelopes. I

21 think we have folks that work in the customer service

22 area that deal with the customer service system that also

23 deal with the bill messages that go on bills, bill

24 stuffers and others and that is my recollection of what

25 she does.

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CSB REPORTING LARSON (X)
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1 Q Let's look at Exhibit 26, page 2. These

2 things read backwards, don't they, this exhibit?

3 A It does.

4 Q So the message to John Eriksson was or the

5 question that was posed was what as it states here?

6 A Well, as it relates to this e-mail that you

7 have to work backwards from, the question is --

8 Q Well, the subject matter of this message

9 was InfoGasElectricWater -- what does that say -- 00,

10 page 2, subject line, message from Peggy Ryan to John

11 Eriksson, January 10th, subject matter, can you explain

12 what that is?

13 A I can't. I mean, there is some sort of

14 attachment that is --

15 Q Where does it indicate that there is an

16 attachment?

17 A Down in the brackets.

18 Q It's "htm" that reflects attachment or

19 what?

20 A No, no, in the brackets on the arrow right

21 below, the InfoGasElectricWtr.htm.

22 Q That indicates that there was an

23 attachment?

24 A That would be my understanding.

25 Q And do you know what information was

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1 attached?

2 A I don't. I mean, I don't have a copy of

3 that attachment, but essentially the question --

4 Q And the question asked was look at Rule

5 102, anything else? Was there a conversation that went

6 along that preceded this or something?

7 A I had a personal conversation with John as

8 well as others that were involved in the case as to

9 whether or not Rule 102 applied related to this case and

10 that was before this e-mail traffic that you have in

11 front of you as Exhibit 26. John had informed me that

12 Rule 102 did not apply, that this was not, as I said

13 before, a tracker or a general rate case.

14 These individuals here, Peggy Ryan and

15 Jennifer Moffatt and others, were also looking at it from

16 a standpoint of our regulatory operations group gets all

17 of the filings and is responsible to make sure that

18 No. 1, we have met all of the Commission requirements,

19 No. 2, where filings require a check in order to be

20 submitted like in Wyoming that the check is attached to

21 the filing. They make sure that all of these things are

22 handled and so as this filing -- you know, they had had

23 the finalization and there were still questions coming up

24 that were being finalized, I mean, being asked again of

25 John related to the applicability of Rule 102 and he

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1 confirmed again what he had told me verbally.

2 Q The counsel advice that you say you relied

3 on is essentially this response of Mr. Eriksson; correct?

4 A This is an e-mail or a written piece of

5 information related to the fact that this conversation

6 had taken place. I had had a personal one-on-one

7 conversation with John Eriksson related to the

8 applicability of Rule 102 prior to this e-mail traffic

9 which was -- you know, people were still in an effort to

10 make sure that we were in compliance or not out of

11 compliance with the Commission rules, you know, people

12 were still asking this question obviously after the

13 filing had been made on January 7th. I had had a

14 conversation with Mr. Eriksson prior to January 7th

15 related to Rule 102 applicability.

16 Q Mr. Eriksson in his response states, "The

17 rule applies to general rate cases and tracker cases.

18 The Company's case is neither, although it has some

19 similarities to a general rate case." Did that raise a

20 flag in your mind as to saying maybe this should be

21 treated differently?

22 A Well, I think it certainly was an issue we

23 struggled a lot with. I mean, clearly, we want -- I

24 mean, the goal of our communications plan in regulation

25 is to communicate with as many customers as we possibly

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1 can. I mean, Mr. Pond's testimony describes all of the

2 meetings that were held with advisory boards, Kiwanis

3 clubs, the meetings with intervenors in general rate

4 cases. Our goal was to communicate this rate case. I

5 think we successfully communicated this to a lot of

6 folks. They were aware of this case.

7 I think in response to the other, you know,

8 to your question on that it has some similarities to a

9 general rate case, it certainly raised the issue where we

10 did not just simply say does it apply, no, and go away.

11 This issue was debated back and forth as to what does the

12 rule require, and the question came up related to this as

13 is stated in this document on communication. In some

14 instances we end up in scenarios where you double

15 communicate on issues where you have actually filed and

16 the BPA piece went in or you file when you actually make

17 the filing and customers end up believing that they've

18 gotten two rate increases out of this, so here where we

19 had a scenario where it appeared to us and our legal

20 advice was that this specifically did not apply, although

21 it had some characteristics of a general rate case, I

22 made the determination that if it was not required and

23 legal counsel gave me that advice that I would rather not

24 send out a bill stuffer which people could then get

25 confused by, but rather go out with a strong

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1 communications plan where we actually sit down like on

2 November 19th, meet with customers, share with them the

3 information, ask Mr. Pond to put together meetings, which

4 he did, and as described here, I think there were 27 or

5 there was a large number of meetings where people from

6 various communities in our service territory attended and

7 the information was taken back.

8 Mr. Eskelsen describes in his testimony a

9 great number of press releases that went out and so I

10 think from my perspective, the communications plan that

11 we put together, the meetings that we held throughout the

12 state, I made several trips here to communicate this face

13 to face so people could ask questions about the issues,

14 the rate mitigation adjustment, all of those components

15 of the rate filing and they could get direct answers from

16 us and it's my view that that communications plan,

17 although it was not a bill stuffer under Rule 102, was

18 effective in communicating this rate change to our

19 customers in Idaho in a very effective way and I think

20 many -- you know, I mean, some turned out at public

21 meetings.

22 Q Mr. Eriksson states in his reply Doug

23 checked with Commission Staff regarding the applicability

24 of 60-day advance notice, this was pursuant to a

25 conversation between you and Mr. Eriksson that took

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1 place? You related it to him and he's putting it in his

2 reply?

3 A Yes.

4 Q And he says, "I don't know if the Company

5 has plans to send out a bill stuffer explaining to

6 customers what the filing is about." That was

7 Mr. Eriksson's understanding regarding bill stuffers at

8 this point, right, and you summarize Mr. Eriksson's

9 response --

10 MR. FELL: Excuse me, let the witness

11 answer the first question.

12 Q BY MR. WOODBURY: I'm referring to the

13 second paragraph of Mr. Eriksson's response. "I don't

14 know if the Company has plans to send out a bill stuffer

15 explaining to customers what the filing is about. You

16 might check with Dave Eskelsen."

17 A Okay.

18 Q Is that a throw-away comment or is that an

19 important comment in the Company's decision making?

20 A No, I think it's not a throw-away comment.

21 I think it was -- I mean, clearly, in our minds there

22 was -- I mean, you can always send out a bill stuffer and

23 explain something. I think the question was that you've

24 got the Company just making a decision independent of

25 what legal counsel had advised us to send a bill stuffer

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1 and we certainly could do that and I think that was the

2 question he was posing is, you know, ask Dave Eskelsen

3 whether or not the Company is planning on sending a bill

4 stuffer.

5 Q Okay, you state on page 6, line 12,

6 "Counsel advised the Company that, because this filing

7 did not meet the definition of either a general or a

8 tracker rate case, bill stuffer notice under Rule 102 was

9 not required."

10 A Okay.

11 Q Is it this particular notice, this is

12 Mr. Eriksson's communication that you're referring to?

13 MR. FELL: Objection. This question has

14 been asked and answered several times. Mr. Larson has

15 said that this communication reflects the advice that he

16 was provided, but that it was provided in oral

17 conversations as well this.

18 COMMISSIONER SMITH: Mr. Woodbury.

19 MR. WOODBURY: Well, you put it very

20 nicely. I guess I'd like Mr. Larson to --

21 COMMISSIONER SMITH: Is that the same

22 question you've been asking?

23 MR. WOODBURY: I'm just attempting to --

24 actually, I've moved on to page 6, line 12 of his

25 testimony and what I'm asking is essentially are you

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CSB REPORTING LARSON (X)
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1 referring to this communication that took place as set

2 forth in Exhibit 26 or something more.

3 THE WITNESS: And I think I said earlier

4 that I had oral conversations with Mr. Eriksson regarding

5 this. This was just additional follow-up related to the

6 regulatory operations folks and the communications folks

7 that supplemented in their minds what was required of the

8 Company.

9 Q BY MR. WOODBURY: Mr. Eskelsen on page 1 of

10 this Exhibit 26 responds to Peggy Ryan in these

11 communications, "I assume, then, a billing insert or bill

12 message would be up to us, but seems logical."

13 A Can you point me to it?

14 Q This is a November 1st, 11:32 message from

15 David Eskelsen to Peggy Ryan, from communications to

16 regulatory; right?

17 A November --

18 Q November 1st.

19 A Oh, November 1st. From Eskelsen to Peggy

20 Ryan --

21 MR. FELL: Excuse me, let me correct --

22 COMMISSIONER SMITH: Mr. Fell.

23 MR. FELL: The dating method here can

24 either put the month first or the date first.

25 Q BY MR. WOODBURY: I'm sorry, yeah, it's

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 January 11th.

2 A January 11th and it says, "Okay, this has

3 come full circle," is that where you're reading from?

4 Q That's where it starts, yes. It says,

5 "Sounds like from John's assessment we are not required

6 to place an ad." I didn't see that there was a question

7 asked of Mr. Eriksson as to whether or not the Company

8 should place an ad. Are we talking about a newspaper

9 press release, is that what they're discussing here?

10 Would that be a better question for Mr. Eskelsen?

11 A I think Mr. Eskelsen ought to answer that.

12 It's his response. I don't know.

13 Q And then I guess looking at the top of

14 this, Jennifer Moffatt Kelly, "I think we can do a bill

15 message, but I wouldn't do an insert until the filing is

16 approved and prices change." Is this the final decision

17 in this matter being made by Ms. Kelly?

18 A No.

19 Q Were there subsequent decisions? Did you

20 make the final decision in this matter?

21 A I made the final decision in this matter.

22 Q After this date, after January 15th?

23 A I made the final decision related to the

24 bill stuffer probably somewhere around the middle of

25 January. I think we were looking at as the question was

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1 posed to the folks in customer service that do the bill

2 messages and also the bill stuffers as to whether or not

3 there could be a simple message placed on the bill and at

4 that time I made the final determination that the

5 approach that we would take on this filing since

6 Mr. Eriksson had given the advice that it was not

7 required to not run the risk of customer misunderstanding

8 related to this filing and do multiple increases that we

9 would go with the communication plan that I talked about

10 just a few minutes ago with the Commission. It was about

11 that time that the final decision was made.

12 Q You state, "The Company nevertheless

13 considered whether and when to provide customers with

14 individual notice of its rate change," and you state, "In

15 our experience..." and this is your experience with the

16 Company or are you speaking of the Company in general in

17 general rate filings in all of its states?

18 A A combination of my own personal

19 experience, the experience of Mr. Eskelsen who has been

20 associated with the Company for 15, 16 years dealing with

21 these regulatory filings and dealing with the questions

22 that come after these notices.

23 Q But you state, "customers can be confused

24 by multiple notices regarding the same rate filing." Are

25 you saying that PacifiCorp is not capable of successfully

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Wilder, Idaho 83676 PacifiCorp

1 communicating to customers the difference between a

2 proposed rate change subject to Commission approval and

3 an approved change?

4 A No, I think we can do a very good job of

5 describing that. The problem is that we do not control

6 the media or how things get proposed and so when you make

7 a filing, the headline is PacifiCorp seeks, you know, X

8 rate increase and then somewhere down the line, you know,

9 PacifiCorp is awarded and in the general consumer's mind,

10 not everybody's, but the reaction through my experience

11 has been that by having those two, you know, one, say, in

12 January and one in June, those in the paper that a lot of

13 customers would read that as two separate rate increases

14 and it's not just in this state.

15 I mean, we file cases and over my 21-year

16 career I can't tell you of the number of customers that

17 call our call center now or our individual call centers

18 in years past and want to know why PacifiCorp has been

19 awarded two rate increases in a six-month period, so

20 that's the issue that we struggle with as a Company in

21 communicating with customers and frankly, in my role over

22 the last 18 months, one of the things that I have taken

23 as a mission that I want to do is regardless of the rules

24 that are there, I mean, we will comply with those, but

25 even without those rules is to lay out a communications

521

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 plan that's not mandated by law where we can get out and

2 actually talk to customers, talk to mayors, talk to

3 Kiwanis clubs.

4 We're in the middle of a Wyoming rate case

5 right now doing all of that stuff, because one of the

6 pieces of feedback that we get from customers, large

7 customers and irrigation type-customers, is that they

8 would like to know in advance so that they can plan for

9 their budgets as they put them forward for the next year

10 into their corporate offices, so we try to be considerate

11 of that and likewise, try to get the word out to as many

12 of the residential customers through these advisory

13 boards, through meeting at Kiwanis clubs and mayors and a

14 lot of it through our communications department,

15 Mr. Eskelsen and others talking with the media, so those

16 combination of things are the way that we communicate.

17 Q Isn't one of the duties of the

18 communications department to convey information to

19 customers in a non-confusing manner?

20 A That's clearly --

21 Q Isn't there one message that's crafted by

22 the Company and it's that message which is provided

23 individually to customers and it doesn't have to be

24 filtered by the media, the press or any way that they're

25 doing that?

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 A Well, clearly, we will put together a press

2 release, the Commission puts together press releases.

3 Q I'm not speaking of press releases. I'm

4 speaking of individual communications with your

5 customers. Isn't that the message that provides you with

6 the ultimate control?

7 A But, Mr. Woodbury, I mean, I would like to

8 say that you have absolute control over all of those

9 things, but the problem is even if you have a bill

10 message that states X, Y and Z, there is still going to

11 be a press release that will be interpreted by the media,

12 they will put together their story related to what is

13 happening at the Commission.

14 When the Commission renders a final

15 decision in a matter, the Commission usually sends out a

16 press release, the Company sends out one and people

17 interpret those the way, you know, whatever way they want

18 to, I guess, and I guess what I'm telling you is that my

19 experience of 21 years of doing regulatory issues are

20 that multiple communications related to the same

21 regulatory issue leads to customers believing that

22 they're getting multiple increases. That's just my

23 professional experience on it and so we try our best to

24 figure out ways to communicate to customer groups, all

25 levels of customer groups so that they can have direct

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 contact with us and ask questions and we can respond.

2 Q Do you not read the Commission's rules as

3 requiring notice in advance?

4 MR. FELL: Objection, this is

5 argumentative.

6 COMMISSIONER SMITH: Mr. Woodbury.

7 MR. WOODBURY: I can frame it differently.

8 COMMISSIONER SMITH: All right, thank you.

9 Q BY MR. WOODBURY: Using the logic that you

10 have set forward with respect to the confusion of

11 customers, wouldn't all customer notices be given after

12 the fact, after the Commission approves the change?

13 A Well, I think it's back, Mr. Woodbury, to a

14 balance and, you know, clearly, the Company is going to

15 comply with the Commission rules. Now, if this were a

16 general rate case or a tracker case and Mr. Eriksson's

17 advice was Doug, you need to provide a bill stuffer, we

18 would have provided a bill stuffer.

19 Q But this wasn't an insignificant case. I

20 mean, you're part of the decision tree in here, this was

21 one of the largest BPA exchange credits ever passed

22 through, one of the largest power cost adjustments ever

23 asked for recovery.

24 A Right, but I mean, I don't think when it

25 relates to the BPA credit being passed through, I mean,

524

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 clearly, that was large, but that was a large price

2 reduction. I don't know that --

3 Q Is it the Company's position that it

4 doesn't need to provide advance notice of price

5 reductions to customers, that they have no need to file

6 comments with the Commission regarding that?

7 A No, I think the Company has responsibility

8 to follow all of the Commission's rules. My point in

9 saying that is that I think the public reacts differently

10 to a large price decrease than they would to a large

11 price increase. You know, I would wager to say that if

12 this issue were simply just a BPA credit being passed

13 back that nobody would have probably paid much

14 attention. I mean, they would have liked the lower bill.

15 Q Did the Company perceive that some of the

16 confusion that might have been generated was as a result

17 of the multiple issues that were presented in the

18 Company's application?

19 A That was not taken into account at all in

20 the consideration of whether or not to file the bill

21 stuffer or not. I mean, the bill stuffer issue was

22 solely related to whether or not we were required under

23 Rule 102. The fact that there were four components in

24 this case clearly made it a much more complicated case

25 for all of the parties and to explain each of those

525

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 components clearly would have been more complicated, but

2 still getting back to the reason and the rationale for

3 not wanting to make this any more complicated, it's

4 strictly the issue of multiple releases related to the

5 same rate filing and folks getting, customers getting,

6 confused about multiple increases.

7 Q You state on page 7, "Because the Company

8 was planning to provide individual customer notice of the

9 final, approved rate change, we decided not to provide

10 individual notice in advance of the change." Didn't this

11 deprive customers of the opportunity to express their

12 opinion in any meaningful way?

13 A I don't believe so, because as I've tried

14 to articulate in my discussion here today and my

15 testimony about our communications plan related to this

16 filing, I think we have communicated. I certainly can

17 say that related to our communications to our Idaho

18 customers, this is the most widely communicated. I have

19 spend more time communicating with customers personally

20 on this case than any other regulatory filing before this

21 Commission.

22 I think Mr. Eskelsen describes all of the

23 newspaper articles related to this filing in virtually

24 every county in which we serve. I think Mr. Pond

25 describes in great detail the individual meetings that we

526

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 had with opinion leaders that took this issue back to

2 citizens and I think clearly, you know, I wouldn't say

3 everybody, but the vast majority of folks through the

4 approach that we took were communicated to about this

5 filing. I don't think anybody didn't show up to comment

6 on this filing because lack of a bill stuffer in their

7 bill ahead of time. I think, frankly, the one-on-one

8 communication more people actually listen than getting

9 something in an envelope is my personal opinion.

10 Q In your statement that because the Company

11 was planning to provide individual customer notice of the

12 final, approved rate change, the Company, who are you

13 referring to? The communications department? The

14 regulatory department?

15 A Well, a combination of the folks related to

16 communicating regulatory issues, which I have primary

17 responsibility to make sure that these issues get

18 communicated and I work very closely with Mr. Eskelsen

19 and Mr. Pond related to Idaho issues and then they will

20 also engage folks, that we want to make sure as customers

21 call in related to these issues at our phone center that

22 our representatives at the phone centers are educated

23 about the case so that they can explain the case to

24 them.

25 We have meetings prior to filing with

527

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 them. All of our customer account managers, folks that

2 deal with customers like Nu-West and others would take

3 the messages out, so I think it's a combined team, Idaho

4 team, that will communicate this message.

5 Q You state, "We decided not to provide

6 individual notice in advance of the change." This was

7 your decision, wasn't it?

8 A Ultimate decision was my decision.

9 Q Because Mr. Eskelsen, looking at

10 Exhibit 26, says, "I assume, then, a billing insert or

11 bill message would be up to us, but it seems logical," so

12 he was of that opinion as represented by here, but

13 essentially you made the decision saying we're not going

14 to do it in this case?

15 A I made the final decision, and I will say

16 that my final decision was made based on legal advice

17 related to Section 102.

18 Q And your counsel's interpretation of that?

19 A My counsel's interpretation of that.

20 Q And your interpretation of that?

21 A I interpreted it, but I would not have made

22 a final decision until I got advice as to my counsel's

23 interpretation of that rule.

24 Q And the decision was not to provide notice

25 to customers if you didn't have to?

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 A The decision was that the filing that we

2 made was not one of the filings that a bill stuffer

3 communication was required and, therefore, we set out to

4 implement a communications plan to make sure that

5 customers understood the filing. I mean, my

6 interpretation of Section 102 is to make sure -- I mean,

7 if you step back and look at what the rule is trying to

8 do, it's trying to make sure that customers are

9 communicated with.

10 I mean, obviously, a bill stuffer is a way

11 to do that. It's not going to list out others, you know,

12 in great detail, but since we were not required by 102

13 and frankly, probably didn't have to go out and have all

14 of these meetings, but we elected to go that approach.

15 That was my decision as to how we would communicate with

16 customers.

17 Q You state, "We chose to focus the

18 individual notice on the approved change because that

19 change would not be subject to adjustment - as filed

20 changes are." Did you provide customers with any

21 individual notice of the change that took place

22 February 1st?

23 A I don't remember the answer to that. I

24 think Mr. Eskelsen would be probably a better one to ask

25 that to, Mr. Woodbury.

529

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 Q Wouldn't you have made the decision whether

2 or not to do any individual notice to customers regarding

3 the change in the BPA exchange credit?

4 MR. FELL: Objection, the question has been

5 answered.

6 COMMISSIONER SMITH: Mr. Woodbury.

7 MR. WOODBURY: I think it's a different

8 question.

9 COMMISSIONER SMITH: Excuse me?

10 MR. WOODBURY: I think it's a different

11 question.

12 COMMISSIONER SMITH: Would you please

13 restate your question? I mean, tell me what it is so I

14 can decide if it's different.

15 Q BY MR. WOODBURY: Wouldn't it have been

16 your decision as regulatory director or vice president of

17 the regulatory department to make a decision as to

18 whether individual notice should be provided regarding

19 the Commission's ordered change in the BPA exchange

20 credit which was effective February 1st?

21 COMMISSIONER SMITH: That is a different

22 question.

23 MR. FELL: I beg your pardon?

24 COMMISSIONER SMITH: I say that is a

25 different question. We'll let the witness answer.

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 THE WITNESS: Ultimately it would be my

2 decision. I don't have the facts of all of that in front

3 of me right now. I mean, this issue was related to

4 notice on the January 7th filing. I want to say my

5 recollection is that the BPA increase, even though it was

6 filed as part of this overall case, was implemented

7 quicker because, obviously, nobody was disputing the

8 calculation of the amount and so it was made -- I don't

9 remember whether it was made on an interim basis and

10 subject to the outcome of everything that would be heard

11 on power costs and rate mitigation because there were

12 several other moving components in that, so I don't know

13 whether that answers your question very well.

14 Q BY MR. WOODBURY: Can you explain to me,

15 what is the difference between a bill message and a bill

16 insert or stuffer?

17 A A bill message, if you look at a customer

18 bill, there is the ability down in a section of the bill

19 like you would have, say, on a Word document where you've

20 got a message section that you can actually type in a

21 message and it could go out with customers' bills;

22 whereas, a bill stuffer is an actual independent piece of

23 paper that's the size of an envelope that would actually

24 be inserted in the envelope along with the bill.

25 Q And is it color coded in any way to bring

531

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 it to the customer's attention that it's something they

2 should look at?

3 A What do you mean "color coded"?

4 Q Is it just standard black and white?

5 MR. FELL: Excuse me, Mr. Woodbury --

6 COMMISSIONER SMITH: Mr. Fell.

7 MR. FELL: For clarification, is

8 Mr. Woodbury talking about the bill message or the bill

9 insert?

10 MR. WOODBURY: I'm talking about the bill

11 insert.

12 THE WITNESS: The bill insert could be

13 colored. I mean, usually the typing would be black. I

14 mean, I think it's just traditional bill stuffers that go

15 in.

16 Q BY MR. WOODBURY: Let's talk about the bill

17 message that you use to convey to customers the changes

18 that were effective June 8th of 2002 as a result of the

19 Commission's June 7th Order. Who crafted that message?

20 A That message would have come through our

21 communications department.

22 Q And do you have a copy of the message that

23 went out to customers?

24 A Personally I don't have a copy. I think

25 Mr. Eskelsen might or if he doesn't, we can get one

532

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 quickly.

2 Q Would you be prepared to file as a late

3 exhibit the communications plan developed in this case

4 and a copy of the bill message that you sent out?

5 A Yes.

6 Q Is it your belief that the Company can

7 comply with Rule 102 by doing either a bill message or a

8 bill insert?

9 A I guess it would be my personal

10 interpretation that the Company could meet its

11 requirement by either filing a bill message or a bill

12 stuffer. The only differentiation is that you're very

13 limited on the amount of information that you can put in

14 a bill message and so to the extent that you file a

15 general rate case that would have -- you would want to

16 put in more detail about that in that stuffer, that would

17 not be allowed due to space constraints in a bill message

18 and would be more applicable for a bill stuffer, so I

19 think in most instances if we were filing a general rate

20 case, we would choose to file a bill stuffer as opposed

21 to a bill message.

22 Q Do you find them equally -- do you find any

23 disadvantages to using just one or the other or is it

24 just the content of the information determines whether

25 you will use the message or the -- I mean, the length of

533

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 information, I guess, that you would like to convey?

2 A Mr. Eskelsen might be able to give you some

3 facts on it, but I think you can use the bill messaging

4 for a lot of different issues. It doesn't strictly have

5 to relate to general rate cases if you want to put it on

6 there and it's clearly a lot easier and more

7 cost-effective to do that as a communication.

8 Q On page 8 of your testimony you state,

9 "Clearly, customers knew about this filing." How many

10 customers does PacifiCorp have in Idaho?

11 A I believe somewhere between 40 and 50,000.

12 Q And how many customers filed written

13 comments?

14 A I don't have an exact count.

15 Q Page 10 of your testimony you use 30 as a

16 number?

17 A Yeah.

18 Q And have you reviewed all of those letters

19 yourself?

20 A I have not read every one of them. I've

21 looked at several of them, though.

22 Q But you state that the letters demonstrate

23 that the customers were well aware of the Company's

24 requested relief and the issues in the case.

25 A Yes, it's my belief that to the extent

534

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 possible the customers that we serve through the vehicles

2 that I have described, both personal one-on-one meetings,

3 advisory group meetings where advisory board members were

4 asked to go back and communicate the issues in their

5 communities, the meetings that Mr. Pond had and then

6 virtually 27 articles in newspapers that serve virtually

7 every household within our service territory, TV, you

8 know, essentially every means of communication was used

9 to get the message out to those customers.

10 COMMISSIONER SMITH: Mr. Woodbury, I

11 apologize for interrupting, would this be a good time for

12 a break unless you're on your last question?

13 MR. WOODBURY: That's fine.

14 COMMISSIONER SMITH: Let's try and be back

15 at 10 minutes after 11:00.

16 (Recess.)

17 COMMISSIONER SMITH: We'll be back on the

18 record. Mr. Woodbury.

19 Q BY MR. WOODBURY: Just winding up here,

20 Mr. Larson, your conclusions are that clearly, the

21 customers knew about the filing, the fact that the

22 hearings were well attended demonstrate that the

23 customers were well aware of the pending request and that

24 the letters demonstrate the customers were well aware of

25 the Company's requested relief and the issues; correct?

535

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 A That's correct.

2 Q And you would agree that the number of

3 customers filing written comments were 30, the number of

4 customers that signed in to testify was 20 and that the

5 number of customers that attended the two meetings of the

6 consumer advisory group was 10?

7 A I would say yes on the first two and

8 clearly, the one meeting that you're talking about of

9 Mr. Pond, several meetings that were held on the customer

10 advisory group, 10 representatives representing those

11 communities that they came from that Mr. Pond can talk in

12 more detail about, they were delivered the message and

13 were asked to go back and deliver it to their

14 communities.

15 Q But your conclusion that clearly, the

16 customers know because of all of these things, you could

17 have been sure that the customers knew had you provided

18 them with individual notice; correct?

19 A I don't know that that's necessarily true.

20 They would have had to have actually --

21 Q Read the notice?

22 A -- read the bill stuffer and I think

23 Mr. Eskelsen could talk in more detail, but I think our

24 experience has been and my own personal experience that a

25 lot of individuals tend to pull out bills and throw away

536

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 a lot of the material inside, so I don't know that

2 there's any way to verify that everyone gets communicated

3 with, but in my history of filing rate cases and doing

4 regulatory issues before this Commission, absent the

5 merger with Scottish Power, the amount of input that has

6 come into the Commission on this issue and the amount of

7 attendance at public meetings is by far and away much

8 greater than any other proceeding, and I can tell you

9 that those meetings and the input from customers is more

10 customer input than I've seen in any other state that we

11 have made a regulatory filing.

12 Q Were you vice president of the regulatory

13 department at the time the Company made its Scottish

14 Power merger filing?

15 A No, I was not. I was actually the director

16 of regulation for Utah, Idaho and Wyoming, just those

17 three states.

18 Q Do you know whether the Company, of your

19 own knowledge, do you know whether the Company made a

20 bill stuffer or bill message notice to customers of its

21 application in that case?

22 A I don't know, but I don't believe that

23 there was a bill stuffer or bill message related to that.

24 Q Regarding the Scottish Power/PacifiCorp

25 merger?

537

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 A Merger.

2 Q Does the regulatory department have a copy

3 of the Commission's, a physical copy of the Commission's,

4 customer information rules, Idaho Code Title 61 and the

5 Commission's rules of procedure?

6 A I personally don't. You know, Mr. Eriksson

7 I'm sure would have a copy of that.

8 Q Your legal counsel?

9 A Uh-huh.

10 Q Wouldn't you agree that individual notice

11 at the time a case is filed has a different purpose than

12 individual notice after the Commission makes a decision

13 about a filing?

14 A That's correct, and that's exactly the

15 purpose of my testimony today is that I think we given

16 the advice related to Section 102 tried to accomplish

17 both in what we considered to be the most meaningful way

18 and that is to put together a communications plan to go

19 out and notify all customers in advance of the filing, of

20 the order that would come out, and then at the end issue

21 a bill stuffer related to what the outcome of the

22 Commission's decision was.

23 MR. WOODBURY: Madam Chair, I have no

24 further questions. Thank you.

25 COMMISSIONER SMITH: Thank you,

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 Mr. Woodbury. I would like to extend a warm welcome on

2 behalf of the Commission to state Senator Robert Geddes

3 who has been with us most of this morning and ask

4 Mr. Shurtz if he has any questions.

5 MR. SHURTZ: Yes.

6

7 CROSS-EXAMINATION

8

9 BY MR. SHURTZ:

10 Q Mr. Larson, in your earlier testimony this

11 morning, you mentioned a lot of personal communication

12 with your customers and things in lieu of sending a bill

13 stuffer and things of that nature. I would like to ask

14 the question, I called -- I worked with the Nu-West and I

15 don't have, forgive me, I don't have, the exact time, in

16 late April, I worked with the Nu-West Energy

17 representative and they were completely unaware and then

18 they had to seek the Commission's indulgence or approval

19 to enter as intervenor status with Conley Ward at late

20 notice because they were completely unaware, since

21 they're one of your largest customers, how would you

22 describe your communication with them? How did they miss

23 not knowing until just before the hearing that they were

24 on the hook or that they were going to be charged in this

25 tariff or rate adjustment?

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CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 MR. FELL: Madam Chair, I object to the

2 premise of the question. Mr. Shurtz has said as a

3 premise to the question that Nu-West was not aware of the

4 rate change, but I believe their petition or their late

5 protest specified that they relied on the early

6 explanation that there would be no increase to any

7 customer class and based on that information did not

8 participate in the case until they later found out that

9 the stipulation changed those facts, so I don't agree

10 with the premise and I think the witness could be misled

11 by that.

12 COMMISSIONER SMITH: Mr. Shurtz.

13 Q BY MR. SHURTZ: Okay, what I'm asking is in

14 your testimony, you said there was a lot of communication

15 generally through all your customers.

16 A Yeah, and to answer, Mr. Shurtz, I mean, I

17 concur what Mr. Fell just responded to is exactly what I

18 was going to say related to Nu-West's intervention. I

19 think clearly, I don't have the documents in front of me,

20 but I think we have a customer account manager that is

21 assigned to Nu-West and they would have gone out in

22 advance of the filing on January 7th and visited with the

23 representatives of Nu-West, so they were completely aware

24 of the filing, the components of the filing.

25 As Mr. Fell said, what they weren't aware

540

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 of was what some of the components were in the

2 stipulation and it was at that time that they sought

3 intervention, were granted intervention in the case, so

4 they were communicated with.

5 Q Okay. Also, you mentioned a number of

6 meetings that were held, in your testimony you mentioned

7 a number of meetings that were held. In review of

8 Exhibit 33, page 1 of this, I see that most of them were

9 held with, other than the consumer advisory group, most

10 of them were held with water users associations, I would

11 say more in the irrigation class and of those, there were

12 228 people involved, can you describe any contacts that

13 you might have had with any in the commercial class or

14 any of the larger users other than Nu-West?

15 A Well, I think Mr. Pond can go into detail

16 on exactly what groups that he visited with, Kiwanis

17 clubs and others in the area. We could provide,

18 certainly if the Commission would find this helpful, we

19 could provide a complete listing of any of the large

20 customers that are assigned to customer account

21 managers. They would have been contacted shortly before

22 the filing, so we can provide a complete list of that and

23 I think Mr. Pond is probably a better person to respond

24 directly to the various organizations, like Rotary,

25 Kiwanis Club, others perhaps that were communicated with

541

CSB REPORTING LARSON (X)
Wilder, Idaho 83676 PacifiCorp

1 that would fall outside of the irrigation category.

2 MR. SHURTZ: Okay, I have no further

3 questions. Thank you.

4 COMMISSIONER SMITH: Thank you,

5 Mr. Shurtz.

6 Do we have questions from the Commission?

7 Commissioner Hansen.

8

9 EXAMINATION

10

11 BY COMMISSIONER HANSEN:

12 Q Mr. Larson, just a couple of questions and

13 maybe you can try and clarify a couple of things.

14 A Sure.

15 Q With so small of input with a few others

16 that we received from the public and the public hearings

17 that probably drew 50, 60 people, how can you be assured

18 that even a fair minority, let alone a majority, of

19 customers knew what was going on? How would you know

20 that?

21 A I don't think I would ever pretend to know

22 what's in the minds of customers. You know, like I

23 responded to Mr. Woodbury earlier, even if you send out

24 bill stuffers, I mean, it's virtually impossible unless

25 you run a survey to find out how many customers actually

542

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 read the bill stuffer. I guess from my experience of

2 doing cases for 20 years, the level of communication that

3 has gone on in this proceeding, that went on in this

4 proceeding, is far and away the most extensive effort

5 that we have ever done to communicate with customers and

6 I think the responses, as I said earlier, 30 actual

7 letters that came in to the Commission, the public

8 meetings that were attended that well, I think that

9 demonstrates that there were a fair number of folks that

10 were aware of the issue.

11 The only thing I can judge it against is we

12 had public meetings in, say, Wyoming rate cases in the

13 City of Casper, which is the largest city in our service

14 territory, where we showed up and nobody showed up for

15 those and they were price increases, so my summary is

16 that the attendance, the letters, the other things that

17 went on here demonstrate to me that through the other

18 vehicles that were used, the media, the newspapers,

19 television and other things that many, many, many of our

20 customers in southeastern Idaho were aware of what was

21 going on and those that didn't elect to participate

22 either through written word or come and testify, I assume

23 that they chose not to because they were comfortable with

24 what they had seen.

25 Q Are you aware or can you recall receiving

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CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 any information, either written or verbal, of customers

2 indicating rate shock when they received their first bill

3 after this Order was approved?

4 A No, I'm not aware. I personally have not

5 received any phone calls related to the final

6 implementation of the Commission's Order. I have had

7 some conversations with folks that have talked with Idaho

8 irrigation customers and I know Mr. Pond could also

9 respond that there are a lot of individuals that are

10 pleased with the prices that they're paying for

11 electrical service with Utah Power and, frankly, I've

12 heard from other sources that there are folks that reside

13 in some of the territories surrounding Utah Power that

14 would like to become customers of Utah Power because of

15 the prices that were set by this Commission.

16 Q I know Mr. Woodbury has gone over this

17 fairly extensive and I don't plan on doing that a lot,

18 but I have a couple of questions and that is I'm trying

19 to understand why you didn't think this rate increase was

20 similar to a rate increase in a tariff or a rate case,

21 similar to a rate case and I guess, didn't the surcharge

22 tariff agreed to in the stipulation increase rates

23 substantially for residential and irrigation customers?

24 A Well --

25 Q I mean, wasn't it a double digit increase

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CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 on the tariff?

2 A Well, if you look at all of the components

3 of the filing that we made, the net impact was either no

4 change or a significant decrease. If you dissect the

5 components out, clearly, the excess power costs that were

6 a one-time event, a surcharge, that was an increase to

7 customers, and as I said in responding to Mr. Woodbury

8 that our assessment and the assessment came after

9 final -- in the discussions with legal counsel was that a

10 general rate case is defined, at least in my mind, as a

11 case in which this Commission would look at all the

12 revenues, expenses and rate base items and set rates

13 related to customers in Idaho. It wasn't that, clearly.

14 The other case that denotes a bill stuffer

15 would be a tracker case and my interpretation and it was

16 confirmed by legal counsel was that a tracker case is

17 something that tracks along with costs and, you know, a

18 lot of people have deemed those power cost adjustment

19 mechanisms that go out for companies over a long period

20 of time. The rates are trued up to whatever is in

21 rates. Clearly, it was not that.

22 This was simply a final resolution to

23 deferred power costs. This Commission approved the

24 Company to defer excess power costs for a defined period

25 of time, 12 months starting November 1st of 2000, and

545

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 this filing was simply a filing requesting to recover all

2 or some portion of those power costs over a -- with a

3 surcharge and so my assessment was that that was

4 something different than what was defined under Section

5 102, but having said all of that, it still did not in my

6 mind eliminate the need to communicate this case and as

7 I've described in, I think, fairly good detail, we've

8 tried to do that during that process and I think we were

9 successful in communicating the case, the components and

10 the outcome.

11 Q Well, didn't the BPA credit, though, wasn't

12 that passed on way ahead before this stipulation was even

13 agreed to by any of the parties? Wasn't that passed on

14 to the customers?

15 A Clearly, it was, Commissioner Hansen. It

16 was implemented effective February 1st. I think that

17 piece of it was a big price decrease. It was something

18 that was easy to implement by the Commission and I think

19 all parties knew that these other components that were

20 going to be dealt with during a process that not all of

21 the parties agreed with. I think everybody agreed with

22 this big decrease.

23 Q Do you think at that time when a

24 residential customer received this credit in February on

25 their bill or probably March when they actually got it,

546

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 do you think that they looked at that and had any idea

2 that this Company was going to go before the Commission

3 in April with a stipulation trying to recover 38 million

4 or eventually getting the 22.7 million, do you think the

5 residential customer knew that?

6 A I think as was described in the articles

7 that have been attached, newspaper articles, and others

8 that have been attached to Mr. Eskelsen's testimony and

9 also the meetings that Mr. Pond had, the meetings that I

10 had, I think clearly, many, many people understood far

11 better all of the components that were included in this

12 filing. The BPA decrease was just one piece of that and

13 it's anybody's guess whether the communication that we

14 did as a Company in trying to let customers know about

15 all of the components, including the excess power costs,

16 whether that was more or less effective than what a bill

17 stuffer would be.

18 I personally tend to believe that we got

19 the message out in a very effective way and as I've said

20 over and over again, you know, had we determined, had

21 legal advice been that it was required to send a bill

22 stuffer in that, we would have done that and we still

23 would have gone out and communicated with customers, but

24 it was the legal advice to me that a bill stuffer was not

25 required and, therefore, we did not go forward with that.

547

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 Q Well, in regards to that, on page 8,

2 lines 14 through 19 of your testimony, you talk about the

3 harsh treatment for this violation and let's say that the

4 Commission still finds that the Company is guilty of this

5 violation of the rules and as I understand your statement

6 there, if that's the case, you still think this is a very

7 harsh treatment, is this the largest fine you're aware of

8 being levied against PacifiCorp in any of the states

9 which your Company serves? Have you had fines greater

10 than this in other states for penalties?

11 A I am not personally aware of any fines that

12 have been levied against PacifiCorp in any of the

13 jurisdictions. I certainly am not in my 21 years, I'm

14 not aware of any fines levied by the Wyoming or Utah

15 Commission. Certainly, this would be the first in

16 Idaho. I mean, the fine in my view was staggering when I

17 read the Commission Order and in light of essentially, as

18 I read, that the largest fine that had been granted or

19 levied by this Commission was against Washington Water

20 Power and it was a situation where Washington Water Power

21 for 41 months wasn't complying with their own tariff that

22 was filed with this Commission and here we have got a

23 case before the Commission where we have got a rule that

24 perhaps has some ambiguity to it.

25 I think I have tried to demonstrate today

548

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 that we took the Commission rule extremely seriously. We

2 debated this issue in great detail among several

3 departments in the Company. We made a decision based on

4 legal advice and I'm taking responsibility for making

5 that final decision, but at the same time, if we have

6 violated something, we have not done it out of malicious

7 intent. We certainly have not done it because we wanted

8 to just blatantly ignore Commission rules.

9 It was a misunderstanding or a

10 misinterpretation and I think the case that we've tried

11 to put on and my testimony today is that in addition to

12 that issue alone, we did have an extensive communication

13 program to try to communicate with our customers, and so

14 from that standpoint, there doesn't seem to be to me,

15 Commissioner Hansen, a very good correlation between what

16 Washington Water Power did for 41 months of ignoring

17 their own tariff and an unintentional misinterpretation

18 or whatever, difference of opinion related to a tariff

19 that basically lasted, you know, the tenure of the filing

20 and on the one hand, you know, $75,000 for 41 months of

21 ignoring your own tariff; on the other hand, $1.1 million

22 for a Company that misinterpreted, if that's the case, a

23 rule; yet, when you look at the communication to

24 customers, it was pretty darn good and as I've stated,

25 the turnout in the proceedings and the customer

549

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 involvement at the residential level is higher than what

2 I have ever experienced in any rate proceeding that we

3 put on before a commission.

4 COMMISSIONER HANSEN: Thank you. That's

5 all the questions.

6 COMMISSIONER SMITH: Commissioner

7 Kjellander.

8 COMMISSIONER KJELLANDER: Thank you.

9

10 EXAMINATION

11

12 BY COMMISSIONER KJELLANDER:

13 Q Good morning, Mr. Larson.

14 A Good morning.

15 Q Regardless of which communication method is

16 the most effective, because I think you've outlined which

17 one you think is the most effective, isn't one of the

18 goals or benefits of a bill stuffer to ensure that every

19 customer gets a notice, that even if the customer once

20 they open up their bill decides that the most appropriate

21 place to put the bill stuffer is in the trash, they had

22 an opportunity to see the notice and it eliminates

23 ultimately an argument that customers might bring forward

24 that, in essence, suggests they weren't given an

25 opportunity to be notified of any rate change, whether or

550

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 not they availed themselves of an educational opportunity

2 that may come later through some of the other options

3 that you've laid out in your testimony, so then isn't it,

4 then, one of the objectives of the bill stuffer to ensure

5 that the argument goes away that customers didn't at

6 least have an opportunity to be notified and to further

7 educate themselves?

8 A I think that clearly is the purpose behind

9 it. I think, as I stated, our reading of the section

10 that requires bill stuffers, this was not a case that

11 required it. I guess looking back -- I mean, hindsight

12 is 20-20, Commissioner Kjellander. If I would have had

13 any dream that this caused that much controversy, perhaps

14 that's what should have been filed, but our reading of it

15 was that the bill stuffer wasn't required in this filing

16 and so we sought our means to try to communicate it, but

17 I can't disagree that if you put it in everybody's bill

18 and they elect not to look at it, then it's given to

19 them.

20 Q Is it, and I'm not trying to knock your

21 communication plan, it may have been very good, I don't

22 know, I didn't see it, it sounds from the testimony that

23 it was fairly extensive, but is it fair to say or safe to

24 say that not everyone in that service territory takes a

25 newspaper, so is it fair to say that there's a

551

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 possibility that not everyone who is a customer actually

2 saw one of the articles?

3 A Oh, I think, clearly, that's a possibility.

4 Q And it's probably fair to say, too, that of

5 the broadcast coverage that may have occurred, it's

6 possible that a good percentage of people maybe didn't

7 see the broadcast?

8 A Uh-huh.

9 Q Okay. Let me move to the questions, then,

10 that you had about cost of service adjustments that were

11 posed to you by Mr. Woodbury and in that response related

12 to cost of service adjustments, I think you mentioned

13 that cost of service adjustments aren't common or rather

14 are common in general rate cases, but they're not unusual

15 to occur outside of a general rate case. If we look just

16 solely at the Idaho jurisdiction, do you know when the

17 last time was that a cost of service adjustment was dealt

18 with in the Idaho jurisdiction that was outside of a

19 general rate case?

20 A My recollection is, and it goes back a

21 ways, but my recollection is that we dealt with a cost of

22 service case, strictly cost of service and BPA-related

23 case, in, I want to say, 1990, '91 time frame. That's my

24 recollection.

25 Q You're probably not aware as to whether or

552

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 not a bill stuffer was included in that particular

2 filing?

3 A (The witness shook his head from side to

4 side.)

5 Q Okay. In your discussions with legal

6 counsel Mr. Eriksson, how quickly did he turn around a

7 response to you, to your original inquiry about whether

8 or not Rule 102 applied?

9 A I think it was within a day or two, the

10 first verbal communication. I mean, this obviously, as

11 you have seen through the e-mail traffic, was something

12 that was debated over a period of time, but his response

13 back to me as to the issue was in a day or two.

14 Q Do you know if he checked with PUC Staff or

15 others in relationship to Rule 102 and whether or not it

16 applied?

17 A I don't know whether he checked with

18 anybody at the PUC Staff. I presume it was probably his

19 reading of the rule.

20 Q By that point in time, at least in the

21 history of this Commission, this Commission had already

22 dealt with some very significant purchased power deferral

23 cases with Idaho Power and Avista, do you know if your

24 legal counsel had inquired of legal counsel from some of

25 the other electric utilities that the Idaho Public

553

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 Utilities Commission regulates, that he checked with them

2 to see whether or not this rule applied?

3 A I don't know if he called them

4 specifically. I know we did have a discussion about the

5 Idaho Power filing and our discussion was that there was

6 a distinction between what we were filing and what Idaho

7 Power was filing, because ours was a deferral for a fixed

8 period of time, 12 months, and then some type of a

9 recovery mechanism which ended up being a surcharge;

10 whereas, Idaho Power, any of their power costs that

11 deviate, whether they're excess or not, they have,

12 obviously you're aware of, a balancing mechanism where

13 those increases or decreases are brought to the

14 Commission, but it's specifically a tracker filing that

15 they would make and it's not fixed in duration. It's

16 something that extends over a -- I mean, in perpetuity

17 until the Commission would change the recovery mechanism

18 for Idaho Power.

19 Q And just one final question, since you've

20 had the ultimate decision as to whether or not the bill

21 stuffer was to be included as part of this case, was

22 there ever a time in this process that you thought Rule

23 102 applied?

24 A My personal reading of it from day one was

25 that Rule 102 didn't apply, so I personally never thought

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CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 Rule 102 applied. The only question in my mind was

2 basically if it didn't apply as I thought, how are we

3 going to communicate this case to customers, and also the

4 question came up, even if it doesn't apply, you know, is

5 there some -- is there value in our communication plan as

6 we were going to head to it versus the potential impacts

7 of double communication through the bill stuffers and

8 people misinterpreting it and that.

9 Right or wrong, I made the decision that we

10 would not -- weighing all of the feedback that I got back

11 from the various people that were participating in the

12 case, I ended up having to make the decision and I made

13 the decision that we would go forward with the

14 communication plan as I've outlined and not provide a

15 bill stuffer until the Commission rendered a decision and

16 notify them then, so if someone made an error in this, it

17 was my decision. I made the decision.

18 COMMISSIONER KJELLANDER: Thank you,

19 Mr. Larson. That's all I have.

20 COMMISSIONER SMITH: Do you have redirect,

21 Mr. Fell?

22 MR. FELL: Yes, thank you.

23

24

25

555

CSB REPORTING LARSON (Com)
Wilder, Idaho 83676 PacifiCorp

1 REDIRECT EXAMINATION

2

3 BY MR. FELL:

4 Q Mr. Larson, would you turn to your Exhibit

5 No. 29? Just to make matters clear, did you attend the

6 public hearings and evidentiary hearings in southeast

7 Idaho?

8 A I did.

9 Q And you have here the list -- Exhibit 29 is

10 two pages, actually it looks like three pages, of sign-up

11 sheets, is it your recollection that more people, less

12 people actually attended these hearings than what you see

13 on the sign-up sheet?

14 A My recollection is it was probably about a

15 three- or four-to-one ratio of folks that attended the

16 hearings and those that actually testified before the

17 Commission.

18 Q And then regarding communications with

19 customers, would you agree that there are two parts to

20 communication: there's the delivery of the communication

21 and the receipt of the communication?

22 A Absolutely.

23 Q And is it your testimony, then, that the

24 issue of the bill stuffer has a lot to do with the second

25 part of that, whether customers actually personally

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CSB REPORTING LARSON (Di)
Wilder, Idaho 83676 PacifiCorp

1 receive it in the sense of reading it and being aware of

2 it?

3 A Yes.

4 Q If you'll turn to Exhibit 31, please, which

5 is Mr. Eskelsen's, we're a little bit ahead of ourselves,

6 but that's where it has gone, do you see the part in that

7 press release -- this is a press release that was issued

8 January 7, there are four bullets and would you read

9 those four bullets and the paragraph that follows that

10 just to refresh your recollection?

11 A Okay.

12 Q Do you consider that a fairly clear and

13 complete explanation of what the filing was about?

14 A It's absolutely crystal clear to me what

15 the filing is about based on that.

16 Q And the second bullet actually identifies

17 the 38 million in power cost recovery that was being

18 sought?

19 A Yes.

20 Q Do you see anything about that

21 communication that suggests that the Company was trying

22 to in any way minimize or conceal the significance of the

23 rate filing in this case?

24 A No.

25 MR. FELL: No further questions.

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CSB REPORTING LARSON (Di)
Wilder, Idaho 83676 PacifiCorp

1 COMMISSIONER SMITH: Thank you, Mr. Fell,

2 and thank you, Mr. Larson.

3 THE WITNESS: Thank you.

4 COMMISSIONER SMITH: And Mr. Larson may be

5 excused.

6 MR. FELL: Thank you.

7 (The witness left the stand.)

8 COMMISSIONER SMITH: And it appears we have

9 come to the time for lunch, so let's recess for lunch and

10 come back at 1:15.

11 MR. FELL: Thank you.

12 (Noon recess.)

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558

CSB REPORTING COLLOQUY
Wilder, Idaho 83676