20081024Lobb Direct.pdf

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2008 OCT 2.4 PH 3: 28
IDAHO PUBLIC UTILITIES COMMISSIO~AHO p~eU~i"\ON
UTiLiTIES COiiIM¡v~ l
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 RANDY LOBB
IDAHO PUBLIC UTILITIES COMMISSION
OCTOBER 24, 2008
1 Q.Please state your name and business address for
2 the record.
3 A.My name is Randy Lobb and my business address is
4 472 West Washington Street, Boise, Idaho.
5 Q.By whom are you employed?
6 A.I am employed by the Idaho Public Utilities
7 Commission as Utilities Division Administrator.
8 Q.What is your educational and professional
9 background?
10 A.I received a Bachelor of Science Degree in
11 Agricultural Engineering from the University of Idaho in
12 1980 and worked for the Idaho Department of Water Resources
13 from June of 1980 to November of 1987. I received my Idaho
14 license as a registered professional Civil Engineer in 1985
15 and began work at the Idaho Public Utilities Commission in
16 December of 1987. My duties at the Commission currently
17 include case management and oversight of all technical
18 Staff assigned to Commission filings. I have conducted
19 analysis of utility rate applications, rate design, tariff
20 analysis and customer petitions. I have testified in
21 numerous proceedings before the Commission including cases
22 dealing with rate structure, cost of service, power supply,
23 line extensions, regulatory policy and facility
24 acquisitions.
25 Q.What is the purpose of your testimony in this
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
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1 case?
2 A.The purpose of my testimony is to introduce Staff
3 wi tnesses, identify issues addressed by each and discuss
4 the various policy issues associated with this case.
5 Q.Could you please describe Staff's filing in this
6 case?
7 A.Yes. Staff Auditor Cecily Vaughn begins with
8 actual audited cost data for the historical 12-month base
9 period of January 1,2007 through December 31,2007. She
10 then updates the historical data to reflect changes in
11 investment and expense levels through December 31, 2008.
12 The resulting annual revenue requirement increase proposed
13 by Staff is approximately $9.68 million for an overall
14 increase of 1.44%.
15 The revenue requirement proposal is based on her
16 recommendations for expense adjustments, the rate base
17 additions and expense adjustments of Staff accounting
18 witness Leckie, the various expense adjustments of Staff
19 accounting witness Nobbs, the power supply expense
20 adjustment of Staff Engineering witness Sterling and the
21 cost of capital recommendations of Staff accounting witness
22 Carlock.
23 Ms. Vaughn is responsible for summarizing all
24 revenue requirement adj ustments in the jurisdictional
25 separations study model showing accounting and allocation
CASE NO. IPC-E-08-10
10/24/08 LOBB, R. (Di)
STAFF
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1 of Company costs. In addition, Ms. Vaughn specifically
2 discusses the Company's proposed treatment of Adjustment
3 for Funds Used During Construction (AFUDC) associated with
4 Hells Canyon relicensing construction work in progress
5 (CWIP). Ms. Vaughn recommends an adjustment of $2.9
6 million to reflect a more accurate recovery in rates of
7 annual AFUDC accruals. Ms Vaughn also discusses her
8 recommended reduction of $885,000 in annual P-card
9 expendi tures and her $653,000 pass through to customers of
the Federal Energy Regulatory Commission (FERC)credit.
Finally,Ms.Vaughn addresses the Company proposal to
increase various 2007 capital and expense accounts using a
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13 compound annual growth rate (CAGR) escalator. Ms. Vaughn
14 recommends reducing the Company's proposed increase in
15 expense accounts from $15.9 million to $1.75 million and
16 reducing materials/supplies related ratebase for an
17 additional revenue requirement decrease of $780,000.
18 Senior Staff Auditor Joe Leckie discusses various
19 adjustments to O&M expenses and verifies the Company's rate
20 base calculation. Mr. Leckie accepts the Company's
21 calculation of rate base using the 13-month average,
22 including Company proposed plant additions through December
23 31, 2008, annualizing of major plant additions and
24 escalation in plant accounts under $2 million to arrive at
25 a recommended rate base level of approximately $2.1
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
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1 billion.
2 Mr. Leckie also proposes to limit salary expense
3 to known and measureable changes through 2008 resulting in
4 a reduction in Company proposed revenue requirement of $2.9
5 million. Mr. Leckie further recommends reductions in
6 incentive payments ($3.2 million) and removes the 2009
7 Structured Salary adjustment (SSA) ($3.0 million) .
8 Additionally, he recommends adjustments in miscellaneous
9 revenue, depreciation expense, legal fees and interest paid
10 on deferred director fees to further reduce the Company's
11 request by $2.1 million. Finally, Mr. Leckie discusses the
12 Company's limited application of cost containment and the
13 need to improve cost reduction programs.
14 Staff Auditor John Nobbs addresses various 900
15 Series account expense adjustments to reflect the
16 extraordinary level of expenses incurred in the historic
17 base year. Mr. Nobb's adjustments reduce the Company's
18 recommended test year revenue requirement by $667,000.
19 Senior Staff Engineer Rick Sterling is
20 responsible for review of the Company's Aurora power supply
21 model used to calculate annual net power supply costs. Mr.
22 Sterling proposes an adjustment in the natural gas price
23 forecast used by the Company in its modeling. The results
24 of the forecast modification are increases in fuel
25 expenses, purchase power costs and opportunity sales for an
CASE NO. IPC-E-08-1010/24/08 LOBB , R . (D i ) 4
STAFF
1 overall decrease in Company proposed annual net power
2 supply expenses of $11.2 million.
3 Deputy Administrator and Audit Section Supervisor
4 Terri Carlock addresses cost of capital and return on
5 equi ty . Ms. Carlock recommends a return on equity of
6 10.25% and a capital structure of approximately 51% debt
7 and 49% equity for an overall recommended rate of return of
8 8.057%.
9 Senior Staff Engineer Keith Hessing addresses
10 class cost of service (COS) methodology, class revenue
11 spread and the power cost adjustment (PCA) load growth
12 adjustment component. Mr. Hessing recommends that the
13 Commission accept the 3cp/12cp cost of service methodology
14 proposed by the Company. Using the jurisdictional
15 allocation study modified to reflect Staff's proposed
16 adjustments, Mr. Hessing applies the cost of service (COS)
17 study results to recommend class revenue requirement
18 changes ranging from no change for some classes where COS
19 suggests declines are warranted to a 4.9% cap on the
20 increase for the other classes where larger increases are
21 suggested by the COS. Mr. Hessing's recommendation of no
22 increase for the residential class, when combined with his
23 revenue recommendations for the other classes, generates
24 Staff's recommended overall revenue requirement increase of
25 1.44 percent. Mr. Hessing further recommends that the load
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
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1 growth adjustment in the PCA remain unchanged from that
2 approved by settlement in Case No. IPC-E-07-08 until the
3 Commission decides the issue in Case No. IPC-E-08-19.
4 Staff Economist Bryan Lanspery addresses issues
5 associated with residential rate design. After a review of
6 potential rate design alternatives and the Company's
7 proposal, Mr. Lanspery recommends that the Commission adopt
8 a three block tiered rate design with block breaks at 1000
9 and 2000 kWh per month in winter months and 1000 kWh and
10 3000 kWh in summer months. Mr. Lanspery determines that
11 the current customer charge of $4.0 per month combined with
12 revenue generated under his summer and winter three tiered
13 energy rate proposal will provide the current annual
14 revenue requirement for the residential class as
15 recommended by Staff. Mr. Lanspery also supports the
16 Company's recommendation to adopt a load factor based rate
17 design for irrigation customers.
18 Staff economist Matt Elam addresses rate design
19 for all non residential customer classes except irrigation.
20 Mr. Elam evaluates and accepts the rate design proposals of
21 the Company for Schedules 7, 9 and 19 as adjusted for Staff
22 recommended class revenue requirement. While Mr. Elam
23 recommends no change in the Schedule 7 customer charge, he
24 specifically supports the Company recommendation for a year
25 round two tiered energy rate. He also specifically
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
6
1 supports the Company recommendation to implement time-of-
2 use (TOU) rates for Schedule 9 commercial customers.
3 Finally, Mr. Elam evaluates the effects of TOU rates on
4 large industrial Schedule 19 customers and supports the
5 Company proposal to increase TOU energy rate differentials .
6 Staff Economist Lynn Anderson addresses the
7 demand side management (DSM) expenditures made by the
8 Company over the last two years. Mr. Anderson recommends
9 that the Commission defer approval of the Company's DSM
10 program expenditures from the DSM tariff rider for calendar
11 years 2003 through 2007 until sufficient information is
12 provided to evaluate prudency. Mr. Anderson specifies what
13 information should be provided in terms of program specific
14 DSM expenditures and resultant energy savings for
15 presentation in future DSM or general rate proceedings.
16 Finally, Consumer Investigators Marilyn Parker
17 and Curtis Thaden address a broad range of consumer issues.
18 Ms. Parker concludes that the Company has done a reasonable
19 job of reducing overall customer complaints and improving
20 overall customer service. She specifically recommends that
21 the Company be directed to re-evaluate the convenience fees
22 it charges for electronic payments.
23 Mr. Thaden provides information on customer
24 income levels and employment levels and evaluates the low
25 income programs provided by the Company.
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
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Q.What has been your role in this case?
A.My role as Staff Administrator has been to
3 oversee the preparation of the Staff case with respect to
4 identification of issues, coordination of positions on
5 those issues and development of Staff policy.
6 Q.What are the important policy issues in this
7 case?
A.In my opinion, the most important policy issues8
9 include establishing the rate case test year, identifying
10 revenue requirement adj ustments, assigning cost of service
11 responsibility and applying appropriate rate design.
12 TEST YEA
13 Q.What is the Company's proposed test year in this
14 case?
A.The Company proposes to use a 12 -month test year15
16 ending December 31, 2008.
17 Q.Does this represent a change from test year
18 proposals made by the Company in past cases?
19 Yes, it does represent a change in terms of theA.
20 methods used to establish test year levels for revenues,
21 expenses, investment totals and determine annual revenue
22 requirement.
23
24
Q.Please explain.
A.In past rate cases, the Company has used a
25 variety of approaches to establish what it believes to be a
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
8
1 representative annual revenue requirement recoverable
2 through rates. It has used 12 months of actual historic
3 cost data updated for known and measurable changes. It has
4 proposed a split test year that utilizes 6 months of actual
5 booked costs and 6 months of forecasted or budgeted costs,
6 wi th actual cost provided before hearing, to establish
7 annual revenue requirement and set rates. In its last
8 case, the Company proposed a 12-month test period using
9 fully budgeted costs.
10 In this case, the Company has proposed to start
11 with 12 months of actual 2007 booked costs and then update
12 those costs by including known and measurable expense
13 changes, annualizing for partial year expenditures,
14 annualizing for major plant additions as if they were in
15 service for the entire year and finally, inflating a
16 variety of expense and capital accounts based on the annual
17 growth rate in those accounts over prior years.
18 Q.Why has the Company continually changed the
19 method by which it determines annual revenue requirement?
20 A.The Company argues that the methodology changes
21 are necessary to reduce the effects of "regulatory lag" and
22 improve the Company's ability to earn its authorized
23 return.
24 Q.Wha tis " regulatory lag"?
25 A.Regulatory lag generally refers to the delay
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di)
STAFF
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1 between when the Company actually requests cost recovery
2 and when new Commission approved rates become effective to
3 recover those costs.
4 Q.How does the Company proposed test year in this
5 case address "regulatory lag"?
6 A.The Company's proposed test year addresses
7 regulatory lag in the following ways:
8 1) It updates actual account expenditures
9 incurred during a historical base test period to reflect
10 known and measurable future changes through year-end 2008.
11 Salaries are escalated through 2009.
12
13 expenditures to reflect the fact that costs will be
2) It annualizes partial year test period
14 incurred in the future for the entire year.
15 3) It includes forecasted plant additions to be
16 completed before December 31, 2008.
17
18 million) completed before December 31, 2008 as if they were
4) It annualizes major plant additions (over $2
19 in service for the entire year.
20 5) It escalates various expense and capital
21 accounts by a compound annual growth rate (CAGR) based on
22 the growth in that account in prior years.
23 6) It forecasts variable power supply costs
24 based on estimated 2008 average customer totals.
25 Q.What is Staff's position with respect to the
CASE NO. IPC-E-08-1010/24/08 LOBB, R . (D i) 10
STAFF
1 Company's proposed test year and adjustments?
2 A.Staff generally accepts the Company proposed 2008
3 test year that begins with actual 2007 calendar year costs
4 updated through December 31, 2008. There are notable
5 exceptions associated with forecast methodology. Items 1
6 and 2 listed above dealing with traditional known and
7 measurable changes and annualization of existing partial
8 year costs have been accepted in the past by the Commission
9 and are supported by Staff in this case. Staff has
10 recommended that salary changes be limited to year-end
11 2008.
12 Staff also supports the inclusion of maj or plant
13 addi tions (in excess of $2 million) expected to be
14 completed prior to December 31, 2008 and annualizing such
15 plant as if it were in service for the entire year. While
16 this adjustment has been allowed by the Commission in the
17 past on a proj ect by proj ect basis for very large plant
18 additions, it has not been approved across the board for
19 proj ects as small as $2 million. The Commission has
20 historically required expense reducing or revenue producing
21 offsets to match proj ect cost recovery in rates. Although
22 the Company has included a revenue producing impact for
23 some plant in this case, it has not included any impact for
24 others.
25 Staff supports some but not all of the Company's
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di) 11
STAFF
1 proposed escalation of expense and capital accounts on the
2 basis of a CAGR. Staff witness Vaughn addresses the
3 Company's proposal and recommends that escalation be
4 limi ted to select accounts with more reasonable increases.
5 The effect of this recommendation is an annual revenue
6 requirement that is $15.01 million less than that proposed
7 by the Company.
8 Q.Company witness Gale states in testimony that the
9 methodology used by the Company to escalate historic
10 expense and capital account totals was consistent with
11 input received by Staff and others in workshops addressing
12' forecasted test years. Why then does Staff oppose the
13 Company's full application of this methodology?
14 A.Staff agrees that the methodology used by the
15 Company in this case, an escalator applied to historic
16 account totals, is superior to the fully budgeted future
17 test year proposed by the Company in its last general rate
18 case. The impact of the forecast in this case can at least
19 be evaluated. However, Staff does not believe that the
20 Company's choice of escalator or the accounts chosen for
21 escalation reasonably meet the "known and measureable" cost
22 standards.
23 Q.Can any forecasted increase meet the "known and
24 measurable" cost standard?
25 A.I believe it is very difficult to meet the known
CASE NO. IPC-E-08-10
10/24/08 LOBB, R. (Di) 12
STAFF
1 and measurable standard using any budget projection,
2 forecast or estimate of future costs. However, Staff has
3 tried to balance the need for timely cost recovery with the
4 Commission's obligation to audit and verify that costs have
5 been or will be reasonably incurred. That is why Staff has
6 agreed to support including major capital investment in
7 rates before some of the costs are actually incurred and
8 before the plant is actually in service. These maj or
9 investments are scheduled to be online by December 31,
10 2008, to be used and useful when rates are effective.
11 Staff has also agreed to go beyond the 13 month average
12 rate base for major plant additions to include plant in
13 rate base as if it had been in service for the entire year.
14 Furthermore, Staff has agreed to use forecasted 2008
15 customer totals to establish annual variable power supply
16 costs. Finally, Staff has agreed to escalate capital
17 accounts and some expense accounts using the Company
18 proposed CAGR. While Staff does not agree with all of the
19 recommended forecasted increases, it has agreed to
20 cautiously move beyond the strict interpretation of what
21 has traditionally been "known and measurable" .
22 Q.Why does Staff agree with the Company's proposal
23 to account for 2008 capital expenditures?
24 A.Staff recognizes the impact of growing load on
25 Company expenditures and the need to include major plant
CASE NO. IPC-E- 08 - 1010/24/08 LOBB, R. (Di) 13
STAFF
1 additions in rates on a more timely basis. Consequently,
2 Staff supports the Company's proposal for treatment of 2008
3 plant additions in excess of $2 million. The expected
4 expenditures and the timeline for these additions are
5 generally known and measureable.
6 Staff has also agreed in this case to accept the
7 Company's proposal to escalate (at 6%) 2008 plant additions
8 with the exception of Staff witness Vaugh's recommended
9 reduction for escalated materials and supplies in ratebase,
10 of less than $2 million. Staff does not believe that this
11 adjustment necessarily reaches the same level of need nor
12 is it as justified from a known and measurable standpoint.
13 Nevertheless, Staff recognizes the smaller capital
14 requirements associated with growing load and will continue
15 to evaluate the merits of escalating these capital accounts
16 in future rate cases. Staff witness Leckie addresses this
17 issue further in his testimony.
18 STAFF ADJUSTMNTS
19 Q.Staff has recommended a reduction of $56.9
20 million in the annual revenue requirement proposed by Idaho
21 Power Company. In what areas were the adjustments made?
22 A.The annual revenue requirement adjustments were
23 primarily made in the following areas.
24 1) A decrease of $16.9 million due to a
25 recommended reduction in return on equity from
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di) 14
STAFF
1
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7
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10
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11.25% to 10.25%.
2) A decrease of $15.01 million due to
reductions in the Company's proposed CAGR
O&M/materials supplies account escalation.
3) A decrease of $11.2 million in proposed
variable power supply cost.
4) A $7.3 million adjustment that includes an
increase in miscellaneous revenues, a reduction
in legal fees, miscellaneous expenses and P-card
expenses, a reduction in depreciation expense, a
reduction in annual AFUDC recovery associated
with Hells Canyon relicensing and spreading of a
prior FERC credit.
5) A decrease of $4.6 million due to reductions
in 2008 salary adjustments, a reduction in
anticipated 2008 employee and executive salary
incentives and elimination of forecasted 2009
salary increases.
Q.You mention above a reduction in the Company
20 proposed adjustment for funds used during construction
21 (AFUDC) associated with Hells' Canyon relicensing. Does
22 Staff oppose the recovery of Hell's Canyon AFUDC in this
23 case?
24 A.No. In fact Staff agrees that AFUDC recovery
25 through rates is justified in this case. While Staff would
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di) 15
STAFF
1 not normally recommend recovery of any proj ect cost before
2 the project is completed and expenditures appropriately
3 reviewed, the magnitude of deferred construction work in
4 progress (CWIP) costs, the magnitude of AFUDC associated
5 wi th those costs and the length of the relicensing process
6 make it necessary in this instance.
7 Staff agrees with the Company that the current
8 AFUDC accrual on an annual basis should be recovered
9 through rates as an expense rather than allowed to accrue
10 in the deferred account for later recovery through rates as
11 a capital investment. The AFUDC adjustment proposed by
12 Staff simply reflects what Staff believes is a more
13 accurate estimate of annual AFUDC accrual. Staff also
14 believes that AFUDC accrual on Hells Canyon relicensing
15 CWIP should cease after 2009 with a filing by the Company
16 to incorporate all project costs in rates. Staff witness
17 Vaughn discusses the AFUDC adjustment further in her
18 testimony.
19 Q.How were the areas and magnitude of other Staff
20 adjustments determined?
21 A.The areas for adjustment were identified as a
22 result of extensive Staff audit of Company books and an
23 evaluation of the methodology and justification used by the
24 Company to update actual 2007 booked costs to the 2008 test
25 year levels.
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di) 16
STAFF
1 Staff's overall approach in developing revenue
2 requirement is to identify expenses and investment that are
3 inappropriate or otherwise excessive and should not be
4 subject to recovery from customers. Additionally, Staff
5 evaluated the methodology used by the Company to increase
6 or adjust actual costs to reflect future costs that are
7 expected to be incurred. Staff has tried to balance the
8 need for timely cost recovery with the need to assure that
9 costs are appropriately incurred, and capital investments
10 are both used and useful in providing utility service and
11 known and measurable for recovery through rates.
12 The specific rationale and justification for each
13 adjustment is further addressed in the testimony of
14 individual Staff witnesses.
15 Q.Do you believe the Staff recommendation for a
16 1.44% revenue requirement increase in this case balances
17 the needs of the Company with the needs of its customers?
18 A.Yes, I do. While Staff has taken a critical look
19 at all underlying Company expenses, the proposed
20 adjustments have been limited almost entirely to return on
21 equity and forecasted increases in expenses for 2008. In
22 fact, except for the CAGR adjustment in materials and
23 supplies addressed by Staff witness Vaughn, Staff
24 recommended no adjustments to Company proposed capital
25 additions. At the same time, Staff has agreed to a broad
CASE NO. IPC-E-08-1010/24/08 . LOBB, R. (Di) 17
STAFF
1 range of adjustments to the historical base year in
2 developing the 2008 test year designed to allow more timely
3 recovery of capital investment and expenses. These
4 previously discussed adjustments include annualized capital
5 additions forecasted for completion in 2008, CAGR
6 escalation of capital plant additions of less than $2
7 million, CAGR escalation of O&M expense accounts, the use
8 of variable power supply costs using forecasted 2008 loads
9 and recovery of annually accumulated AFUDC associated with
10 Hell's Canyon relicensing.
11 I believe Staff's recommendations serve customers
12 by limiting rate recovery to a reasonable level of Company
13 costs. While not moving to a fully forecasted test year as
14 recommended by the Company, Staff has agreed to cautiously
15 move from the traditional definition of known and
16 measureable adj ustments of historical data to allow test
17 year adjustments based on estimates and forecasts.
18 COST OF SERVICE
19 Q.What other policy positions has the Staff taken
20 in this case?
21 A.The remaining policy issues deal primarily with
22 class cost of service allocation methodology, rate spread
23 among the classes and rate design. Staff's positions on
24 these issues were developed in conjunction with the
25 technical Staff who address those issues in testimony filed
CASE NO. IPC-E- 08 - 10
10/24/08 LOBB, R. (Di) 18
STAFF
1 in this case and are discussed by those witnesses.
2 Generally, it is the Staff's policy to maintain consistency
3 between rate cases with regard to power supply,
4 jurisdictional allocations and class cost of service
5 methodologies. Staff believes its methodologies in this
6 case for these functions adhere to that policy.
7 With respect to cost of service, Staff believes
8 that the 3cp/12cp methodology proposed by the Company
9 reasonably allocates costs to the various classes. Staff
10 believes, and Mr. Hessing explains in his testimony, that
11 the small changes in this methodology over that last
12 approved by the Commission in Case No. IPC-E-03-13 is
13 justified by more accurately assigning cost based on
14 causation. Specifically, the recommended cost of service
15 study provides a more accurate allocation of production
16 costs based on how production plant is used, when it is
17 used and the value of the plant at the time it is used.
18 With respect to revenue spread among the classes,
19 Staff believes that cost of service is an inexact science
20 to be used as a guide in setting class revenue requirement.
21 That is why Staff witness Hessing uses cost of service in
22 his proposal to move toward, but not all the way to, cost
23 of service as indicated by the study. Mr. Hessing's
24 proposal provides rate stability by limiting revenue
25 requirement changes within each class to a relatively small
CASE NO. IPC-E-08-10
10/24/08 LOBB, R. (Di) 19
STAFF
1 range. Although cost of service in conjunction with
2 Staff's proposed revenue requirement could have justified a
3 reduction in residential rates, it was determined that no
4 increase was most appropriate. This approach recognizes
5 the potential bill reducing impact on residential customers
6 of the tiered rate design and the moderating effect on
7 other classes of no change in the residential revenue
8 requirement.
9 RATE DESIGN
10 Q.What is Staff's policy with respect to rate
11 design within the customer classes?
12 A.Staff's policy with respect to rate design is to
13 balance the need to send appropriate price signals with the
14 need to have relatively stable rates and appropriate
15 revenue recovery.
16 Q.What is Staff's position with respect to the rate
17 design recommendations of the Company?
18 A.Staff believes the Company has done a good job of
19 proposing customer rates that meet the Staff objectives
20 described above. In fact, the Company proposal to
21 establish residential tiered rates year round and increase
22 the first energy block from 300 to 600 kWh per month was
23 quite reasonable. Staff also agrees with the Company's
24 rate design proposals based on irrigation load factor and
25 the Time of Use (TOU) rate proposed for large commercial
CASE NO. IPC-E-08-10
10/24/08 LOBB, R. (Di) 20
STAFF
1 customers. These rate design proposals recognize the
2 principal that rates should follow costs without
3 sacrificing rate stability. With adjustments for its
4 revenue requirement recommendation, Staff supports all of
5 the rate design recommendations of the Company with the
6 exception of the Schedule 1 residential rate and customer
7 charges for Schedule 7.
8 Q.Why has Staff proposed a different rate structure
9 for the residential customer class?
10 A.Staff simply believes that we can and should do
11 more to send the most appropriate price signal to as many
12 residential customers as possible. That is why Staff has
13 made the three tiered inverted block rate proposal to
14 provide at least two break points where rates change to
15 reflect higher production costs. Certainly, time of use
16 (TOU) rates made available with the installation of
17 automated meters will allow the Company to send a broad
18 range of price signals to customers that better reflect
19 cost of service. The multiple tiered rate structure serves
20 a similar role until TOU rates are implemented. Staff
21 witness Lanspery provides greater detail on Staff's
22 residential rate design recommendation.
23 Q.Does this conclude your direct testimony in this
24 proceeding?
25 A.Yes, it does.
CASE NO. IPC-E-08-1010/24/08 LOBB, R. (Di) 21
STAFF
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF OCTOBER 2008,
SERVED THE FOREGOING DIRECT TESTIMONY OF RANDY LOBB, IN CASE
NO. IPC-E-08-1O, 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: bkline(iidahopower.com
Inordstrom(iidahopower .com
dwalker(iidahopower.com
PETER J RICHARDSON
RICHARDSON & O'LEARY
PO BOX 7218
BOISE ID 83702
E-MAIL: peter(irichardsonandoleary.com
RANDALL C BUDGE
ERICLOLSEN
RACINE OLSON NYE ETAL
PO BOX 1391
POCATELLO ID 83204-1391
E-MAIL: rcb(iracinelaw.net
elo(iracinelaw.net
MICHAEL L KURTZ ESQ
KURT J BOEHM ESQ
BOEHM KURTZ & LOWRY
36 E SEVENTH ST STE 1510
CINCINATI OH 45202
E-MAIL: mkurz(iBKLlawfrm.com
kboehm(iBKLlawfirm.com
BRAD MPURDY
ATTORNEY AT LAW
2019 N 17TH ST
BOISE ID 83702
E-MAIL: bmpurdy(ihotmail.com
JOHN R GALE
VP - REGULATORY AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rgale(iidahopower.com
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL: dreading(imindspring.com
ANTHONY Y ANKEL
29814 LAK ROAD
BAY VILLAGE OH 44140
E-MAIL: yanelCfattbi.com
KEVIN HIGGINS
ENERGY STRATEGIES LLC
PARKS IDE TOWERS
215 S STATE ST STE 200
SALT LAKE CITY UT 841 1 1
E-MAIL: khiggins(ienergystrat.com
LOTH COOKE
ARTHUR PERRY BRUDER
UNITED STATE DEPT OF ENERGY
1000 INDEPENDENCE AVE SW
WASHINGTON DC 20585
E-MAIL: lot.cooke(ihq.doe.gov
arhur. bruder(ihq .doe. gOY
CERTIFICATE OF SERVICE
DWIGHT ETHERIDGE
EXETER ASSOCIATES INC
5565 STERRTT PLACE, SUITE 310
COLUMBIA MD 21044
E-MAIL: detheridgeCfexeterassociates.com
DENNIS E PESEAU, Ph.D.
UTILITY RESOURCES INC
1500 LIBERTY STREET SE, SUITE 250
SALEM OR 97302
E-MAIL: dpeseauCfexcite.com
CONLEY E WARD
MICHAEL C CREAMER
GIVENS PURSLEY LLP
601 WBANNOCKST
PO BOX 2720
BOISE ID 83701-2720
E-MAIL: cew(igivenspursley.com
KEN MILLER
CLEAN ENERGY PROGRA DIRECTOR
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 83701
E-MAIL: kmiler(isnakeriverallance.org
JJ~SECRETARY -
CERTIFICATE OF SERVICE