20051031Said direct testimony.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-05-
IN THE MATTER 0 F THE
APPLICATION OF IDAHO POWER
COMPANY TO INCLUDE EXPENSES
ASSOCIATED WITH ITS CLOUD
SEEDING PROGRAM IN THE
COMPANY'PCA ON AN ONGO ING
BASIS.
IDAHO POWER COMPANY
DIRECT TESTIMONY
GREGORY W. SAID
October 2005
. .
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
Manager 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 in Mathematics wi th honors from Boise State
Uni versi ty.In 1999, I attended the Public Utility
Executives Course at the University of Idaho.
Please describe your work experience wi
Idaho Power Company.
I became employed by Idaho Power Company in
1980 as an analyst in the Resource Planning Department.
1985, the Company applied for a general revenue requirement
increase.I was the Company wi tness 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.Wi th the
Company s application for a temporary rate increase in 1992,
my responsibilities as a witness were expanded.While I
SAID, Di
Idaho Power Company
continued to be the Company wi tness concerning power supply
expenses I also sponsored the Company s rate computations
and proposed tariff schedules in that case.
In 1994, I was asked to become the Meridian
District Manager for a one-year cross-training opportunity.
In 1995, I returned to my position in the Rate Department.
In October 1996, I was promoted to lead a team of analysts
in the newly reorganized Pricing & Regulatory Services
Department, formerly known as the Rate Department.As the
Manager of Revenue Requirement, I coordinate the Company
efforts to recover prudently incurred expenses and
inves tmen ts via the rates and charges of the Company.
What is the Company requesting in this
application?
The Company is requesting that the Commission
allow the Company to defer expenses associated wi th its
cloud seeding program for inclusion in the Company s PCA on
an ongoing basis.Last year, the Company requested a one-
year deferral of cloud seeding expenses to complete a three-
year cost/benefi t analysis.That cost/benefi t analysis is
now complete.The Company believes that once the Commission
has reviewed the analysis that demonstrates the benefits of
cloud seeding, it will determine that the Company should
continue its cloud seeding program.Benefi ts of cloud
seeding have been quantified over the last three years to be
SAID, Di
Idaho Power Company
7 times the program expenses.Idaho Power believes that
there will be similar benefi ts in the future that the
Company and its customers can obtain if the cloud seeding
program is continued.Recognizing that, in the past, the
Commission has expressed reservations concerning the
efficacy of cloud seeding, the Company sought approval
funding for one addi tional year of cloud seeding last year.
With the data from this additional year, the Company
believes that the three years quantification of benefits
demonstrates that ongoing rate recovery for a cloud seeding
program is appropriate.The Company is now reques ting tha
ongoing recovery of cloud seeding expense be accomplished
permanently including cloud seeding expenses in the
Company s PCA.The Company proposes ongoing PCA trea tmen t
because the cloud seeding expenses directly produce power
supply benefi ts that have been demonstrated over time.
this time, the Company requests an accounting order that
allows the Company to defer expenses incurred for cloud
seeding efforts beginning with the upcoming 2005-2006 winter
period of time.Cloud seeding expenses would first be
incurred around October 15, 2005 and the season would
continue until approximately April 30, 2006 and annually
thereafter.As part of the Company s imminent general rate
case application, I will discuss PCA base adjustments due to
cloud seeding.Until an order is issued in the general rate
SAID, Di
Idaho Power Company
case proceeding, no cloud seeding expenses or benefits
should be included in the peA base.Ini tially, customers
will fund 90 percent of all the expenses of cloud seeding
and receive 90 percent of all the benefits of cloud seeding.
Once base levels are established in a general revenue
requirement proceeding customers will fund 100 percent of
base level cloud seeding expenses and receive 100 percent of
base level cloud seeding revenues.Differences from base
level expenses or revenues will be shared 90 percent by
customers and 10 percent by the Company.
Please provide a brief history of the
Company s recent acti vi ties wi th cloud seeding.
The Company has had some experience wi
cloud seeding dating back to 1995.However, my involvement
with the current efforts in cloud seeding began in 2001.
Wi th the extremely high market prices that were then being
experienced, the Company was desirous of finding any and all
measures to assist in the reduction of overall power supply
expenses.Stream flow enhancement via cloud seeding was one
of the options available to the Company.
Prior to the winter of 2001-2002, Company
personnel met wi th members of the Commission Staff to
discuss the possibility of a cloud seeding pilot program.
three-year pilot program was envisioned.Staff was
reluctant to support such a program because they were not
SAID, Di
Idaho Power Company
confi,dent that the Company would be able to demonstrate
cloud seeding benefits.Without Staff support the Company
declined to make an application for a pilot program to the
Commission.The Company did not fund cloud seeding during
the winter of 2001-2002.Prior to the following winter,
2002-2003, the Company again met with the Staff, providing
addi tional information of cloud seeding efforts and measured
benefits in other areas of the country.Staff was still
reluctant to support a pilot program, but the Company was
willing to fund the ini tial efforts in cloud seeding wi thout
an accounting order with the hope that sufficient data would
be available to demonstrate the efficacy of the program
during the general rate case review.
The first year of cloud seeding efforts
primarily involved installation of equipment with limited
cloud seeding and limi ted measurement of cloud seeding
benefi ts.The second winter of cloud seeding, 2003-2004,
provided the first real opportuni ty to quantify the benefi
of cloud s~eding on the Company system.The Company
test year for the general rate case was 2003, prior to the
point in time that the quantification of benefits was
determined.The Commission, in Order No. 29505, denied the
inclusion of cloud seeding costs in the Company s revenue
requirement stating "results are at this time speculative.
The Commission also stated it would be unfair to ratepayers
SAID, Di
Idaho Power Company
to include all cloud seeding program cost in the test year
as if it were continuing each year into the future.
Subsequent to the issuance of Order No.
29505, the Company requested, in Case No. IPC-E-05-10, that
the Commission allow the Company to continue cloud seeding
for the winter of 2004-2005 with cloud seeding expenses
deferred for review wi th PCA expenses in May 2005.The
Company is currently recovering those expenses in PCA rates.
The purpose of the one-year PCA funding was to allow for a
third year of cloud seeding benefi t computations.
Did last winter s cloud seeding program
produce benefi ts for customers of Idaho Power during the
2004-2005 winter period?
Cloud seeding expenses were $1.Yes.
million and benefi ts were quantified at $1.8 million for a
net benefit to customers of $800,000.
How have the Company s customers benefited
from cloud seeding efforts?
To the extent that the Company s cloud
seeding program created addi tional snow pack that
subsequently reached the river and flowed through the
Company s hydro resources, addi tional zero cost generation
was available for consumption by the Company s customers.
The cost was not truly zero, but cloud seeding costs are not
recorded in tradi tional peA accounts.As a resul t , the
SAID, Di
Idaho Power Company
Company s Idaho jurisdictional customers received the
majority of cloud seeding benefits while the Company
shareholders received all of the cloud seeding program
costs.
What has been the three-year benefit to cost
ratio associated with cloud seeding?
been times
three year s .
Benefits from cloud seeding activities have
the expenses of cloud seeding over the last
What FERC accounts are used to record cloud
seeding related expenses?
Capi tal expendi tures for cloud seeking are
ini tially recorded in FERC account 107 Construction Work In
Progress and subsequently moved to FERC account 101 Electric
Plant In Service when operational.Cloud seeding expenses
have been recorded in FERC account 536.
Did the Company "write-off" its capital
investment in cloud seeding as a result of Order no. 29505?
As I have stated, the Company continuesNo.
to believe that there are benefits for the Company and its
customers to be derived from cloud seeding.Although the
Company cannot currently earn a return on cloud seeding
investment, the Company continues to believe it can justify
inclusion of its cloud seeding investment in rate base in
the future.The Company will request that cloud seeding
SAID, Di
Idaho Power Company
investment be included in the Company s rate base in its
next general revenue requirement case.
What level of cloud seeding investment
remains on the books at this time?
The Company has nearly $400,000 of cloud
seeding investment in Account 101 Electric Plant In Service
that is currently not included in the Company s rate base.
What does the Company envision as the annual
expense of cloud seeding going forward in time?
The Company believes it will spend in the
neighborhood of $1 million annually on cloud seeding O&M
expenses if the Commission approves PCA deferrals on an
ongoing basis.
What is the Company requesting that the
Commission approve for deferral purposes in this case?
Similar to last year s request for a one-year
deferral, the Company is requesting that the Commission
approve the deferral of 90% of the Company s Idaho
jurisdictional percentage of cloud seeding O&M expenses
wi thin the PCA process in an ongoing basis.Idaho Power
will continue to have its investment in cloud seeding remain
at risk while not included in rate base until the Company
next general revenue requirement case.Idaho Power wi
also expense 10% of its Idaho jurisdictional cloud seeding
O&M expenses.This would be reflected as a line item in the
SAID, Di
Idaho Power Company
PCA as it was last year.Customers in Idaho will continue
to see 90% of the benefits derived from cloud seeding
through reductions in power supply expenses.Commission
approval of cloud seeding efforts will match expenses and
benefi ts such that customers will continue to see 90% of the
benefits, but will also be responsible for 90% of the
expenses which would be deferred for recovery in subsequent
year s .
When would the Company envision a change in
rates and amorti za tion of deferred cloud seeding expenses to
occur?
As a new PCA component, the Company envisions
a rate change and amortization of deferred cloud seeding
expenses annually wi thin the PCA application process.
Does this conclude your testimony?
Yes, it does.
SAID, Di
Idaho Power Company