20230221_IPC_TariffAdvice2204_ms.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER HAMMOND
COMMISSIONER LODGE
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MATTHEW E.SUESS
MICHAEL DUVAL
DATE:FEBRUARY 21,2023
RE:IDÁHO 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.22-04
BACKGROUND
On December 28,2022,Idaho Power ("Company")filed Tariff Advice No.22-04 with
the Commission proposing to update charges and allowances to its Rule H tariff,New Service
Attachments and Distribution Line lnstallationsor 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 1,2023,to facilitate implementation of
the Rule H tariff revisions to meet an effective date of March 15,2023.
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.
DECISIONMEMORANDUM -1 -FEBRUARY 21,2023
Overall,the proposed Rule H charges and credits increased driven by higher material,labor,and
vehicle costs.These increases were partlyoffset by a reduction in the general overhead rate.
OverheadRates
General overheads are capital costs that cannot be directly assigned to a specific asset or
individual project.The Company's general overhead rate is applied to all direct costs related to
vehicles,labor,materials,and trenching.Compared to last year's filing,the general overhead
rate decreased from 13.29 percent to 10.64 percent.Staff verified the Company's inputs and its
calculations and finds them reasonable.
The stores loading rate,which captures the cost of supervision,labor,and expenses
incurred for the purchasing,storage,handling,and distribution of material and supplies,
decreased slightly from 9 percent to 8.75 percent.The Company evaluates the stores loading
rate quarterly to determine whether an adjustment is needed to align the clearing rate with year-
to-date stores expenses and issuances while considering forecasted activity.Staffreviewed the
Company's most recent evaluation of the stores loading rate and supports the reduction.
Staff recommends approval of the proposed general overhead rate and stores loading rate.
Standard Charges
Standard charges are established for the installation of undergroundservices,temporary
service attachments,and return trip services.The installation of underground services includes
both base and distance charges.All the charges increased anywhere from 1 percent to 39 percent
due to increases in the vehicle rate,the labor rate,and the cost of materials.The increases were
slightly mitigated by the above-mentioned reduction in the general overhead rate.
The primary contributor to the increases is the cost of materials,of which most items
increased from 30 percent to 60 percent.Staff reviewed invoices for the largest cost items -the
electrical cable and the pole-mounted transformers -and found the cost increases were justified.
These cost increases have been occurring across the industry and are consistent with inflation
rates for these types of costs.
The next largest contributor to the increase in standard charges is a 22 percent increase in
vehicle rates 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.The hourly rate for both vehicles
DECISION MEMORANDUM -2 -FEBRUARY21,2023
increased from $46.39 to $57.99,an increase of 25 percent.The cost increase is due to
significantlyhigher fuel prices,maintenance expenses,and an increased rate of depreciation.
See Response to StaffAudit Request No.4.
Staffreviewed all changes to vehicle,labor and material costs used to develop the
standard charges and believes the Company's proposed amounts are reasonable.
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 to install new line and terminal facilities.By periodicallyadjusting the
allowance to reflectrecent costs,the inflationarypressure on the project cost is offset by the
inflationarypressure on the allowance,keeping the impact to customers relativelyconsistent.
The proposed allowances for single-phase and three-phase installations increased by 33
percent and 9 percent,respectively.The increases were driven by increases in vehicle rates,
labor rates,and material costs,all of which are in line with their respective inflation rates.Staff
reviewed the material cost invoices and found the cost increases were justified.See Response to
StaffAudit Request No.3.Therefore,Staffbelieves the proposed allowance increases are
reasonable.
EngineeringServices
Engineering costs for line installations and alterations have increased from $81.37 per
hour to $87.05 per hour despite the reduction in the overhead rate.The increase is driven by an
8.1 percent rise in engineering wages and a 10.4 percent rise in the benefit rate.The increased
electrical engineering wages are in line with the statewide averages for electrical engineers,'and
the increase in benefits are in line with annual inflation rates.For these reasons,Staffbelieves
that the increase in Engineering Services cost is reasonable.
I According to the U.S.Bureau of LaborStatistics,the Company's electrical engineering wages are 95%to 98%of
the state average for 2020 and 2021.
DECISIONMEMORANDUM -3 -FEBRUARY21,2023
STAFF RECOMMENDATION
Staffrecommends that the Commission approve the Company's proposed general
overhead rate of 10.64 percent and changes to the Rule H charges and allowances reflected in the
Company's origiiial filing,dated December 28,2022,as filed.Staffrecommends an effectivé
date of March 15,2023.
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 as filed with an effective date of March 15,
2023?
Matthew E.ess '
Udmemos/TA-22-04 Decision Memo
DECISION MEMORANDUM -4 ·FEBRUARY21,2023