HomeMy WebLinkAbout20070402Reply comments.pdfWilliam J. Batt, ISB No. 2938
John R. Hammond, Jr., ISB No. 5470
BA IT & FISHER, LLP
U S Bank Plaza, 5th Floor
101 South Capitol Boulevard
O. Box 1308
Boise, Idaho 83701
(208) 331-1000
(208) 331-2400 facsimile
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Attorneys for A vimor, LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPRO V AL OF
AN AGREEMENT BETWEEN A VIM OR, LLC
AND IDAHO POWER TO PROVIDE ELECTRIC
TRANSMISSION AND SUBSTATION
FACILITIES TO THE A VIMOR MULTI-USEDEVELOPMENT
Case No. IPC-O6-
REPLY COMMENTS OF
VIM OR LLC
COMES NOW Avimor, LLC, an Idaho limited liability company, by and through
its attorneys of record, Batt & Fisher, LLP, pursuant to Commission Order No. 30270
and files its Reply Comments in response to the Idaho Public Utilities Commission
Staffs ("Staff') written comments filed on December 15 2006.
Introduction
On August 17, 2006, Idaho Power Company ("IPCo" or the "Utility ) and
Avimor, LLC ("Avimor" or the "Company ) entered into an agreement whereby the
Utility would provide electric transmission and substation facilities (the "Agreement") to
the Avimor multi-use development (the "Project") in exchange for the Company
REPLY COMMENTS OF A VIM OR, LLC
payment of the costs of design and construction of the same with the opportunity to be
refunded these expenses at a later date.
In its Comments, Staff asserted that amendments to the Agreement were needed
to protect IPCo and ratepayers from the "speculative" nature of the Project and from the
substantial and unnecessary upward pressure on rates" it would cause if approved as
submitted. Staff Comments at pp. 2 & 5.
In its Reply Comments, A vimor proposes an alternative to the Agreement and
Staffs recommendations. Avimor s proposal (the "Proposal") still requires the Company
to pay IPCo for the design and construction costs for utility infrastructure (the
Facilities ) with the opportunity to receive refunds of the payments based on the amount
of customer connections and/or metered demand that results from the Project.
requirement Staff claims insulates IPCo from risk and caps any upward pressure on rates.
A vimor' s Proposal also addresses the concerns raised in Staff s Comments through: 1) a
refund mechanism that will reduce IPCo s potential per customer investment by roughly
thirty-eight percent (38%); 2) increasing the number of customer connections or metered
demand required for Avimor to receive a full refund of the payment(s) it makes to IPCo;
3) elimination of the lump sum payment provision contained in the Agreement in Section
4.2(b) at page 7, paragraph 3; and 4) accepting a refund period of20 years.
A vimor also requests that the Commission approve two other amendments to the
Agreement. The first is to authorize IPCo to require any other non-Avimor connections
to the Facilities to pay a lump sum to the Utility, prior to the connection, based on the
estimated amount of customer hook-ups or metered demand, which payment would then
be passed through to Avimor. The second is to allow interest to accrue on the $4 300 000
REPLY COMMENTS OF A VIM OR, LLC 2
in refundable payments that the Company could receive if it were able to connect 1 103
customers or 11 030 kW of metered demand to the Facilities within 20 years.
Based on the foregoing and the discussion below, Avimor asserts that its Proposal
is just and reasonable and should be approved and incorporated into the Agreement for
the following reasons: 1) the minimal impact it will have on customer rates; 2)
recognition of the risks taken on by Avimor and the benefits they provide to IPCo and its
customers; 3) the Commission s treatment of a previous special agreement; and 4) the
conservation/energy efficiency features of the Project that will be beneficial to Avimor
homeowners and businesses, IPCo and the general body of ratepayers.
Le2:al Framework
The Commission exercises limited jurisdiction and has no authority other than
that expressly granted to it by the legislature. Washington Water Power Co.v. Kootenai
Environmental Alliance 99 Idaho 875 , 591 P.2d 122 (1979). As a result, nothing is
presumed in favor of its jurisdiction. United States v. Utah Power Light Co.98 Idaho
665 570 P.2d 1353 (1977). If the provisions of the statutes pertaining to the Commission
are not met and compliance is not had with them, no jurisdiction exists. Washington
Water Power 99 Idaho at 879 591 P.2d at 126.
The Commission has jurisdiction over utility rate-making matters. Idaho Code
61-502 et seq. However, in exercising authority over rates, the Commission is forbidden
to allow preferential treatment, advantage, prejudice or disadvantage between ratepayers.
Idaho Code 9 61-315; Idaho State Homebuilders v. Washington Water Power Co.107
Idaho 415 , 690 P.2d 350 (1984); Building Contractors Assn. of Southwestern Idaho, Inc.
v. Idaho Public Utilities Commission 128 Idaho 534, 916 P.2d 1259 (1996).
REPLY COMMENTS OF A VIM OR, LLC 3
Procedural Back2:round and Facts
A vimor, LLC
Initially Avimor s Project will be an 830 acre, 685 residential unit community (+/-
10% based on actual development applications) with 75 000 square feet of commercial
and retail space.! In approving the Project, the Ada County Board of Commissioners
Commissioners ) found that:
(TJhe tax base anticipated at build-out is expected to cover the costs of
essential public services and government functions needed to support the
project.
Board of Ada County Commissioners, Findings of Fact, Conclusions of Law and Order
05-001-PC Report 5, at p. 10. The Commissioner s also found:
(TJhe proposal sets forth sufficient and adequate mitigation for the
identified economic impacts beyond normally expected incremental
impacts on municipalities and other agencies and districts. . . . (TJhe
proposed zoning ordinance text amendment will not result in an adverse
impact on the delivery of services because all potential economic impacts
have been identified and mitigated(. J . . . Therefore, in the overall scheme
of things, any potential impacts the A vimor development may have would
be miniscule when compared to the publicly funded impacts and sprawl
development currently taking place in the City of Eagle and Boise City
areas of City Impact.
Id. at p. 23 & 25 (emphasis added).
Consistent with mitigating economic impacts, Avimor s Project has been
designed to conserve energy and water for the benefit of its residents, the Utility and the
general body of ratepayers. Central to this is that at least 585 all residential units within
the Project to be built by Avimor will meet or exceed Northwest Energy Star Standards
that is, they will be 30% more energy efficient than residential construction built to state
I 498 acres of the Project will be devoted to open space.
REPLY COMMENTS OF A VIMOR, LLC 4
code standards. A vimor will also strongly encourage other builders working in the
Project to build residential units that meet Northwest Energy Star Standards.
In addition, although not directly related to energy conservation, Avimor s Project
will have a state of the art wastewater treatment plant that will convert 300 000 gallons of
wastewater daily into water clean enough for reuse.2 The treated wastewater will be used
to irrigate play fields, parks and other common areas in the Project, a practice that will
both conserve valuable drinking water and reduce water costs for A vim or homeowners
and businesses.
The Application and Agreement
On September 27 2006, IPCo filed an Application requesting Commission
approval of its Agreement with A vimor. The facilities proposed to be built pursuant to
the Agreement are: 1) 3.4 miles of 138 kV transmission line, and 2) a substation with
initial capacity of 10 MY A (collectively the "Facilities
The Agreement requires A vimor to advance the cost for the design and
construction of the Facilities to IPCo in three installments totaling $4 300 000. The
Company made the first installment of$2 150 000 to IPCo on or about June 23 2006 and
is ready to make the second installment of$I 075 000 to IPCo when construction of the
Facilities begins. Finally, within 10 calendar days of written certification from IPCo that
construction of the Facilities is completed, Avimor will pay the final installment of
075 000 to the Utility.
2 This facility can be expanded to convert 1 000 000 gallons of wastewater daily into usable effluent.
SunCor Development Company ("SunCor ), the parent of A vimor, has used water conservation features in
other developments. Its master-planned community in New Mexico, Rancho Viejo, was the fIrst in that
state to reuse effluent for irrigating common areas. SunCor is also working with New Mexico on an aquifer
recharge pilot program, from which that state will develop new regulations. In Utah, SunCor s Coral
Canyon development was awarded Envision Utah's Governor s Merit Award in 2002, in part because of its
water conservation program.
REPLY COMMENTS OF A VIMOR, LLC 5
Provided A vimor makes the installment payments and performs its other
obligations under the Agreement, the Company would be eligible to receive refunds from
IPCo at a rate of $4 300 per permanent residential connection, or $430 per kilowatt
kW") for non-residential loads based on the kva rating of the distribution transformers
serving each non-residential account. Ifwithin 10 years Avimor were to connect: 685
permanent residential service connections, or 6 850 kW of metered demand, whichever
occurs first, IPCo would refund the remaining refundable balance of installment
payments.3 If at the end of the 10 year period the metered demand is less than 6 850 kW
or fewer than 685 permanent residential electrical services have connected to the
Facilities, Avimor would forfeit any remaining balance of the payments to IPCo. Such
forfeited amounts would never be included in the Utility s rates.
Staff Comments
In its Comments, Staff agreed that A vimor should advance the cost for the design
and construction of the Facilities. As stated previously, Staff believed this would protect
IPCo and its ratepayers. Comments at p. 2. However, Staff alleged the per customer
investment for building and connecting customers to the Facilities was too high as
compared to similar costs currently in IPCo rates. Thus, Staff contends if the Agreement
were approved, as is, it would cause substantial upward pressure on rates for all ofIPCo
customers. Id. at p. 5.
To address its concerns, Staff recommended that the Agreement's refund
provisions be amended to require Avimor to connect 4 300 customers to the Facilities
before it could receive a full refund of the $4 300 000 in payments it will make to IPCo.
Staff further recommended extending the refund period from 10 to 20 years. Staff
3 Avimor calculates the lump sum refund it would receive to be $1 354 500.
REPLY COMMENTS OF A VIMOR, LLC 6
claimed if its recommendations were adopted, upward pressure on rates would be capped
but not eliminated.
REPLY COMMENTS
Negligible Rate Impact
A vimor is sensitive to cost issues, a primary reason it agreed to advance the funds
for the design and construction of the Facilities with the opportunity for refund at a later
date. Notwithstanding this assumption of risk which will mitigate rate impacts, Staff
asserts Commission approval of the Agreement will cause substantial upward pressure on
rates. Comments at p. 5. As will be discussed herein, Commission approval of the
original Agreement or Avimor s Proposal will cause negligible impacts on IPCo
customer rates.
Under the original Agreement, Avimor s payments to IPCo essentially amount to
an interest free loan which the Utility will repay incrementally as the Company connects
customers to the Facilities. Agreement at Section 4.2(b), p. 7, ~ 3 (refund amounts will
not include interest). Those amounts not refunded will be kept by IPCo and not impact
customer rates. Avimor s willingness to undertake this risk that protects IPCo and
ratepayers at its own expense should not be discounted.
Second, if Avimor meets its obligations under the Agreement, it will only receive
refunds when residential, commercial and retail buildings, the wastewater treatment plant
and other infrastructure improvements are connected to the Facilities. As the foregoing
will be built and connected to the Facilities over a period of years, any refunds will be
added to IPCo s rate base over an extended period of time. Avimor s Proposal extends
REPLY COMMENTS OF A VIM OR, LLC 7
the projected amount of time necessary to recover a full refund by a minimum of3 years
longer than that anticipated through the Agreement.
Third, any rate base additions resulting from refunds will not be included in
customer rates until IPCo receives authorization from the Commission to do so. While
Avimor has no control over the timing ofIPCo s rate cases, the Utility generally does not
file them annually. As such, it is likely that any upward pressure on rates would be
spread out over general rate case filings, thus mitigating impacts on customers. An
example of this is the Hidden Springs Planned Community ("Hidden Springs ). In 1998
the developer of Hidden Springs paid the cost for utility infrastructure improvements with
the opportunity to receive refunds. IPCo refunded the full amount to the developer and
these costs were not included in rates until over 5 years after they had been refunded. See
Order No. 29505, IPC-03-13.
Finally, the Project's overall impact on IPCo s entire customer base if the
payments are refunded to A vimor is very small. If the Commission were to accept the
original Agreement, which Avimor is not proposing, Avimor were to receive a full refund
of the payments and IPCo were to file a general rate case every year where the
Commission authorized inclusion of the cost of the refund payments to the Utility into
rates, the impact on customer rates would be 0.01 % per year for 10 years, creating an
overall impact of 0.1 % when the full cost of the Facilities was authorized to be included
in rates. After the recovery of all refunds and their inclusion in rates, any additional
4 Avimor s Proposal also would allow the Company to receive refunds based on Equivalent Dwelling Units
EDUs ) which means that each unit of construction that is equivalent to one home in electrical usage will
also cause a refund to be paid to Avimor. Each home will be counted as one EDU, while commercial
property will be counted as EDUs based on the kva rating of the distribution transformers serving each non-
residential account. For example, all street lighting will be counted as 2 EDUs and when the elementary
school is built in 7-8 years it will use the equivalent of 43 homes and have an EDU of 43.
REPLY COMMENTS OF A VIM OR, LLC 8
customers in that area would connect to the system at little or no cost for IPCo and its
ratepayers. In fact, additional connections may provide downward pressure on rates
because the transmission and distribution substation equipment would already be paid
for. Under Avimor s Proposal, the negligible rate impacts of the Agreement will be
further mitigated.
Similar Projects, Rate Treatment and Discrimination
Although the cost for these Facilities is higher than the average cost for similar
facilities currently in IPCo s rates, the allowance of such costs is not without basis.
According to IPCo, Avimor s Agreement is similar to the Utility s agreement
with Hidden Springs. In 1998, Hidden Springs needed distribution substation equipment
to serve the approximately 300 homes. To obtain these facilities, Hidden Springs entered
into an agreement with IPCo where Hidden Springs agreed to pay the entire cost for the
design and construction of the facilities with the opportunity to receive refunds from the
Utility as customers connected to them. According to IPCo , the per customer investment
for this distribution substation equipment was approximately $2 333 per customer.
Hidden Springs was eventually refunded all the payments it made to IPCo, but the cost of
these refunds to the Utility was not included in rates until 2004. See Order No. 29505
Case No. IPC-03-13.6 It is safe to assume that if the Hidden Springs facilities were
built today, the electrical distribution substation costs would be more expensive than in
5 Idaho Power response to A vimor Request No.4: "The approximate cost of the Hidden Springs substation
construction project was $700 000. At an estimated average electrical load often average kilowatts, the
three megawatt station would serve about 300 homes (provided there was no non-residential load served).
Under these assumptions, the cost per home of that project was $2 333.6 Email from Tim Tatum, Idaho Power Company Analyst, dated March 20 2007
, "
(uJnder the agreement
between Hidden Springs and Idaho Power, Hidden Springs was required to pay the full construction cost of
the substation over two payments, both issued in 1998. As the subdivision phases were completed, Hidden
Springs ultimately received full reimbursement of its original financial contribution. The total cost of the
Hidden Springs substation was subsequently included into rate base for the purpose of determining
customer rates.
REPLY COMMENTS OF A VIM OR, LLC 9
1998.7 A report done in 2007 by the Associated General Contractors of America
generally supports the above proposition that construction costs, including those that
would impact IPCo, have increased. See Exhibit A.
The Avimor Facilities costs, like those of Hidden Springs, include a cost for
distribution substation equipment. Unlike Hidden Springs, the Facilities associated with
Avimor include a cost for transmission equipment.8 Using Staffs per customer
investment figure, the cost for distribution equipment would be $3 066 per connection
and for transmission equipment it would be $3 211 per connection, for a total per
customer investment of $6 277.
Avimor s Agreement is essentially the same as the Hidden Springs agreement and
as such should be accorded similar treatment. Based on IPCo s response to Avimor
request for information see footnote 6 above, the $2 333 per customer investment for
Hidden Springs appears to have been included in rates. See Order No. 29505 , IPC-03-
13. A vimor should at least, at a minimum, also be authorized by the Commission to
recover $2 300 per customer connection for distribution substation equipment. If the
Commission instead chooses to follow Staff s recommendation, such a decision would be
discriminatory towards A vimor, a customer ofIPCo, and further, possibly amount to a
violation of the Equal Protection Clause of the United States Constitution.See Idaho
Code 9 61-315; Idaho State Homebuilders v. Washington Water Power Co.107 Idaho
415 690 P.2d 350 (1984); Building Contractors Assn. of Southwestern Idaho, Inc., v.
Idaho Public Utilities Commission 128 Idaho 534, 916 P.2d 1259 (1996). Based on the
7 Using a CPI increase in costs of3% per year this cost would have been more than $3 000 in 2007.8 Hidden Springs did not include any transmission costs because the distribution substation was located
directly beneath a 138 kV line.
9 A vimor is a customer ofIPCo due to the Agreement and the fact that it will own various properties that
will connect to the Facilities.
REPLY COMMENTS OF AVIMOR, LLC 10
foregoing, A vim or asserts that it should be allowed to receive a refund of at least $2 300
per connected customer for distribution substation equipment, just as the Hidden Springs
developer did.
Aside from the above, A vimor believes that the Staff is making unfair or possibly
inaccurate comparisons between the per customer investment for the Facilities it has
calculated versus what it alleges: 1) is the same cost embedded in IPCo s rates; or 2) an
average cost that it calculates from data in the Utility s last two rate cases. First, Staff
states that the cost for the Facilities is much higher than the $350 currently embedded in
rates. A vimor asserts that it is patently unfair to the Company for Staff to compare the
per customer investment for the Facilities to this number as it is significantly depreciated
and includes all connections prior to 2003. Next, Staff asserts that the $1 000 average per
customer investment it calculates from the Utility s most recent rate cases is much lower
than the per customer investment resulting from the Agreement. Although Staffs later
figure provides a more reasonable comparison, the average per customer investment for a
connection has likely increased as it was calculated from data included in IPCo s 2003
and 2005 rate cases. See generally Report from the Associated General Contractors of
America (increasing construction costs). Thus, it is more equitable to Avimor to compare
its costs against similar projects, or at least against a more updated IPCo average per
customer Investment 19ure.
Another issue is that when Staff uses an average of$I OOO for transmission and
distribution costs per customer, it automatically implies that there are some customer
connections which cost more and were later authorized to be included in IPCo s rates. In
10 A vimor asked IPCo for a more updated average cost figure and the Company responded generally that it
does not track such data until it is preparing to file a rate case.
REPLY COMMENTS OF A VIMOR, LLC 11
this case, Staff is not proposing that all costs for per customer connection above $1000 be
denied, rather it is only recommending such treatment for Avimor. This is unfair to the
Company as little justification has been shown to treat this Agreement differently than
other projects which have had a higher per customer investment than $1 000. Further
just because the costs are higher than an average does not mean that they are not prudent.
The customers in Avimor, including the Company who will own some of the commercial
property and the water treatment plant, have a right to be served by IPCo at rates that are
consistent with their rate class. Accordingly, the potential per customer investment that
arises from Avimor s Proposal should be deemed prudent by the Commission.
Finally, it is important to understand that virtually all new equipment IPCo
purchases will cause at least some upward pressure on rates because it is more expensive
than older, partially depreciated equipment. Under Staffs rationale, ifIPCo needs
equipment that is more expensive than older, depreciated equipment already in rates, the
Utility should only be allowed to recover up to the average amount already in rates. That
would be an umeasonable and unfair position for the Commission to take. IPCo would
not be able to recover its costs and would be hard-pressed to make the appropriate
investments to keep its system functioning properly.
Energy Efficient Development is beneficial to IPCo and its Customers
Staff has not discussed the fact that Avimor s Project is designed and will be built
with energy conservation in mind. The Commission should consider the positive impacts
of the Company s energy efficient development when it makes its findings in this matter.
The conservation of energy through demand response/demand-side management
DSM") and energy efficiency programs is becoming part of federal and state energy
REPLY COMMENTS OF A VIMOR, LLC 12
policy as shown by the Energy Policy Act of2005 (the "Act") and its predecessors.
Through the Act, the federal government provides incentives for: 1) the construction of
energy efficient homes; and 2) making existing homes more energy efficient.
The Commission has similarly encouraged the utilities it regulates to engage in
DSM and energy efficiency programs, stating:
This Commission continues to support the pursuit by PacifiCorp of cost
effective DSM and energy efficiency programs. We find that cost effective
DSM provides benefits to non-participants by reducing the overall cost of
serving new load. It also benefits all Idaho customers by reducing Idaho
allocation of system power supply costs.
Order 29952 at p. 2. See also Order No. 28189 at p. 21 ("Believing many DSM programs
involving conservation, efficiency improvements and/or load shaping may sometimes be
the least cost resource, we expect that the Company will have seriously exhausted and
signed up all available cost-effective DSM prior to building a utility-owned supply-side
resource(.J"); Order No. 30281 , IPC-24 (Commission states that DSM/energy
efficiency programs continue to be among the most cost-effective resources available to
IPCo); and, Order No. 29726 at p. 10, IPC-04-18.
Although beneficial, one difficulty with DSM and energy-efficiency programs is
that they may affect a utility s ability to recover its fixed costs. However, through the
approval of tariff riders and a decoupling mechanism to mitigate the financial
disincentives for a utility to engage in DSM and energy efficiency programs, the
Commission is attempting to eliminate these disincentives. For example, in the
Commission s Final Order accepting IPCo s 2006 IRP it stated:
II The Act required the Federal Energy Regulatory Commission to make an assessment of demand response
and advanced metering and how these matters can result in energy conservation and become part of utility
resource planning. Assessment of Demand Response and Advanced Metering Staff Report Docket No.
AD06-000 (August 2006).
REPLY COMMENTS OF A VIM OR, LLC 13
The Commission recently approved a fixed cost adjustment mechanism
designed to provide the Company financial neutrality to deviations in
sales, such as lost sales due to DSM efforts. See Case No. IPC-04-15.
The goals of the fixed cost adjustment are to remove the inherent
disincentive to investing in demand-side measures and facilitate the
Company s efforts to expand its DSM offerings.
Order No. 30281 , Case No. IPC-06-24 at p. 12. On the same day it approved this
decoupling mechanism, the Commission also approved a pilot program that should
encourage the construction of energy-efficient homes. Order No. 30268, Case No. IPC-
06-32. The Commission approved program provides incentive payments or penalties
to IPCo for meeting or not meeting specified participation goals in the Energy Star
Homes Northwest program. Order No. 30268 at p. 2. The Commission noted that on
average, homes constructed to the Energy Star Standard will save an estimated 2 078
kilowatt hours annually, or 30 percent greater energy efficiency than existing Idaho
residential building codes. Id.
Avimor s Project will meet or exceed the Energy Star standards for the 585
residential units that it will build and will encourage other builders building homes in the
Project to do the same. Avimor believes its Project represents the very type of building
the Commission seeks to promote. A vim or believes that if Commission adopted Staff s
refund recommendations, such an action would contradict the conservation policy it is
seeking to promote in the proceedings mentioned above. Accordingly, instead
adopting Staff s approach, A vimor presents its Proposal which, if adopted, will mitigate
rate impacts and encourage further Energy Star development.
REPLY COMMENTS OF AVIMOR, LLC 14
AVIMOR PROPOSED ALTERNATE RECOVERY METHODOLOGY
Based on the foregoing arguments Avimor offers the following Proposal.
First, A vim or proposes an amendment to the refund provisions of the Agreement
to allow the Company to receive refunds of$3 900.00 per customer (including EDUs).
And to require it to connect 1 103 customers or 11 030 kW of metered demand to receive
a full refund of its payments made to IPCo for the Facilities. The Proposal also removes
the lump sum payment provision contained in the original Agreement at Section 4.2(b), p.
, ~ 3 (on connecting 685 customers or connecting metered demand of6 850 kW, IPCo
will refund the remaining refundable balance to Avimor.)
The proposed $3 900.00 per connecting customer refund is based on the
following:
300.00 - Distribution substation equipment. Avimor requests a per customer
connection refund amount similar to the amount already in rates, and thus just and
reasonable, from Hidden Springs even though this number converted into today
dollars would equal more than $3 000.00. See footnote 7.
600.00 - Transmission equipment. This represents 1/2 of the investment in
transmission equipment per EDU that was originally requested for recovery.
While the Developer maintains that the entire amount should be recovered, it is
willing to stretch out the recovery time based on a lower refund amount
(including removal of any lump-sum provision) to mitigate any rate impacts.
As stated previously, Avimor estimates that at a refund rate of$3 900., it will
recover all the payments in 8 to 12 years, depending of course, on market conditions.
12 If the original Agreement were approved Avimor s believes that based on the same forecasted market
conditions that it would recover all payments made to IPCo less than 5 years.
REPLY COMMENTS OF A VIMOR, LLC 15
Avimor does not have any objection to extending the refund period to 20 years as
proposed by Staff. However, if this period is extended, Avimor requests that the
Commission allow the accrual of interest on the deferred refunds at a rate that is
equivalent to a long-term market index. The accrued interest will offset the invested
funds frozen at IPCo and allow A vimor to continue to proceed as planned. Interest is not
unreasonable considering that Avimor is willing to extend its recovery of the payments
from a period estimated to be less than 5 years to 8 to 12 years. The Commission has
allowed interest to be collected on other deferred costs for Idaho Power 13 and whenever
a deferral period is extended, interest should be allowed to be collected. If after 20 years
the Company has not recovered the $4 300 000 in payments and interest associated with
that investment, it will forfeit those amounts to IPCo and not seek further recovery.
such forfeiture occurs, any such amount will not be included in customer rates.
A vimor also requests that the Commission allow the Company to recover refunds
based on the estimated EDUs that may use the Facilities from any development not a part
of the Avimor Project. Avimor believes Staff has no objection to this.
CONCLUSION AND SUMMARY
Based on the foregoing, A vimor asserts that its Proposal addresses Staff s
concerns regarding rate impacts as it reduces what is already a negligible impact and still
encourages the building of energy efficient homes. In summary, Avimor makes the
following proposals and changes to its Agreement with Idaho Power, which it
respectfully requests that the Commission approve:
13 See cases IPC-01-, Order No. 28975 - Deferral of extraordinary security costs following 09-11-
2001 , IPC-03-, Order No. 29601 - Deferral of income tax expense, Case No. IPC-04-, Order No.
29600 - Deferral of a customer credit stemming from the settlement of multiple issues.
REPLY COMMENTS OF A VIMOR, LLC 16
1. Reduction of the refund per customer connection or EDU to be received by
Avimor from $6 277 (including the lump-sum provision) to $3 900 (without
the lump-sum provision);
2. The requirement that Avimor connect 1 103 customers or EDUs (including
non-Avimor connections) or metered demand of 11 030 kW prior to it
receiving a full refund of the $4 300 000 in payments it will make to IPCo.
3. An extended refund period of 20 years;
4. Accrual of interest on the unrefunded balance of the payments at a rate
equivalent to a long-term market rate for a secure investment. The accrued
interest will be paid to A vimor after all the refunds have been collected or will
be forfeited in its entirety if A vimor does not connect 1 103 customers or
metered demand of 11 030 kW;
5. IPCo requiring any other non-Avimor connections to the Facilities to pay a
lump sum to the Utility, prior to the connection, based on the estimated
number of customer hook-ups or metered demand which would then be
passed through to A vimor; and
6. For such further relief as the Commission finds just and reasonable.
DATED This 2nd day of April, 2007.
BATT & FISHER, LLP
Jo . Hammond, Jr.
tto eys for Avimor, LLC
REPLY COMMENTS OF A VIMOR, LLC 17
CERTIFICATE OF SERVICE
I HEREBY CERTIFY That on this 2nd day of April, 2007, I served the
foregoing upon all parties of record in this proceeding as indicated below:
Jean Jewell
IDAHO PUBLIC UTILITIES COMMISSION
472 W. Washington Street
P. O. Box 83720
Boise, Idaho 83720-5983
i iewel(iV,puc .state .id. us
( J
( J
(xJ
( J
Monica B. Moen
IDAHO POWER COMPANY
P. O. Box 70
Boise, Idaho 83707-0070
mmoen~idahopower.com
( J
(xJ
( J
( J
Weldon Stutzrnan
IDAHO PUBLIC UTILITIES COMMISSION
472 W. Washington Street
P. O. Box 83720
Boise, Idaho 83702-5983
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REPLY COMMENTS OF A VIMOR, LLC 18
EXHIBIT A
Construction Materials Costs: Lull between
the Storms
From early 2004 to mid-2006, the construction industry was plagued by
runaway materials cost increases. Many of these price increases have
slowed or even reversed course modestly in recent months. Unfortunately,
it seems likely that the current calm is only a lull between storms and not a
return to the inflation-free period of 2001-2003, By the end of 2007, materials
costs could be rising again at a 6-to-8 percent rate, with wages rising at a 5
percent pace.
This report documents what has happened to materials costs in three
recent periods (2001-2003, 2004-mid-2006, and late 2006-early 2007). It
provides a short-term and long-term examination of the expected volatility
for construction inputs induding crude oil, metal and concrete, and
outlines implications forfuture Gosts for building, highway and other heavy
construGtion. For the first time, the Construction Inflation Alert looks at the
impact of the construction industry on job growth, and presents an analysis
of construction wages that suggests pay is accelerating.
For readers interested in greater detail, there are two appendices. Appendix
A enables readers to compare materials cost increases and consumer price
changes over different intervals, by means of two tables that show the
monthly value from 1997 through early 2007 of the producer price index
(PPI) for construction materials and components and the consumer price
index (CPI). Appendix B lists the five industries whose output Gontributes
the most to PPls for construction as a whole and for several specific types
of construction.
Measuring Construction Costs
The Bureau of Labor Statistics (BLS) tracks the cost of construction
materials and components (items such as diesel fuel that are consumed
during construction) each month by !~Jettinn reports from producers of
their selling prices for precisely specified items. BLS turns the prices
from multiple producers of a given item into a single index number, the
PPI for that item. BLS also calculates PPls for groups of items, such as
AGC
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;NFLATION ALERT: 2007
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Materials & Components for Construction
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steel mill products, or for an industry, such as the highway and street
construction industry. Industry indexes are weighted averages of the
PPls for hundreds of items used by that industry.
Because prices are gathered at the producer s loading dock or other
point of sale, they do not include amounts contractors actually pay for
shipping, insurance, storage, fabrication or installation. Such costs vary
greatly according to the mix of materials used on a project, distance
from the producer s point of sale, construction labor rates in a locality
and other factors.
Recently, however, BLS has introduced three indexes for the costs of new
warehouse construction (beginning December 2004), schools (December
2005) and office buildings (June 2006). These indexes are based on
materials cost estimates from an estimating firm and contractors
estimates of their labor costs and overhead (including profits) for a
hypothetical building. Over time, these indexes should become useful
guides to final costs.
All PPls are given a value of 100 at the time they are introduced or
recalibrated. Becausethese datesvary,comparing the actual index number
between two commodities or industries is not meaningful. Instead, this
report presents the change in PPls, including the PPI for finished goods
(the most commonly cited measured of producer-level cost changes) and
in the CPI for all urban consumers (CPI-, a widely referenced measure
of inflation at the consumer level) over various intervals.
Labor costs are rneasured differently. BLS presents a measure of
average hourly earnings far "nollsupervisary or production workers" in
construction each month as part of the employment report. But unlike
the fixed "basket" of goods that makes up the PPI , the mix of workers by
construction segment and craft changes each month, Those shifts mask
the change in costs experienced by a given industry segment, especially
when homebuilding employment, with its lower wage and skill rnix,
changes at a different rate from nonresidential segments. Accordingly,
this report includes reference to two private sources specific to
nonresidential construction, in addition to the BLS figures.
Construction Costs YS. the CPI and PPI
The CPI-U and the finished-goods PPI are widely used by budget officials
to project cost changes for an items, inciudiD~l construction. Ther'efore
it is useful to compare the performance of the broader indexes with the
PPI for constr'uction materials and components.
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Chart 1 (on page 2) and Table 1 (on page 10) compare the annual change
from 2001 to 2006 (to be exact, the 12 months ending in December in
each of those years) for the three indexes. As the graph shows, there
was very little increase in any of the measures in 2001 through 2003.
The CPt increased about 2 percent each year. Changes in the PPI for
finished goods ranged from -1.6 percent in 2001 to 4 percent in 2003.
The PPI for construction inputs did not change at all from December
2000 to December 2001, rose just 0.8 percent the following year, and
climbed 3 percent in 2003.
But in 2004, there were huge price increases for steel, wood
products, gypsum wallboard and diesel fuel. PPls for several
inputs are shown in Chart 2 (top right); Chart 3 (bottom right)
and Chart 4 (on page 4); more are included in Tables 2 and 3 (on pages
10-11). While steel and wood products prices began declining slightly
late in the year, the construction PPI jumped 10.1 percent for the year
far outpacing the 4.2 percent increase in the finished-goods PPI and the
3.4 percent change in the CP1.
In 2005, steel and wood products prices declined throughout the year.
Those drops moderated, but did not fully offset, continuing increases in
gypsum, diesel, concrete, asphalt, copper, plastics and other costs. For
the year, construction materials costs climbed 6,1 percent, less than the
10 percent rise of the prior year but more than the 5.4 percent increase
in the overall PPI or the 3.5 percent gain in the CPI.
In the first half of 2006, materials that were rising in 2005 continued
to go up in price, with some (such as copper and asphalt) acceleratin~J
from already high rates of change. In addition, some steel prices turned
back up and aluminum costs advanced at double-digit rates, Only wood
products prices fell.
Several factors converged in the second half of 2006 to moderate the
earlier price increases. Crude oil prices, which set a record last July
on the flJewYork Mercantile Exchange of $78 per barrel for next-month
delivery of West Texas Intermediate crude, tumbled to $50 per barrel
by early January 2007, Retail prices for diesel fuel dropped nearly in
tandem , from a high of $3.06 in August to $2.41 in January, Lower
energy costs and slackening demand from home building helped bring
down prices for gypsum and plastics, and slow the rate of increase for
concrete, Copper futures prices, which had more than doubled between
January and May 2006, fell about 35 percent by yeAr-end, leading to a
small drop in prices for copper and brass mill shapes (such as pipe,
wire, fixtures, flashings and gutters).
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Changes in PPls for Selected Building Inputs
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The drop in energy costs also benefited consumers and most producers.
The CPI wound up 2006 only 2.5 percent higher than in December
2006, and the finished-goods PPI was up a mere 1.1 percent. The PPI
for construction materials and components climbed 4.3 percent better
than in the previous two years but nevertheless more than the inflation
adjustment many budget..setters and cost estimators had been using.
In recent months, energy costs plunged, then rebounded- There were
also declines in the PPls for construction plastics, gypsum products,
copper and brass mill shapes, These were offset by an unusual rise in
lumber and plywood prices and increases in concrete and aluminum
prices. The ricocheting energy costs brought the finished-goods PPI
down 0.2 percent in January and back up 1.1 percent in February, while
the construction PPI slowed to a monthly gain of 0.3 percent in January
and 0.1 percent in February.
Appendix A (on page 12) shows the PPI for construction materials and
components for each month from January 1997 through February 2007
enabling readers to calculate the cumulative increase in the index over
any interval during that period. Appendix A also shows the CPI-l) for
those months, allowing comparison between construction costs and
consumer costs.
Price Changes by Construction Segment
There is considerable variation in the mix of TTJaterials used for
different types of construction. AccordinDly, there ha~; been a
wide range of pl'ice increases, as shown by Chart 5 (on page 5) and
Table 4 (on page 11). The five industries whose products contribute
most heavily to the movement of the prig for several construction
segments are shown in Appendix B (on pages 13-14).
The largest pricl~ jumps were for highway and sheet construction, for
which the PPI is weighted more than 50 percent tovvard inde;,es for the
industries producin~j diesel fuel , asphalt, concrete and steel. Each of
these materials experienced double-digit price increases on an annual
basis in 2005 and early 2006,
In general, price increases were mol e moderate for materials and
components used in building construction. However, even these
segments experienced bigger cost increa!;es than COIlSUI1l(")I"S did,
Conversely, the steep decline in petroleum product prices in late 20f)()
leel to a larger deceleration in construction prices than in the CPI.
j\Jevl,rtheless, the construction PPI was still rising fastGr than the CPI in
recent months.
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Near Term Prospects
UnfOltunately, the good news for construction inputs may be short-
lived. Crude-oil futures touched bottom around January 9, the day that
producers reported prices for the January PPI. Less than two months
later, the futures price topped $62 per barrel, a 24 percent increase
before dropping somewhat. Crude oil is refined into diesel fuel, asphalt
and feedstocks for some plastics, as well as gasoline, jet fuel and
heating oil. Not surprisingly, diesel fuel prices also moved up-25 cents
per gallon from late January to mid-March- as had the futures price
for natural gas, a competing energy and feedstock source. By spring,
therefore, the PPls for diesel fuel, asphalt, construction plastics, and
other energy-intensive products are likely to go higher.
Separately, some metal prices have been rising, In particular, mills
producing structural steel and reinforcing steel (such as rebar, used
to reinforce concrete pavement, and strand for prestressed steel for
structures) announced increases for February, March and April. As of
mid-March, the cash price for stainless steel scrap was more than double
the year-ago price, implying that stainless steel pipe for industrial and
medical construction would continue rising from already-high levels.
Aluminum supplies may tighten as a result of a two-week strike in
Guinea, the leading producGr of bauxite, the are that is the source of
raw aluminum. Copper futures rose about 20 percent from their lows in
late 2006. Futures prices for nickel , tin and zinc-used for stainless and
galvanized steel and other alloys-hit records or multi-year highs,
Concrete prices rnay also rise. The PPls for cement and construction
sand/gravel/crushed stone both moved lip in the past three months
which will affect near-term concrete costs. Concrete is made from
cement, sand, crushed stone (known as aggregate) and water, and
requires lots of fuel to mine, mill, mix, and deliver the ingredients,
The best prospects for further priee declines are for gypsum and wood
products. Both of these categories are used heavily by home builders
who are continuinfj to reduce starts. In addition, manufacturers of
both wallboard (gypsun,) and oriented-strand board (wood) have been
addin~J more capacity than the market can currently absorb, adding to
downwarcj pressure on prices,
These diver~Jent trends su~Jgest that the annual rate of change
for construction materials and components prices, which was
9 pereent in the 12 months through Februra rv 2007 wi1l be 4-
to-6 percent by summer, with double-digit increases possible for
concrete and some metals products, The ~Jreater volatility that
can be expected for petroleum, concrete, and metals products implies
that highway and other heavy construction are more likely to experience
lal'ge price jumps again than are building construction segments, But
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even building construction is at risk of much higher materials cost
increases than the general rate of inflation,
Longer-Term Outlook
Two factors distinguish construction costs from the costs facing
consumers or most other industries. First, the CPI includes large
amounts of services and goods for which materials are not a significant
share of the costs, or for which substitution among materials is
possible. In contrast, materials are a major part of construction costs
and contractors are generally required to use roughly the same types
and quantities of materials for a given job as in earlier years. Many
of these materials are in strong demand worldwide, particularly from
economies (such as those of China , India, and other Asian countries)
that are simultaneously industrializing, building large amounts of
infrastructme and getting a modern consumer class. Copper, for
instance, is needed for all these markets. But there are only a few copper
mines that supply most of the world's are. In 2006, most of those mines
faced strikes (Chile), other labor unrest (Mexico) or political strife (Congo)
that kept supplies from expanding. The result: price spikes, Price spikes
are likely to be chronic for many construction materials, and to occur
with little warning.
Second, every material used in construction must be physically delivered.
Again , this is unlike services, many of which involve electronic delivery
or only minor transportation costs. Even when a construction material is
abundant worldwide, such as cement, there may be hif.Jh delivery costs
particularly when economies are growing. Cement had been in short
supply in 30-some states in 2004 and 2005, Supplies were ample in 2006,
partly because China more than doubled its exports to the U.S, (and
partly because the U,S. and Mexico , at the urging of AGC and others,
signed an agreement to end duties on lVlexican cement,. see box on
page 7). But the imports traveled in the same dry-bulk carriers that are
in demand for iron and steel scrap, copper ore and other materials.
a result, shipping rates.-an important component of the delivered price
for inherently low-value items like cement-have risen sharply over the
past few years. Polis, rail lines, trucking and bar~Je companies all have
experienced demand surges and/or bottlenecks that have pushed up
delivered costs for materials.
When transpoliation networks are stretched tight, fuel cost inct'eases
also are likely to be passed along to custorTlcrs. Indeed , contractors
report that fuel surcharges are more common than in the past. Since a
large construction job entails thousands of deliveries of materials CIne!
equipment, as well as hauling away of dirt, debris ane! equipment at
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In both 2004 and 2005, there were reports of cement shol1ages
more than 30 states. The shortages appeared as demand for cement
rose sharply from single- and multi-unit homebuilding, nonresidential
building, and public works, while domestic supplies remained nearly
constant. Meanwhile, an anti-dumping duty on Mexican cement, in
place since 1990, pushed up the price of cement imported from Mexico
by 50-60 percent.
AGC led a campaign, joined by other associations and companies
concerned that shortages would lead to project delays and layoffs, to
end the anti-dumping duty. Several governors and members of Congress
also sought suspension or repeal of the duty. The Wall Street Journal
criticized the duty in an editorial that drew on information supplied by
AGC. In March 2006, the U.S. and Mexico signed an agreement that
reduced the duty from more than $26 per metric ton to $3 per metric ton
immediately, with elimination of the duty planned for April 2009.
In 2006, there were no reported shortages of cement, despite continuing
growth of demand. Mexican imports increased somewhat but the
biggest expansion was from China, which more than doubled its exports
of cement to the U.S. compared to 2005 levels. China had built large
new plants on its coast and , for the moment at least, has excess capacity
that it is selling in the U.S, and elsewhere. However, the cost of shipping
cement from across thr~ ocean is high , because the same ships that
carry cement are in demand for hauling scrap metals, ores and other
commodities. Thus, cement prices have continued to rise.
The U.S. cement industry has begun adding capacity, But current plans
will take as long as four years to build out and may not be sufficient to
keep up with the growth of demand, let alone substitute for existing
imports. Therefore, further cement price increases appear to be likely.
Periodic, localized shortages are also a stron~J possibility, especially in
regions where breakdowns in a single plant or transport mode cut the
only local source of cement.
the end orthe job, fuel surcharges can add significantly, and unexpectedly,
to costs.
These factors-,-dependence on fixed types and quantitites of materials
for which demand is growing and supply is erratic, and high and volatile
transportation and fuel costs--make it likely that construction materials
and components prices will rise by 6-to-8 percent per year as long as the
world economy is growing. Higher price spikes are probable any time
fuel prices SLJrIJe or if there is a major disruption of output or transport,
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AGC CEO Stephen E Sandherr greets u.S.
Commerce Secretary Carlos Gutierrez at the
signing to lift MfJxiCfJn CfJment tariffs held at the
Commerce Departme/lt in Washington, D.
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Conversely, prices can moderate or drop when fuel prices fall, but such
price breaks tend to be short-lived.
labor Supply and Costs
The construction industry has been a major contributor to job growth
in the past decade, BLS data show (www.bls.gov/ces). From February
1997 to February 2007, the industry created one out of 10 new jobs in
the economy, double the industry s share of overall employment.
Construction employment increased by nearly 2 million, or 33 percent,
while total nonfarm payroll employment rose barely one-third as fast, or
13 percent. Yet seasonally adjusted average hourly earnings of production
workers in construction actually rose a little less rapidly, 33 percent, than
in the private nonfarm sector as a whole, 39 percent.
In the past year, however, construction wages have begun to accelerate
even though overall construction employment gains have slowed.
Construction employment fell by 18 000, or 0.2 percent, from February
2006 to February 2007, while average hourly earnings rose to an all-time
high of $20.60 per hour, up 4.8 percent from 12 months before. Part of
this apparent speedup is due to a changing mix: increases in higher-paid,
high-skill nonresidential employment, combined with declines in lower..
paid, less skilled residential occupations would tilt the average even if
the hourly rate for each job remained constant. But other indicators also
suggest that construction pay is accelerating.
First-year wage settlenients for construction union employees on
contracts signed in 2006 rose 4.5 percent, up from around 4 percent for
the previous several years, according to an analysis by the Construction
labor Research Council, an independent organization funded by AGC
and others. The average second-year increase on 2006 contracts was
7 percent.
The average salary increase for construction-industry executives in
2006 was 5.0 percent, according to the latest report from consulting Firm
PAS, Inc. (www.pas1.com). This compares with an average increase of
4 percent in 2005 and 4.2 perGent in 2004. Due to "the quickening of
construction activity;' PAS antiGipates the average inCl"ease to be about
5 percent in 2007.
The mix of construction jobs has changed markedly in the past year
as homebuilding has declined while nonresidential construction has
remained vibrant. BlS's two I"esidential construction employment
categories, residential buildi ng and residential spE,cia!ty trade contractors,
shed 133 000 jobs, 01' 3.9 percent of their February 2006 totals in the past
12 months. The other three categories, heavy and civil
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engineering, nonresidential building and nonresidential specialty trade
contractors, added 115,000 jobs, or 2.7 percent.
Further declines in homebuilding employment in 2007 will add
somewhat to the pool of available workers for nonresidential jobs.
Some plumbers, electricians, and wallboard and concrete workers
can readily transfer from residential to commercial work, for instance.
But there is relatively little call for carpenters in nonresidential work.
Conversely, homebuilders employ few of the tower-crane or paving-
machine operators that will be needed for large-scale building or
highway work.
Consequently, nonresidential wages and salaries are likely to rise
at roughly a 5 percent rate in 2007, up from 4.5 percent in 2006
and 4 percent or less in 2005 and earlier years. A 5 percent rate of
wage increases seems likely in future years as long as demand for
nonresidential construction remains strong.
Conclusion
Construction cost increases slowed markedly in the last half of 2006.
But the relief is likely to be short-lived and may have ended already.
Several key inputs are rising in price now, with more increases expected
as long as economic growth continues in the U.S. and j.\sia.
Construction is vulnerable to high price increases because the industry
has little ability to avoid using materials that are in strong demand
and for which supplies increase irregularly. In addition, the need
for physical delivery of materials means the industry is affected by
upward pressure on freight costs, transportation bottlenecks, and fuel
price spikes.
The industry also may be entering an era of acceleratinu wage and
salary Gosts. Demand for skilled craft workers, supervisors, estimators
and managers is growing as the volume of nonresidential construction
increases, However, low unemployment throughout the economy
means there are fewer applicants to choose from while more skilled
Gonstrllction workers are reaching retirement a~Je.
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Table 1: Changes in Consumer, Producer & Construction Prices
12 Months through December to February 2001 oller the Past:
2001 2002 2003 2004 2005 2006 1mo 3mo 1yr
Consumer Price Index (CPI-1.0
Producer Price Index (Ppl) for 1.6 1.1 1.1 1.4
Finished Goods
PPI for Materials and 10,
Components for Construction
New Warehouse Construction - not available before 2005 -7.5 1.1
New School Construction - not available; series began 12105 17.4 17,
New Office Construction - not available; series began 6/06 1.7
Table 2: Changes in PPls for Specific Construction Inputs
#2 Diesel Fuel 44.54.13.37.9 46.7.0
Asphalt (at Refinery)not available 10.18.17.36.13.36.
Asphalt Paving Mixtures & Blocks 14.27.1 23.
Asphalt Felts & Coatings 15.1.1
Concrete Products 1.5 7.6 10.7.9 '1.7
Concrete Block & Brick 1.6 1.2
Concrete Pipe 1.4 1.5 0.4
Ready-mixed Concrete 1.1 11,
Precast Concrete Products 5.-1
Prestressed Concrete Products '1.8 14.1.5 2.4
Brick & Structural Clay Tile
Plastic construction Products 21.6 '1.2
Gypsum Products 20.IS.
Insulation Materials 1.5
lumber & Plywood 1.'1 10,3.-1 10.
Architectural Coatings
Steel Mill Products 6. '11.'1.7 48,11.6 1.4 '0.
Hot-rolled Bars, Plates, & Structural Shapes 2.-1 1"1.3 53.1.0 8.9
Steel Pipe & Tube 66.
Copper & Brass Mill Shapes 1.6 11.6 29.31.44.10.23,
Aluminum Mill Shapes 12.4
Fabricated Structural Metal 'L3 0.-1 24.1.0
Fabricated Structural Metal for Buildings 1.(':;20,3.4
Architectural & Ornamental Metalwork 23.
Fabricated Iron & Steel Pipe, Tube, & Fittings 32.
Fabricated Steel Plate
Prefabricated Metal Buildings 35.1.1
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Construction Machinery & Equipment 1.3 1.2
Table 3: Changes in PPls for Basic Inputs Important to Construction
12 Months through December to February 2007 aver the Past:
2001 2002 2003 2004 2005 2006 1mo 3mo 1yr
Crude Petroleum (Domestic Production)42.60.14.30.49.6.4 1.4
Industrial Natural Gas 36.12.20.20.31.5 17.11.2
Plastic Resins & Materials 28.10.
Construction Sand/Gravel/Crushed Stone 1.9
Cement 1.3 7.9 12.10.4
Iron Ore 15.7.5 1.4
Iron & Steel Scrap 27.8 64.50.10.10.22.20.
Copper Ores 19.37.65.39.3 !l.l1.13.32.
Copper Base Scrap 17.4 11.30.34.51.47.21.2
Table 4: Changes in PPls for Construction Types
Highway & Street Construction 10.14.1.3 1.1
Other Heavy Construction 13.
Nonresidential Buildings 0.7 2.4 7.4
Multi-unit Residential 1.0
Single-unit Residential 0.4
Updated 3/16/07 Source: Bureau of Labor Statistics (BL8): www.bls.gov/cpiforCPI, www.bls.gov/ppi for PPls
Compiled by Ken Simonson (simonsonkc(j)agc.org), Chief Economist, Associated General Contractors of America, www.agc.org
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I AGC's CONSTRUCTION INFLATION ALERT: 2007
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Appendix A: Monthly Values for Construction and Consumer Price Indexes
Shown below are the monthly values beginning in January 1997 of the PPI for construction materials and
components and the CPI-U. To calculate the cumulative percentage increase over any interval, take the difference
between the ending and starting index numbers, divide by the starting number, and multiply by 100 percent.
For example, the cumulative change in the construction PPI from January 2004 to January 2007 was:
(190.156.2)/156.2 = .218 or 21.8%.\fJM.lQC6
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During the same span, the change in the CPI-U was: (202.185.2)/185.2 = ,093 or 9.3%,
Producer Price Index for Construction Materials and Components
-------------
145.145.1462 146.147.2 147.0 147.2 147.1 146.146.4 146.146.4 146.
III 146.146.4 146.147.0 146.9 146.7 147.147.4 147.3 146.7 '146.6 146.6 146.
l1li 146.9 147.3 147.148.148.5 149.5 '150,150.4 149.149.-1 149.4 149.8 148.
&II 150.4 150.151.3 151.6 151.151.2 150.8 150.4 150.3 150.2 150.1 149.9 150.
l1li 149.7 150.1 150.150.4 151.151.7 151.1 151.1 150.9 150,3 150.2 '149.9 150.
III 150.2 '150.2 150.151.1 151.151.5 151.7 152.1 152.151.7 151.2 151.1 151.
III 151.4 152.1 152.3 152.9 152.153.153.6 153.7 ')55.0 155.2 155.6 155.6 153.
Ell 156.2 '159.0 161.9 164.7 166.9 166.9 167.5 169.8 170,9 170.8 170.171.3 166.
111 173.1 174.7 175.175.4 175.0 175.5 175.7 175.177.0 '179.180.181.7 176.
- 184.2 185.0 185.5 186.7 188,2 189.2 '190.2 190.7 '19'1.0 190.4 189.8P 189.6P 188.
III 190.2P '190.
P: Preliminary. AI! indexes are subject to revision four months aTter original pu.blication.
Source: Bureau of Labor Statistics, www.b/s.gov/ppi
Consumer Price Index for All Urban Consumers
---------
III 161.6 161.9 162.2 162.5 162.8 '163,0 163.163.4 163.164.
III 164.164,165.0 166.2 166,2 '166.2 '166.167.1 167.9 168.
III 168.169.8 171.171.3 171.5 172.4 '172,8 172.8 173.7 174.
III "175.175.8 176.2 176.9 177.7 178.177.5 177.5 178.177.7
. '
177.1 177.8 178.8 179.8 179.8 179,9 180.1 180.181.0 181.3III 181.7 183.1 184.2 183.8 183.5 183,7 '183.9 '184.6 185.2 '\85.
Ell 202.4 203.
Source: Bureau of Labor Statistie~~ www.bls.gov/cpi
159.159.160.160.160.160.160.160.161.2 161.6 16'1.5 '16'1. 3 160.
1G4.163.163,
168.168.166.
174.174.172.
177,4 176.177.
181.180.179.
184.184.184.
191.0 190.188.
197.196.195.
2015 201.8 201.
185.
190.
198,
186.
191,
198,
187.
193,
188.
194.
201.5
189.
194.
189.7 '189.
194.195.
189.
196.
189.
198.
202.
190.
199.
199.202,5 202.203.5 203.201.8
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AGC Resources for Tracking Construction
Economic Information
AGC provides a variety of materials to help contractors, owners and the
public learn what is happening to construction costs. The Data DIGest
a weekly one-page email newsletter covering economic developments
including cost and supply issues, affecting construction. It is posted at
www.agc.org; for a free subscription, email simonsonk(?j)agc.org. Once
a month, tables of PPls for construction materials and segments are
sent along with The Data DIGest. AGC also offers free podcasts about
construction economics once or twice a month; go to www.agc.org/
podcast to see the latest offerings. Back issues of AGC's Construction
Inflation Alert are posted at www.agc.org. Audio conferences with
experts on construction economics and specific materials and segments
are held twice a year and can be purchased for download; go to
www.age.org/audioeonferenee.
About the Author
Ken Simonson has been Chief Economist for AGC of America since 200l
In that role, he provides a multitude of information , through written
materials, personal appearances, and media interviews, about the role
of construction in the economy and aboLlt economic developments
affecting construction nationally and locally.
Ken was recently appointed to the Blue Ribbon Panel of experts
advisinfj the National Surface Transportation Policy and Revenue Study
Cornrnission. Ken is a board member of the National Association for
Business Economics (NABE) and chairs its quarterly Industry Survey,
Among his many publications is "Digging into Construction Data;'
published in NABE's journal, Business Economics. Since 1982, he has
co-chaired the Tax Economists Forum, a professional meeting group
he co-founded for leading researchers and policy makers arnon~J tax
economists, He is a member of several other professional organizations
for economists.
Ken has a SA in economics from the University of Chicago, an MA in
economics from Northwestern University, and has taken advanced
graduate economics courses a1 the Universite de Paris, Johns Hopkins
and Georfletown.
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AGC Chief Economist,
Ken Simonson