The URL can be used to link to this page

Home My WebLink About20060316Gale rebuttal.pdfIDAHO POWER COMPANY O, BOX 70 BOISE, IDAHO 83707 . :!" :: - ' 1, : \ I \ ,j " BARTON L. KLINE Senior Attorney An IDACORP Company -- ' ', ~; " ~ : \ I., - ':'" :" ') , , . .- \ i '., - ' March 16 2006 Jean D. Jewell , Secretary Idaho Public Utilities Commission 472 West Washington Street P. O. Box 83720 Boise , Idaho 83720-0074 Re:Case No. IPC-05- Rebuttal Testimony of John R. Gale Dear Ms. Jewell: Please find enclosed for filing nine (9) copies of the rebuttal testimony of John R. Gale regarding the Company s General Rate Case, with one copy designated as the Reporter s Copy." A computer disk containing Mr. Gale s rebuttal testimony is also enclosed. I would appreciate it if you would return a stamped copy of this letter for my file in the enclosed stamped , self-addressed envelope. Very truly yours~!/L- Barton L. Kline BLK:jb Enclosures Telephone (208) 388-2682 Fax (208) 388-6936 E-mail BKlinerBJidahopower.com ; ,: ' 1 (; F, L:: 12 . " ', . ' '.' (, . :, ; . ",, \ i ,'-- ' - '-'~' ,,' i ,)'::' I Li , 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-O5- IDAHO POWER COMPANY TESTIMONY IN SUPPORT OF SETTLEMENT STIPULATION AND REBUTTAL 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 capacity? I am employed by Idaho Power Company (Idaho Power or the Company) as the Vice President of Regulatory Affairs. Are you the same John R. Gale that previously submitted testimony in this proceeding? Yes, I submitted direct testimony on behalf of Idaho Power supporting regulatory policy matters related to the Company s request for general rate relief. What is the purpose of your testimony? I want to express Idaho Power s support for the Stipulation that was filed by the parties to settle all issues arising in this case (Proposed Settlement) and to urge the Commission to adopt the Proposed Settlement without material change or condition.I will also address the testimony supporting the Proposed Settlement filed by Idaho Public Utili ties Commission Staff Witness Randy Lobb and the Idaho Irrigation Pumpers Association s Witness Yankel.In the case of Mr. Lobb' s testimony, I want to amplify a few points from the Company s perspective. Do you believe that the Proposed Settlement is in the public interest? GALE, Di-Reb Idaho Power Company I say this because all parties to theYes. case have agreed to settle all issues, thus indicating their satisfaction with the outcome.I believe that the Proposed Settlement is Idaho Power s first general rate case settlement in its Idaho jurisdiction.From the Company s particular perspective, the Proposed Settlement provides the Company with the ability to update its rates to better reflect current costs and the abi li ty to economically finance new investments ln infrastructure for its system. Why was the Company willing to accept in set tlement a lower general rate increase than it initially filed? First of all, the Company s actual 2005 expendi tures were less than originally expected.Idaho Power had originally filed a split test year in October 2005 that consisted of six months of 2005 actual information and six months of forecast information.As 2005 came to a conclusion, the actual expenditures for 2005 were ultimately less than originally forecast. Other than the difference between the projected 2005 test year results and the actual ,results for 2005, were there other reasons why the Company was willing to accept a lower revenue requirement? Yes.The two other major adjustments to the test year were adjustments to net power supply costs and to GALE, Di-Reb Idaho Power Company the overall rate of return.Both of these adjustments are correctly described in Mr. Lobb' s testimony and both are acceptable to the Company. Please state why the Company is willing to accept the adjustment to its net power supply costs contained in the Proposed Settlement. The net power supply cost issue arises out of the Company s current ability to appropriately model its power supply costs and the relationship between power supply costs, water condi tions, and gas prices.Because the Company has experienced an extended period of drought, there are mixed views on the impact of gas prices on normalized net power supply costs and the degree to which gas prices influence electric power prices in years when water is abundant.After many years of drought, most parties are not very comfortable in predicting what electric prices will do under better water condi tions .Because of this uncertainty, the parties to this proceeding were willing to accept the continuing use of the existing net power supply costs until such time as the Company s net power supply cost model can be reviewed more thoroughly after water conditions actually improve.This solution was acceptable to Idaho Power as long as the Company s loads were updated to 2005 levels. Please explain the Company s acceptance of an overall rate of return that was less than originally GALE , Di-Reb Idaho Power Company requested. For purposes of the Settlement Proposal , Idaho Power is willing to accept an overall rate of return that is lower than originally requested because the agreed-upon return is higher than the existing rate and because Idaho Power believes that it can economically finance its new electric facili ties at the agreed-upon rate of return until such time that either interest rates and/or risk factors change. Included in the settlement provisions, is a statement regarding the appropriate inclusion of incentive payments in a test year.Why was this provision important to the Company? Idaho Power believes that a pay-at-risk component is important in an overall employee compensation package because of its ability to positively influence employee behavior and action.Whenever pay-at-risk is included in a compensation package, the question of how much of the pay-at-risk is appropriate to include in the test year inevitably arises.After much discussion and thought , the Company believes that a pay-at-risk component based on customer-oriented incentives (at their base or target levels) is the best way to align employee incentives with customer interests.The provision included in the Settlement Proposal is a recognition of the Company s perspective on that issue by the other parties to the proceeding.It was important for the GALE, Di-Reb . Idaho Power Company Company to have this provision in the Settlement Proposal so that Company management, on a going-forward basis, will have some assurance that it is structuring employee compensation appropriately. Do you have any observations regarding the rate spread provided for in the Proposed Settlement? Given that this case is the second in a series of general rate adjustments driven by growth-related increases to capital and O&M budgets and given that the Company had just completed a general rate case in 2003, when the Company began preparing this case it recognized that there was a distinct possibili ty that this case might settle.In order to facili tate settlement and avoid unnecessary confrontational issues, the Company s original filing proposed a uniform percent increase approach to rate spread to the customer classes.Further, as indicated in the Company s original filing, the Company s cost of service results reach some different conclusions than past cost of service studies. Idaho Power does not believe that these new results are sufficiently conclusive at this time to make major shifts in rate spread to the customer groups.Future cost of service studies will help determine whether the 2005 results presented in this case are an anomaly or if there has been a structural change in the cost of service. Do you have any concluding remarks regarding GALE, Di-Reb Idaho Power Company the Settlement Stipulation? During this proceeding the CompanyYes. experienced a willingness by the Commission Staff and the other parties to address the issues in this case in a straight-forward manner and to approach the possibility of set tlement in a productive way.The Company is very appreciative of these efforts by the Staff and the other parties. Have you reviewed the testimony of IPUC Staff wi tness Randy Lobb? Yes. Would you please describe your reaction to Mr. Lobb's testimony? I agree with Mr. Lobb's characterization of the filed Stipulation that proposes to settle all issues related to Case No. IPC-05-28 (Proposed Settlement) as well as his description of the Proposed Settlement process. Have you read Mr. Yankel' s testimony filed on behalf of the Idaho Irrigation Pumpers Association (Irrigators) supporting the Settlement Stipulation? Yes. What is your response to Mr. Yankel' testimony? Let me begin by saying that Idaho Power appreciates the fact that consistent with their commitment in GALE, Di-Reb Idaho Power Company the Settlement Stipulation , the Irrigators filed testimony stating that the Proposed Settlement is reasonable and should be approved by the Commission.That being said, I am disappointed that the Irrigators used their testimony in support of the Proposed Settlement as a vehicle to make a detailed presentation of their posi tion on several issues which would have been the subj ect of contention if the parties had not been able to reach the settlement.I am concerned that the Irrigators ' use of supporting testimony as a vehicle to insert their side of contested positions into the record may discourage future settlements of rate cases. Please explain why you are concerned about the impact of the Irrigators ' testimony on future settlement negotiations. If this case had not settled before Staff and the intervenors filed their direct testimony, I am sure a number of the parties to this proceeding would have presented testimony refuting the testimony Mr. Yankel presented, particularly in the area of the cost of serving the various customer classes.All of the parties, in signing the Stipulation, agreed that the settlement was a compromise of conflicting positions, agreed that the settlement does not set a precedent on particular issues, and each of the parties essentially agreed to forego presenting its individual positions on contested issues in order to achieve a settlement GALE, Di-Reb Idaho Power Company that was fair , just and reasonable.A settlement like this one is something like a ~black box " in which it is the mutual understanding of the parties that they are all agreeing to forego the opportunity to advocate their individual positions in order to achieve a fair, just and reasonable overall settlement.Some portions of the Irrigators ' testimony in support of the settlement goes beyond that mutual understanding and, in my opinion , those portions of the testimony border on bad faith on the part of the Irrigators. How do you think the Commission should treat the Irrigators ' testimony in support of the Stipulation? I hope the Commission will acknowledge those portions of the testimony that support the reasonableness of the settlement embodied in the Stipulation and ignore those parts of the testimony that I believe are inappropriate for inclusion in testimony filed to support a ~black box settlement. Does this conclude your testimony? Yes, it does. GALE, Di-Reb Idaho Power Company CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 16th day of March , 2006, I served a true and correct copy of the within and foregoing TESTIMONY IN SUPPORT OF SETTLEMENT STIPULATION AND REBUTTAL TESTIMONY OF JOHN R. GALE upon the following named parties by the method indicated below, and addressed to the following: Donald L. Howell, II Cecelia A. Gassner Idaho Public Utilities Commission 472 W. Washington Street O. Box 83720 Boise, Idaho 83720-0074 don.howell ~ puc.idaho.Qov ---L... Hand Delivered- U.S. Mail Overnight Mail FAX (208) 334-3762 ---2L-E-mail Randall C. Budge Eric L. Olsen Racine , Olson, Nye, Budge & Bailey O. Box 1391; 201 E. Center Pocatello , I D 83204-1391 rcb~ racinelaw.net elo~ racinelaw.net Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (208) 232-6109 ---2L-E-mail Anthony Yankel 29814 Lake Road Bay Village, OH 44140 vankel (g) attbi. net Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (440) 808-1450 ---2L-E-mail Peter J. Richardson Richardson & O'Leary 515 N. 27th Street O. Box 7218 Boise,. ID 83702 peter(g) richardsonandolearv.com Hand Delivered ---L... U.S. Mail Overnight Mail FAX (208) 938-7904 ---2L-E-mail Dr. Don Reading Ben Johnson Associates 6070 Hill Road Boise, ID 83703 dreadinQ (g) mindsprinQ.com Hand Delivered ---L... U.S. Mail Overnight Mail FAX (208) 384-1511 ---2L-E-mail Lawrence A. Gollomp Assistant General Counsel United States Dept. of Energy 1000 Independence Avenue , SW Washington, D.C. 20585 Lawrence.Goliomp (g) hQ.doe.Qov Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (208) 384-1511 ---2L-E-mail CERTIFICATE OF SERVICE, Page Dennis Goins Potomac Management Group 5801 Westchester Street O. Box 30225 Alexandria, VA 22310-1149 dqoinsPMG (g) aol.com Conley E. Ward Givens , Pursley LLP 601 W. Bannock Street O. Box 2720 Boise, ID 83701-2720 cew (g) qivenspurslev ,com Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (703) 313-6805 ---2L-E-mail Hand Delivered ---L... U.S. Mail Overnight Mail FAX (208) 388-1300 ---2L-E-mail Dennis E. Peseau , Ph. Utility Resources , Inc. 1500 Liberty Street S., Suite 250 Salem , OR 97302 dpeseau (g) excite.com Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (503) 370-9566 ---2L-E-mail William M. Eddie Advocates for the West 1320 W. Franklin Street O. Box 1612 Boise, ID 83701 beddie (g) advocateswestorQ Ken Miller NW Energy Coalition 5400 W. Franklin , Suite G Boise, ID 83705 kenmiller1 (g) cableone.net Hand Delivered ---L... U.S. Mail Overnight Mail FAX (208) 342-8286 E-mail Hand Delivered ---L... U.S. Mail Overnight Mail FAX E-mail Hand Delivered - U.S. Mail ---L... Overnight Mail FAX (513) 421-2764 ---2L-E-mail Michael L. Kurtz Kurt J. Boehm Boehm , Kurtz & Lowry 36 East Seventh Street, Suite 1510 Cincinnati, Ohio 45202 mkurtz ~ bkllawfirm .com kboehm (g) bkllawfirm.com Hand Delivered - U.S. Mail ---L... Overnight Mail Neal Townsend Energy Strategies 215 S. State Street, Suite 200 Salt Lake City, UT 84111 ntownsend (g) enerqvstratcom ---2L-E-mail ~'a BARTON L. KLINE CERTIFICATE OF SERVICE, Page 2