20190226_me1jo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:MICHAEL ELDRED
DATE:FEBRUARY 22,2019
SUBJECT:IDAHO POWER'S ANNUAL COMPLIANCE FILING TO UPDATECHARGES,CREDITS,AND GENERAL OVERHEADS UNDER RULE H,
NEW SERVICE ATTACHMENTS AND DISTRIBUTION LINE
INSTALLATIONS OR ALTERATIONS;TARIFF ADVICE NO.18-03
BACKGROUND
On December 28,2018,Idaho Power ("Company")filed a tariff advice with the
Commission proposing to update charges and allowances 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 H 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.Idaho Power requests that updated Tariffs are
approvedby March 1,2019 to facilitate implementation with an effective date of March 15,2019.
STAFF ANALYSIS
Staff has reviewed three areas in its analysis of the Company's filing:(1)the proposed
updates to the charges and allowances to Rule H,(2)the new blendedrate method for trench costs,
and (3)the adjustment to the general overhead rate.Staff believes the proposed updates,including
the new blended rate method for trench costs,are reasonable and the filing complies with all prior
Commission Order requirements.Each of the three areas reviewed by Staff are detailedin the
sections below.
DECISION MEMORANDUM 1 FEBRUARY 22,2019
UpdatedCharges and Allowances
Staff reviewed all changes to vehicle,labor,and material direct cost used to develop the
updated charges and allowances and believes the Company's proposed amounts are justified and
reasonable.The updated charges in this filing includes base and distance charges for the
installation of underground services,engineering,temporary service attachments,and return trip
services.The updated allowances include-line installation and service attachment for residential
and non-residential schedules.
Updated charges ranged from a reduction of 5 percent to an increase of 6 percent.The
increase in charges were created by increases in labor,vehicle,and material costs,but the
increases were reduced by the proposed lower general overhead rate.Material costs in 1/0 and 4/0
conductors were the largest influence on the increase in charges.These increases in conductor
costs were largely due to a change in packaging of the cable to include a wooden reel when
shipped,which the Company stated was necessary to mitigate safety concerns,increase labor
efficiency,and minimize material damage.The reduction in charges of up to 5 percent for
Company installed facilities was driven by the new blendedrate method for trench cost which will
be discussed in more detail in the blended rate section below.
Updated allowances ranged from increases of 1 percent to 4 percent and the increase in
charges were created by slight increases in labor,vehicle,and material costs.The Company stated
the main reason for the increase in the cost was due to an increase in transformer cost.Staff
believes that the increases are within normal rates of inflation.
Blended Rate Methodfor Trench Cost
In reviewing the Company's new blended rate method for trench cost,Staff finds the new
method is reasonable and is a more accurate representationof the average cost for trench work.
The prior rate for trench work relied on a fixed rate based on the cost for using third-party
contractors.The Company found in reviewing 2018 trench work that Company crews accounted
for approximately 31 percent of trench work,while third-partycontractors accounted for
approximately 69 percent of trench work.The new blended rate method for trench cost uses the
2018 trench work information for both the Company and third-partycontractor to create an
average weighted cost per foot.The new rate method resulted in a 20 percent decrease in cost per
DECISION MEMORANDUM 2 FEBRUARY 22,2019
foot when compared to the prior method and is more representative of how the Company is
actuallyperforming trench work.
Adjustment to General OverheadRate
Staff reviewed the updated calculation of the general overhead rate and believes it to be
accurate and reasonable.The Rule H general overhead rate which is applied to all vehicle,labor,
and material direct cost decreased from last year's rate of 16.62 percent to 14.53 percent.
STAFF RECOMMENDATION
Staff recommends that the Commission accept Idaho Power's proposed updates to Rule H
with an effective date of March 15,2019.
COMMISSION DECISION
Does the Commission wish to approve Idaho Power's proposed updates to Rule H with an
effective date of March 15,2019?
Michael Eldred
Udmemos/Tariff Advice No.18-03
DECISION MEMORANDUM 3 FEBRUARY 22,2019