20090304Vol I Workshop.pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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)
)
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) CASE NO. PAC-E-08-09
)
)) WORKSHOP
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MARIAN MATHEWSON,
Complainant,
vs.
ROCKY MOUNTAIN POWER,
Respondent.
BEFORE
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COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER MACK REDFORD
COMMISSIONER JIM KEMPTON
PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:February 25, 2009
VOLUME I - Pages i - 38
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb~heritagewifi.com
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1 APPEARANCES
2
3 For the Staff:Kristine Sasser, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
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5
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For Rocky Mountain Power:Ted Weston
and Robert Stewart
Rocky Mountain Power
201 South Main Street
Suite 2300
Salt Lake City, Utah 84111
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10
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12 Also Present:Daniel Klein
T.J. Golo
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APPEARACES
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1 BOISE, IDAHO, WEDNESDAY, FEBRUARY 25, 2009, 1:00 P. M.
2
3
4 COMMISSIONER SMITH: Good afternoon,
5 ladies and gentlemen. This is the time and place set for
6 a workshop before the Idaho Public Utilities Commission
7 in Case No. PAC-E-08-09, further identified as Marian
8 Matthewson, Complainant, versus Rocky Mountain Power,
9 Respondent. I appreciate the Company being here today.
10 When the Commission considered this item, it had many
11 questions and thought a workshop format might be the best
12 way to get them answered. If you would, would you please
13 state your appearances for the court reporter?
14 MR. WESTON: All right, I'm Ted
15 COMMISSIONER SMITH: And there's a little
16 button there you push and your red light comes on. Thank
17 you.
18 MR. WESTON: Ted Weston, Rocky Mountain
19 Power. I i m the Idaho regulatory manager.
20 MR. STEWART: Rob Stewart, Rocky Mountain
21 Power. I am the tariff consultant in the regulation
22 area.
23 COMMISSIONER KEMPTON: Was that Ron?
MR. STEWART: Robert, Robert Stewart.
COMMISSIONER SMITH: Thank you, and for
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1 COLLOQUY
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1 the Commission Staff.
2 MS. SASSER: Kristine Sasser representing
3 Commission Staff.
4 COMMISSIONER SMITH: Thank you, so our
5 purpose today is not to have a formal hearing, but I 1m
6 hoping you brought something that's going to explain to
7 us you how this tariff provision works and we can ask
8 questions and make sure that we fully understand.
9 MR. WESTON: We i ve got a handout.
10 COMMISSIONER SMITH: It would be great,
11 thank you.
12 (Pause in proceedings.)
13 MR. WESTON: We appreciate the opportunity
14 to come up and address the questions raised in the
15 complaint about the Company i s line extension policy and
16 facilities charge, how the Company calculates that and
17 the purpose of it and any other questions that you have,
18 so Rob is the tariff administrator and the expert in this
19 area, we'll let him walk us through this exhibit that was
20 prepared.
21 MR. STEWART: Okay, years ago when we
22 first filed this, we were filing in all the states to
23 what we called a revenue neutral line extension or
24 tariff. The intent and the effort, the design was to.25 gi ve an allowance based on the revenue that would support
CSB REPORTING
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2 COLLOQUY
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1 a line and then any line that's not supported by revenue
2 to have a customer advance that piece and then in
3 addition to that, for all commercial loads and remote
4 residential to have a facilities charge which would cover
5 it. In case the revenue didn't cover the ongoing costs
6 associated with that line, we would have this facilities
7 charge that would pick up the deficit, so the whole point
8 was to make it revenue neutral so that there would be
9 neither an upward pressure on the rates, but at the same
10 time be an allowance for the revenue that that customer
11 brought on, so that was the intent behind the design.
12 The actual application of that, these facilities charges
13 are given in this handout as one example. Of course, you
14 have to through the estimating process and through the
15 design process come up with a line cost which is in the
16 first box there under (a). For this example, I've given
17 $35,000 and then the allowance in the case of
18 residential
19 COMMISSIONER KEMPTON:Could we talk
20 about these each one as you get to it?
21 MR. STEWART: Yes.
22 COMMISSIONER KEMPTON: So, Robert, on the
23 estimated line extension cost, what all is incorporated
24 in that?
25 MR. STEWART: All of the material and
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3 COLLOQUY
.1 labor of installation, the design cost, associated
2 overheads, so you'd have engineering overheads in that
3 cost. Our labor is the activity rate for the
4 construction personnel which includes their vehicle and
5 their - - all of their salary and support staff that
6 directly supports them, so it's primarily the material
7 and labor, vehicle with some overheads.
8 COMMISSIONER KEMPTON: Okay, go ahead.
9 MR. STEWART: Then we give the allowance,
10 which in the case of residential it is the cost of
11 transformer, meter and service necessary to serve that
12 person. In the case of general service, it i S based on.13
14
the capacity, installed capacity, as required, the
kilowatt demand times $90, so you get $90 per kW for the
15 general service customer, so in this example, that 5,000
16 could represent either one. It could be - - it's just a
17 number put in just for example purposes, and then as
18 mentioned, the customer has to pay everything in excess
19 of that, so in this case example, the customer would have
20 to advance 30,000 because the allowance is only five and
21 so 35 less the five makes the 30,000, so that's the
22 up-front cost, and then the facilities charges are
23 applied to the Company cost which is the allowance and to
24 the customer advance which is the 30,000. The facilities.25 charge is a - - this is percent per month, so it's 1.67
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4 COLLOQUY
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1 percent of the Company investment of 5,000 and this
2 example would be, therefore, the product of the 5,000 and
3 the 1. 67 and
4 COMMISSIONER SMITH: I just fell off the
5 train.
6 MR. STEWART: Okay.
7 COMMISSIONER SMITH: But the 5,000 is not
8 the Company i s investment, the 5,000 is an allowance.
9 MR. STEWART: Yes, which the allowance is
10 the cost the Company bears, so that does make it the
11 Company investment.
12 MR. WESTON: It's the cost of the
13 transformer and the meter and then the service drop to
14 the customer, so that i s what makes up the allowance.
15 COMMISSIONER SMITH: It i S not the
16 allowance you talked about earlier based on the revenue?
17 MR. STEWART: No, residential is a
18 transformer, meter and service. General service would be
19 based on, I say revenue, all of our other states it is
20 strictly revenue, in Idaho it's actually based on demand
21 which is related to revenue, but it's not -- I apologize.
22 I explained it five times one way and the sixth time a
23 different slip.
24.25
COMMISSIONER SMITH: All right, so even
though that's an allowance, there i s a facilities charge
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1 on that?
2 MR. STEWART: Yes.
3 COMMISSIONER SMITH: Okay.
4 MR. STEWART: And so the facilities
5 charge, as mentioned, will be the product of the 1.67
6 times the allowance, the Company investment, for $83.50
7 in this example and on the customer advance it IS. 67
8 percent per month on the 30,000. In this case, the
9 30,000 times the .67 percent is the $201, and then you
10 take the sum of those two to come up with the total
11 facilities charge of $284.50, so that's the mathematical
12 steps of getting to the facilities charge, and when we
13 discuss the facilities charge with a customer with
14 regards to the contract, it's always that total, the
15 number in bold, the $284.50.
16 MR. WESTON: Maybe you can explain what
17 the purpose of the facilities charge is, what it covers,
18 what makes it.
19 MR. STEWART: We derived - - when we
20 originally filed it and still, it represents -- the use
21 of facilities charges are based on information reported
22 in the Company i s FERC Form 1 and i t involves for those
23 facilities on the Company investment, the 1.67 percent is
24 made up of the return on capital, recovery of capital,.25 state and federal income tax. I have a handout that
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1 covers - - only four of them, I didn i t make enough. I
2 thought you may as I go through these - - would it be
3 appropriate to supply three to the Commissioners?
4 (Pause in proceedings.)
5 MR. STEWART: On the second page, i t gives
6 you the breakdown of it, but the description is on the
7 first page, so it gives it on an annual basis from the
8 most recent FERC Form 1, so these numbers are based on
9 2007 data, of course, at the time we made the filing.
10 They change every year. We don i t we haven i t changed
11 the numbers since we filed the tariff.
12 COMMISSIONER SMITH: So let me see if I
13 understand. The percentages on page 2 in columns (a) and
14 (b) are some percent calculated by numbers that are in
15 the FERC Form I?
16 MR. STEWART: Yes, cost of capi tal.
17 MR. WESTON: So for each category we'd be
18 taking the last authorized Idaho return.
19 COMMISSIONER SMITH: Overall rate of
20 return?
21 MR. WESTON: Yeah, and then also
22 Idaho's - - we'd be backing into Idaho i s state and federal
23 income taxes, their local taxes, the distribution,
24 operation and maintenance costs for the State of Idaho..25 COMMISSIONER SMITH: And then is this an
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7 COLLOQUY
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1 annual number that you turn into a monthly?
2 MR. STEWART: Right, yes.
3 MR. WESTON: So then the purpose of this
4 sheet was just to kind of demonstrate the components that
5 went into the percentages that are used in the facilities
6 charge.
7 COMMISSIONER KEMPTON: What's the purpose
8 of the sum on those, 18.44 and 18.11 percent of what,
9 when you add up the percentages?
10 MR. STEWART: It's based on the cost of
11 capital, so when we do a job design, that's the capital
12 and these are a percentage of that cost, so we take all
13 of our distribution facility costs and so that's a
14 percent on those distribution basically rate base.
15 MR. WESTON: So they're comparative to the
16 distribution capital investment, O&M costs and so
17 forth.
18 COMMISSIONER KEMPTON: But if I apply
19 these individual percentages to the line item they apply
20 to and I add those up, I won't necessarily get the same
21 number as applying the 18.44 and 18.11 times whatever
22 that total amount may be, right?
23 MR. STEWART: That bottom sum is divided
24 by 12 - - actually, that's a current. What we have is.25 1.67 here. If we multiply 1.67 times 12, we actually
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8 COLLOQUY
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1 come up with 20 percent instead of in this case
2 COMMISSIONER KEMPTON : Divide by 12 to get
3 the 1.67?
4 MR. STEWART: Yes.
5 COMMISSIONER SMITH: So the 1.67 was a
6 previous number, these are your new FERC Form 1 numbers,
7 so if we divided those by 12 ,it's going to be something
8 a little less than 1.67.
9 MR. STEWART: Yes.
10 COMMISSIONER SMITH: Okay. What this
11 represents is that you believe that 18 percent of your
12 costs from your FERC Form 1 should be applied to the line
13 extension?
14 MR. STEWART: Yes.
15 COMMISSIONER REDFORD:And that's uniform
16 regardless where you are?
17 MR. STEWART: Yes, wi thin the state.
18 COMMISSIONER REDFORD:You know, I just
19 have a couple of questions. One is when an
20 unsophisticated person visits with you about a line
21 extension, do you go through or particularly in this case
22 did you go through with Mrs. Mathewson to explain that
23 she is not picking up any extra costs, she is
24 percentage-wise picking up her share of all line.25 extensions or the Company's cost of capital?
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1 MR. STEWART: I don't know what was
2 discussed, but I do not -- I don't believe I can
3 represent that that's explained with every person, no.
4 COMMISSIONER REDFORD:Well, you know,
5 sometimes and it's gotten a lot better, but I can
6 remember years past when especially your telephone bill
7 when you got it there was just no one on earth that could
8 explain it to you and everybody has done a lot better job
9 nowadays, but if I was her, you know, who wants a line, I
10 would be overwhelmed and it seems to me that there's a
11 lot of -- well, you come up with $284.50 per month and
12 then they say well, is that all and you say well, no it's
13 not all, now you have to pay for the power you use.
14 MR. STEWART: Yes.
15 COMMISSIONER REDFORD:So it is quite a
16 daunting experience for someone who probably when she
17 built her home didn't have any idea that she was going to
18 be charged for that. Do you know, where did she get her
19 early power for building her home? I don't know if it's
20 new or not.
21
22 has solar and wind and I don't know how --
MR. WESTON: In the complaint it says she
23 COMMISSIONER REDFORD:How long do these
24 facilities charges go on?.25 MR. STEWART: For as long as the
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10 COLLOQUY
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1 facilities are in place.
2 COMMISSIONER REDFORD:Would the
3 facilities as your corporate numbers change for capital
4 change, would then she be required to pick up her share
5 of the cost of capi tal as it decreased?
6 MR. STEWART: No, we don't change it.
7 Once we make thi s number, we don i t ever go back and
8 adjust it. It stays, so over time, assuming there's
9 inflation, at the time it becomes relatively less because
10 the dollar number doesn i t change.
11 COMMISSIONER SMITH: Of course, we see
12 that doesn't work in this case, since it would be lower
13 if you used the current numbers.
14 MR. STEWART: There's two parts to it.
15 There's changing the number we file and there's also
16 changing this number as the capital becomes more
1 7 expensive and we haven't changed either one. If this
18 number were filed, it would be smaller than 1.67. Of
19 course, this is not her numbers, but if it were, the
20 $284.50 would never change once --
21
22
COMMISSIONER SMITH: I understand that.
MR. STEWART: I had for instance, we
23 are serving a ranch up a canyon and he's been there since
24 the' 60s and he still has this facilities charge, but.25 it i s, like, 20 some dollars a month because over the time
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1 that it was built, that's the number we came to and it i s
2 not been adj usted since.
3 COMMISSIONER REDFORD:Well, you
4 depreciate your equipment.
5 MR. STEWART: Yes.
6 COMMISSIONER REDFORD:And yet, you could
7 depreciate all this off, say, in five years and yet,
8 there would be still a facilities charge that goes on,
9 could go on, forever.
10 MR. STEWART: We depreciate it over the
11 expected life of them, so it i s 30 or 35 depending on the
12 piece and then if you' re active on depreciation, then you
13 replace it with new and so then you restore your rate
14 base, so to speak, by that capital replacement, so yes,
15 if you do it year by year, there would be a changing
16 number, it would decrease, decrease and then all of a
17 sudden it would jump a lot as you replaced with new.
MR. WESTON: And the other thing, the
19 return on the investment is one piece of it. The other
20 components, obviously, are ongoing maintenance, property
21 taxes and those types of things.
22
23 question, she's been there since '99.
COMMISSIONER SMITH: In answer to your
24
25
COMMISSIONER REDFORD:Well, I just
looked at it from a ratepayer's standpoint that, you
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12 COLLOQUY
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1 know, she looks at it and says wow, that's unreasonable
2 and then I have to pay a monthly facilities charge that
3 goes on forever, plus my power. Wouldn't you think if
4 you depreciated this off in 30 years that it's been fully
5 depreciated and shouldn i t the charge be reduced?
6 MR. STEWART: For a remote customer, the
7 most common remote customer is our communication towers
8 because they find a butte where they get good
9 communication signals and those facilities have no
10 purpose in being in there except for serving that site,
11 but the revenue on that doesn't support having that line
12 in place. The revenue is insufficient to support that
13 line in place and so we have a facilities charge¡
14 otherwise, what you do is you have - - you basically have
15 a line unsupported by that revenue, therefore, in
16 essence, you're causing other ratepayers to help pay for
17 that line and so in the case of any remote customer, if
18 you don't have a facilities charge, then you're asking
19 other ratepayers to help pick up the ongoing costs with
20 maintenance and taxes associated with that investment,
21 and again, as stated in the beginning, our effort was to
22 be revenue neutral, to not have other customers pick up
23 that cost, but have the customers being served bear that
24 cost.
25 COMMISSIONER REDFORD: Well, what, if you
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1 know, what has been the dialogue with you and
2 Mrs. Mathewson? I mean, we i ve got a compl aint and you've
3 responded to the complaint and I think it i S incumbent
4 upon Rocky Mountain or Idaho Power or anyone to sit down
5 and go through these numbers and explain to the extent
6 you can what they mean and I mean, she just gets hit with
7 this and says well, I'm going to have to pay $284.50
8 forever and let's assume for a second that you don It
9 replace or upgrade her system, I don't think it's
10 unreasonable for her to say you fully depreciated - - you
11 finally depreciated this line out, your costs stopped
12 theoretically, hers don't, now that may not - - you know,
13 I don't know how old this lady is, but I know I won't be
14 around in 30 years, but maybe she will.
15 COMMISSIONER SMITH: Actually, 284 is not
16 her number.
17 MR. WESTON: No, it's not. I think her
18 number was, like, 200.
19 COMMISSIONER SMITH: 180.
COMMISSIONER REDFORD: Do you have an
21 estimate of - - have you ever done an estimate of how much
22 power she will consume? I mean, she's got a generator,
23 she's got wind and so on.
24.25
MR. WESTON: I mean, the irony of this
complaint is - - I guess to answer your original question,
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1 no, we don't have any idea. You know, she stated she
2 wanted it for backup service, so how much energy she
3 would actually use, we don't know. I guess the irony
4 that I see that the Company has in that metering tariff,
5 we could actually bill this line extension to her and end
6 up buying power from her and never pay the costs of the
7 line.
8 COMMISSIONER REDFORD: Do you know if she
9 has telephone service there?
10 MR. STEWART: I don't know.
11 COMMISSIONER REDFORD: Maybe the question
12 is kind of dumb, but can you hang your wire on a
13 telephone pole that i s using a landline?
14 COMMISSIONER SMITH: I would be surprised
15 if there were any poles.
16 MR. WESTON: In the response the estimate
1 7 was for underground service.
18 COMMISSIONER SMITH: Because it said the
19 roads were so windy you couldn't put poles.
20 COMMISSIONER REDFORD:Well, you know, I
21 don't think there's any question that you have a right to
22 get your return on these investments and other ratepayers
23 should not have to pay that, but on the other hand, I can
24 still appreciate her concern..25 MR. WESTON: Yes.
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.1 COMMISSIONER REDFORD:And it seems to me
2 that if someone from your Company goes up and goes
3 through it with her in detail and I don i t know what her
4 background is, but you ought to be able to explain to her
5 what it is. It sounds like this lady is pretty
6 self-sufficient and if she's just going to use this line
7 for backup, maybe she ought to have some other kind of --
8 increase the size of her generator or put another
9 windmill in or something like that. Sometimes we get
10 locked in these disputes where we haven't really gone to
11 the customer and said here's what it is.
12 MR. WESTON: And your point is a valid one.13 and I can't address it. I know we've had an estimator
14 that's talked to her. Daniel has probably talked to her
15 more than I have so he might be a better person -- I
16 never spoke to her. We have customer account reps that
17 have probably talked to her, but exactly what has been
18 explained to her, I'm not sure. Daniel, I think you
19 tried to explain the facilities charge and that to her.
20 COMMISSIONER REDFORD: Maybe a better way
21 to explain it to her would say to her that let's assume
22 that there was a development going in somewhere else,
23 those people who are going to buy homes in there,
24 somewhere in the cost, the cost of the home or whatever,.25 are these very charges. The problem for her is there
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1 aren't a bunch of people around her that can share the
2 expense. Have you explained to her we 11, i don't
3 know, you might explain to her that as new customers come
4 on that she would get a refund. Now, maybe she's so
5 remote no one would come on it.
6 COMMISSIONER SMITH: Well, it's my
7 understanding from reading the tariff language that was
8 in your response that you apparently make some judgment
9 calls with things called distant or isolated locations
10 and you make a judgment call that this is in an area
11 where additional development is unlikely.
12 MR. STEWART: Yes.
13 COMMISSIONER SMITH: So if you had made
14 the judgment call that additional development was likely,
15 this wouldn i t even apply.
16 MR. STEWART: There's two pieces to that
17 definition. One is anything over a half a mile and the
18 other is isolated which could be less than half a mile.
19 For the sake of just avoiding battles, we very seldom
20 make that determination if it's less than a half a mile.
21 It's just a hard case to argue. Now, for a communication
22 tower, I think it would be easier to make that argument
23 if they're on a rocky butte and there's absolutely
24 nothing else, but outside of that, we have not used that.25 isolated type piece of the definition. We Ive only used
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1 the over half a mile, and at the same time when people
2 have been over half a mile and other people have built on
3 that line, then we remove the facilities charge because
4 it, again, gets back to fairness and treating everyone
5 the same.
6 MS. SASSER: If I may ask a question
7 regarding that statement, is it written down anywhere
8 that you do remove the facilities charge from the
9 person i s statement? It was a question that Staff had
10 during the course of the case that was never answered.
11 We didn i t find anything on paper that said that you would
12 remove the facilities charge if at some point someone
13 moved within that distance.
14 MR. STEWART: No, it is not written in the
15 tariff.
16 MR. WESTON: In fact, to your point,
17 Commissioner Redford, the Company would be more than
18 happy, I i 11 take the assignment, to contact our customer
19 account representatives and see if they've explained the
20 facilities charge to the customer and if not, we i 11 be
21 more than happy to contact her and try to help her
22 understand the purpose of the facilities charge.
23 COMMISSIONER SMITH: Well, based on her
24 very well written letter September 12th and the fact that
25 she says she i s a widow on a teacher's pension, I think
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1 she probably understood and she just doesn i t like it.
2 MR. WESTON: I agree wi th that.
3 COMMISSIONER KEMPTON: On the one-half
4 mile, if someone requests power on a home that's
5 four-tenths of a mile from the end point of your
6 transmission line, what are they charged for that?
7 MR. STEWART: They're charged the same.
8 The facilities charge just isn't applied, so the up-front
9 costs would be whatever the design costs are less than
10 that transformer, service and meter allowance, but we
11 just would not have a contract to pay the ongoing
12 facilities charges.
13 COMMISSIONER KEMPTON: And what's the
14 logic of somebody who is only five-tenths of a mile
15 further on not getting credit for the first four~tenths
16 of a mile?
17 MR. STEWART: It's not a matter of credit.
18 It's just a matter of drawing a line for when you
19 implement and when you don't, of having some point you
20 have to make a determination. The determination of
21 whether revenue supports it or not is actually far less
22 than a half a mile.
23 COMMISSIONER KEMPTON: But I don't
24 understand why a facilities charge for those things that
25 you've identified, why if you're willing to make that
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19 COLLOQUY
.1 reduction for somebody that's four-tenths of a mile, why
2 at least the first four-tenths of a mile wouldn i t get the
3 same consideration and then everything after that would
4 be constructed as the requirement for payment.
5 MR. STEWART: All I can answer is the
6 method that we've used for as long as I've been with the
7 Company is that when the charges apply, they apply to the
8 whole investment. I can't really --
9 COMMISSIONER KEMPTON: So the charge to
10 the ratepayer as a whole is not necessarily the whole
11 criteria because certainly, if you're not going to charge
12 for that on the first four-tenths of a mile, you're
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14
billing that back to the ratepayer base.
MR. STEWART: It's certainly going to the
15 rate base and there's not offsetting revenue, that's
16 correct. It's all going to rate base and then is there
17 offsetting revenue or not is the question. The
18 facilities charge assures that there is offsetting
19 revenue. If you don't have the facilities charge, you
20 don't have that same assurance.
21 COMMISSIONER KEMPTON: Isn't it a little
22 bit arbitrary to make that kind of a decision on distance
23 when in one case you will allow it and the other case you
24 won i t if you can't construct the basis - - the distinction.25 between the two?
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1 MR. STEWART: I don't know if it's any
2 more arbitrary than the fact that we charge standard
3 rates no matter how far, you know, how rural it is, that
4 it could be more expensive than rates elsewhere. I think
5 it i S consistent with our ratemaking policy and process.
6 COMMISSIONER KEMPTON: So, again, I return
7 to the fact that if it's four-tenths of a mile or less,
8 it i s okay to include that back in the rate base.
9 MR. STEWART: It's okay to - - what we i re
10 doing is actually it's okay not to ensure that the
11 revenue covers it is what I'm --
12 COMMISSIONER SMITH: Because the
13 facilities charge is not mileage based.
14 MR. STEWART: No.
15 COMMISSIONER SMITH: It's investment
16 based.
MR. STEWART: Yes.
COMMISSIONER KEMPTON: And that i s my point
19 as well. I mean, four-tenths of a mile really doesn It
20 have anything to do with the mileage and so that cost,
21 whether it's out at one mile, nine-tenths of a mile or
22 four-tenths of a mile, it's the same.
23 COMMISSIONER SMITH: Well, the cost would
24 be more if the line were longer.
25 MR. STEWART: Yes.
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21 COLLOQUY
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17
18
1 COMMISSIONER KEMPTON: For materials.
2 MR. STEWART: Yes.
3 MR. WESTON: And the property taxes and
4 maintenance and all the components. The more you add to
5 the line the more the costs increase. I mean, I
6 understand your point.
7 COMMISSIONER SMITH: So just let me get
8 clear, so if you had in this example a customer
9 four-tenths of a mile, they would pay the $30,000.
10 MR. STEWART: Yes.
11 COMMISSIONER SMITH: But they would not
12 pay the $284.50.
13 MR. STEWART: Correct.
14 COMMISSIONER SMITH: But if you are a
15 customer that is .51, he pays the 30,000 and $284.50 a
16 month unless and until somebody moves in the gap.
MR. STEWART: Yes.
COMMISSIONER SMITH: And therefore, the
19 density is greater than one house every half mile.
20 MR. WESTON: Yes, I mean, the other
21 important piece is probably the bottom piece we haven It
22 touched on.
23 MR. STEWART: In the application of the
24 contract when they're billed facilities charges, in that
25 calculation we do give them revenue - - there is a credit
CSB REPORTING
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22 COLLOQUY
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1 based on the revenue to help which covers those costs and
2 the calculation of that is basically 20 percent of their
3 usage charge, so they have an electric bill of $100, 20
4 percent or $20.00 of that is to apply against the 284.
5 The example given down below, the middle explains the
6 contract minute bill, how we apply revenue against the
7 facilities charge. The third box is an example actually
8 showing the calculations, so if - - and the example given
9 if there were $300 worth of consumption in a month, well,
10 20 percent of that is $60.00 which would be a credit
11 against the 284.50, so the contract amount or the
12 deficiency that the customer would pay in addition to the
13 300 would be $224.50. It would be reduced from the 284
14 by the $60.00, so the total amount the customer would pay
15 would be the $300 worth of consumption, plus the portion
16 of the facilities charge not covered by revenue which is
17 $224.50 for a total of $524.50 and so there is a revenue
18 component that enters into this.
19 COMMISSIONER KEMPTON: I understand that
20 from actually the first block that you have.
21
22
MR. STEWART: Okay.
COMMISSIONER KEMPTON: So if I could
23 pursue the estimated line extension cost, how much would
24 you estimate of the 35,000 is for material?
25 MR. STEWART: I couldn't estimate without
CSB REPORTING
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23 COLLOQUY
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1 actually looking at the job.
2 COMMISSIONER KEMPTON: Without a number, I
3 mean, if you can just estimate in a percentage given
4 you've got material, labor design, salary, that sort of
5 thing. More than 50 percent? Less than 50 percent?
6 MR. STEWART: I could say it could be
7 either. I would say the range would be between 30 and
8 70, but I really couldn't say beyond that without looking
9 at the job. Where you're building new line, it's going
10 to be weighted more towards material. If there is
11 rearrangement of the facilities and lots of complexities,
12 you're going to drive labor up.
13 COMMISSIONER KEMPTON: And let's see, I
14 have to look up a sheet here real quick. It says the
15 facilities charge is an annualized charge this is on
16 item 7 on the PacifiCorp page 2, the facilities charge is
17 an annualized charge on the life costs of an extension
18 that covers taxes, replacements as well as maintenance.
19 On replacement, what would you be replacing typically on
20 that kind of a hook-up?
21 MR. STEWART: Well, probably the shortest
22 life would be your transformer and then your conductor
23 has a life and the poles have a life and so in the case
24 of underground, it would be the conductor. Underground
25 cable fails after a certain amount of time.
CSB REPORTING
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24 COLLOQUY
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14
1 COMMISSIONER KEMPTON: I'm rural, I live
2 rural, so about how long would you consider that time to
3 be? I've been there now 30 years and haven't required
4 any replacements yet.
5 MR. STEWART: Our first underground cable
6 started failing at 30. They have better cable now and we
7 also have construction where we require conduit, but our
8 cable started failing at 30 years underground, but we
9 hope with our. new cable and the new standards that we're
10 going to go longer than that. We would hope we get 40 to
11 50 years out of it.
12 COMMISSIONER KEMPTON: And her payments of
13 $180 a month, she actually pays for the total cost, the
full 19,867 that you're talking about, in 9.2 years,
15 that's just that I applied it all to that.
16 MR. STEWART: Yeah, if there weren't any
17 taxes or anything else associated.
18 COMMISSIONER KEMPTON: Yeah. Commissioner
19 Redford asked the question about whether you're
20 depreciating the cost of this at the same time that these
21 payments are being made for the purpose of replacement.
22 It seems to me that the amount of it would almost be a
23 double dipping and I don't mean that in the sense of a
24 suggestion that it would be double dipping. I'm trying
25 to get the concept over that you i re depreciating at the
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25 COLLOQUY
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1 same time you're charging for replacement and they're
2 both happening over the same period of time, if that
3 isn't excessive, let me put it that way.
4 MR. STEWART: The capital replacement
5 annuity is only on the customer's investment.
6 COMMISSIONER KEMPTON: So whatever she's
7 putting in, she's responsible for having the ditch or the
8 trench dug, refilled, you just leave the line.
9 COMMISSIONER SMITH: Right, but I think
10 what he's saying is she's not responsible - - she's also
11 responsible for paying depreciation on the amount of
12 cable that she paid for and therefore, that amount is not
13 included in the Company's overall depreciation in
14 rates.
15 MR. WESTON: Correct.
16 COMMISSIONER SMITH: So this is like a
17 separate way of recovering a portion of the depreciation
18 on the segment of the line that she fronted the money
19 for, so she paid for it up front and then over the life
20 of the asset she's also paying the depreciation.
21 MR. WESTON: Replacement, capital
22 replacement annuity, yeah.
23 COMMISSIONER SMITH: As it depreciates,
24 she's paying the replacement cost, so at the end of its
25 useful life, you already collected enough money to
CSB REPORTING
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26 COLLOQUY
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1 replace it.
2 MR. WESTON: Theoretically.
3 COMMISSIONER SMITH: And you're doing that
4 because you believe this location is so remote that they
5 wi 1 1 be the only person ever to use it and there won't be
6 any other way of the Company of using it or creating
7 income from this line to support the replacement costs.
8 MR. STEWART: Correct.
9 COMMISSIONER SMITH: I think I've got
10 it.
11 COMMISSIONER KEMPTON: Okay.
12 COMMISSIONER SMITH: Which makes a lot of
13 sense if you're at the top of some butte with a signal
14 tower.
15 MR. STEWART: Yes.
16 COMMISSIONER SMITH: Where nobody could
17 ever build maybe even if they wanted to. How often do
18 you apply a facilities charge, any idea?
19 MR. STEWART: Yes.
COMMISSIONER SMITH: Is this something
21 that's fairly routine or is this something that's not
22 very routine?
23 MR. STEWART: If we're talking about
24 residential --.25 COMMISSIONER SMITH: Residential.
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27 COLLOQUY
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17
1 MR. STEWART: - - only, it's not routine.
2 We've got three accounts right now.
3 COMMISSIONER SMITH: Three in just Idaho?
4 MR. STEWART: In Idaho.
5 COMMISSIONER SMITH: In Idaho.
6 MR. STEWART: Three accounts in Idaho.
7 COMMISSIONER SMITH: And that would be in
8 a year?
9 MR. STEWART: No, that's period. That's
10 all we have.
11 COMMISSIONER SMITH: Ever?
12 MR. STEWART: We've only had three
13 residential customers that decided they want to make that
14 kind of an investment.
15 COMMISSIONER KEMPTON: Actually, it speaks
16 to the wisdom in my mind for what you're asking.
MR. STEWART: At some point you're wiser
18 to invest in a generator than you are to invest in the
19 Power Company.
20 COMMISSIONER SMITH: So you don't know how
21 many times people have inquired or you've made estimates?
22
23
MR. STEWART: No, I don't.
COMMISSIONER SMITH: And then they just
24 say well, that's too steep for me, I'm going to go get
25 myself a generator.
CSB REPORTING
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28 COLLOQUY
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1 MR. STEWART: Correct.
2 MR. WESTON: You know, to your point, the
3 basic theory of regulation and cost of service is cost
4 causation and so the intent of this line extension policy
5 is to charge the customer that's causing the Company to
6 incur those costs and, you know, as we look at the
7 environment today, we were involved in the Commission's
8 energy affordability workshop and the concern of rising
9 rates, companies are looking at ways to mitigate costs to
10 the customers. I'm aware of the House bill here in Idaho
11 looking at an impact fee. The Company is reviewing its
12 line extension policies and considering revising those to
13 even reduce the amount of credit that we offer to
14 customers because new growth is one of the things that's
15 driving up rates for all of our customers, so while we
16 can certainly empathize with Mrs. Mathewson and her
17 situation, you know, I wouldn't pay it and that's
18 probably why we only have three customers in the state
19 that do. At the same time, the Company doesn't want to
20 implement a line extension policy that would encourage
21 people to build cabins out in remote areas that would
22 increase the costs for our other customers, so it i s
23 certainly a tough situation to deal with.
24
25
COMMISSIONER SMITH: So let me just get
this straight in my mind. Is there no, then, like free
CSB REPORTING
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29 COLLOQUY
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1 footage allowance --
2 MR. STEWART: Correct.
3 COMMISSIONER SMITH:that comes into
4 play? It's just that they get --
5 MR. STEWART: Transformer, meter,
6 service.
7 COMMISSIONER SMITH: - - the TMS?
8 MR. STEWART: That means the transformer
9 is there to service them, service from the transformer to
10 the house and the meter on the house.
11 MR. WESTON: I guess the free footage is
12 and I think in the definition it says a service drop of
13 100 feet.
14 MR. STEWART: 100 feet.
15 COMMISSIONER KEMPTON: That's only the
16 thing that's dropped inside a half mile?
17 MR. STEWART: That's regardless. That's
18 the allowance. That's the piece the customer never has
19 to pay for.
20 COMMISSIONER KEMPTON: And so if you're
21 inside a half mile, then, and the facilities charge, what
22 else is removed from the cost to the customer?
23 MR. STEWART: Okay, the transformer, meter
24 and service. In all cases, for any residential person,
25 they pay all costs in excess of transformer, meter and
CSB REPORTING
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30 COLLOQUY
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1 service, so any home that builds along an existing
2 distribution line and they build within 100 feet of that
3 line, there is no cost to connect because we connect the
4 transformer, the service and meter, so if the home is
5 built back away from distribution where we have to build
6 primary voltage facilities to reach a transformer,
7 they'll pay for the cost of the primary voltage
8 distribution line but not the transformer.
9 COMMISSIONER KEMPTON: Kris, was that your
10 understanding as well on that inside of a half a mile
11 that it was -- let me put it this way: What was your
12 interpretation of her letter or any information that you
13 got from her about what they were doing inside half a
14 mile versus what they were doing outside a half a mile?
15 MS. SASSER: I did not understand her to
16 distinguish between the two. I don't think that she had
17 an argument as to whether anything inside or outside a
18 half mile was reasonable. In fact, in her paperwork and
19 her letter, she doesn't dispute the initial extension
20 cost. Her dispute is strictly the facilities charge that
21 is attached to that on her monthly bill in addition to 80
22 percent of her usage. In any of my conversations, she
23 did not distinguish between inside or outside that half
24 mile.
25 COMMISSIONER SMITH: But she knows it's
CSB REPORTING
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31 COLLOQUY
.1 because she's more than a half a mile because that's what
2 she says.
3 MS. SASSER: Correct.
4 COMMISSIONER SMITH: Remote facility fee
5 for homes farther than a half a mile.
6 COMMISSIONER KEMPTON: Okay¡ so I want to
7 make sure I absolutely understand this. The sentence in
8 her letter says that Rocky Mountain Power charges a
9 remote facility fee for homes further than one half mile
10 from the power source and that statement in and of itself
11 could mean that they also have a remote facility fee for
12 something less than half a mile because it just talks.13
14
about the fact that they do it farther than one-half
mile, but that statement by itself doesn't mean they
15 don't it for less than one-half a mile. The other
16 meaning that you can ascribe to that is that they have a
17 remote facility fee for homes further than one-half mile,
18 but they don't have a remote facility fee for homes less
19 than one-half mile, so which one of those two is it? Do
20 you have a remote facility fee for homes less than
21 one-half mile?
22 MR. STEWART: The remote facility fee
23 is -- no, we don't. The remote facility fee is the
24 facilities charge and we don't apply it for home less.25 than one-half mile.
CSB REPORTING
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32 COLLOQUY
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19
1 MS. SASSER: Commissioner Kempton, for
2 further clarification of the question you were asking as
3 to what Mrs. Mathewson understood, Daniel did have more
4 than one conversation with Ms. Mathewson explaining how
5 the process worked and he might be able to speak to
6 whether it was told in no uncertain terms to her had she
7 been under a half a mile that she wouldn't have paid
8 anything.
9 COMMISSIONER SMITH: No, she would have
10 paid.
11 MS. SASSER: She wouldn't have paid a
12 monthly facilities charge.
13 COMMISSIONER SMITH: Right.
14 MS. SASSER: Did she understand that,
15 Daniel?
16 MR. KLEIN: She did, yes.
17 COMMISSIONER SMITH: And she only wanted
18 this for backup power?
MR. KLEIN: Well, I think partially
20 they're tired of being off the grid. I think they'd like
21 to have regular power if the costs were reasonable in her
22 mind.
23 COMMISSIONER KEMPTON: I want to go back
24 to your sheet now and Marsha's arguments have clarified
25 some of this to me, but on the facilities sheet, there i s
CSB REPORTING
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33 COLLOQUY
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20
1 a total facilities charge and I'm assuming that since she
2 hasn i t specifically identified the facilities charge that
3 we're talking about, the total facilities charge, that
4 mayor may not be correct. Is it the total facilities
5 charge we're talking about?
6 MR. WESTON: Yes, so in her case it's the
7 $180.
8 MR. STEWART: We don't give the customer
9 the two pieces. We j ust give them the total. That's
10 what goes in the contract is the total because that's how
11 it's implemented.
12 COMMISSIONER KEMPTON: And so would a
13 charge to a person of less than one-quarter of a mile or
14 one-half of a mile be simply the cost of the power?
15 MR. STEWART: Yes, the ongoing costs, yes.
16 The initial cost, of course, we already discussed.
17 COMMISSIONER KEMPTON: They contributed to
18 the construction.
19 MR. STEWART: Yes.
COMMISSIONER KEMPTON: Okay, it still
21 bothers me as a matter of policy to have a break point
22 this is a legislative thing, okay --
23
24.25
MR. STEWART: Okay.
COMMISSIONER KEMPTON:in the sense of
the argument. It's a little dab will do you argument.
CSB REPORTING
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34 COLLOQUY
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1 If it's one-half of a mile that you picked, why did you
2 pick one-half of a mile instead of three-quarters of a
3 mile or five-eighths of a mile and then I can go out and
4 stretch it to the last part of the equation which takes
5 you out to the full distance that she's at?
6 MR. STEWART: I have to make a bunch of
7 assumptions to answer that question. The person that
8 actually came up with the half mile retired and left no
9 files, Mike Burkhouse. You may remember Mike, Marsha,
10 Commissioner, but I do know in trying to answer that
11 question that someone asked me, I went back to the policy
12 we had before and asked and all I could really do is say
13 does this align with it in any sense and in a rough sense
14 it aligns. What we had before was we did a revenue
15 calculation instead of a distance calculation and we
16 looked at the revenue and said if their cost to the line
17 exceeded seven times their estimated annual revenue that
18 then we implemented a facilities charge.
19 COMMISSIONER KEMPTON: Same kind of a
20 thing.
21 MR. STEWART: And the seven times, the
22 best I could figure out when I first hired on with this
23 Company 23 years ago was derived from the Utah tariff. I
24 don't know how much that interests you, but it came about
25 wi th the method of we had a process of charging customers
CSB REPORTING
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35 COLLOQUY
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1 advances and then if they had revenue in - - for costs in
2 excess of a certain multiple of revenue and then
3 refunding that advance if the revenue exceeded that by a
4 certain percentage and when you worked all the numbers
5 through, it came up to about 6.67 and it was rounded off
6 to 7, and when you get through all the mathematics, I'm
7 not sure that it's really a solid scientific number, but
8 it was a number.
9 COMMISSIONER SMITH: Retire and leave no
10 files.
11 COMMISSIONER KEMPTON: I think I'll start
12 making a list of those, Marsha.
13 MR. STEWART: It's convenient to have
14 someone to blame.
15 Well, I canCOMMISSIONER REDFORD:
16 understand her concern if others who are half a mile or
17 less don't have the facilities charge. At least I would
18 think well, at least I'm entitled to a half a mile and
19 then I'll pay the other half mile and we are only talking
20 about bringing the power one mile, so I guess I would
21 have the same difficulty she's having.
22 COMMISSIONER SMITH: My whole goal in this
23 was just to understand how the tariff was applied because
24 when I tried to sort it out for myself, I couldn't, but I
25 understand the policy behind saying we're building this
CSB REPORTING
(208) 890-519ß
36 COLLOQUY
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1 only for you and we have no other revenue to get off of
2 it if we don't get it from you, but it certainly does
3 seem to be a hardship in this case.
4 MR. WESTON: I guess the one point that I
5 would like to make is that the revenues - - the facilities
6 charge is not an additional profit to the Company. I
7 mean, it i s just flowing back into the revenues to offset
8 the costs that the remaining Idaho customers bear, so
9 absent that facilities charge, then we're just passing
10 those costs on to the rest of the Idaho customers.
11 COMMISSIONER REDFORD:I don't have any
12 more questions.
13 COMMISSIONER KEMPTON: No, I don't
14 either.
15 COMMISSIONER REDFORD:Thanks for coming
16 up.
17 COMMISSIONER SMITH: Anything from Staff?
18 You probably understood it all anyway. We appreciate
19 your time and effort and the workshop will be concluded.
20 (The workshop adjourned at 2:00 p.m.)
21
22
23
24.25
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37 COLLOQUY
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18
19
20
21
22
23
24
25
1 AUTHENTICATION
2
3
4 This is to certify that the foregoing workshop
5 held in the matter of Marian Mathewson, Complainant,
6 versus Rocky Mountain Power, Respondent, commencing at
7 1: 00 p. m., on Wednesday, Feburary 25, 2009, at the
8 Commission Hearing Room, 472 West Washington, Boise,
9 Idaho, is a true and correct transcript of said workshop
10 and the original thereof for the file of the Commission.
11
12
Ms1~
CONSTANCE S. BUCY
Certified Shorthand Reporter
13
14
15
16
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CSB REPORTING
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38 AUTHENTICATION