20081230Comment.pdf

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CRAG CASTAGNETO
4102 Ivy Drive
Nampa, il 83686
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December 19, 2008
Mack A. Redford
Idaho Public Utilities Commssion
P.O. Box 83720
472 W. Washington
Boise, il 83720-0074
Dear Commissioner Redford,
I am wrting to provide you with the perspective of a high lift irrgation pumper in the
curent Idaho Power rate case no. IPC-R-08-1O. As you deliberate on how to allocate any
rate increase across the varous user classes, I ask that you carefully consider the history
of how Idaho Power's customers and power demands have grown over the past couple of
decades. In paricular, I ask that you consider the realities that the irrgation class has not
grown, either in customer numbers or power demand, for decades, and the growt in
power demand and the sumertime peak that is drving increased costs have been caused
by other user classes. When this history is factored in, it is clear that point-in-time cost of
servce studies that suggest irgators curently are not paying their way are inaccurate
and unfairly shift a disproportionate share of the increased costs over to irrigators.
My comments are made on behalf West End Project, Jones-Noble-Morrs Project, Basin
Land Irgation Company, Sailor Creek Water Company and Grindstone Butte Mutual
Canal Company. All five entities own and operate high-lift irrgation systems that divert
water from the Snake River. I am involved in faning extensive acreage with water
delivered by these systems, and I presently serve as president of two ofthese high-lift
entities. We are major Idaho Power customers under Schedule 24. The rate case you are
curently deciding will have an enormous impact on our operations.
The focus of these comments is on the class revenue spread and the cost of service
: methodologies used by the varous paries to deteriine how to make this allpcation.
Since the size of the revenue requirement is fixed, any decrease in the allocation for one
. class means another class has to absorb a corresponding increase. Not surrisingly, most
customer classes in this case have submitted wrtten testimony pointing the finger at other
user classes-mostly at the irrgators. I don't envy your having to make the final
decision on what is a fair and equitable distrbution and imagine that no matter what your
decision is, most, if not all, user groups will complain that they have not been treated
fairly.
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In any event, the decision must be made, and my purose is to advocate for an allocation
that recognizes the irrgators-a no growth class-have already shouldered a
disproportionate share ofthe cost of the system's recent growth. Indeed, as you know,
durng the rate case in 2003 - 2004, the irrgation class received a 13.95% increase in
rates, which was over 2.5 times more than the average increase.
Ths large percentage increase was done under a theme of makg the irrgators "pay their
way" based on cost of service studies. I submit that ths view-that irrgators are not
paying their fair share-like most views in these rate cases, is a matter of perspective.
The only way to conclude that irrgators are not paying their way is to take a snap shot of
the present situation and assume that irrgators and their power demands have grown to
create the peak demands that aredrving Idaho Power's increased costs that cause these
rate cases. Ths is exactly what all the cost of servce studies put forward by Idaho
Power, the Staff and the other paries do. They arbitrarly assume that irrgators are the
cause ofthe curent peak and should have to pay for it. This view ignores the fact that
the irrgators did not cause the peak. The peak came to us through rapid growth by other
user classes.
There is universal agreement about this history in ths case. Everyone seems to agree that
the energy demand by the irrgation class has not grown in decades. The graph from
page 5 of Mr. Yankel's testimony (copy attached) makes this very clear. The paries also
seem to acknowledge that growt in classes other than irrgation has created a system
wide sumertime peak demand that did not exist prior to the recent rapid growt.
Despite agreement on these facts, all the cost of service studies fail to properly consider
the historic facts and advocate for disproportionate cost shifting over to irrgators.
Shifting the costs of growth created by others over to the irrgators has a doubly
devastating effect on the irrgation class. Not only are we required to pay for costs of
system growth we did not create, we do not have a growing customer base with which to
absorb the increased costs. Other classes that are growing can spread their increased
share of the revenue requirement among a growing customer base, so the impact ofthe
increase is buffered by the growth in the class. Not for irrgators. Any percentage
revenue increase for the class translates into a straight percentage increase in our power
bills because our customer base has not grown.
Meanwhile other user classes cause extraordinar growt all around us and create an
explosiori in sumertime energy use. Even though we have hot increased our power
demand, Ìoad factors or times ofusè, we get hit with rate increases in rate cases designèd
to recaptue capital costs and expenses related to growth generated by other classes.
Perhaps you can see why this notion that we are not paying our way does not ring tre for
us.
That is not to say we should not be subject to any rate increases. We understand system
components need to be replaced, input costs become more expensive and we gain
benefits when the overall system is upgraded. However, given that we have neither
grown nor caused the costs associated with the growth that has occurred, we believe our
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rate increases should be equal to or less than the average rate increases across the classes,
not disproportionately higher.
We also understand the Commission in not legally permitted to set rates purely based on
service initiation date, and we don't advocate such a system. But we know of no legal
impediment that would prevent the Commission from recognzing that extraordinar
growth created by the other user classes has created the peak demand and associated costs
that make up the bulk of expenses the Company is seeking to recover in this case. With
that recognition, the Commission should not penalize the irgation class with an order
that requires it to disproportionately absorb the cost of growt.
Our bottom line is this: User classes other than irrgation are causing disproportionate
growth on Idaho Power's system. The allocation of the revenue requirement must
recognize this fact, not only as a matter of fudamental fairness and equity, but also to
send the appropriate price signals to the customer classes that are causing the growth.
I request that the Commission recognize that the irrgation class has already been
allocated more than its fair share of the increased revenue requirement in the past and that
the Commission enters an order that does not increase rates for the irrgation class, or if
there is an increase, that it be limited to 1.4%.
Sincere).y __h' . ~'~-;
1'r;9l'O' _ //'../ " ~-:~,, y;¿Ø'- /,'r"' l1'
Craig Castagneto Ó
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