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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC SERVICE
TO ELECTRIC CUSTOMERS IN THE STATEOF IDAHO.
CASE NO. IPC-O3-
IDAHO POWER COMPANY
DIRECT REBUTTAL 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.
Are you the same Gregory W . Said that
previously submitted direct testimony in this proceeding?
Yes,am.
Have the Company and the Commission Staff
typically been able agree PCA methodology changes
address unanticipated PCA impacts not originally envisioned
by the Commission?
Since the creation of the PCA, theYes.
Company and the Staff have been able to identify certain
aspects concerning the PCA that were not fully developed at
the time of the PCA creation.In thqse instances, either
the Staff or the Company has identified the issue and,
without opposition, recommended a change to PCA methodology
that was ultimately approved by the Commission.An example
of such a change is the current use of sales level data
rather than load level data when computing rates.
Has the Company proposed a PCA methodology
change that the Staff disagrees with in this proceeding?
Yes.The Company and the Staff disagree as
to the appropriate value to be utilized as the Expense
Adjustment Rate for Growth EARG"
Please recap the computations of the EARG
SAID, Di-Reb
Idaho Power Company
presented in this case for use in future PCA computations.
The Company included a computation of the
EARG consistent with prior orders at $13.98 per megawatt-
hour.The Company also discussed and recommended a
rationale to change PCA methodology to utilize the embedded
cost of serving load at $7.30 per megawatt-hour as the EARG.
Mr. Hessing proposed a different change to PCA methodology
to utilize a marginal cost of $29.41 per megawatt-hour.
At the time the PCA was first implemented,
did the Staff contend that an EARG was required to insure
that the Company did not double recover costs?
Yes.Order No. 24806 issued in Case No. IPC-
92-25 recaps the Staff contention as follows:
Staff argues that th~ power supply costs of
serving differences between normal and actual firm
retail load should be factored out of the PCA.
Differences from normalized firm r~tail load are
caused by factors such as changes in load and
abnormal weather. Staff contends that some
differences in power supply costs are caused by
changes in load and that the associated differences
in power supply costs are not appropriate for PCA
treatment. If the Company is allowed to increase
rates to account for the power supply costs of
serving additional load and to recover base rates
which also include power supply costs, the Company
is double recovering those costs. Fuel costs
component of net power supply costs) are first paid
when load growth customers pay their electric bills
at the end of the month. They are again paid in the
following year after the Company captures them in
its year-end true-up and spreads them to
ra tepayers .
Wi thou t an EARG, how would the Company
double-recover the costs of load growth?
SAID, Di-Reb
Idaho Power Company
The Company would first recover the costs of
load growth through base rates (embedded) and then again at
a PCA rate reflecting actual costs incurred in the PCA year.
In order to not double-recover, one of these rates must be
The Company would again suggesteliminated via the EARG.
that the embedded cost of service is the appropriately
I assume that the Staff's position isremoved collection.
that the actual costs of serving additional loads or a
surroga te should be removed.
Is the embedded cost of serving load known?
Yes.The embedded cost of serving load
included in the proposed base rates of the Company in this
case is $7.30 per megawatt-hour.
Is the future actual cost of serving load
growth known?
No.
Is the Staff recommendation that a marginal
cost of $29.41 be utilized as a surrogate for the cost of
serving future additional load reasonable?
No.During the discovery portion of this
case, the Staff requested information as to the Company
marginal cost based upon a 10-megawatt increase in Company
load without specifying the intended use for such
information.The marginal cost the Company provided
reflects a rate that is often driven by reductions of
SAID, Di-Reb
Idaho Power Company
surplus sales at market prices rather than the additional
Since the EARG is concernedcosts of serving firm loads.
with the costs of serving additional firm loads, a more
appropriate value than the marginal costs provided would
include only the cost of serving additional load and not the
lost opportunity to make surplus sales.Ten years ago, the
Commission Staff recommended an EARG of $16.84 per megawatt-
hour as the "approximate fuel costs associated with changes
in load that should be adjusted out of a PCA.The impact
of lost surplus sales was not part of the Staff'
recommendation at that time.
Mr. Hessing states that "A surrogate for
Idaho Power s marginal cost of power supply was proposed in
that case because Staff did not have .an operating power
supply model that would allow it to incrementally adjust the
load and calculate the marginal cost. please comment.
I believe Mr. Hessing may be stating his
recollection of Staff thoughts prior to submitting testimony
in 1992 , but both Staff testimony in Case No. IPC-92-
and Order No. 24806 are silent with regard to computations
being a surrogate for another methodology.In fact, the
Commission notes that it accepts the $16.84 per megawatt-
hour EARG because it was the only method proposed. The
Company did not propose an alternate computation because it
opposed a growth adjustment of any kind.
SAID, Di-Reb
Idaho Power Company
Are there additional reasons that the $29.
per megawatt-hour recommendation as the EARG is
inappropriate?
Yes.Mr. Hessing has used a 5-year forward
average marginal cost of $29.41 per, megawatt-hour as his
recommended EARG.Such a credit for load growth would be
higher than the Staff proposed tariff rate for Schedule
customers and special contract customers.Idaho Power could
find itself in the position where load growth is driven by
growth of Schedule 19 and Special Con tract customers being
served by the Company s thermal resources at costs in the
mid-teens.Staff would recommend a credit to PCA expenses
that would not only eliminate a double collection of revenue
at embedded costs and not only eliminate the costs of
serving the additional loads served at rates in the mid-
teens, but would eliminate costs greater than the revenues
received from the specific customer classes causing the load
growth.The thought that while serving additional loads the
Company s revenue recovery would be less than if the new
loads were not served does not make any sense and suggests
that any EARG should not exceed the total rate paid by any
customer class.In fact, a good portion of any customer
rate is not related to power supply costs at all.
appropriate EARG should be significantly less than the total
The Company still believesrate paid by any customer class.
SAID, Di-Reb
Idaho Power Company
that the embedded variable power supply cost is the
appropriate EARG.
Have you supervised the preparation of an
exhibit that would quantify the cost of serving additional
load without the inclusion of surplus sales?
Yes.Exhibit 75 is an attempt to quantify
the cost of serving additional load without the inclusion of
surplus sales.The top half of Exhibit 75 utilizes the same
data that formed the basis of Mr. Hessing s $29.41 per
megawatt-hour marginal cost recommendation , but identifies
the highest cost resources utilized to serve an additional
10 megawatts of firm load rather than the value of resources
no longer available for surplus sales.It can be seen that
Bridger, Danskin, Purchases and even ,Hydro generation are
the identified resources that serve the 10-megawatt load
addi tion throughout the year.Prior to the known and
measurable inclusion of the PPL Montana contract and the
Tiber CSPP contract the marginal cost of the resources
serving firm loads is $18.20 per megawatt-hour.The lower
half of Exhibit 75 shows that when the PPL Montana contract
and the Tiber CSPP contract are added, the marginal cost of
the resources serving firm loads drops to $16.10 per
megawatt-hour.
With your rebuttal testimony there are now
four quantifications of what could be referred to as a
SAID, Di-Reb
Idaho Power Company
Which one ofmarginal cost of serving additional load.
those quantifications is most appropriate EARG?
The Company views any marginal cost based
EARG computation as an inappropriate means to deny the
Company an opportunity to recovery its costs of serving
addi tional loads.To the extent that the EARG exceeds the
embedded cost included base rates,the Company
penalized for load growth even though it ha an obligation
serve such growth.
Does the Commission have to make a
determination of the appropriate EARG in this proceeding?
No, a decision on the appropriate EARG could
In light of thebe made outside of this general rate case.
large difference between the Company s recommendation that
the EARG be $7.30 per megawatt-hour and the Staff'
recommendation that the EARG be $29.41, the Commission may
want to give this issue further consideration outside the
record of the general rate case.There is clearly a
material difference in opinion as to the appropriateness of
using embedded costs or marginal costs or a basis closer to
A separate proceeding tothe method used in prior orders.
address this limited issue could be a more efficient way to
resolve this dispute.
Does this conclude your direct rebuttal
testimony?
SAID, Di-Reb
Idaho Power Company
Yes, it does.
SAID, Di-Reb
Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-O3-13
IDAHO POWER COMPANY
EXHIBIT NO. 75
G. SAID
Cost of Serving load Growth
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