20210216_rk1jo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:RICHARD KELLER
DATE:FEBRUARY 12,2021
RE: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.20-06
BACKGROUND
On December 30,2020,Idaho Power ("Company")filed Tariff Advice No.20-06 with
the Commission proposing to update charges and allowances to its Rule H tariff,New Service
Attachments and Distribution Line Installations or Alterations.The Company is required to
make this annual compliance filing to update the Rule H charges and credits by way of
Commission Order Nos.30853 and 30955.The Company is also required to update the general
overhead rate used within the Rule H tariff through Commission Order No.32472.The filing
requests the Commission approve the update by March 1,2021 to facilitate implementation of
the Rule H tariff revisions to meet an effective date of March 15,2021.
STAFF ANALYSIS
Staff reviewed the followingitems tied to the Company's Rule H compliance filing:(1)
the adjustment to the overhead rates applied to work order costs;(2)the updated costs for
standard service attachment charges;(3)the revisions to line installation and attachment
allowances;and (4)the update to the rate charged for engineering services.The cost estimation
methodology used to update these charges and credits is the same as used in prior annual filings.
Overall,the proposed Rule H charges decreased,driven by lower vehicle costs and a reduction in
the general overhead rate which offset increases in labor and material costs.
DECISION MEMORANDUM -1 -FEBRUARY 12,2021
Overhead Rates
Compared to last year's filing,the general overhead rate has been reduced to 13.64
percent from 15.18 percent,while the stores overhead rate remains at 9.0 percent.The
Company's general overhead rate is applied to all direct costs related to vehicles,labor,
materials,and trenching while the stores overhead rate is only applied to direct costs for
materials and trenching.Staff recommends approval of the reduction to the proposed general
overhead rate.
Standard Charges
Standard charges are established for both base and distance costs for the installation of
underground services,temporary service attachments,and return trip services.As mentioned
above,reduction in the general overhead rate has moderated increases in the direct costs of these
charges resulting in charges that range from a reduction of 10 percent to an increase of 4 percent.
Depending on the type of service,there were both increases and reductions in direct
material costs.However,the source of the increases is mostly attributed to a 3 percent increase
in labor cost which makes up about 40 percent of the total cost of each charge.The increase in
labor was due to a change in the labor rate from $68 to $71 per hour.Staff believes this increase
in the labor rate is acceptable based on comparing this increase to increases reported by the
United States Bureau of Labor Statistics.'
The largest contributing factor to the decrease in standard charges was a 19 percent
reduction in direct vehicle cost from the previous year.According to the Company,the line
truck and bucket truck are the primary vehicles used to perform Rule H type work,and the
hourly rate for both vehicles decreased from $55.97 to $45.89.The hourlycost of the vehicles
decreased due to lower fuel prices and maintenance expenses.Because vehicle costs constitute
approximately 11 percent of the total costs associated with Rule H charges,any charges
requiring these types of trucks reflected this decrease in cost.
Staff reviewed all changes to vehicle,labor and material direct cost used to develop
standard charges and believes the Company's proposed amounts are reasonable.
I According to the U.S.Bureau of Labor Statistics,over the past four years,average Electrical Power-Line Installers
and Repairers wages have increased 2.33 percent.
DECISION MEMORANDUM -2 -FEBRUARY 12,2021
Allowances
Service attachment allowances are provided to customers to compensate for distribution
costs the Company recovers through base retail rates.Customers receive the allowance as a
credit against the cost of terminal facilities and line installation cost.Total direct cost of
allowances for three-phase and single-phase installations decreased by 3 and 4 percent,
respectively.The allowances were reduced due to lower overhead rates and reduced material
costs.Staff believes the reduction in the proposed allowances are reasonable.
Engineering Services
Engineering cost for line installations and alterationshave increased from $76.15 per
hour to $78.36 per hour despite a reduction in the overhead rate from 15.18 percent in last year's
rate to 13.64 percent for this year.The increase is driven by a 2.75 percent rise in engineering
wage rates in combination with an increase in the benefit rate of 7.06 percent.These increases
are in line with electrical engineering wage increases and regional benefit rate increases over the
last four years.2 For these reasons,Staff believes that the increase in Engineering Services cost is
reasonable.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's proposed general
overhead rate of 13.64 percent and changes to the Rule H charges and allowances reflected in the
Company's original filing,dated December 30,2020.Staff recommends an effective date of
March 15,2021.
2 According to the U.S.Bureau of Labor Statistics,over the past four years,average Electrical Engineering wages
have increased 2.44 percent,and benefits have increased 6.38 percent in the Western region of the United States.
DECISION MEMORANDUM -3 -FEBRUARY 12,2021
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 15,2021?
Richard V.Keller
Udmemos/IPC-E-TA-20-06 Decision Memo Rule H
DECISION MEMORANDUM -4 -FEBRUARY 12,2021