20081024Lanspery Direct.pdf

RECE1VED
lOD8 OCT 2tl PH 3: 24
IDAHO PUBLIC UTILITIES COMMIS8l8P~iç.'i~!I¡s~~I('I~.~
UTIUTU:S' CIJ¡f¡I'I . v "" 1
BEFORE THE
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-08-10
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
TO ELECTRIC CUSTOMERS IN THE STATE)OF IDAHO. )
)
)
)
DIRECT TESTIMONY OF BRYAN LANSPERY
IDAHO PUBLIC UTILITIES COMMISSION
OCTOBER 24, 2008
1
3
2 record.
Q.Please state your name and address for the
A.My name is Bryan Lanspery and my business address
5
4 is 472 West Washington Street, Boise, Idaho.
6
Q.By whom are you employed and in what capacity?
I am employed by the Idaho Public Utili tiesA.
8
7 Commission as a utility rate analyst.
Q.Gi ve a brief description of your educational
10
9 background and experience.
A.I received a Bachelor of Arts degree in Economics
11 with a social science emphasis from Boise State University
12 in 2003. I also earned a minor in Geographic Information
13 Systems from Boise State University in the same timeframe.
14 I have also earned a Master of Arts in Economics from
15 Washington State University, received in 2005. My Masters
16 work emphasized Labor Economics and Quantitative
17 Econometric Analysis. Concurrent to pursuing my Masters
18 degree, I functioned as an instructor of Introductory and
20
19 Intermediate Economics as well as Labor Economics.
22
21 Commission?
Q.Would you describe your duties with the
A.I was hired by the Commission in late 2005 as a
23 utility analyst. As such, my duties revolve around
24 statistical and technical analysis of Company filings,
25 including cost/benefit analysis, resource evaluation, price
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 1
STAFF
1 forecasting, and weather normalization methods. I have
2 participated in several general rate cases, focusing on
3 power supply, cost of service, and rate design. I have
4 also been actively engaged in integrated resource planning,
5 DSM/energy efficiency program evaluation, and revenue
6 allocation issues. I completed the Practical Skills for
7 the Electric Industry held by New Mexico State University
9
8 in 2006, among numerous other conferences.
10
Q.What is the purpose of your testimony?
A.My testimony will cover Idaho Power's rate design
11 proposals for Residential Schedules 1, 4, and 5 as proposed
12 by Company witness Waites, as well as its rate design for
13 Schedule 24, Agricultural Irrigation Service, discussed in
15
14 Company witness Bowman's testimony.
16 case?
Q.Could you please summarize your testimony in this
17 A.Yes. As pointed out by Company witnesses Gale
18 and Waites, effective rate design should be based on
19 sending cost-based price signals that promote efficient
20 consumption of energy. I propose an alternative inverted
21 block, or three-tiered rate design for residential
22 customers which, in my opinion, provides better price
23 signals to customers while affording the Company a
24 reasonable opportunity to recover its Commission-approved
25 costs. I will also explain Staff's support for the
CASE NO. IPC-E-08-10
10/24/08 LANSPERY, B. (Di) 2
STAFF
1 Company's rate design proposal for Schedule 24 with
2 proposed rates based on Staff's Cost of Service study.
3 Q.Have you prepared any Exhibits to accompany your
4 testimony?
5 A.Yes. Exhibit Nos. 135, 136 and 137.
6 Effective Rate Design
7 Q.Please describe what is meant by effective rate
8 design.
9 A.Effective rate design entails promoting efficient
10 consumption of energy through proper pricing. Idaho Power,
11 like most utili ties in the Northwest, has low embedded
12 costs of generation resources used to meet its average
13 loads but finds itself capacity constrained through much of
14 the summer and deep winter months. During these times, it
15 is forced to either run higher cost generation resources,
16 such as its simple cycle combustion turbines, or rely on
17 market purchases to meet its load. Flat rate design, in
18 which kWh rates are based on average costs and do not vary
19 based on timing or level of consumption, do not reflect the
20 disparity in costs to serve load during peak periods and
21 off-peak periods.
22 Effective rate design provides customers with a
23 cost-based signal that when consumption reaches a certain
24 threshold, or occurs in a particular time period, the cost
25 to provide that energy can be significantly higher than the
CASE NO. IPC-E- 08 - 1010/24/08 LASPERY, B. (Di) 3
STAFF
1 embedded rate, and the rate charged to customers should
2 reflect that fact.
3 Q.How can rates reflect disparate costs of energy?
4 A.There are many ways that rates can reflect the
5 variable cost to serve, but the two most prevalent ways are
6 through tiered rate design and time-of -use (TOU) rates. I
7 will describe the basis for tiered rates, or inverted block
8 rates, in further detail within my testimony. TOU rates
9 may be the more effective means of tying variable energy
10 costs with consumption in the short run since marginal
11 costs (generally reflected in market prices), can vary
12 seasonally, daily, or hourly due to loads exceeding the
13 capacity of low cost generation and the inability to store
14 electricity.
15 Tiered rates, in essence, act as a surrogate for
16 TOU rates when TOU metering is not available. For Idaho
17 Power, residential consumption is highest during the most
18 expensive periods to provide energy, the summer and deep
19 winter months. Since timing of consumption correlates well
20 with the amount of consumption, tiered or block rates
21 reasonably tie usage with costs.
22 Q.Are there any advantages to implementing tiered
23 rates in lieu of TOU rates?
24 A.Yes, the main advantage of tiered rates is that
25 no special metering equipment is necessary. TOU rates
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 4
STAFF
1 require meters that can capture consumption over specific
2 timeframes during the billing period. Idaho Power plans to
3 exchange its meters throughout the service terri tory with
4 advanced meters over the next few years, facilitating TOU
5 pricing in the near future for all customer schedules. As
6 of now, only residential customers in the Emmett and McCall
7 region have the metering equipment necessary for TOU
8 pricing schemes.
9 Also, TOU pricing primarily targets the timing of
10 usage, not the amount of consumption. Effective TOU rates
11 encourage shifting energy consumption to off -peak periods,
12 where price per kWh is comparatively low, but can result in
13 higher overall consumption with lower bills if enough
14 energy is shifted off-peak. Though not in Idaho Power's
15 near term, in the long run this may result in the need to
16 construct more baseload generation facilities, putting
17 upward pressure on prices. Tiered rates seek to lower
18 overall usage, which may prolong the need to acquire highly
19 capital-intensive baseload facilities.
20 Q.You mention Idaho Power's plans to rollout
21 automated metering throughout its service territory. Do
22 you anticipate TOU rates for all residential customers in
23 the future?
24 A.Yes I do, which makes effective tiered rate
25 design now much more important. Tiered rates can be
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 5
STAFF
1 combined with TOU rates to maximize the goal of effective
2 price signaling both in the short run and long run.
3 Combining the two would target both the timing and level of
4 consumption by customers, which has the benefit of
5 empowering the customer to control his or her power bill
6 and provide operational improvements for the utility.
7 It is also important to note that the
8 implementation of TOU rates represents a paradigm shift for
9 consumers. To successfully lower one's bill, one must
10 become savvier in tying the overall bill to one's
11 consumption pattern. Tiered rates are billed in blocks,
12 which, if proper education is provided, should draw the eye
13 of the consumer beyond just the bottom line of the bill.
14 If customers are more accustomed to how their consumption
15 affects their overall bill, they will be better prepared
16 for TOU rates.
17 Q.You mention that sending proper price signals is
18 an important part of effective rate design. What other
19 factors did you consider when approaching residential rate
20 design?
21 A.I alluded to the fact that prices should reflect
22 the cost to provide the energy. If this were carried to
23 the extreme, an inverted rate design, which both the
24 Company and the Staff support, would have stark
25 differentials between the first block or tier, and the tail
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 6
STAFF
1 block, in order to reflect the substantial difference
2 between the embedded cost of resources and the cost of
3 marginal resources. When promoting tiered rates, one must
4 not lose sight of general rate design principles: rate
5 equity, rate stability, and opportunity for the utility to
6 recover its approved costs. Regarding the first two
7 principles, my objective was to design a tiered rate
8 structure that provides meaningful signals to customers
9 that incent efficient usage but does not unduly punish a
10 subset of residential customers. Rates should be higher
11 for higher consumption levels, but not to the point that
12 some residential customers face excessively large increases
13 while others face excessively large decreases. To the last
14 principle , given that the goal is to reduce consumption in
15 the tail block, by pricing it too high there is a
16 significant risk that the Company will be unable to collect
17 its Commission-approved costs. Thus, my objective in
18 preparing the residential rate design was to provide
19 effective price signals to customers tempered by the
20 aforementioned principles.
21 Q.Are tiered rates generally regarded as an
22 effective means to promote energy efficiency?
23 A.Yes. In 2005 the National Action Plan for Energy
24 Efficiency, a public-private initiative consisting of
25 organizations such as the Department of Energy,
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 7
STAFF
1 Environmental Protection Agency, and NARUC, stated that
2 "Retail rate designs with clear and meaningful price
3 signals, coupled with good customer education, can be
4 powerful tools for encouraging energy efficiency." The DOE
5 stated more recently in a 2007 report to Congress that rate
6 design is one of 10 mechanisms for enhancing energy
7 efficiency. In each case cited, it is noted that rate
8 design must consider the unique characteristics of the
9 customer class.
10 Q.Are tiered rates common in Idaho?
11 A.Yes. Idaho Power currently has a two-tiered rate
12 structure for residential and small commercial customers
13 during the summer period. Avista also has a two-tiered
14 rate structure for residential customers in Idaho.
15 PacifiCorp currently has a flat rate structure in Idaho,
16 though it does have a two-tiered residential rate structure
17 in both Washington and California, and a three-tiered
18 structure in Utah.
19 Residential Rate Design
20 Q.You mentioned that characteristics unique to the
21 customer class should be considered when designing rate
22 structures. What "unique characteristics" of the
23 residential class did you consider in your rate design?
24 A.Residential customers as a class tend to be quite
25 homogeneous when compared to small commercial and
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 8
STAFF
1 irrigation customers, but more volatile when compared to
2 industrial customer classes. This can be attributed to end
3 use of electricity. As pointed out in Company witness
4 Wai tes' testimony, residential basic electric usage can
5 cover lighting and home appliances, such as refrigerators
6 and electric ovens. These tend to vary mainly with the
7 size and occupancy of the residence. I would suggest that
8 heating and cooling should also be considered basic end
9 uses, as well as a point at which residential customers
10 begin to differ from one another. A fair percentage of
11 homes in Idaho Power's service territory use electricity
12 for heating purposes, while others use natural gas,
13 propane, or biofuels, such as wood-fired stoves, for
14 heating. Similarly, many homes have central cooling
15 systems or some means of air conditioning while many do
16 not.
17 Beyond basic consumption, there is great
18 diversity in discretionary usage such as home computers and
19 home entertainment systems. Between discretionary usage
20 and weather sensitive usage, the residential customers as a
21 whole have relatively low load factors (average load
22 divided by peak load). This impacts the cost to serve
23 residential customers along with the utility's ability to
24 recover its approved costs.
25 Q.How does this affect residential rate design?
CASE NO. IPC-E-08-10
10/24/08 LANSPERY, B. (Di) 9
STAFF
1 A.The low load factor reflects the "peakiness" of
2 residential load profiles. Usage tends to be relatively
3 low in spring and autumn months and higher in winter and
4 summer months. In fact, for Idaho Power the residential
5 class peaks in winter with a smaller peak in the summer.
6 When designing tiered rates, I wanted to provide price
7 signals that reflect the dual-season peaking nature of the
8 class and reduce the class average use per customer.
9 Q.Have you reviewed the Company's proposals for
10 residential rate design?
11 A.Yes.
12 Q.Do you propose any changes to the Company's
13 position?
14 A.Yes.
15 Q.Please summarize your proposal for the residential
16 classes.
17 A.Based on Staff witness Hessing's Cost of Service
18 results, no rate increase is warranted for the residential
19 customers, therefore I do not believe an increase in the
20 customer charge is justified. Also, I believe that a
21 three-tiered rate structure provides stronger and more
22 accurate price signals than the two-tiered structure
23 proposed by Company witness Waites. I do not propose a
24 significant change in the rate differentials for Schedule 4
25 or 5 customers than what the Company has presented in its
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 10
STAFF
1 filing.
2 Q.Please summarize the Company's proposal regarding
3 residential tiered rates.
4 A.The Company proposes to maintain the current two-
5 tier summer rate structure for Schedule 1 customers and
6 implement the same tiered structure in the non- summer
7 period for all residential classes. The Company recommends
8 increasing the size of first block energy from 300 kWh to
9 600 kWh per month for both summer and non-summer periods.
10 Q.Do you support the Company's proposal?
11 A.While I agree that the size of the first tier
12 should be increased, I do not believe that the proposal
13 adequately utilizes rate design to promote energy efficient
14 usage.
15 Q.Please explain.
16 A.Company witness Waites states that basic usage is
17 measured by the shoulder months of May and October (Waites,
18 p. 10). As I stated before, I consider heating and cooling
19 to be basic needs for residential customers. i will also
20 note that what is generally considered basic use, such as
21 lighting, does not translate into efficient use (e. g.
22 iridescent lighting vs. compact fluorescent lighting).
23 Much of the May and October usage cited includes
24 discretionary usage, and serves as a poor basis for setting
25 a base. If August and January were used to determine basic
CASE NO. IPC-E- 08 - 10
10/24/08 LASPERY, B. (Di) 11
STAFF
1 usage, residential use per customer is more in the
2 neighborhood of 1190 and 1340 kWh, respectively. Using the
3 Company's 60 percent method, the first block should be set
4 closer to 800 kWh.
5 Q.Do you propose setting the first block at 800
6 kWh?
7 A.Given the data available to Staff during the
8 discovery process, it was not possible to analyze the
9 revenue generated by setting the block at 800 kWh. Through
10 the review process, I deduced that the proper cutoff point
11 for the first block should be between 600 kWh and 1000 kWh
12 for a three-tier structure. I propose setting the first
13 block at 0-1000 kWh.
14 Q.Why did you stress the three-tier structure in
15 your last reply?
16 A.Again, the goal of tiered rates is to send a
17 cost-based price signal. The farther from the break point,
18 the weaker the price signal. Customers who use 1079, the
19 2008 average according to the Company filings, may see no
20 way to reduce consumption enough to materially impact their
21 bill, thus the signal does not resonate. 600 kWh may work
22 under a three-tier system to encourage relatively low usage
23 customers to conserve if there were a higher block to
24 promote a strong signal to those whose consumption is well
25 above average.
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 12
STAFF
1 Q.Why did you choose 1000 kWh for the first block
2 if you are proposing a three-tier structure?
3 A.The 1000 kWh breakpoint is nearly 8% below 2008
4 average usage. I believe an average 8% reduction is
5 attainable given proper price signals. I see the first
6 block cutoff as a target for customers to achieve. If
7 customers respond to the price signal and average use per
8 customer declines, then I would advocate lowering the block
9 from 1000 kWh, and setting a new target for average usage,
10 and continue that process over time, using the first block
11 as a moving target.
12 Q.What do you propose for the second block?
13 A.For summer months, I propose the second block be
14 set for usage between 1001 kWh and 2000 kWh. In non-summer
15 months, I propose the second block be set between 1001 and
16 3000 kWh.
17 Q.Please explain why you chose to set the summer
18 block between 1001 kWh and 2000 kWh.
19 A.I set the limit on the second block at 2000 kWh
20 in order to send a second price signal. Based on the
21 Company's filings and production responses, nearly 10% of
22 residential customers have consumption levels above 2000
23 kWh during the summer months of June, July, and August.
24 This corresponds to a period where the Company is capacity
25 constrained, and relies heavily on gas-fired generation and
CASE NO. IPC-E-08-10
10/24/08 LASPERY, B. (Di) 13
STAFF
1 market purchases to meet load. As I have stated before,
2 customers farther from the tier breakpoint are sent a
3 weaker price signal. Setting the limit on the second block
4 at 2000 kWh sends a signal to higher usage customers while
5 limiting the Company's exposure for revenue recovery.
6 Q.Please explain why you chose to set the non-
7 summer block between 1001 kWh and 3000 kWh.
8 A.According to the Company, the residential class
9 peaks during the winter, mainly due to space heating, while
10 the system peak is in the summer. Based on net power
11 supply runs, during the shoulder months (included in the
12 non- summer period) the Company has adequate resources to
13 serve its load and make off-system sales. There is little
14 validation for sending marginal ?ost-based price signals
15 during that period. That is not the case during the months
16 of December, January, and February. Net power supply costs
17 per unit during these months are slightly lower than the
18 summer period, presumably due to the higher demand for
19 natural gas.
20 One rationale for a larger block is that, even
21 though marginal costs are somewhat in line with summer
22 marginal costs, the Company's load (demand) is lower, due
23 mainly to the absence of the irrigation load. When
24 analyzing the billings for the three winter months, roughly
25 9% of bills fall into the tail block if set at 3000 kWh,
CASE NO. IPC-E-08-10
10/24/08 LASPERY, B. (Di) 14
STAFF
1 similar to the tail block that I recommend for the summer
2 period. Again, sending a strong price signal to higher
3 usage customers should be a determinant in tiered rate
4 design, and I believe that this design accomplishes that
5 goal.
6 Similarly, I did not want to lose sight of the
7 fact that, in the winter especially, not all high energy
8 consumers are relatively high income users. While I cannot
9 put an exact percentage to it, there are many low income
10 customers with electric space heating and poorly
11 weatherized homes. Tiered rates are not necessarily low
12 income rates i they are efficiency based rates. A higher
13 rate for energy in the tail block provides a higher
14 incentive to invest in energy efficiency measures, such as
15 insulating a home or converting to a high efficiency heat
16 pump, for those that can afford it. For customers that
17 cannot afford to take such measures, there are programs
18 that can assist in payment of utility bills and
19 weatherization assistance. i will leave the remainder of
20 the discussion on such programs to Staff witness Thaden,
21 noting that the Commission has opened a docket (GNR-U-08-1)
22 to address energy affordability.
23 Q.What differentials do you propose for the block
24 rate design?
25 A.I propose that the first block of energy be
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 15
STAFF
1 priced approximately 12% lower than the second block and
2 the tail block be priced approximately 20% above the second
3 block for all residential classes during the non-summer
4 period. For Schedule 1 customers, I left the Company's
5 first tier rate in place and set the second and third tier
6 rates accordingly to generate approximately 25% of
7 residential revenue during the summer period, similar to
8 what the Company currently collects in the summer months.
9 This resulted in the first block being approximately 12%
10 lower than the second tier, and the third tier
11 approximately 20% higher than the second tier. For the
12 non-summer months, I propose that the first block be priced
13 at 90% of the second block, and the last block 120% of the
15
14 second block. I did not change the summer rates for
16
17
18
19
20
21
22
23
24
25
Schedules 4 and 5.The chart below provides a summary of
the rates I propose for Schedules 1,4,and 5.
I PUC STAFFProposedRatesfor Idaho PowerSchedule1Schedule 4 Schedule 5
Non-Sumer
1st Block
2nd Block
3rd Block
5.5799
6.1999
7.4399
5.5799
6.1999
7.4399
5.5799
6.1999
7.4399
Sumer
1 st Block
2nd Block
3rd Block
Energy Watch
Summer kWhOff-Peak
Mid-Peak
On-Peak
5.77926.58507.9020
Rate 20.0
5.7793
4.8084
6.5164
8.8701
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 16
STAFF
1 Q.What is your justification for these
2 differentials?
3 A.I believe that these differentials result in
4 rates that balance the myriad objectives of effective rate
5 design, namely providing price signals to customers,
6 generating rate stability, and a reasonable opportunity for
7 approved revenue recovery.
8 Q.You do not propose any adjustments to Schedule 4,
9 Energy Watch, or Schedule 5, Time-Of-Use, summer rates?
10 A.Not at this time. i will note that the rate
11 differentials have remained the same since the advent of
12 the pilot programs, and may not reflect the Company's
13 current embedded-marginal cost relationship. In its 2007
14 Annual Report filed in February 2008, the Company states
15 that Energy Watch customers are responding to the price
16 signal sent during event hours, but falls short of
17 acknowledging whether greater response could be attained
18 through larger rate differentials. The report also states
19 that TOU participants are apparently not shifting load off-
20 peak, which should be a trigger to address the
21 differentials. Because these are still considered pilot
22 programs, I suggest that these issues be addressed in a
23 different venue than a general rate case.
24 Q.Have you prepared any Exhibits detailing the rate
25 impact of your recommendations?
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 17
STAFF
1 A.Yes. Exhibit No. 135 shows that the rates
2 proposed generate Staff's revenue requirement given the
3 rate design I have outlined above. I have used the energy
4 values provided in Company witness Waites' Exhibit No. 72
5 to calculate the commodity rates.
6 I have also included Exhibit No. 136 to show the
7 bill impact of my recommendation for residential rate
8 design for Schedule 1 customers, compared to the rates
9 currently in place. Under my proposal, Schedule 1
10 customers will see a decrease in their bills for average
11 annual use less than 1500 kWh compared to current rates.
12 Schedules 4 and 5 customers will see a decrease in their
13 bills for average annual consumption less than 1400 kWh.
14 Q.Do you believe that savings occur at too generous
16
15 a level of consumption?
A.I believe this is partly a function of the block
17 choice and partly a function of Staff's residential revenue
18 recommendation. Had the first block been set at 800 kWh, I
19 would have advocated for a lower first block rate, which
20 would necessitate a larger second and/or third block rate.
21 And since the Staff has recommended that the residential
22 class receive no overall increase to its revenue
23 requirement, I chose to temper the rate differentials at
25
24 this time for customer acceptance.
Q.Has Idaho Power implemented a three-tiered rate
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 18
STAFF
1 structure in the past?
2 A.Yes. The Commission approved a three-tiered rate
3 design for Idaho Power in 2001 (Order No. 28722) very
4 similar to what I have proposed here. It was later revoked
5 in 2002 (Order No. 29026).
6 Q.Why did the Commission revoke the three-tiered
7 rate structure?
8 A.The Commission reluctantly returned to the flat
9 rate structure due to a possibility of a large multi-year
10 PCA deferral balance and public sentiment against tiered
11 rates.
12 Q.Do you believe that this is reason enough to
13 prevent the implementation of a three-tiered rate design in
14 this case?
15 A.No. While PCA balances have been fairly large in
16 the recent past, the Company, along with representatives of
17 Staff, IIPA, ICIP and others have engaged in workshops to
18 address the PCA. A properly functioning PCA may alleviate
19 large swings in the deferral balance.
20 Secondly, it is worth noting that rates increased
21 as much as 31% during the period three-tiered rates were in
22 place. It is difficult for a customer to distinguish
23 between bill increases due to rate design modifications and
24 a large, general increase. As pointed out in Order No.
25 29026, only customers consuming over 2008 kWh would see an
CASE NO. IPC-E-08-1010/24/08 LASPERY, B. (Di) 19
STAFF
1 increase in their bill when compared to a flat rate. If
2 customers were properly educated by the Company, there may
3 have been a better understanding as to the causation of the
4 bill increase. Also, the Commission noted that many
5 residential customers with high usage were being improperly
6 metered due to non-residential facilities, such as barns
7 and outbuildings, not being metered under general service.
8 Presumably, the Company has addressed this issue.
9 Since Staff is proposing no rate increase for the
10 residential class, the compounding effects that were
11 witnessed in 2002 are irrelevant in this proceeding. The
12 Company has maintained a two-tiered structure, and to my
13 understanding has not received the same level of customer
14 dissatisfaction expressed in the aforementioned case. It
15 is imperative that the Company utilize resources to educate
16 customers about the change in rate design, what can be done
17 to reduce consumption, and how this can prepare the
18 customer for TOU rates in the near future.
19 Finally, and perhaps most importantly, on page 26
20 of Order No. 29026, the Commission explicitly states that:
21 Although it is appropriate to use flat
residential rates this year, this Order
should not be interpreted as precluding
the use of tiered rates in the future. We
believe that last year's tiered rates were
effective in sending a price signal to
customers to conserve. However, many of
these customers experiencing an increase
of 31% or more had limited ability to
significantly alter their energy consumption
22
23
24
25
CASE NO. IPC-E- 08 - 10
10/24/08 LASPERY, B. (Di) 20
STAFF
1 once they received the price signal. It is
our belief that with additional customer2 education and increased availability of
residential DSM programs like Time-of-Use3 metering, tiered residential rates may be
an appropriate rate design option in the4 future as circumstances dictate.
5 With advanced metering around the corner, I believe that
6 this is the proper time for the Company to revisit a three-
7 tiered rate structure.
8 Schedule 24 Rate Design
9 Q.Have you reviewed the Company's proposal for
10 Schedule 24, Agricultural Irrigation Service?
11 A.Yes.
12 Q.Could you please summarize the Company's
13 recommendations?
14 A.Yes. In Company witness Bowman's testimony, she
15 proposes" load factor" pricing for Schedule 24 customers
16 during the summer period. Load factor pricing is based on
17 the ratio of energy consumed and peak demand in a billing
18 period. A higher load factor indicates efficient energy
19 usage and right sizing of equipment. The Company proposes
20 a two-tiered price structure in which the first applies to
21 usage at or below 164 kWh per kW and a lower rate for usage
22 above that threshold.
23 Q.Does Staff support this change in billing
24 structure?
25 A.Yes. In keeping with the theme of encouraging
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 21
STAFF
1 energy efficiency through rate design, load factor pricing
2 for irrigation customers is a proper tool. Idaho Power
3 would be the second utility in Idaho (Avista) that uses
5
4 this pricing mechanism for irrigators.
Q.What rate differential does the Company propose
7
6 in this proceeding?
A.For the second tier, representing higher load
8 factor, the Company proposes a 3% decrease in the energy
9 rate.
10
11
Q.Does Staff support this differential?
A.At this time, yes, though I would consider this
12 an introductory level differential at best. Agricultural
13 irrigation can be a capital intensive endeavor, and setting
14 the initial differentials aggressively may unduly harm a
15 significant share of customers. By sending the message
16 that efficient use of equipment will be rewarded, customers
17 can, over time, properly size equipment to meet its
18 operational demands and benefit from lower rates. I
19 encourage the Company and IIPA, with the Staff's
20 assistance, to further develop this rate design to achieve
21 its prescribed goals.
22 Q.You mentioned before that tiered rates act as an
23 excellent surrogate for TOU rates. Is that also the case
25
24 for irrigation customers?
A.Yes I believe so. While tiered rates address the
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 22
STAFF
1 magni tude of usage, TOU rates address the timing of usage.
2 This is especially important for a class such as
3 irrigators, who as a whole tend to have the highest usage
4 during the most expensive periods to serve load.
5
7
6 Schedule 24 customers?
Q.Has the Company previously offered TOU rates for
A.Yes. The Company recently had a pilot program
8 that offered optional TOU rates to irrigators under
9 Schedule 25. The pilot program terminated in September
10 2007. The Company has stated that with the rollout of
11 advanced meters throughout its service territory, it is
12 able to avoid costly metering equipment that would soon be
13 obsolete. Once the AMI system is fully rolled out, i would
14 anticipate TOU rates to again be offered to irrigation
16
15 customers.
Q.What is Staff's recommendation for Schedule 24
18
17 revenue requirement?
A.Based on Staff witness Hessing's Cost of Service
19 resul ts, the irrigation class revenue requirement is
21
20 $80,822,001, or 4.9% above current class revenue.
23
22 Schedule 24 customers?
Q.How do you propose to spread the 4. 9 % increase to
A.I recommend that the service charge be increased
24 5.0%, from $15.00 to $15.75. I also recommend that the
25 demand charge be increased approximately 4.9%, from $4.67
CASE NO. IPC-E-08-1010/24/08 LANSPERY, B. (Di) 23
STAFF
1 to $4.90. I propose increasing the non-summer energy rate
2 4.9%, and the summer low load factor and high load factor
4
3 rates 6.9% and 3.7%, respectively.
Q.Have you prepared an Exhibit demonstrating that
5 the proposed rates generate the recommended revenue for
6 Schedule 24?
7 A.Yes. Exhibit No. 137 confirms that the rates I
8 propose generate sufficient revenue given the Company's
10
9 billing determinants.
Q.Does this conclude your direct testimony in this
12
11 proceeding?
13
14
15
16
17
18
19
20
21
22
23
24
25
A.Yes, it does.
CASE NO. IPC-E-08-10
10/24/08 LANSPERY, B. (Di) 24
STAFF
Description
Service Charge
Mininum Serv Chg
Energy Charge
0-30 Summer
Over 300 Summer
Non-Summer
Total kWh
0-100 Summer
1001-20 Summer
;,20 Summer
0- 1 00 Non-Summer
1001-30 Non-Summer
;,30 Summer
Totai kWh
Total Billng, RS 1
Description
Service Charge
Mininum Serv Chg
En. Watch Hours
Summer
0-600 Non-Summer
600+ Non-Summer
Total kWh
0-100 Non-Summer
1001-30 Non-Summer
;,300 Summer
Total Billng, RS 4
Description
Service Charge
Mininum Serv Chg
On-Peak Summer
Mid-Peak Summer
Off-Peak Summer
0-600 N-Summer
Over 600 Non-Summer
Total kWh
0-100 Non-Summer
1001-300 Non-Summer
;,300 Summer
T otai Biling, RS 5
Total Residential Biling
1*) As Filed in Case No. IPC-E-08-Dl
IPUC Sla
Calculation 01 Proposed Rales
Slale of Idaho
Normallied 12.Monlhs Ending December 31, 2008
General Rale Case No. IPC.E.08.10
Residential Service
Schedule 1
(1)(2)(3)14)Current 06/01/08 06/01/08 Proposed
Usage Danskin Danskin Usage
Blocks Ratel)Revenue Blocks
4,690,881.6 $4.00 $18,763,52637,945.1 2.00 75,890
33,255,059 0.057793 19,259,810
865,747,765 0.065164 56,415,587
3,863,828,323 0.057793 223,302,230
5,062,831,47 298,977,627
844,196,199
271225,786
83,58,839
2,58,615,809
1.096,251,545
178,960,969
5,062,831,147
$317,817,043
Residential Service - Energy Watch Program
Schedule 4
(5)Proposed
Effective
Rate
(6)Proposed
Effective
Revenue
$4.00 $18,763,5262.00 75,890
0.057792
0.065850
0.079020
48,787,787
17,860,218
6,604,558
0.055799
0.061999
0.074399
144,442,174
67,966,50
13,314,517
298,975,753
$317,815,169
(1)(2)(3)14)(5)(6)06/01/08 06/01/08 Proposed Proposed Proposed
Danskin Danskin Usage Effective Effective
Use Ratel)Revenue Biocks Rate Revenue
754.5 $4.00 $3,018 $4.00 $3,0182.3 2.00 5 2.00 5
2,668 0.20 534 2,668 0.20 534
257,852 0.057793 14,902 257,852 0.057793 14,902
334,971 0.057793 19,359
370,375 0.057793 21,405
965,866 56,20
471,917 0.055799 26,332
200,564 0.061999 12,435
32,865 0.074399 2,445
56,648
$59,223 $59,671
Residential Service - Time-Of-Day Program
Schedule 5
(1)(2)(3)(4)(5)(6)06/01/08 06/01/08 Proposed Proposed Proposed
Danskin Danskin Usage Effective Effective
Use Ratell Revenue Blocks Rate Revenue
1,045.6 $4.00 $4,182 $4.00 $4,182
1.7 2.00 3 2.00 3
87.619 0.088701 7,72 87,619 0.088701 7,7248,776 0.065164 3,178 48,776 0.065164 3,178
165,536 0,048084 7,960 165,536 0,048084 7,960
661,906 0.057793 38,254
280,321 0,057793 16,201
45,776
1,289,934 73,365
661,906 0.055799 36,934
280,321 0.061999 17,380
45,776 0.074399 3,406
76.29
$77,550 $80,814
$317,953,817 $317,955,654
ExhìbìfNo. T35
Case No. IPC-E-08-10
B. Lanspery, Staff
10/24/08
IPUC Staff
Typical Monthly Biling Comparison
State of Idaho
Residential Service
Schedule 1
Current Rates V5, IPUC Staff Rates (Proposed)
Line Summer Non-Summer Avg Mth Cost -12 Mths
Energy Current Proposed Percent Current Proposed Percent Current Proposed Percent
No kWh Revenue Revenue Difference Revenue Revenue Difference Revenue Revenue Difference
1 0 4.00 4.00 0,00%4,00 4,00 0,00%4.00 4.00 0.00%
2 100 9.78 9,78 0,00%9.78 9.58 -2,04%9.78 9.63 -1.53%
3 200 15.56 15,56 0,00%15.56 15,16 -2,57%15.56 15.26 -1.93%
4 300 21.34 21,34 0,00%21.4 20,74 -2,81%21.34 20,89 -2.11%
5 400 27.86 27,12 -2,66%27,12 26,32 -2,95%27.31 26,52 -2.89%
6 500 34.37 32,90 -4,28%32,90 31.90 -3,04%33.27 32,15 -3.37%
7 600 40,89 38.8 -5.40%38,68 37.48 -3,10%39,23 37,78 -3,70%
8 700 47.41 44.45 -6,24%44.46 43,06 -3,15%45.20 43.41 -3,96%
9 800 53.92 50,23 -6,84%50.23 48,64 -3,17%51.5 49.04 -4.13%
10 900 60.44 56,01 -7,33%56,01 54,22 -3,20%57.12 54.67 -4.29%
11 1,000 66.95 61.9 -7,71%61.79 59,80 -3,22%63,08 60.30 -4.41%
12 1,050 70.21 65,08 -7,31%64,68 62,90 -2.75%66.06 63.45 -3,95%
13 1,100 73.47 68,38 -6,93%67.57 66.00 -2.32%69.05 66.60 -3,55%
14 1,200 79,99 74,96 -6,29%73,35 7220 -1.57%75,01 7289 -2,83%
15 1,300 86.50 81.55 -5,72%79,13 78.40 -0.92%80.97 79,19 -2,20%
16 1,400 93,02 88,13 -5.26%84,91 84.60 -0,37%86,94 85.48 -1.68%
17 1,500 99,54 94,72 -4.84%90,69 90.80 0,12%92,90 91.78 -1.21%
18 2,000 132,12 127,64 -3.39%119.59 121.80 1.85%122.72 123,26 0.44%
19 2,500 164,70 167,15 1.49%148.48 152.80 2,91%152,54 156.39 2.52%
20 3,000 197,28 206,66 4,75%17738 183.80 3,62%182.36 189,52 3,93%
21 4,000 262.45 285.68 8.85%235,17 245.80 4.52%241.99 255,77 5.69%
22 5,000 327,61 364,70 11.32%292,97 307.80 5,06%301.63 322.Q 6,76%
Exhibit No. 136
Case No. IPC-E-08-10
B. Lanspery, Staff
10/24/08
Calculation of Proposed Rates
State of Idaho
Normalized 12.Months Ending December 31. 2008
General Rate Case No. IPC.E.08.10
Agricultural Irrigation Service
Schedule 24 Secondary
(1)(2)(3)(4)(5)
06/01/08 06/01/08 Proposed Proposed
Line Danskin Danskin Effective Effective
No Description Use Rate(.)Revenue Rate Revenue
1 Bils-In Season 60,958.2 $15.00 $914.373 $15.75 $960,092
2 Bils-Out Season 135,071,0 3.00 405,213 3.00 405,213
3 Minimum Charges 502,7 1.50 754 1.50 754
Demand Charge
4 Total In-Season 3.545,678 4.67 16,558.316 4.90 17.373.822
5 Total Out-Season 1,928,580 0.00 0 0.00 0
6 Total kW 5.474.258 16,558.316 17,373,822
Energy Charge
7 First 164 kWh per kW 488,124,64 0.036409 17,772.124 0.038907 18.991.459
8 All Other kWh In-Season 793.042.109 0.036409 28,873.870 0.037774 29.956.373
9 Total Out-Season 270.156,088 0.046347 12.520.924 0,048618 13.134.449
10 Total kWh 1.551.322,661 59,166.918 62,082,281
11 Total Billng $77.045.574 $80,822.162
(.) As Filed in Case No. IPC-E-08-01
Exhibit No. 137
Case No. IPC-E-08-10
B. Lanspery, Staff
10/24/08
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF OCTOBER 2008,
SERVED THE FOREGOING DIRECT TESTIMONY OF BRYAN LANSPERY, IN
CASE NO. IPC-E-08-10, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
BARTON L KLINE
LISA D NORDSTROM
DONOV AN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: bklìneCfidahopower.com
InordstromCfidahopower .com
dwalkerCfidahopower .com
PETER J RICHARDSON
RICHARDSON & O'LEARY
PO BOX 7218
BOISE ID 83702
E-MAIL: .peterCfrichardsonandoleary.com
RANDALL C BUDGE
ERIC L OLSEN
RACINE OLSON NYE ET AL
PO BOX 1391
POCATELLO ID 83204-1391
E-MAIL: rcbCfracinelaw.net
eloCfracìnelaw.net
MICHAEL L KURTZ ESQ
KURT J BOEHM ESQ
BOEHM KURTZ & LOWRY
36 E SEVENTH ST STE 1510
CINCINATI OH 45202
E-MAIL: mkurzCfBKLlawfrm.com
kboehmCfBKLlawfirm.com
BRAD MPURDY
ATTORNEY AT LAW
2019 N 17TH ST
BOISE ID 83702
E-MAIL: bmpurdyCfhotmail.com
JOHN R GALE
VP - REGULATORY AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rgaleCfidahopower.com
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL: dreadingCfmindsprìng.com
ANTHONY Y ANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44140
E-MAIL: yanelCfattbì.com
KEVIN HIGGINS
ENERGY STRATEGIES LLC
PARKS IDE TOWERS
215 S STATE ST STE 200
SALT LAKE CITY UT 84111
E-MAIL: khigginsCfenergystrat.com
LOTH COOKE
ARTHUR PERRY BRUDER
UNITED STATE DEPT OF ENERGY
1000 INDEPENDENCE AVE SW
WASHINGTON DC 20585
E-MAIL: lot.cookeCfhg.doe.gov
arhur. bruderCfhg .doe. gOY
CERTIFICATE OF SERVICE
DWIGHT ETHERIDGE
EXETER ASSOCIATES INC
5565 STERRTT PLACE, SUITE 310
COLUMBIA MD 21044
E-MAIL: detheridgeaYexeterassociates.com
DENNIS E PESEAU, Ph.D.
UTILITY RESOURCES INC
1500 LIBERTY STREET SE, SUITE 250
SALEM OR 97302
E-MAIL: dpeseauaYexcìte.com
CONLEY E WAR
MICHAEL C CREAMER
GIVENS PURSLEY LLP
601 WBANNOCKST
PO BOX 2720
BOISE ID 83701-2720
E-MAIL: cewaYgivenspursley.com
KEN MILLER
CLEAN ENERGY PROGRAM DIRECTOR
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 83701
E-MAIL: kmìleraYsnakeriveralliance.org
~.KGd
SECRETARY
CERTIFICATE OF SERVICE