20200128_rk1jo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:RICHARD KELLER
DATE:JANUARY 22,2020
SUBJECT:IDAHO POWER'S ANNUAL COMPLIANCE FILING TO UPDATE
CHARGES,CREDITS,AND GENERAL OVERHEADS UNDER RULE H,
NEW SERVICE ATTACHMENTS AND DISTRIBUTION LINE
INSTALLATIONS OR ALTERATIONS,TARIFF ADVICE NO.19-12
BACKGROUND
On December 27,2019,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
annual compliance filings to update Rule H charges and credits defined 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
defined by Commission Order No.32472.Idaho Power requests that these updated Tariffs be
approved by March 1,2020 to facilitate implementation based on an effective date of
March 15,2020.
STAFF ANALYSIS
Staff believes that the Company's proposed charges and allowances for Rule H
installations are reasonable and that the filing complies with all prior Commission Orders.
Changes in charges from current authorized amounts fall within acceptable ranges based on
inflation indexes for similar types of cost.The increases in charges range between two and seven
percent,with an average increase of four percent,while customer allowances show a decrease
DECISION MEMORANDUM 1 JANUARY 22,2020
of one percent for single-phase installations from $2,438 to $2,412 and a three percent increase for
three-phase installations from $5,660 to $5,825.
Staff analyzed the size of increases and decreases to charges and allowances by breaking
down the amounts into their component parts.This includes a breakdown by labor,vehicles,and
material cost categories;and by further breaking down these cost categories into their direct and
indirect amounts.
Analysis of Direct Costs
The largest contributor to increases in this year's update is a ten percent increase in direct
vehicle costs.The Company explained that for the type of trucks (i.e.line and bucket trucks)used
in Rule H installations,total operating expense coupled with an increase in depreciation expense
are the primary factors to the higher vehicle costs.After analyzing the Company's workpapers
detailing the increase to vehicle cost,Staff believes that the increase is justified.
Contributing to the increases is a three percent increase to the direct construction labor
rate.Staff believes this increase is within current labor cost inflation rates and,therefore,
reasonable.
Changes in direct material costs are highly variable depending on the type of line
extension.For extensions where the customer performs the trenching,direct material cost for 1/0
underground cabling increases by 17 percent from the prior year,but for customer trenched line
extensions,the larger 350 cabling decreases by six percent.This variance is not unusual when
inspecting prior updates.Staff believes commodity pricing,material inventory,and procurement
timing all contribute to the large variance.Furthermore,although increases in individual direct
material costs can sometimes be large,as long as there are reductions in other categories of costs
which can offset a portion of the increase,the resulting charge to customers can be reasonable.In
this specific case the resulting increase in what the customer will be charged is six percent.
Analysis of Indirect Costs
The general overhead rate which applies to all labor,vehicle,and material direct costs for
Rule H charges and allowances increases from the current authorized rate of 14.53 percent to
15.18 percent.The increase is 4.5 percent higher than the current amount,but below the five-year
average of 16.03 percent.Moderating the general overhead rate increase is a 0.5 percent decrease
DECISION MEMORANDUM 2 JANUARY 22,2020
in the stores overhead rate.Because the stores overhead rate only applies to material direct cost,
its effect on the overall charges and allowances is limited.
STAFF RECOMMENDATION
Staff recommends that the Commission accept Idaho Power's proposed updates to Rule H
with an effective date of March 15,2020.
COMMISSION DECISION
Does the Commission wish to approve Idaho Power's proposed updates to Rule H with an
effective date of March 15,2020?
Richard Keller \
Udmemos/Idaho Power Tairff Advice 19-12 Dec Memo
DECISION MEMORANDUM 3 JANUARY 22,2020