20030415Said Direct.pdf

RECEIVED rnFiLED
2003 APR'5 AH 10: 17
10,41-10 PUbliC
UTILITIES COt"1HISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO IMPLEMENT POWER
COST ADJUSTMENT (PCA) RATES FOR
ELECTRIC SERVICE FROM MAY 16,
2003 THROUGH MAY 15, 2004
CASE NO. IPC-03-
IDAHO POWER COMPANY
DIRECT TESTIMONY
GREGORY W. SAID
Please state your name and business address.
My name is Gregory W. Said and my business
address is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what
capaci ty?
I am employed by Idaho Power Company as the
Director of Revenue Requirement in the Pricing and
Regulatory Services Department.
Please describe your educational background.
In May of 1975, I received a Bachelor of
Science Degree wi th honors in Mathematics from Boise State
Uni versi ty.
Please describe your work experience with
Idaho Power Company.
I became employed by Idaho Power Company in
1980. My first responsibility with the Company was to
develop the Secondary Transactions Simulation Model for use
in determining the average net power supply expenses
associated with multiple hydro conditions as well as the
expenses associated with each hydro condition.
In December 1981, the Company applied for an
increase in its general revenue requirement in Case No. U-
1006-185. The Secondary Transactions Simulation Model became
the basis for determining the Company I s normalized net power
supply expenses in that revenue requirement proceeding.
SAID, DI
Idaho Power Company
In the next general revenue requirement
proceeding, Case No. U-1006-265, filed in September of 1985,
I was the Company I s power supply witness providing direct
and rebuttal testimony as well as direct testimony upon
rehearing. At the same time I was also the power supply
wi tness in the Company s Oregon jurisdictional filing.
In 1988, the Company applied for a temporary
rate increase because of drought conditions. Once again, I
was the Company witness addressing power supply expenses.
In August of 1989, after nine years in the
Resource Planning Department, I was offered and I accepted a
position in the Company s Rate Department. With the
Company I S application for a temporary rate increase in 1992,
my responsibilities as a witness were expanded. While I
continued to be the Company I s witness concerning power
supply expenses, I also sponsored the Company I s rate
computations and proposed tariff schedules.
Because of my combined resource planning
department and rate department experience, I was asked to
design a power cost adjustment which would impact customers
ra tes based upon changes in the Company I s net power supply
expenses. I presented my recommendations to the Idaho Public
Utilities Commission in 1992 at which time the Commission
established the power cost adjustment (" PCA") as an annual
adjustment to the Company s rates.I have sponsored the
SAID, DI
Idaho Power Company
Company s annual PCA adjustment for the years 1996 through
2002.
Did the Commission s issuance of Order No.
29050 approving the Astaris/FMC settlement agreement on
June 10, 2002 affect this year s PCA computations?
Yes.
Please describe the Astaris/FMC settlement.
At the time Astaris/FMC, Idaho Power
Company I S largest customer, announced its decision to cease
operation at its Pocatello plant, it was determined that
resolution of the consequent ratemaking and revenue issues
would be required. Representatives from the Idaho Public
Utili ties Commission Staff, Idaho Power Company, Astaris
LLC, Astaris Idaho LLC, and FMC Corporation entered into
negotiations with the goal of creating a settlement
agreement. Mr. Gale, VP of Regulatory Affairs, and Mr.
Ripley, Senior Attorney, negotiated on behalf of Idaho Power
Company.The settlement between the Company, Astaris/FMC
and the Staff was provided to representatives from the
Industrial Customers of Idaho Power Company and to the Idaho
Irrigation Pumpers I Association for their review before
final approval by the Idaho Public Utilities Commission
through Order No. 29050.
The settlement addressed the issues of:(1 )
the December 30, 1997 Electrical Service Agreement (" ESA" )
SAID, DI
Idaho Power Company
between Idaho Power Company and Astaris/FMC,( 2 ) the
March 15, 2001 Let ter Agreement amending the ESA,( 3) the
then active Commission Investigation of the payments
Astaris/FMC was receiving for load reductions (Case No. IPC-
01-43), and (4) a related action filed in the Fourth
Judicial District Court.
The resulting settlement and order provided
for a $5,000,000 reduction in payments to Astaris/FMC from
Idaho Power Company. The Idaho customers ' share of this
benefi t ($3,825,000) is reflected as a reduction wi thin the
2002/2003 PCA true-up computations.Idaho Power Company
agreed as a part of the settlement to also include its Idaho
jurisdictional share of the $5,000,000 reduction ($425,000)
as a benefit to Idaho retail customers in the 2002/2003 PCA
true-up computations.Idaho Power Company agreed that it
would not seek the recovery of the $6,968,473 in under-
collected take-or-pay obligations from its Idaho retail
customers in a rate proceeding. It was also agreed that the
under-collection of PCA commitments from Astaris/FMC in the
amount of $275,663 would be included as a one-time charge in
the 2002/2003 true-up balance without the addition of
carrying charges.
Are there any other changes in PCA
computations required at this time as a result of the
Astaris settlement?
SAID, DI
Idaho Power Company
No.Prior to performing this year
computations, I met with Mr. Gale and Mr. Ripley to
determine if the Astaris/FMC contract dispute resolution
impacted any additional PCA computations. I was advised that
the intent of the contract dispute resolution was that
nei ther customers nor the Company be harmed by additional
PCA computations after the contract dispute was resolved.
Prior to March 2003, actual loads as reported
in the PCA true-up report were to include 120 MW of
Astaris/FMC load whether served or not because Idaho Power
Company was receiving revenues from Astaris/FMC regardless
of whether Astaris/FMC received power. This has been
referred to as a take-or-pay commitment.Customers were not
responsible for Astaris/FMC load decline impacts while Idaho
Power Company was receiving revenues from Astaris/FMC.
After March 2003, actual loads would no
longer be adjusted to include 120 MW of "phantom
Astaris/FMC load because Idaho Power Company would no longer
be receiving any revenues from Astaris/FMC.
Idaho Power Company and the parties to the
dispute resolution envisioned that Idaho Power would re-
establish base rates and PCA computations in a general rate
case proceeding after March 2003. At this time, Idaho Power
Company has not re-established base rates or corresponding
PCA computations.
SAID, DI
Idaho Power Company
What is the projection of PCA expenses for
the period April 1, 2003 through March 31 , 2004?
The proj ection of PCA expenses for the period
April 1, 2003 through March 31, 2004 is $111,209,453. This
amount is $38,130,325 more than the $73,079,128 normalized
level of PCA expenses.
What is the basis for the projection of April
1, 2003 through March 31, 2004 PCA expenses?
The Commission, in Order No. 24806 issued in
Case No. IPC-92-25, the proceeding which created the PCA
adopted a natural logarithmic function of proj ected April
through July Brownlee runoff to compute the projection of
April through March PCA expenses. The derivation of the
current equation is contained on Exhibit No.1 ("Current
Regression
" ) .
Qualifying facilities ("QF") purchase expense
and normalized Astaris/FMC second block energy revenue are
constants, which have been included in the proj ection
computation.The current equation is:
PCA expense = $1 023,185,930
$63,236,861 * (In (runoff)
$47 574,344
$9,074,032
In this formula, the $47,574,344 is the
constant for QF purchase expense, established in Order No.
27997. The $9,074,032 is the normalized Astaris/FMC second
SAID , DI
Idaho Power Company
block of energy revenue. This amount was not changed as a
result of the cancellation of the Astaris/FMC contract
because an equal and offsetting reduction in purchase power
expenses would also be required. The PCA true-up calculation
has captured both the decrease in power supply expenses and
the offsetting decrease in Astaris/FMC second block
revenues.
What is the April through July Brownlee
runoff forecast that you used to arrive at the projection of
PCA expenses?
The National Weather Service River Forecast
Center, in its April 1 forecast, proj ected April through
July Brownlee runoff to be 3.37 million acre feet. Inserting
this value into the equation results in a projection of net
PCA expenses of $111,209,453 for the period April 1, 2003
through March 31, 2004. This amount is $38,130,325 more than
the normalized level of PCA expenses of $73,079,128. The
Brownlee runoff information supplied by the National Weather
Service is contained on Exhibit No.2 ("National Weather
Service April 1 Forecast"
) .
The Brownlee reservoir inflow
appears on page 4 of Exhibi t No.
You have stated that the proj ected net PCA
expenses are more than the normalized level of PCA expenses
by $38,130,325. Please describe the computation of the rate
adjustment associated with the $38,130,325 difference from
SAID, DI
Idaho Power Company
base PCA expenses?
The normalized PCA expense of $73,079,128,
divided by the normalized system firm load value of
13,952 283 MWh is used to arrive at the normalized base
power cost of 0.52389 per kWh. For the period April 1, 2003
through March 31 , 2004, the projected power cost of servlng
firm loads is 0.79719 per kWh which is computed by dividing
the projected PCA expense of $111,209,453 by the 13,952,283
MWh normalized system firm load. The Company adjusts its
rates by 90 percent of the difference between the projected
power cost of serving firm loads (0.79719 per kWh) and the
normalized base power cost (0.52389 per kWh.) Restated, this
year s computation is (.9)(0.79719 per kWh-52389 per
kWh)=0.24609 per kWh.The resulting adjustment is a 0.24609
per kWh adder to the base power cost.
Please describe the true-up required from the
comparison of the April 1 , 2002 through March 31, 2003
actual expenses to last year 's proj ection of expenses?
The PCA true-up deferral for the year
April 1, 2002 through March 31 , 2003 is shown on Exhibit
No.3 ("True-up Deferral"
) .
Thi s Exhibi t compares the
actual expenses to last year 's proj ection of expenses,
month-by-month, with the differences accumulated in a
deferred expense account. Monthly carrying charges have been
applied to the deferred expense account.
SAID, DI
Idaho Power Company
Are there any amounts included in this year
deferral balance that are unique to this year s PCA filing?
Yes.There are deferrals in this year
true-up computations that I would characterize as non-
tradi tional deferrals.These non-traditional deferrals,
both charges and credits, that are included in this year '
PCA, can be divided into four distinct categories:
(1) intervener funding charges--some allocated to all
classes and some allocated to a specific class,(2) mobile
home metering charges,(3) IdaCorp Energy contract benefit
payments reflected as a credit, and (4) the Astaris /FMC
settlement charges and credits. All of the non-traditional
deferrals are Idaho jurisdictional specific and are not
subject to sharing by the Company or other jurisdictions.
Please describe the intervener-funding
charges in this year 's PCA deferral balance that were
attributable to all classes.
In Order No. 29147 , the Commission authorized
the Company to book $1,137.50 of intervener funding awarded
in Case No. GNR-02-1. The Commission provided that the
expenses booked for funding should be treated in a similar
manner as purchase power expenses, i. e. recoverable in the
PCA true-up computation. This amount has been included in
the deferred expense account balance and is listed at
line 58 on page 1 of Exhibit No.
SAID, DI
Idaho Power Company
In Order No. 29085, the Commission authorized
the Company to include $25,000 of intervener funding awarded
in Case No. IPC-01-42. This amount has been included in
the deferred expense account balance and is listed at
line 58 on page 1 of Exhibit No.
Was there any class-specific intervener
funding awarded during the PCA deferral period?
Yes. In Order No. 28992, the Commission
authorized the Company to book $7,314.19 of intervener
funding in the PCA for recovery from the Company
Schedule 24 customers. The $7,314.19 and related carrying
charges have been isolated from the total deferred expense
account balance and have been included as an adjustment to
the Schedule 24 2003/2004 PCA rate. Please see page 2 of
Exhibit No.3 for the calculation of the $7 314.19 plus
rela ted carrying charges.
Please describe the true-up charges related
to the mobile home metering costs.
In Order No. 28753 the Commission approved
the inclusion of mobile home metering costs in the Company
PCA for recovery. The total mobile home metering cost of
$16,499 is shown at line No. 57 on page 1 of Exhibit No.
Please describe the benefits of the IdaCorp
Energy contract that are reflected in the true-up.
In Order No. 28596, the Commission authorized
SAID , DI
Idaho Power Company
the contract between the Company and IdaCorp Energy.
part of the contract, the Company agreed to flow-back a $2
million annual benefit to the Idaho jurisdiction as a credit
to the PCA balance on a monthly basis.Line 59 on page 1 of
Exhibi t No.3 reflects this amount as $166,667 monthly
credi ts to the PCA true-up balance.
Please describe the true-up charges and
credits related to the Astaris/FMC contract settlement
agreemen t ?
In Order No. 29050, the Commission authorized
the inclusion of the Idaho Power Company payments to
Astaris/FMC in the traditional PCA true-up charges allocated
to jurisdictions and shared by the Company. The amount of
the monthly payments for the Astaris/FMC VLR component of
the contract settlement is listed at line 18 on page 1 of
Exhibi t No.
In Order No. 29050, as a result of the
Astaris/FMC settlement agreement, the Commission authorized
the Company to include a $1 million take-or-pay charge that
was not to be jurisdictionally allocated or shared by the
Company.This amount is shown as two $500,000 entries at
line 56 on page 1 of Exhibit No.3. The Commission also
directed the Company to include $419,727 and $5,273 of non-
traditional Idaho jurisdictional VLR credits in January 2003
and February 2003 respectively. These values are listed at
SAID, DI
Idaho Power Company
line 55 on page 1 of Exhibit No.3. Finally, in Order No.
29050, the Commission directed the Company to include a
charge for uncollected Astaris/FMC April 1, 2003 through
May 15, 2003 take-or-pay obligations in the amount of
$275,663 in the 2002/2003 PCA true-up balance. This
adjustment recognizes the difference between the Astaris/FMC
take-or-pay obligation under the Commission 's 2002 PCA order
and the expiration of the Astaris/FMC contract under the
settlement agreement before the end of the PCA rate recovery
period May 15, 2003. Line 56 on page 1 of Exhibit No.
includes this value as an adder to the final true-up balance
wi th no accumulation of carrying charges.
What is the total PCA deferred expense
including the non-traditional deferrals you have described?
Line 84 on page 1 of Exhibi t No.3 lists the
total deferred expense account balance that is comprised of
the non-traditional components discussed above and the
tradi tional components, which include fuel, purchased power
and surplus sales. The total of deferred expenses applicable
to all customer classes at the end of March 2003 is
$38,707 636.
How is the deferred expense account balance
of $38,707,636 reflected in the true-up portion of the PCA
rate?
In accordance with Order No. 26455 from Case
SAID, DI
Idaho Power Company
No. IPC-96-5, the true-up component is calculated by
dividing the deferred expense balance of $38,707,636 by the
1993 normalized Idaho jurisdictional firm sales of
10,802,636 MWh. The resulting PCA true-up component is
35839 per kWh.
Why did you use 1993 Idaho jurisdictional
firm sales instead of the 1999 or 2000 normalized sales
value used in the last two PCA computations?
Standard PCA computations require the use of
1993 normalized Idaho jurisdictional firm sales.The
Commission accepted the Company I s voluntary proposal that
1999 and 2000 normalized sales values be used in the last
two PCA filings as a temporary deviation from ordered
methodology because of the magnitude of the true-up dollars.
In 2001, the true-up was $161 million. In 2002 , the true-
was $223 million.
What was the effect of the Commission'
acceptance of the Company proposal to deviate from standard
PCA computations?
Using a larger sales denominator resulted in
a smaller increase for customers with a consequential
greater cost responsibility for the Company at the same time
the Company was experiencing very high power supply costs.
Did customers receive other benefits
associated with a large deferral balance?
SAID, DI
Idaho Power Company
Yes.The Company has never calculated
carrying charges on the deferred expense account balance
during the PCA collection term. In effect, for each of the
last two years the Company has provided a large interest-
free loan/deferral to customers once the PCA rates became
effective.
Why do you propose returning to standard PCA
computations?
I propose a return to standard PCA
computations because this year the magnitude of the true-up
balance is much less than in the previous two years and
customers will experience rate reductions.In addi tion, the
Company is not in a financial position to absorb a higher
cost burden. In my opinion, it is appropriate to return to
the 1993 Idaho jurisdictional sales volume in accordance
wi th Order No.2 6455, which specified the sales volume for
use in the PCA true-up calculation. Not returning to the
1993 Idaho jurisdictional sales volume would create an undue
financial hardship on the Company particularly during the
extended drought.
What is the PCA rate that will become
effective May 16, 2003 as a result of:(1) the adjustment
for the 2003/2004 projected power cost of serving firm loads
and (2) the 2002/2003 true-up portion of the PCA?
The Company s PCA rate for May 16, 2003
SAID, DI
Idaho Power Company
through May 15, 2004 is 0.60439 per kWh. The rate is
comprised of:(1) the 0.24609 per kWh adjustment for
2003/2004 projected power cost of serving firm loads, and
(2) the 0.35839 per kWh for the 2002/2003 true-up portion of
the PCA.The components used to calculate the 0.60439 per
kWh are shown in the Company I s proposed Schedule 55, which
is Exhibit No.4 ("Schedule 55, Proposed Power Cost
Adjustment, Effective 5-16-03 through 5-15-04"
) .
Do any customer classes have adders to this
year 's PCA rate?
Three classes:Yes.(1) Schedule 24
Irrigation)(2) Schedule 7 (Small Commercial), and
Schedule 19 (Large Industrial) have specific adders to the
PCA rate as a result of the Commission postponing collection
of a portion of last year 's PCA.
Does the termination of the Astaris/FMC
Special Contract impact the specific class computations for
the PCA component associated with rate postponements?
Yes.In order to maintain the relationship
between PCA expenses and the level of loads served, it was
necessary to redistribute the Astaris/FMC Special Contract
energy sales across the customer classes, so that the total
1993 Idaho jurisdictional sales of 10,802,636 MWh would
remain cons tan t .
How were the Astaris/FMC special contract
SAID , DI
Idaho Power Company
sales redistributed to individual classes without changing
the total 1993 normalized system sales for the Idaho
jurisdiction?
This redistribution was accomplished by
adding a percentage of the total Astaris/FMC 1993 normalized
sales to each class.The class specific adders were
determined by computing the ratio of class-specific changes
in sales from 1993 to 2002 to the total change in sales from
1993 to 2002 and multiplying this ratio by the 1,051,200 MWh
of Astaris/FMC special contract sales.
please detail the specific class adjustments
that are required as a result of last year s postponements.
First, as a result of Order No. 29026, the
Commission authorized a deferral , or postponement of
recovery of a portion of the 2002/2003 PCA for Schedule 24
customers in the amount of $10,953,165. As of April 1, 2003,
the balance of the Schedule 24 deferral with carrying
charges was $11,610,346. As I mentioned previously, there
was also a class-specific intervener funding charge
including carrying charges, for Schedule 24 customers in the
amount of $7,534. When the total $11,617 880 ($11,610,346 +
534) is divided by the Schedule 24 redistributed class
sales (1 631,722 MWh) the PCA class-specific adder becomes
71209 per kWh.This class-specific adder and the PCA rate
of 0.60439 per kWh are the two components that comprise the
SAID, DI
Idaho Power Company
total Schedule 24 PCA rate of 1.31639 per kWh.The 1.31639
per kWh compares to last year s rate of 1.34159 per kWh.
Next, second class that will receive a class-
specific adder is Schedule 7 , Small General Service. As
authorized by the Commission in Order No. 29026, a class-
specific deferral of $577 033 was booked for later recovery
similar to the Schedule 24 class PCA postponement discussed
previously. The April 1, 2003 deferral balance with carrying
charges was $611 655. When divided by the redistributed
sales for the class (250,901 MWh) the adjustment for the
Schedule 7 class is an additional 0.24389 per kWh to the
2003/2004 PCA rate of 0.60439 per kWh.This results in a
total class-specific rate for Schedule 7, of 0.84819 per
kWh , a 0.87609 per kwh decrease from last year s rate of
72419 per kWh.
Finally, the third class with a class-
specific adder is Schedule 19, Industrial Customers. In Case
No. IPC-02-02 and IPC-02-03, the Industrial Customers of
Idaho Power , requested similar treatment as the deferrals
for Schedule 24 and Schedule 7, with the argument the
irrigation class should not be singled out for special
treatment. As a result , in Order No. 29026, the Commission
authorized the deferral or postponement of the recovery of
$3,635,405. With the inclusion of carrying charges, the
balance of the deferral, on April 1, 2003, was $3,798,998.
SAID , DI
Idaho Power Company
The total deferral divided by Schedule 19 redistributed
sales of 1,744,618 results in a 0.21789 per kWh class-
specific rate adder. The total rate for Schedule 19, 0.82219
per kWh, is the sum of the two rates, 0.60439 per kWh plus
0 . 21 789 per kWh.The 0.82219 per kWh is a 0.90209 per kWh
decrease from last year s PCA rate of 1.72419 per kWh.
Have you computed addi tional carrying charges
on the postponed amounts during the recovery period?
No.Although the postponed amounts are not
typical PCA components, the Company is not requesting
additional compensation for carrying charges during the
period for recovery of the postponed amounts.
What is the overall decrease in revenues as a
result of the proposed PCA rates?
The revenue decrease as a resul t of
implementing the proposed PCA rates is $113,972 587.
In summary, what would you attribute the
decrease in the PCA rate to this year?
The PCA decrease is the result of a much
smaller true-up balance this year compared to last year.
This year s stream flow forecast of 3.37 million acre feet
is lower than last year 's proj ected April through July
Brownlee runoff of 3.63 million acre feet which in isolation
would contribute to a modest upward pressure on the PCA
rates. This increase is more than offset by the much smaller
SAID , DI
Idaho Power Company
true-up amounts.
Have you directed the preparation of the
remaining Idaho jurisdictional tariffs as a result of
implementing the PCA for the period May 16, 2003 through May
15, 2004?
Yes. Exhibit No.(" Proposed Tariff
Schedules and Tariffs with Legislative Format") includes the
Company s proposed service schedules, which reflect the PCA
that will take effect May 16, 2003.The rate changes are
also noted in legislative format.
Does this conclude your testimony?
Yes, it does.
SAID, DI
Idaho Power Company