20040426Post Hearing Brief.pdf

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Conley E. Ward (ISB No. 1683)
GIVENS PURSLEY LLP
601 W. Bannock Street
O. Box 2720
Boise, ID 83701-2720
Telephone No. [phone]
Fax No. [phone]
cewCillgi venspursley. com
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Attorneys for Micron Technology, Inc.
S:\CLIENTS\4489\I7\Micron Post.Hearing BrieEDOC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS INTERIM
AND BASE RATES AND CHARGES FOR
ELECTRIC SERVCE
Case No. IPC-03-
POST-HEARING BRIEF OF MICRON
TECHNOLOGY, INC.
This Post-Hearing Brief deals with only one issue-the proper inter-class allocation of
any rate increase the Commission may approve. As the Commission is well aware, the primary
allocation question is whether the enormous disparity in rates of return between Schedule 24 and
all other customer classes should be eliminated.
Micron respectfully submits that a failure to address the existing cross subsidy of
Schedule 24 customers in this case would amount to a violation of Section 61-315 , Idaho Code
No public utility shall, as to rates, charges, service, facilities or in any other
respect, make or grant any preference or advantage to any corporation or person
or subject any corporation or person to any prejudice or disadvantage. No public
utility shall establish or maintain any unreasonable difference as to rates, charges
service, facilities or in any other respect, either as between localities or as
between classes of service. The commission shall have the power to determine
any question of fact arising under this section.
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which provides:
POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC.
While Section 61-315 explicitly applies only to public utilities themselves, the Idaho Supreme
Court has repeatedly held that it implicitly imposes a duty on the Commission to correct any
unjust, unreasonable, discriminatory or preferential rates.See Grindstone Butte Mutual Canal
Co. v. Idaho Power Co., 89 Idaho 860, 867, 574 P.2d 902 (1978).
Micron does not contend that the Commission must slavishly follow any particular cost
of service approach in administering Section 61-315. The Commission is entitled to consider
all relevant criteria" in determining whether inter-class allocations are reasonable. Grindstone
Butte, etc. v. Idaho P., 102 Idaho 175, 181 627 P.2d 804 (1981). But it is likewise true that
cost of service is the generally accepted foundation of ratemaking.
Rates found to be far in excess of cost are at least highly vulnerable to a charge of
unreasonableness. Rates found well below cost are likely to be tolerated, if at all
only as a necessary and temporary evil. For if rates are not compensatory, they
are not subsidy free. In fact, the golden rule of socially optimal ratemaking is
that, whenever possible, prices should track all the identifiable (marginal, private
and social) costs occasioned by a service s provision.
JAMES C. BONBRIGHT, PRINCIPLES OF PUBLIC UTILITY RATES 109-110 (1988). Thus
where the Commission assesses costs disproportionately between customer classes, it must at the
very least "explain the reasoning employed to reach its conclusions." Boise Water Corp to Rev
& Inc. Rates, 128 Idaho 534, 537, 916 P.2d 1259 (1996).
On this record, there are only three remotely plausible rationales for rejecting the
substantially similar results of the cost of service studies presented by Idaho Power Company,
Micron and the Commission Staff. The Irrigators first argue that the studies are so deeply flawed
that they should be rejected out-of-hand. Their second line of defense is that Schedule 24
customers are not significant contributors to Idaho Power s incremental costs associated with
load growth. Finally, they contend that the adverse economic impact of "rate shock" should stay
the Commission s hand. None of these arguments are persuasive or defensible.
POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC. - 2
Accepting the Irrigators' attack on the other parties ' cost of service methodologies would
require the Commission to overturn a long line of precedent adopting and refining the
methodologies that produced the cost of service results in this case. It would also require the
Commission to disregard the unanimous opinion of all the cost of service testimony other than
that presented by the Irrigators. Finally, to accept the Irrigators ' position the Commission would
have to reject the use of seasonal peak weighting in cost of service studies, despite the
overwhelming evidence in the record and in numerous economic studies that seasonal peaks are
extremely important drivers of Idaho Power s and other electric utilities ' overall cost of service.
The Irrigators' second argument , that they have not contributed to load growth, is neither
supported by the facts nor reasonable as a matter oflaw. In the first place, there is no evidence
in the record that the requested increase is due solely, or even primarily, to load growth. Many
other factors, including general inflation and on-peak consumption, are also partially responsible
for the requested increase, and the Irrigators are as responsible for these increased costs as any
other customer class. Moreover, if the Commission accepted the Irrigators ' contention that they
should not have to shoulder costs associated with growth, it necessarily follows that individual
businesses and residential customers whose loads have not grown should likewise be assigned
less than a full share ofldaho Power s costs.
Assigning costs on this basis is not only impractical, it is also unlawful. The Idaho
Supreme Court has twice held that Section 61-315 prohibits the disproportionate assignment of
incremental load growth costs to a subset of a utility s general body of customers. In Idaho State
Homebuilders v. Washington Water, 107 Idaho 415 690 P.2d 350 (1984), the Court struck down
as discriminatory a Commission decision that imposed a $50 per kilowatt charge on new electric
space heating customers after March 1 , 1980. Similarly, in Boise Water Corp to Rev. & Inc.
POST-HEARING BRIEF OF MICRON TECHNOLOGY, INc. - 3
Rates supra the Court held that incremental costs associated with load growth could not be
collected solely from new customers in the form of a hook up fee. The Irrigators' argument in
this case is squarely contrary to the holdings in both Boise Water and Washington Water and its
adoption in this case would undoubtedly lead to a reversal on appeal.
The Irrigators' concerns about adverse economic impacts and rate shock are matters the
Commission is entitled to consider, but these arguments are not persuasive when viewed in
context. In the first place, Schedule 24 is slated to receive a 15 percent rate decrease when the
current PCA expires on May 31 2004. See Case No. IPC-04-, Order No. 29478. If the
Commission were to adopt the Staff recommendation for Schedule 24 rates, the resulting effect
would be no net increase at all for the Irrigators on June 1 2004, while most ofthe customers
who are subsidizing the irrigation customers would presumably experience a net increase. This
is hardly a compelling case for the "rate shock" argument.
Furthermore, a number of parties have offered phase-in proposals that would eliminate
any sudden "rate shock" for Schedule 24. Dr. Peseau s proposal has the decided advantage of
immediately terminating the subsidy payments from other customer classes. But regardless
the manner in which the phase-in is handled, the Commission has the tools available to mitigate
the impact of a sudden and dramatic increase for Schedule 24. Under these circumstances, it is
disingenuous for the Irrigators to advance "rate shock" as a reason why they should continue to
be subsidized indefinitely by other customers who have their own adverse economic impacts and
rate shock" concerns to worry about.
Finally, the Commission might find it instructive to review the Court and Commission
decisions in Grindstone Butte Mut. Canal v. Idaho Power Co., 98 Idaho 860, 574 P.2d 902
(1978). The Irrigators made many ofthe same arguments in that case when faced with a
POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC. - 4
disproportionate rate increase to bring their rates up to cost of service parity. The Commission
nevertheless approved, and the Court upheld, the disproportionate increase. While this
undoubtedly caused some pain in the farming community, the predicted economic ruin for that
sector of the economy clearly did not come to pass.
In summary, Micron submits that it is past time for Schedule 24 to start paying its fair
share of Idaho Power Company s costs. The other ratepayers have subsidized the Irrigators far
longer and more heavily than is reasonable. Continuing this subsidy into the future is both
unreasonable and unduly discriminatory.
RESPECTFULLY SUBMITTED this 26TH day 0 f
April 2004
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Con yE.
GIVENS PURSLEY LLP
Attorneys for Micron Technology, Inc.
POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC. - 5
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 26TH day of April 2004, I caused to be served a true
and correct copy ofthe foregoing by the method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
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Barton L. Kline
Monica B. Moen
Idaho Power Company
O. Box 70
Boise, ID 83707
John R. Gale
Vice President Regulatory Affairs
Idaho Power Company
O. Box 70
Boise, ID 83707
Lisa Nordstrom
Weldon Stutzman
Deputy Attorney Generals
Idaho Public Utilities Commission
472 W. Washington Street
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Boise, ID 83720-0074
Peter J. Richardson
Richardson & O'Leary
99 E. State Street, Ste. 200
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Eagle, ID 83616
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Don Reading
Ben Johnson Associates
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POST-HEARING BRIEF OF MICRON TECHNOLOGY, INc. - 6
Randall C. Budge S. Mail
Eric L. Olsen Hand Delivered
Racine, Olson, Nye, Budge, Bailey Overnight Mail
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POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC. - 7
Nancy Hirsh u.S. Mail
NW Energy Coalition Hand Delivered
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Utility Resources, Inc.Hand Delivered
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POST-HEARING BRIEF OF MICRON TECHNOLOGY, INC. - 8