20140303_4305.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MICHAEL LOULS
DATE:FEBRUARY 24,2014
RE:IDAHO POWER’S ANNUAL COMPLIANCE FILING TO UPDATE RULE
H CHARGES AND CREDITS;TARIFF ADVICE NO.13-07
BACKGROUND
On December 20,2013,Idaho Power (“Company”)filed a tariff advice with the
Commission proposing to update costs in its Rule H tariff,New Service Attachments and
Distribution Line Installations or Alterations.The Company is required to make an annual
compliance filing to update Rule I-I charges and credits as required by Commission Order Nos.
30853 and 30955.The Company also updates the general overhead rate relating to new service
attachments and distribution line installations and alterations under its Rule H tariff as required
by Commission Order No.32472.After initial Staff review,the Company discovered a mistake
in labor rates used to establish underground distance charges.On January 27,2014,the
Company filed a supplement to the tariff advice reflecting the correction.
STAFF ANALYSIS
The Company is proposing four changes in this year’s Rule H compliance filing:(1)
adjustment to the general overhead rate which is applied to all work order costs (except
engineering charges);(2)updates to standard service attachment charges;(3)revision to line
installation and attachment allowances;and (4)an update to the rate charged for engineering
services required by customers for line installations and alterations.Staffs analysis reflects all
corrections included in the Company’s supplemental filing.
DECISION MEMORANDUM -I -FEBRUARY 24,2014
Overhead Rate
The Rule H general overhead rate which is applied to all vehicle,labor,and material
direct cost decreased from last year’s rate of 19.69 percent to 17.49 percent.Staff has reviewed
the updated calculation of the general overhead rate and believes it to be accurate and reasonable.
In addition,the stores overhead rate which is only applied to direct material cost used to
determine this year’s Standard Charges and Allowances decreased from 11 percent to 7 percent.
These reductions moderated increases in line installation direct cost resulting in small overall
increases and in some cases,decreases from last year’s rates.Staff recommends approval of the
general overhead rate.
Standard Charges
Standard charges are established for both base and distance charges for the installation of
underground services,temporary service attachments,and return trip services.As mentioned
earlier,reduction in overhead has moderated increases in the direct cost of these charges
resulting in overall rates that range from a reduction of 1.4 percent to an increase of 5.8 percent.
Fiowever,the direct cost for these charges has increased in all categories (vehicle,labor,and
material)resulting in direct cost increases ranging from 1.12 percent to a little over 11 percent
from last year’s rates.The only exception is a reduction in material cost for customers that
provide their own trenching and conduit.
It appears there are large reductions in direct labor cost in the distance charge for
Company installed underground facilities but this was due to the Company shifting equal
amounts of cost from labor to the vehicle cost category.In actuality,direct labor costs have risen
due to labor rates increasing from $55/hour to $56/hour.Staff agrees that this re-categorization
reflects costs more accurately and believes the increase in the labor rate is justified.Staff
reviewed all direct cost increases for standard charges and believes they are reasonable.
Allowances
Allowances against the total cost of overhead and underground installations and service
attachments are given for the cost of standard terminal facilities and line installation costs.Total
direct cost of allowances for single phase and three phase installations has increased between 12
and 17 percent,respectively.Again,these costs are moderated by reduced overhead rates
DECISION MEMORANDUM -2 -FEBRUARY 24,2014
resulting in overall increases of approximately 9 and 5 percent.The largest increases came as a
result of higher material cost of standard transformers and increased labor cost due to higher
labor rates.Staff believes the cost increases are justified.
Engineering Services
Engineering cost for line installations and alterations have increased from $61 per hour to
$63 per hour in spite of a reduction in the engineering overhead rate from 12.75 percent in last
year’s rate to 10.75 percent for this year.The increase is driven by a 3 percent rise in
engineering wage rates in combination with an increase in the benefit rate of 4.7 percent.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company’s proposed general
overhead rate of 17.49 percent and changes to the Rule H charges and allowances reflected in
the Company’s original filing dated December 20,2013 and subsequent modifications contained
in the Company’s supplemental tiling dated January 27,2014.Staff recommends an effective
date of March 15,2014.
COMMISSION DECISION
Does the Commission wish to approve the Company’s proposed updates to the general
overhead rate and the Rule H charges and allowances with an effective date of March 15,2014?
Michael Lot
Udmcmos/RuIc II dcc memo
DECISION MEMORANDUM -3 -FEBRUARY 24,2014