HomeMy WebLinkAbout20080805Waites Direct.pdfBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
A CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY TO )
INSTALL ADVANCED METERING )
INFRASTRUCTURE ("AMI") TECHNOLOGY )
THROUGHOUT ITS SERVICE TERRITORY )
)
CASE NO. IPC-E-08-16
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 Utilities 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 Utilities conference.
20 Q.Please describe your business experience
21 with Idaho Power Company.
22 A.I became employed wi th 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 detail the costs
13 associated with the Advanced Metering Infrastructure
14 ("AMI") deploYment ("Proj ect") .
15 Q.Please describe the costs you will be
16 addressing in your testimony.
17 A.First, I will address the capital costs
18 associated with the three-year deploYment of the AMI
19 Proj ect. Next, I will describe the Company's request to
20 accelerate the depreciation of the existing meters.
21 Finally, I will describe the Company's estimate of the
22 quantifiable Operations and Maintenance ("O&M") savings as
23 a result of the deploYment.
WAITES, DI 2
Idaho Power Company
1 Q.What are the total capital costs associated
2 with the Project?
3 A.The total capital costs associated with the
4 Project are $70.9 million,as seen on Exhibi t No.4.
5 Q.Is the Company providing a capital cost
6 "commitment"estimate for the capital costs of the Project?
7 A.Yes,the Company is willing to commit to the
8 Commission that the total cost of the Proj ect to be
9 included in the Company's rate base will not exceed $70.9
10 million ("Commitment Estimate"). This amount includes
11 Information Technology ("IT") expenditures, meter costs,
12 stations equipment expenses, plus additional costs the
13 Company knows it will incur but cannot precisely quantify
14 at this time. These additional costs include, but are not
15 limited to, sales taxes, customer growth, fuel charges,
16 additional IT hardware, software, and personnel time, and
17 the cost of Idaho Power oversight of the Proj ect. The
18 Commitment Estimate also covers contingencies, such as
19 change orders and customer growth. However, the Commitment
20 Estimate is subject to adjustment to account for
21 documented, legally-required equipment changes and material
22 changes in assumed escalation rates or growth rates not
23 foreseen at the time of the Application.
WAITES, DI 3
Idaho Power Company
1 Q.Please describe the IT expenditures included
2 in the Commitment Estimate.
3 A.The total IT expenditures associated with
4 the AMI Project and allocated to the Idaho jurisdiction are
5 $1,631,736, as shown on Exhibit No.4. These expenses are
6 related to the hardware and software installations and the
7 testing and interface development of the Meter Data
8 Management System and the TWACS Net Server. These expenses
9 include the costs of servers, licenses, sales tax, and
10 labor with payroll loadings.
11 Q.Are there any costs included in the IT
12 expenditures that the Company has identified as those that
13 cannot be precisely quantified?
14 A.No. Although the IT expenditures include
15 sales tax, the purchase of the products will occur during
16 the year 2008, when the sales tax is known and measurable.
17 Q.Please describe the meter costs included in
18 the Commitment Estimate.
19 A.The meter costs included in the Commitment
20 Estimate associated with the AMI Project and allocated to
21 the Idaho jurisdiction are $54,964,643, as shown on Exhibit
22 No.4. These costs are made up of three components: the
23 meters, the TWACS communications modules, and the meter
24 exchange services. As Mr. Heintzelman describes in his
WAITES, DI 4
Idaho Power Company
1 testimony, Landis+Gyr Inc. ("Landis+Gyr") will supply the
2 residential meters and General Electric Company ("GE") will
3 supply the commercial meters. In the contract, Landis+Gyr
4 has committed to a fixed price for five years and GE has
5 committed to a fixed price for three years.
6 The Company has contracted with Aclara Power-Line
7 Systems Inc. ("Aclara") to provide the TWACS communications
8 modules with a five-year fixed price. These modules will
9 be shipped directly to the meter manufacturers, Landis+Gyr
10 and GE, for integration into the meters. The AMI equipped
11 meter will then be shipped directly to Tru-Check, Inc.
12 ("Tru-Check") the meter exchange vendor, which makes up the
13 third component of the meter costs included in the
14 Commitment Estimate. Tru-Check will then install the AMI
15 equipped meters throughout the Company's service territory
16 at a per meter cost based on the area of installation,
17 which is defined in the contract. Together, with stores
18 loadings, sales tax, and overheads, these three components
19 make up the total meter costs of $54,964,643, shown in
20 Exhibit No.4, included in the Commitment Estimate.
21 Q. Are there any costs included in the meter
22 costs that the Company has identified as those that cannot
23 be precisely quantified?
WAITES, DI 5
Idaho Power Company
1 A.Yes. The meter costs include a sales tax
2 assumption of six percent over the course of the three-year
3 deploYment. However, the sales tax is subj ect to change
4 and could adjust the total meter costs upwards or
5 downwards. Also, as part of the cost analysis, the Company
6 forecasted customer growth and incorporated the associated
7 meter costs into the Commitment Estimate. During the
8 three-year deploYment, the Company assumes a growth rate
9 which averages 2.7 percent for the residential class, 2.5
10 percent for the commercial class, and 1.5 percent for the
11 irrigation class. In addition, the Company negotiated a
12 fuel escalation clause into the contract with Tru-Check,
13 the meter installation vendor. The per meter installation
14 cost by area included in the contract assumes a fuel cost
15 of $4. OO/gallon of gasoline. However, the fuel clause
16 allows for.a $0.01 per meter adjustment for every $0.10
17 movement in the price of gasoline. That is, if the price
18 per gallon of gasoline goes up $0.10, Tru-Check is entitled
19 an extra $0.01 per meter installed. Likewise, if the price
20 per gallon of gasoline decreases, the Company's cost of
21 installation per meter decreases at the same $0.10/$0.01
22 rate.
23 Q.Please describe the stations equipment
24 expenses included in the Commitment Estimate.
WAITES, DI 6
Idaho Power Company
1 A.The total stations equipment expenses
2 associated with the AMI Proj ect and allocated to the Idaho
3 jurisdiction are $14,268,522, as shown on Exhibit No.4.
4 This equipment is necessary for upgrades to the substations
5 for the deploYment of the Proj ect which may include new
6 modulation transformer units, third-party backhaul
7 communications/frame relays, control receiver units,
8 outbound modulation units, inbound pickup units, other
9 miscellaneous materials, and the Idaho Power labor
10 associated with the stations upgrades. All station
11 equipment material cost estimates are fully loaded with
12 stores loading, sales tax, and overheads. The labor
13 included in the estimate is also fully loaded.
14 Q.Are there any costs included in the stations
15 equipment expenses that the Company has identified as those
16 that cannot be precisely quantified?
17 A.Yes. The stations equipment expenses
18 include the same sales tax assumption of six percent over
19 the course of the three-year deploYment as that assumed in
20 the meter costs. Therefore, a change in the sales tax
21 could adjust the total stations equipment expenses upwards
22 or downwards.
23 Q.Are there any other costs associated with
24 the AMI Project that are not included in the Commitment
WAITES, DI 7
Idaho Power Company
1 Estimate?
2 A.No.
3 Q.How does the Company propose that the
4 Commission treat the costs associated with the Proj ect for
5 ratemaking purposes?
6 A.Provided the Proj ect costs are less than the
7 Commitment Estimate of $70.9 million, Idaho Power would
8 expect the Commission to ultimately approve the total
9 Proj ect investment to be included in the Company's rate
10 base for ratemaking purposes.
11 Q.Do you have an estimate of the annual
12 revenue requirement to be recovered from customers?
13 A.Yes. The Company has put together an
14 estimate of an annual revenue requirement for the
15 additional plant to be included in rate base for the year
16 2009 only. The total 2009 revenue requirement is $3.82
17 million, which can be seen on Exhibit No.5.
18 Q.In this Application, the Company is
19 requesting to accelerate the depreciation of the old
20 meters. What is the net plant value of the old meters?
21 A.The Company estimates the net plant value of
22 the old meters on December 31, 2008, based on the actual
23 net plant value as of March 31, 2008, and forecasted net
24 plant values through December 31, 2008, will be
WAITES, DI 8
Idaho Power Company
1 $27,637,090. As can be seen from Exhibit No.4, for
2 presentation purposes, the Company has assumed a straight
3 line depreciation method for the old meters over three
4 years.
5 Q.Has the Company calculated an estimate of
6 the annual revenue requirement to be recovered from
7 customers for the accelerated depreciation of the old
8 meters?
9 A.Yes. However, in an attempt to mitigate the
10 impact of the increased revenue requirement, the Company
11 felt it was reasonable to also calculate the O&M benefits
12 the Company expects from the deploYment of the AMI Proj ect
13 and offset the revenue requirement of the accelerated
14 depreciation of the old meters by that amount. Although
15 the two items are not related, their impact on the
16 Company's revenue requirement would occur at the same time.
17 Q.What are the O&M benefits associated with
18 the Proj ect?
19 A.The Company expects quantifiable O&M
20 benefits from the following areas: reduction in labor and
21 transportation costs related to meter reading, regional
22 operations benefit in confirming equipment outage to
23 prevent crew dispatch, regional operations benefits in
24 confirming service restored to prevent prolonged crew time
WAITES, DI 9
Idaho Power Company
1 in area, regional operations benefit on detecting
2 overloaded distribution transformers, benefit with regards
3 to the operation of the irrigation peak rewards program,
4 and outage management operation benefits. The O&M benefits
5 identified for the three-year deploYment period are shown
6 on Exhibit No.4.
7 Q.What is the estimate of the 2009 revenue
8 requirement associated with the accelerated depreciation of
9 the old meters less the O&M benefits to be recovered from
10 customers?
11 A.When the first year of accelerated
12 depreciation is offset by the O&M benefits anticipated in
13 2009, the estimated 2009 revenue requirement is $8.40
14 million, as shown on Exhibit No.6.
15 Q.Has the Company included the costs
16 associated with the accelerated depreciation of the old
17 meters less the O&M benefits as part of the Commitment
18 Estimate?
19 A.No. The accelerated depreciation less the
20 O&M benefits is not a component of the Commitment Estimate.
21 The Commitment Estimate is for capital costs.
22 Q.Does this conclude your testimony?
23 A.Yes, it does.
WAITES, DI 10
Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-08-16
IDAHO POWER COMPANY
WAITES, 01
TESTIMONY
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-08-16
IDAHO POWER COMPANY
WAITES, 01
TESTIMONY
EXHIBIT NO.5
IDAHO POWER COMPANY
JURISDICTIONAL REVENUE REQUIREMENT
FOR THE AUTOMATED METERING
INFRASTRUCTURE (AMI) PLANT ADDITIONS 2009
IDAHO
3 DESCRIPTION RETAIL
4 SUMMARY OF RESULTS
5 RATE OF RETURN UNDER PRESENT RATES
6 TOTAL COMBINED RATE BASE 11,824,275
7
8 OPERATING EXPENSES
9 OPERATION & MAINTENANCE EXPENSES
10 DEPRECIATION EXPENSE 1,292,892
11 AMORTIZATION OF LIMITED TERM PLANT 99.456
12 TAXES OTHER THAN INCOME
13 REGULATORY DEBITS/CREDITS
14 PROVISION FOR DEFERRED INCOME TAXES 78;925
15 INVESTMENT TAX CREDIT ADJUSTMENT 715,881
16 FEDERAL INCOME TAXES (69,897)
17 STATE INCOME TAXES (801,565)
18 TOTAL OPERATING EXPENSES 1,315,691
19 CONSOLIDATED OPERATING INCOME (1,315,691 )
20 RATE OF RETURN UNDER PRESENT RATES -11.13%
21
22 DEVELOPMENT OF REVENUE REQUIREMENTS
23 RATE OF RETURN 8.55%
24
25 RETURN 1,010,976
26 EARNINGS DEFICIENCY 2,326,667
27
28 NET.TO.GROSS TAX MULTIPLIER 1.642
29 REVENUE DEFICIENCY 3,820,387
30
31 FIRM JURISDICTIONAL REVENUES (Order Nos. 30508 and 30559)658,840,173
32 PERCENT INCREASE REQUIRED 0.58%
33
34 SALES AND WHEELING REVENUES REQUIRED 662,660,560
35
Exhibit NO.5
Case No. IPC-E-08-16
C. Waites, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-08-16
IDAHO POWER COMPANY
WAITES, 01
TESTIMONY
EXHIBIT NO.6
IDAHO POWER COMPANY
JURISDICTIONAL REVENUE REQUIREMENT
FOR THE AUTOMATED METERING
INFRASTRUCTURE (AMI) NON-AMI PLANT REMOVALS 2009
IDAHO
3 DESCRIPTION RETAIL
4 SUMMARY OF RESULTS
5 RATE OF RETURN UNDER PRESENT RATES
6 TOTAL COMBINED RATE BASE (5,940,245)
7
8 TOTAL OPERATING REVENUES
9 OPERATING EXPENSES
10 OPERATION & MAINTENANCE EXPENSES (262,828)
11 DEPRECIATION EXPENSE 8,893,770
12 AMORTIZATION OF LIMITED TERM PLANT
13 TAXES OTHER THAN INCOME
14 REGULATORY DEBITS/CREDITS
15 PROVISION FOR DEFERRED INCOME TAXES (3,112,820)
16 INVESTMENT TAX CREDIT ADJUSTMENT
17 FEDERAL INCOME TAXES 86,194
18 STATE INCOME TAXES 16,558
19 TOTAL OPERATING EXPENSES 5,620,874
20 CONSOLIDATED OPERATING INCOME (5,620,874)
21 RATE OF RETURN UNDER PRESENT RATES 94.62%
22
23 DEVELOPMENT OF REVENUE REQUIREMENTS
24 RATE OF RETURN 8.55%
25
26 RETURN (507,891)
27 EARNINGS DEFICIENCY 5,112,983
28
29 NET- TO-GROSS TAX MULTIPLIER 1.642
30 REVENUE DEFICIENCY 8,395,518
31
32 FIRM JURISDICTIONAL REVENUES (Order Nos. 30508 and 30559)658,840,173
33 PERCENT INCREASE REQUIRED 1.27%
34
35 SALES AND WHEELING REVENUES REQUIRED 667,235,691
Exhibit No.6
Case No. IPC-E-08-16
C. Waites, IPC
Page 1 of2
IDAHO POWER COMPANY
JURISDICTIONAL REVENUE REQUIREMENT
FOR THE AUTOMATED METERING
INFRASTRUCTURE (AMI) NON-AMI PLANT REMOVALS 2009
3 DESCRIPTION
36 SUMMARY OF RESULTS
37 DEVELOPMENT OF RATE BASE COMPONENTS
38 ELECTRIC PLANT IN SERVICE
39 INTANGIBLE PLANT
40 PRODUCTION PLANT
41 TRANSMISSION PLANT
42 DISTRIBUTION PLANT
43 GENERAL PLANT
44 TOTAL ELECTRIC PLANT IN SERVICE
45 LESS: ACCUM PROVISION FOR DEPRECIATION
46 AMORT OF OTHER UTILITY PLANT
47 NET ELECTRIC PLANT IN SERVICE
48 LESS: CUSTOMER ADV FOR CONSTRUCTION
49 LESS: ACCUM DEFERRED INCOME TAXES
50 TOTAL COMBINED RATE BASE
51
52 DEVELOPMENT OF NET INCOME COMPONENTS
53 OPERATING REVENUES
54 SALES REVENUES
55 OTHER OPERATING REVENUES
56 TOTAL OPERATING REVENUES
57 OPERATING EXPENSES
58 OPERATION & MAINTENANCE EXPENSES
59 DEPRECIATION EXPENSE
60 AMORTIZATION OF LIMITED TERM PLANT
61 TAXES OTHER THAN INCOME
62 REGULATORY DEBITS/CREDITS
63 PROVISION FOR DEFERRED INCOME TAXES
64 INVESTMENT TAX CREDIT ADJUSTMENT
65 FEDERAL INCOME TAXES
66 STATE INCOME TAXES
67 TOTAL OPERATING EXPENSES
68 OPERATING INCOME
69 CONSOLIDATED OPERATING INCOME
70
IDAHO
RETAIL
9,053,065
(9,053,065)
(3,112,820)
(5,940,245)
(262,828)
8,893,770
(3,112,820)
86,194
16,558
5,620,874
(5,620,874)
(5,620,874)
Exhibit No.6
Case No. IPC-E-08-16
C. Waites, IPC
Page 2 of2