20050418Gale Direct.pdf

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UTIL JES' COrfil"iISS ION
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 JUNE 1, 2005
THROUGH MAY 31, 2 006 CASE NO. IPC-O5- /6
IDAHO POWER COMPANY
DIRECT TESTIMONY
JOHN R. GALE
Please state your name and business address.
My name is John R. Gale 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 Idaho
Power or the Company) as the Vice President of Regulatory
Affairs.
Please describe your work experience.
In October 1983, I accepted a posi tion as
Ra te Analys t wi th Idaho Power Company.I was promoted to
Manager of Rates in 1991 and to General Manager of Pricing
and Regulatory Services in 1997.In March of 2001, I was
promoted to Vice President of Regulatory Affairs.As Vice
President of Regulatory Affairs, I am responsible for the
overall coordination and direction of the Pricing &
Regulatory Department, including development of
jurisdictional revenue requirements and class cost-of-
service studies, preparation of rate design analyses, and
administration of tariffs and customer contracts.In my
current position, I am responsible for policy matters
related to the economic regulation of Idaho Power Company.
What is the purpose of your testimony in
this case?
GALE, DI
Idaho Power Company
I will summarize the June 1, 2005 rate
impacts of two revenue requirement cases currently before
the Commission that are unrelated to the Power Cost
Adjustment ("PCA"I will also describe the Company
proposal to mi tigate the overall impact of the June 1, 2005
PCA rate adjustment on customers.
Please summarize the applications that the
Company has made this spring that will impact customer
rates and charges beginning June 1, 2005, that are
unrelated to the June 1, 2005 PCA rate adjustment.
In Case No. IPC-05-10, the Company
requested a June 1, 2005 overall ongoing 1.84 uniform
percentage increase applied to the demand and energy
components of all customer classes to reflect the addi tion
of the Bennett Mountain power plant to the Company
Bennett Mountain will be an especially valuedresources.
resource this summer as drought conditions persist.
In Case No. IPC-05-14, the Company
requested a June 1, 2005 overall 4.45 percent increase in
rates (2.25 percent ongoing and an additional 2.20 percent
for one year) to comply with Commission Order No. 29601
that addresses resolution of the Company s income tax
issues in Case No. IPC-03-13.For the ongoing portion of
the income tax-related increase the Company proposed a
GALE, DI
Idaho Power Company
uniform percentage increase of 2.25 percent applied to the
demand and energy components of all customer classes in the
same manner as the Bennett Mountain-related rate increase.
For the one-year portion of the income tax-related increase
the Company proposed a uniform percentage increase to the
customer classes with a uniform cents per kilowatt-hour
wi thin the class.
adjustment.
Please describe the June 1, 2005 PCA rate
The June 1, 2005 PCA rate increase, as
computed by Ms. Schwendiman and described in her direct
testimony in this case, would be a 4.75 percent increase to
current rates to be implemented by an equal 0.2296 cents
per kWh increase applied to the energy component of all
customer classes for one year.
What would be the cumulative rate impact of
the three filings you have just described on the Company
customers?
In order to represent the impact of these
three filings in comparable terms, I first need to express
the impact of the PCA in terms of an increase from base
rates, since both the Bennett Mountain and the income tax
filings are expressed in terms of changes from the base
In order to determine the PCA impact from basera tes .
GALE, DI
Idaho Power Company
rates, the incremental change to the PCA rate of 0.2296
cents per kWh was multiplied by the 2003 test year sales
utilized in both the Bennett Mountain and income tax
filings.When expressed in terms of an increase from base
rates, the impact of the PCA is a 5.42 percent overall
increase in cus tomer rates.The cumulative impact of these
three filings would be an overall increase of 11.71 percent
with ongoing impacts affecting both energy and demand
components and one-year impacts affecting only energy
components.
Have you supervised the preparation of an
exhibi t to show the specific class impacts of the combined
Bennett Mountain, income tax, and PCA filings?
Yes, I supervised the development of Exhibi
7 that details the specific class impacts of the combined
Bennett Mountain, income tax, and PCA filings.The over all
percentage increase associated wi th the three filings is
11.71 percent.Individual classes experience differing
percentage increases due to the uniform cents per kWh
treatment associated with the PCA.
Does the Company have a proposal as to the
implementation of the PCA rate adjustment that would reduce
the overall effect of the combined rate increase associated
GALE, DI
Idaho Power Company
with the three revenue requirement filings:(1) Bennet t
Mountain, Case No. IPC-05-10,(2) income tax compliance,
Case No. IPC-05-14, and (3) PCA computations in this
case?
Yes.The Company has a proposal that would
resul t in no increase in overall PCA rates this year
thereby reducing the combined rate increase on June 1, 2005
to 6.29 percent of base rates (1.84 percent for Bennett
Mountain and 4.45 percent for income tax compliance)
What is the current PCA rate?
Wi thout taking into consideration individual
class variation due to one-year class specific credi ts, the
overall PCA rate is 0.6039 cents per kWh.The components
of the overall PCA rate are the true-up component rate of
3540 cents per kWh and the projection component rate of
2499 cents per kWh.
please describe the Company s proposal to
maintain the current overall PCA rate of 0.6039 cents per
kWh.
First, the Company would recommend
acceptance of Ms. Schwendiman ' s forecast computation of
4288 cents per kWh.Second, the Company would use a
reduced PCA true-up component of 0.1751 cents per kWh in
order to hold the overall PCA rate at 0.6039 cents per kWh.
GALE, DI
Idaho Power Company
What is the impact of maintaining the 0.6039
cents per kWh PCA rate rather than utilizing the 0.8335
cents per kWh PCA rate as computed by Ms. Schwendiman?
Based upon the estimate that Idaho
jurisdictional sales during June 1, 2005 through May 31,
2006 will be 12,453,880 MWh, the 0.2296 cents per kWh
difference between Ms. Schwendiman ' s O. 8335 cents per kWh
computation and the Company s proposal to hold at the
current 0.6039 cents per kWh PCA rate that I am presenting
in my testimony, the Company is offering to under-recover
its PCA expenses by $28.6 million during June 1, 2005
through May 31, 2006.
How would this under-recovery eventually be
collected by the Company?
From June 1, 2005 through May 31,2006 the
PCA true-up of the true-up balance would normally be
expected to reduce to zero; however, for this year I am
proposing that it in essence reduce to $28.6 million plus
carrying charges at the PCA rate of 2 percent.
Effectively, the $28.6 million will be postponed for an
addi tional year.
Have you supervi sed an exhibi t to show the
specific class impacts of the combined Bennett Mountain and
income tax filings wi th the Company s proposal to keep the
GALE, DI
Idaho Power Company
PCA rate at 0.6039 cents per kWh by postponing the recovery
of the $28.6 million?
Yes.I supervised the preparation of
Exhibit 8 that details the specific class impacts of the
combined Bennett Mountain and income tax filings with the
Company s proposal to keep the PCA rate at 0.6039 cents per
kWh.
cus tomers will
2005-2006 PCA?
Do you believe Idaho Power s retail
value the postponement of a portion of the
Yes.I believe that customers will welcome
the 5.42 percent rate relief this year.
In your opinion, will postponement of the
PCA recovery of $28.6 million until next year create an
undue hardship on customers next year?
No.I believe that the $28.6 million impact
next year will be mitigated by future PCA credits and the
cessation of the one-year income tax rate change.
Please describe the PCA credi ts that will
mitigate the impact of deferring $28.6 million to next
year s PCA.
In Order No. 29600, the Commission
established 24 months of PCA credi ts to be included in PCA
true-up computations through May 2006.From June 1, 2005
GALE, DI
Idaho Power Company
through May 31, 2006, these PCA credits will amount to
$9,650,000 and effectively offset a portion of the $28.
million deferral leaving a net remaining amount of
approximately $19 million.
Please describe why the cessation of the
one-year income tax increase will also mi tigate next year
deferral-related rate increase.
As I mentioned, due to the Commission
established PCA credits, the effective net remaining
deferral is approximately $19 million that would indicate a
PCA rate increase next year.However, independent f rom the
PCA, rates will decrease by $11.5 million next year as a
resul t of the cessation of the one-year income tax rate
adjustment.This would result in combination as only a
$7 .5 million net rate adjustment next year rather than a
$28.6 million increase due to PCA credits and the cessation
of the one-year income tax adjustment.
Have you prepared an exhibi t that detai 1 s
the cumulative effect of the Company s requested change in
rates for the Bennett Mountain and income tax filings with
the Company s proposal to keep the PCA rate at 0.6039 cents
per kWh for the period June 1, 2005 through May 31, 2005?
Yes.Exhibit 9 includes the Company
tariff sheets reflecting the cumulative effect of the
GALE, DI
Idaho Power Company
Bennett Mountain, income tax, and PCA filings with the
proposal to keep the PCA at 0.6039 cents per kWh.This
exhibit is provided for informational purposes and
intended to detail the class specific rates that would
become effective with approval by the Commission of all
three filings.
Does this conclude your testimony?
Yes, it does.
GALE, DI
Idaho Power Company