20080627Waites direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
AN CHAGES FOR ELECTRIC SERVICE.
)
)
) CASE NO. IPC-E-08-10
)
)
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
COURTNEY WAITES
1 Q.Please state your name and business address.
2 A.My name is Courtney Waites. My business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what
5 capacity?
6 A.I am employed by Idaho Power Company as a
7 Pricing Analyst.
8 Q.Please describe your educational background.
9 A.In December of 1998, I received a Bachelor
10 of Arts degree in Accounting from the University of Alaska
11 in Anchorage, Alaska. In 2000, I earned a Master of
12 Business Administration degree from Alaska Pacific
13 University. I have attended New Mexico State University's
14 Center for Public Utili ties and the National Association of
15 Regulatory Utility Commissioners Practical Skills for the
16 Changing Electric Industry conference and the Electric
17 Utility Consultants, Inc., Introduction to Rate Design and
18 Cost of Service Concepts and Techniques for Electric
19 Utili ties conference.
20 Q.Please describe your business experience
21 with Idaho Power Company.
22 A.I became employed with Idaho Power Company
23 in December 2004 in the Accounts Payable Department. In
24 2005, I accepted a Regulatory Accountant position in the
WAITES, DI 1
Idaho Power Company
1 Finance Department where one of my tasks was to assist
2 responding to regulatory data requests pertaining to the
3 finance scope of work. In 2006, I accepted my current
4 position, a Pricing Analyst, in the Pricing and Regulatory
5 Services Department. My duties as a Pricing Analyst
6 include providing support for the Company's various
7 regulatory activities including tariff administration,
8 regulatory ratemaking and compliance filings, and the
9 development of various pricing strategies and policies.
10 Q.What is the scope of your testimony in this
11 proceeding?
12 A.My testimony will address the Company's rate
13 design proposal for the residential customer class.
14 Q.What are your overall objectives in arriving
15 at the proposed rate design for the customers taking
16 Residential Service?
17 A.Under the direction of Mr. Gale, I have
18 developed a rate design proposal that is both cost-based
19 and encourages increased energy efficiency.
20 Q.How does your proposal implement the
21 directive given to you by Mr. Gale?
22 A.My proposal implements these obj ecti ves by
23 pricing the individual rate components closer to the cost
24 of providing electric service, by increasing the
WAITES, DI 2
Idaho Power Company
1 differential between the first and second energy blocks
2 during the summer months, and by implementing tiered rates
3 in the non-summer months.
4 Q.What are the Company's Residential Service
5 schedules?
6 A.The Company has three Residential Service
7 schedules, Schedules 1, 4, and 5. Schedule 1 is available
8 to all customers taking service for general domestic use.
9 Both Schedules 4 and 5 are optional, time-variant pricing
10 programs and are available only to residential customers in
11 the Emmett valley area who are part of the Company's
12 Advanced Metering Infrastructure (UAMI") Phase One project.
13 The time-variant nature of these two programs is enabled by
14 the ability of AMI to dynamically capture hourly energy
15 consumption.
16 Schedule 4, the Energy Watch Program, is a fixed-
17 price critical peak pricing program in which participants
18 pay a flat rate for all kilowatt-hours (UkWh") used during
19 the summer months except for those kWh used during an
20 Energy Watch Event. During an Energy Watch Event, the rate
21 is nearly four times higher than the flat rate. Energy
22 Watch Events may be called on up to ten weekdays a year
23 between June 15 and August 15 during the hours of 5:00 p.m.
24 to 9:00 p.m.
WAITES, DI 3
Idaho Power Company
1 Schedule 5, the Time-of-Day Program, defines three
2 time periods during the summer months during which
3 participants pay specific prices for energy consumption:
4 On-Peak, Mid-Peak, and Off-Peak. The Off-Peak rate is the
5 lowest rate and the Mid- and On-Peak rates are 35 percent
6 and 85 percent higher, respectively.
7 Q.What is the annual revenue requirement to be
8 recovered from Residential Service customers?
9 A.The annual revenue requirement to be
10 recovered from Residential Service customers, which
11 includes Schedule 1, Schedule 4, and Schedule 5, is
12 $338,033,548, as shown on page four of Mr. Tatum's Exhibit
13 No. 70.
14 Q.What are the major changes to the current
15 rate design for Residential Service that you are proposing?
16 A.For Residential Service customers, I am
17 proposing two changes that are common to all residential
18 service schedules, Schedules 1, 4, and 5. The first change
19 is an increase in the Service Charge. The second is the
20 addition of tiered rates during the non-summer months. In
21 addition, I am proposing to modify the block levels and
22 differential between the block Energy Charges during the
23 summer months for Schedule 1 only.
WAITES, DI 4
Idaho Power Company
1 SCHEDULE i
2 Q.Please describe the present rate structure
3 for Residential Service under Schedule 1.
4 A.As Mr. Gale stated in his testimony, the
5 rates I will describe as the present rate structure are the
6 rates filed in Case No. IPC-E-08~01 related to the Danskin
7 Combustion Turbine. The actual rates approved by the
8 Commission in Case No. IPC-E-08-01 (Order No. 30559) vary
9 slightly from those originally filed. In Order No. 30559,
10 the Commission excluded a relatively small part of the
11 investment from inclusion in rates ($422,000). The Company
12 has not included this small impact in the General Rate Case
13 filing because of the time impact associated with
14 reprocessing all the analyses and studies. Since the
15 impact of not making the change is to slightly overstate
16 revenues, any disadvantage accrues to the Company's case.
17 Residential Service customers taking service under
18 Schedule 1 pay a monthly Service Charge of $4.00. During
19 the non-summer months, September through May, they pay an
20 Energy Charge of 5. 7793ç per kWh for all kWh used. During
21 the summer months, June through August, they pay a base
22 Energy Charge of 5. 7793ç per kWh for the first 300 kWh of
23 energy used and 6. 5164ç for all energy used over 300 kWh.
WAITES, DI 5
Idaho Power Company
1 Q.Please describe your proposal to increase
2 the Service Charge.
3 A.The Service Charge is intended to recover
4 costs that do not vary with the amount of energy or
5 capacity used. Historically, the Service Charge has been
6 well below the unit cost, meaning that the Service Charge,
7 from a cost of service standpoint, has under-collected the
8 customer-related fixed costs associated with this rate
9 component. In an attempt to meet our objective and move
10 the individual rate components closer to the cost of
11 providing electric service, I am proposing to increase the
12 Service Charge to $5.00 per month. The $5.00 per month
13 Service Charge represents approximately 34 percent of the
14 cost-of-service result of $14.89 shown at line 60 on page
15 one of Mr. Tatum's Exhibit No. 67.
16 Q.Please describe your proposal for tiered
17 non-summer rates.
18 A.Currently, during the non-summer months,
19 September through May, Schedule 1 customers pay the same
20 rate for all kWh used,S. 7793ç. I am proposing to
21 implement a two-tier inverted block rate that mirrors the
22 structure of the summer rate design. Customers would pay a
23 lower rate for their first block of energy usage,S. 8891ç,
24 and a rate 5 percent higher, or 6.1836ç, for the second
WAITES, DI 6
Idaho Power Company
1 block of energy usage.
2 Q.Why are you now suggesting a tiered rate for
3 the non-summer months for all residential customers?
4 A.While the Company continues to experience
5 the highest power supply costs during the summer months,
6 the costs during the non-summer months continue to rise.
7 Since 2003, the average non-summer marginal cost has risen
8 152 percent compared to the average summer marginal cost,
9 which has risen 129 percent. Likewise, the differential
10 between the summer and non-summer marginal costs is
11 decreasing i another indication non-summer marginal costs
12 are on the rise.
13 In addition to rising power supply costs during the
14 non-summer months, the usage of the residential customer
15 class has continued to increase consistently, even in years
16 when summer usage decreased. Similarly, the 2008 peak
17 system coincident demand for the residential customer class
18 is in December and has been in the non-summer months during
19 each of the previous three test years filed in general rate
20 case proceedings. In 2008, the forecasted peak demands in
21 December, January, February, and March are all greater than
22 the average summer demand. Keeping with the objectives of
23 the rate design, I am proposing to implement the tiered
24 rate for the non-summer months in an effort to move the
WAITES, DI 7
Idaho Power Company
1 energy rate closer to the marginal cost as well as
2 encourage energy efficiency for the residential customer
3 class year round.
4 Q.How will a tiered rate for the non-summer
5 months encourage energy efficiency?
6 A.Inverted block rates are a mechanism for
7 providing an incentive to customers to conserve energy. By
8 charging customers a higher rate for energy as the amount
9 of energy usage increases, customers are given a price
10 signal to encourage energy efficiency.
11 Q.Please describe your proposal to increase
12 the size of the first block of energy usage during the
13 summer and non-summer months.
14 A.Currently, customers taking serviçe under
15 Schedule 1 pay one rate for the first 300 kWh of energy
16 used (the first block) and a slightly higher rate for all
17 energy used over 300 kWh (the second block). I am
18 proposing to increase the first block of energy usage to
19 600 kWh for both the summer and non-summer months. For the
20 summer months, the rate proposed for the first block is
21 6. 1376ç per kWh and 7. 3409Ç per kWh for all energy used
22 over 600 kWh. During the non-summer months, the proposed
23 rate is 5. 8891ç for energy use from 0-600 kWh and 6. 1836ç
24 for all energy use over 600 kWh. This proposed rate design
WAITES, DI 8
Idaho Power Company
1 is shown on page one of Exhibit No. 72.
2 Q.In Order No. 29505, the Commission stated
3 that uproviding the first 300 kWh of summer usage at the
4 non-summer rate allows some basic electric usage, such as
5 for lighting and home appliances . . ."Why is the
6 Company proposing to increase the size of the first block
7 of energy usage?
8 A.The Company has found that basic electric
9 usage entails more than 300 kWh per month. According to
10 the Department of Energy (uDOE"), the end use consumption
11 of only lighting and home appliances (which includes a
12 refrigerator, electric range, electric oven, a microwave,
13 and a water heater) is 512 kWh per month. Likewise, in
14 their Housing Choice Voucher Program Guidebook, the US
15 Department of Housing and Urban Development ( UHUD" )
16 estimates 700-850 kWh per month for the same basic electric
17 usage. Based on this information, it appears that 300 kWh
18 is not adequate to cover basic electric service. I have
19 included both the DOE and HUD basic electric usage
20 calculations in my work papers.
21 Q.How did you determine that 600 kWh per month
22 is the appropriate amount for the first block of energy
23 usage?
WAITES, DI 9
Idaho Power Company
1 A.First, I looked at the baseline load of the
2 residential class. To estimate the baseline load, I looked
3 at customers' loads during the spring and fall months, a
4 time when it is reasonable to assume that neither an air
5 conditioner nor a heater would be running, or, if running,
6 would have minimal usage. This would likely occur in May
7 and October. The 2007 average usage was 806 kWh and 838
8 kWh, respectively. This average energy usage, which is
9 slightly higher than that detailed by the DOE and HUD
10 studies, would probably include a customer's lighting,
11 basic home appliances (a refrigerator, range, oven,
12 microwave, and water heater) as well as other household
13 appliances such as clocks, stereos/radios, telephones,
14 vacuum cleaners, televisions, and clothes washers and
15 dryers. Next, I looked at the average monthly residential
16 customer energy usage. In Idaho, it was approximately
17 1,065 kWh per month in 2007. As Mr. Gale stated in his
18 testimony, the Company's objective is to encourage energy
19 efficiency for all customers year round. In an effort to
20 incent customers to conserve, I am proposing to set the
21 first block at approximately 60 percent of the average
22 monthly energy usage for the Company's customers in Idaho,
23 or 600 kWh. This level will also align with the basic
24 electric usage studies performed by the DOE and HUD and the
WAITES, DI 10
Idaho Power Company
1 Company's baseline load estimates. Furthermore, adjusting
2 the first consumption tier to 600 kWh will allow a large
3 percentage of what might be considered basic electric usage
4 to be priced at the lower rate while still providing an
5 incentive to conserve.
6 Q.Are there any other changes to the proposed
7 Schedule 1 rate design?
8 A.Yes. In addition to the changes I have
9 discussed, I am proposing to increase the differential
10 between the first and second energy blocks of the summer
11 months. In its Order in Case No. IPC-E-03-13, the
12 Commission found a differential of 12.56 percent to be
13 reasonable. However, in an effort to keep in line with the
14 Company's objectives and move individual rate components
15 closer to the cost of service, I am proposing to increase
16 that differential to 20 percent. According to the cost of
17 service results, the unit energy cost during the summer
18 months is approximately 27 percent higher than the cost
19 during the non-summer months (see page one of Mr. Tatum's
20 Exhibit No. 67). In addition, increasing the differential
21 of 12.56 percent during the summer months to 20 percent
22 will send a stronger price signal to customers encouraging
23 the efficient use of energy, another objective of the
24 Company.
WAITES, DI 11
Idaho Power Company
1 Q.Please summarize the proposed charges for
2 Residential Service customers taking service under Schedule
3 1.
4 A.The rate design proposal for Schedule 1 is
5 included on page one of Exhibit No. 72. Under the proposed
6 rate design, Schedule 1 customers would pay a $5.00 per
7 month Service Charge. During the summer months, they would
8 pay a base Energy Charge of 6. 1376ç per kWh for the first
9 600 kWh used and 7. 3409ç per kWh for all energy used over
10 600 kWh. During the non-summer months, they would pay
11 5. 8891ç per kWh for the first 600 kWh and 6. 1836ç per kWh
12 for all energy used over 600 kWh.
13 Q.What impact does this rate design proposal
14 have on Residential Service customers taking service under
15 Schedule 1?
16 A.The typical monthly billing comparison for
17 Residential Service customers taking service under Schedule
18 1 appears on page one of Exhibit No. 73. As shown on this
19 exhibit, for customer's whose usage equals or exceeds 600
20 kWh, the lower their monthly usage, the lower the overall
21 percentage increase. Also noticeable is the fact that a
22 slightly higher first block will provide some rate relief
23 for lower usage customers.
WAITES, DI 12
Idaho Power Company
1 Q.Are you proposing any other changes to
2 Schedule 1?
3 A.No.
4 SCHEDULE 4
5 Q.Please describe the present rate structure
6 for Residential Service under Schedule 4.
7 A.Under Schedule 4, the Energy Watch Program,
8 customers pay a monthly Service Charge of $4.00. During
9 the non-summer months, September through May, they pay an
10 Energy Charge of 5. 7793ç per kWh for all kWh used. During
11 the summer months, June through August, they pay the same
12 rate of 5. 7793ç per kWh except for those kWh used during an
13 Energy Watch Event. During an Energy Watch Event, the rate
14 they pay is 20ç per kWh.
15 Q.Which of the major changes that you are
16 proposing for residential service impact Schedule 4
17 customers?
18 A.There are two proposed changes common to all
19 residential customers that impact customers taking
20 Residential Service under Schedule 4, the increase to the
21 Service Charge and the implementation of tiered block rates
22 in the non-summer months.
23 Q.Are you proposing to increase the Service
24 Charge to $5.00 per month like that of Schedule 1?
WAITES, DI 13
Idaho Power Company
1 A.Yes.
2 Q.Please describe your proposal for tiered
3 non-summer rates.
4 A.For Residential Service customers taking
5 service under Schedule 4, I am proposing to implement the
6 same two-tier inverted block rates during the non-summer
7 months I discussed previously for Schedule 1 customers.
8 Customers would pay a lower rate for their first 600 kWh of
9 energy usage and a rate five percent higher for all energy
10 used over 600kWh.
11 Q.Are there any changes to the summer rate
12 design for customers taking service under Schedule 4?
13 A.There are no proposed changes to the summer
14 rate designi however, I am proposing increases to the
15 summer Energy Charges in order to maintain the relationship
16 between the Energy Watch Event rate and the rate for all
17 other kWh used during the summer months as well as keeping
18 the rate for all other kWh used during the summer months
19 equal to the first block of the summer Energy Charge for
20 Schedule 1 customers.
21 Q.Please summarize the proposed charges for
22 Residential Service customers taking service under Schedule
23 4.
WAITES, DI 14
Idaho Power Company
1 A.The rate design proposal for Schedule 4 is
2 included on page two of Exhibit No. 72. Under the proposed
3 rate design, the Service Charge is $5.00 per month. The
4 Energy Charge during the Energy Watch Event hours would
5 increase to 22ç per kWh. The Energy Charge during all
6 other hours of the summer months would be 6. 1376ç per kWh,
7 the same as that proposed for the first block of the summer
8 Energy Charges for Schedule 1. During the non-summer
9 months, customers would pay 5. 8891ç per kWh for the first
10 600 kWh and 6. 1836ç per kWh for all energy used over 600
11 kWh, the same rates as proposed for customers taking
12 Residential Service under Schedule 1.
13 Q.What impact does this rate design proposal
14 have on Residential Service customers taking service under
15 Schedule 4?
16 A.The typical monthly billing comparison for
17 Residential Service customers tàking service under Schedule
18 4 appears on page two of Exhibit No. 73. As shown on this
19 exhibit, similar to Schedule 1 customers, for customer's
20 whose usage equals or exceeds 600 kWh, the lower their
21 monthly usage, the lower the overall percentage increase.
22 SCHEDULE 5
23 Q.Please describe the present rate structure
24 for Residential Service under Schedule 5.
WAITES, DI 15
Idaho Power Company
1 A.Under Schedule 5, the Time-of-Day Program,
2 customers pay a monthly Service Charge of $4.00. During
3 the non-summer months, September through May, they pay an
4 Energy Charge of 5. 7793ç per kWh for all kWh used. During
5 the summer months, June through August, the Energy Charge
6 customers pay during the On-Peak Period is 8. 8701ç per kWh,
7 during the Mid-Peak Period customers pay 6. 5164ç per kWh,
8 and during the Off-Peak Period customers pay 4. 8084Ç per
9 kWh.
10 Q.Which of the major changes that you are
11 ~roposing impact Schedule 5 customers?
12 A.There are two proposed changes common to all
13 residential customers that impact customers taking
14 Residential Service under Schedule 5, the increase to the
15 Service Charge and the implementation of tiered block rates
16 in the non-summer months.
17 Q.Are you proposing to increase the Service
18 Charge to $5.00 per month like that of Schedule 1?
19 A.Yes.
20 Q.Please describe your proposal for tiered
21 non-summer rates.
22 A.For Residential Service customers taking
23 service under Schedule 5, I am proposing to implement the
24 same two-tier inverted block rate that I discussed
WAITES, DI 16
Idaho Power Company
1 previously for Schedules 1 and 4. Customers would pay a
2 lower rate for the first 600 kWh of energy usage and a rate
3 5 percent higher for all energy used over 600 kWh.
4 Q.Are there any changes to the summer rate
5 design for customers taking service under Schedule 5?
6 A.I am not proposing any changes to the summer
7 rate design, however I am proposing increases to the summer
8 Energy Charges equal to the overall percentage increase for
9 the residential class , or 6.31 percent, to maintain the
10 relationships between the on-, Mid-, and Off -Peak periods.
11 Q.Please describe the proposed charges for
12 Residential Service customers taking service under Schedule
13 5.
14 A.The rate design proposed for Schedule 5 is
15 shown on page three of Exhibit No. 72. Under the proposed
16 rate design, the Service Charge is $5.00 per month. The
17 existing Energy Charge differentials between the three
18 pricing blocks are maintained with the summer On-Peak
19 Energy Charge set at 9. 4298ç per kWh, the summer Mid-Peak
20 Energy Charge set at 6. 9276ç per kWh, and the summer Off-
21 Peak Energy Charge set at 5. 1118ç per kWh. During the non-
22 summer months, the Energy Charge would be 5. 8891ç per kWh
23 for the first 600 kWh and 6. 1836ç per kWh for all energy
24 used over 600 kWh.
WAITES, DI 17
Idaho Power Company
1 Q.What impact does this rate design proposal
2 have on Residential Service customers taking service under
3 Schedule 5?
4 A.The typical monthly billing comparison for
5 Residential Service customers taking service under Schedule
6 5 appears on page three of Exhibit No. 73. As shown on this
7 exhibit and similar to Schedules 1 and 4, for customer's
8 whose usage equals or exceeds 600 kWh, the lower their
9 monthly usage, the lower the overall percentage increase.
10 Q.Are you proposing any other changes to
11 Schedules 1, 4, or 5?
12 A.No.
13 Q.Does this conclude your testimony?
14 A.Yes, it does.
WAITES, DI 18
Idaho Power Company