20091027Post-hearing Brief on Reconsideration.pdf

LISA D. NORDSTROM
Senior Counsel
Inordstromtiidahopower.com
eslDA~POR~
An IDACORP Company
October 27, 2009
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-22
RuleH
Dear Ms. Jewell:
Enclosed for filing please find an original and seven (7) copies of Idaho Power
Company's Post-Hearing Brief on Reconsideration in the above matter.
Very truly yours,
~tL ,Q. n(kb~
Lisa D. Nordstrom
LDN:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. ID 83702
LISA D. NORDSTROM (ISB No. 5733)
BARTON L. KLINE (ISB No. 1526)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
InordstromCâidahopower.com
bklineCâidahopower.com
HECEi D
2009 OCT 27 PH~: 46
UTILl,DTllltiio PUBLIC~:0 COV1~,ll;¡'SI'''~Ji ¡~l V Vi,
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO MODIFY ITS RULE H
LINE EXTENSION TARIFF RELATED TO
NEW SERVICE ATTACHMENTS AND
DISTRIBUTION LINE INSTALLATIONS.
)
) CASE NO. IPC-E-08-22
)
) IDAHO POWER COMPANY'S
) POST-HEARING BRIEF ON
) RECONSIDERATION
At the technical hearing held on October 20, 2009, the Commission provided an
opportunity for Parties to file a post-hearing brief summarizing their respective positions.
Idaho Power Company (hereinafter "Idaho Powet' or "Company") hereby submits its
Post-Hearing Brief on Reconsideration and urges the Commission to affirm the findings
it made in Order No. 30853.
i. Order No. 30853 Requires Those That Cause Costs
to be Incurred to Pay Those Costs.
Idaho Power initiated this proceeding to implement changes to its Rule H in
furtherance of one of the fundamental principles of electric utilty regulation; that to the
extent practicable, utiity costs should be paid by those entities that cause the utilty to
incur the costs. This principle is often referred to as "cost-causation" and is one of the
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION-1
bedrocks of utilty regulation. Idaho Powets Rule H is a good example of how the
Commission exercises its jurisdiction to address a "cost-causation" by requiring those
entities that cause Idaho Power to incur additional costs to pay those additional costs. If
the "cost-causers" do not pay, the electric rates for the utilties' other customers wil be
higher than they would otherwise be. In light of current circumstances, if that result is
allowed, Idaho Powets rates are neither "just and reasonable" as required by Idaho
Code § 61-503 nor non-discriminatory and non-preferential as required by Idaho Code §
61-315.
It is true that under Order No. 30853, Idaho Power would invest less toward line
installations than it has in the past by limiting its investment to terminal facilties. The
Company makes many investments for new customers for the numerous parts of its
system that comprise its electric service, and the fact is that Idaho Powets investment
per customer is increasing. There are two principal drivers that effect growth in rates
over time: (1) inflation and (2) growth-related costs. The growth in rates over the past
five years (over 21 percent) has outpaced pure inflation, demonstrating that growth is
not paying for itself. Idaho Power's Answer to Petitions for Reconsideration at 8. Other
than Rule H, no means of assessing the costs of serving new customers directly to
those specific customers currently exists.
To the extent that Order No. 30853 requires a new customer payment greater
than that made to serve existing customers, it is a reflection that different circumstances
exist in 2009 than did in 1997 when the Commission issued Order No. 26780. Rule H
addresses the costs that must be paid by individuals who are not currently customers of
Idaho Power for the opportunity to become customers. If the new line installation
investment is solely to provide service to specific applicants/new customers, the
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 2
Commission is authorized by law to require that the applicants/new customers bear the
cost of that new investment. Idaho State Homebuilders v. Washington Water Power,
107 Idaho 415, 421, 690 P.2d 350, 356 (1984). So long as all potential new
customers/applicants are treated in a like manner, there is no unlawful discrimination.
Line installation charges offset the actual per-customer cost of physically
connecting to Idaho Power's distribution system and have no relationship to existing or
past customers. In light of the Company's increased investments in generation and
transmission that must be made to serve both old and new customers on its system as
a whole that wil be paid for by the entire rate paying public, it is reasonable and prudent
for the Commission to require that connection costs for individual customers be more
fully funded by the individual customers causing them. Having developers/applicants
fund line extensions will also reduce ratepayer exposure to speculative development, at
a time when the Company has currently installed primary (backbone) line and
transformers to more than 20,000 lots without new customers taking service. Tr. at 280.
II. Order No. 30853's Adoption of a Standard Terminal Facilties Allowance
Ensures that New Customers Are Treated Similarly.
Regardless of whether construction is inside or outside of a subdivided
development, Order No. 30853 requires the Company to provide customers and
developers a fixed allowance equal to the Company investment toward their required
terminal facilties. Customers are eligible to receive maximum allowances up to $1,780
for single-phase services and $3,803 for three-phase services per service attachment,
whereas developers of subdivisions (with no connected load) are eligible to receive the
same amounts for each transformer installed within a development. In no instance wil
allowances exceed the cost of the facilties provided.
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 3
The $1,780 allowance approved by Order No. 30853 was based upon the current
installation cost of Standard Terminal Facilties for single-phase service. Standard
Terminal Facilties costs include the costs associated with providing and installng one
overhead service conductor and one 25 kVa transformer to serve a 200 amperage
meter base. Tr. at 267. Based upon this allowance, customers that require non-typical,
larger than standard transformation outside of subdivisions wil be required to pay, as a
contribution in aid of construction ("CIAC"), those work order costs that exceed the
Standard Terminal Facilities cost of $1,780. Developers receive a $1,780 allowance
toward installed transformers and are responsible for the costs of new primary
conductor constructed between the existing distribution facilties and the customers'
terminal facilities, as well as any secondary conductor constructed between the
transformers and junction boxes.
Most customers receive the equivalent of overhead service attachments without
any personal investment because the allowance (credit) provided by the Company
(investment) covers the entire cost of the required service. Customers requesting
services beyond the "standard" or most commonly installed facilities are required to pay
all costs above the provided allowance. If the customer wants underground service, or
if the customer is building a large home that requires larger than standard
transformation, or if the customer is some distance from existing facilties, that customer
is responsible for the additional costs of providing service. As a result, customers are
treated and charged equitably based on a standard overhead service, thereby mitigating
intra-class and cross-class subsidies.
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 4
II. Order No. 30853 Maximizes Limited Resources Available
for Facilty Investment.
If Idaho Power had unlimited access to capital, the Building Contractors'
recommendation to continue requiring the Company to spend significant amounts of
capital on distribution facilties, so that customers wil experience the impacts of inflation
as it occurs, might not impact the Company's ability to replace or upgrade existing
facilties. However, to the extent that the Company must invest in new distribution
facilties for the benefit of new customers, the Company wil have less capital available
for other capital projects. The Building Contractors argue that new investment benefits
existing customers by lowering average costs, but those benefits must be examined
from a wider perspective and compared to the benefits that may be derived if the limited
capital resources are utilzed for other purposes.
Customer CIACs reduce rate base growth and Idaho Power does not earn a
return on them. A larger CIAC payment by a customer or developer wil reduce the
responsibilty of existing customers to pay for facilities that do not serve them. Now is
the time for the Commission to reduce Company investment in new distribution facilities
in order to allow for investment in other infrastructure that is more valuable to
customers.
IV. Building Contractors' Proposed Alternative to Order No. 30853 Is Flawed.
The Building Contractors' proposal as described by Dr. Siaughtets testimony
would provide an upfront allowance to developers (not customers) of residential
subdivisions equal to $1,232 per lot within the subdivision. He compares this
embedded cost number to the Commission-ordered allowance within residential
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 5
subdivisions of $1,780 per installed transformer. This is not a valid comparison for
several reasons.
First, the Building Contractors' $1,232 per lot allowance within a residential
subdivision is based upon historical investments that the Company has made on behalf
of customers. Those computations include embedded costs related to investments the
Company has made in substations, primary lines, secondary lines, transformers,
services, and meters that have been allocated to the residential class in rate
proceedings.
However, the Building Contractors' proposed $1,232 allowance does not reflect
costs found in most residential subdivision work orders, which typically include only a
primary line (or backbone), a number of transformers, and secondary line to individual
lots. There are no costs associated with substations, services, or meters in residential
subdivision work orders, yet these costs are included in the $1,232 amount. Tr. at 276.
Service conductor and meters are not installed within subdivisions until later when
homes are actually constructed and customer load occurs. Thus, the Building
Contractors' proposal would provide allowances to developers for costs that are not
incurred or included in the developets work order to construct facilties necessary for
the residential subdivision. The Building Contractors' embedded cost allowance
proposal is also inconsistent with the Company's treatment of other customer classes,
where only transformers (not primary or secondary lines) are considered for allowances.
Tr. at 277.
It should also be noted that the Building Contractors' proposed per lot allowance
of $1,232 included the costs of both primary and secondary transformers that receive
allocation to residential class in general rate case proceedings. New residential
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 6
requests under Rule H provisions rarely, if ever, include primary transformers. Tr. at
277-78.
Second, per Order No. 30853, residential customers outside of subdivisions
receive allowances based solely on Standard Terminal Facilties. They receive no
allowances for the costs of substations, primary lines, or secondary lines. The Building
Contractors' proposal would offer an unlawful preference to developers by offering a
more generous allowance for speculative lots inside a residential subdivision based on
facilties that are not considered for allowances to actual new residential customers
outside of subdivisions.
Third, because transformers often serve more than one ultimate customer,
offering developers an allowance on a per lot basis rather than on a per transformer
basis can also lead to the unreasonable result that the allowance is greater than the
cost of terminal facilties (in this case transformers) required to provide service. By
contrast, if additional residential customers request service that can be served by an
existing transformer, under Order No. 30853, those customers only receive a terminal
facilties allowance reflective of service conductor and metering because the
transformer is already there.
v. The Commission Has Exclusive Jurisdiction over
Utilty Facilty Relocation Expense.
The Idaho Legislature has given the Commission authority to regulate how Idaho
Power charges its customers for facilty relocations through a variety of statutes. Idaho
Code § 61-501 vests the Commission with the power and jurisdiction to supervise and
regulate every public utilty in the state and to do all things necessary to carr out the
spirit and intent of the provisions of the Public Utilties Act. Idaho Code § 61-503 and -
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION-7
507 provide the Commission with the power to set rates, charges, rules, regulations and
practices of the utilties it regulates. Utilties are prohibited by Idaho Code §61-315
from granting any preference or disadvantage to customers with regard to rates,
charges, services or facilties. Idaho Code § 61-301 requires that utilty charges for any
product or commodity be just and reasonable lest it be declared unlawfuL. Finally, Idaho
Code § 61-302 requires that every public utility maintain service and facilties that are
"adequate, efficient, just and reasonable. A specific reference granting the Commission
authority over "relocation of utilty facilties located in public rights-of-way" is not
necessary.
In exercising its jurisdiction, the Idaho Supreme Court has noted that the
Commission is allowed all power necessary to effectuate its purpose. In Grindstone
Butte Etc. v. Idaho Power, 102 Idaho, 175,627 P.2d 804 (1981), the Court explained
that the Commission operates in the public interest and can take into consideration
relevant criteria in setting utilty rates and charges. The Idaho Supreme Court clearly
envisioned Commission jurisdiction over Rule H-type issues when it stated in Idaho
State Homebuilders, supra, that the Commission could establish non-recurring charges
for line extensions.
Idaho Power constructs relocations of its facilties for its customers every day.
Those relocations are governed by Rule H, which has been in effect in one form or
another for at least thirty years. If a public road agency asked Idaho Power to relocate
its facilties not in the public right-of-way in order to accommodate construction of a new
building for the public road agency, Rule H would apply and would require that the
public road agency bear the cost of that relocation. The Petitioners do not assert that
the Commission has no jurisdiction over utility facilty relocations in those situations.
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 8
It is only when utility facilties are located in public road rights-of-way that the
petitioners assert that the Commission is divested of jurisdiction over utilty facilty
relocations. In that one instance, they argue an exception to the general rule is legally
mandated. Yet there is nothing in Idaho Code §§ 61-301, -501, -502, or -503 to suggest
that the Legislature divested the Commission of its authority to determine how utilties
will recover the cost of relocating utility facilties in their rates if public road relocations
are involved.
The Commission is obligated to protect the public interest and is charged with
ensuring that costs of utility facilty relocation have not been unreasonably charged to
Idaho Power customers when, in fact, the relocation of utilty facilities wholly or partially
benefits a person or entity other than the public. If costs are being unreasonably
allocated, the Commission has the authority to provide a remedy. It is reasonable and
prudent that the Commission should approve rules that require the third party causing
facility relocation to reimburse Idaho Power so that the costs of the relocation are not
unfairly shifted to the Company's customers.
Vi. Section 10 of Rule H Should be Applied to LIDs.
In their briefs, the Petitioners argue that local improvement districts (or "LIDs")
must be excluded from the application of Section 10 of Rule H. They argue that
because LIDs are created by government units, i.e., a city, highway district, or public
road agency, they must be excluded from the application of Section 10 of Rule H. Idaho
Power respectfully disagrees. First, a LID is not a public road agency that is charged
with operating and maintaining public roads. An LID is simply a vehicle by which
taxation can occur but not be included in the general budget of a public road agency.
The only function the LID performs is to collect money. Where the local improvement
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 9
district is paying for the road improvements in question, the local improvement district
should also pay for the cost of relocating the power line as required for the
improvements. The local improvement district typically derives funding from adjacent
private businesses and land owners and those parties, who are directly benefiting from
the power line relocation, should bear the costs of the relocation rather than the utilty's
customers as a whole. Idaho Power does not believe it is unreasonable to expect a LID
to include an amount to cover the cost of utilty facility relocation in the amount of money
it wil fund.
In light of problems the Company has experienced with LIDs as referred to in the
testimony of Company witness David Lowry and the fact that it would be very easy for
LIDs to include cost of utilty relocations in their initial funding, Idaho Power urges the
Commission to retain LIDs among the entities subject to Section 10 of Rule H.
VII. Conclusion.
The Commission's findings in Order No. 30853 were based upon substantial and
competent evidence in the record. For the reasons described above and in the entirety
of the Commission's record, Idaho Power respectfully requests the Commission issue
an Order affirming its findings in Order No. 30853 and denying the Petitions for
Reconsideration filed in this case.
DATED at Boise, Idaho, this 2th day of October 2009.
&l)tllh~
LISA D. NORD ROM
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION -10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 27th day of October 2009 I served a true and
correct copy of IDAHO POWER COMPANY'S POST-HEARING BRIEF ON
RECONSIDERATION upon the following named parties by the method indicated below,
and addressed to the following:
Commission Staff
Kristine A. Sasser
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Building Contractors Association of
Southwestern Idaho
Michael C. Creamer
GIVENS PURSLEY, LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
City of Nampa AND
Association of Canyon County
Highway Districts
Matthew A. Johnson
Davis F. VanderVelde
WHITE PETERSON GIGRA Y
ROSSMAN NYE & NICHOLS, P.A.
5700 East Franklin Road, Suite 200
Nampa, Idaho 83687
Kroger Co.
Michael L. Kurtz
Kurt J. Boehm
BOEHM, KURTZ & LOWRY
36 East Seventh Street, Suite 1510
Cincinnati, Ohio 45202
Kevin Higgins
Energy Strategies, LLC
Parkside Towers
215 South State Street, Suite 200
Salt Lake City, Utah 84111
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IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION - 11
Ada County Highway District
Scott D. Spears
Ada County Highway District
3775 Adams Street
Garden City, Idaho 83714
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IDAHO POWER COMPANY'S POST-HEARING BRIEF ON RECONSIDERATION -12