20081110Said Direct.pdf

RECEIVED
2808 NOV -1 PH~: 52
IDAHO PUBUÇ ..\
UT1UTIES COMMI:;SION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPAN i S PETITION FOR APPROVAL
OF CHAGES TO THE IRRIGATION
PEAK REWARDS PROGRA i AND FOR
AUTHORITY TO RECOVER THE COST
OF THE PROGRA IN THE PCA
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) CASE NO. IPC-E-08-23
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IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
GREGORY W. SAID
1 Q.Please state your name and business address.
2 A.My name is Gregory W. Said and 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 the
7 Director of State Regulation in the Pricing and Regulatory
8 Services Department.
9 Q.Please describe your educational background.
10 A.In May of 1975, I received a Bachelor of
11 Science Degree in Mathematics with honors from Boise State
12 University. In 1999, I attended the Public Utility
13 Executives Course at the University of Idaho.
14 Q.Please descriöe your work experience with
15 Idaho Power Company.
16 A.I became employed by Idaho Power Company in
17 1980 as an analyst in the Resource Planning Department. In
18 1985, the Company applied for a general revenue requirement
19 increase. I was the Company witness addressing power
20 supply expenses.
21 In August of 1989, after nine years in the Resource
22 Planning Department, I was offered and I accepted a
23 position in the Company's Rate Department. With the
24 Company's application for a temporary rate increase in
SAID, Dr 1
Idaho Power Company
1 1992, my responsibilities as a witness were expanded.
2 While I continued to be the Company witness concerning
3 power supply expenses, I also sponsored the Company's rate
4 computations and proposed tariff schedules in that case.
5 Because of my combined Resource Planning and Rate
6 Department experience, I was asked to design a Power Cost
7 Adjustment ("PCA") which would impact customers' rates
8 based upon changes in the Company's net power supply
9 expenses. I presented my recommendations to the Idaho
10 Public Utilities Commission in 1992, at which time the
11 Commission established the PCA as an annual adjustment to
12 the Company's rates. I sponsored the Company's annual PCA
13 adjustment in each of the years 1996 through 2003. I
14 continue to supervise PCA-related regulatory filings.
15 In 1996, I was promoted to Director of Revenue
16 Requirement. I have managed the preparation of revenue
i 7 requirement information for regulatory proceedings since
18 that time.
19 In August 2008, I was promoted to Director of State
20 Regulation, adding the area of Rate Design to my
21 responsibilities.
22 Q.What is the purpose of your testimony in
23 this proceeding?
SAID, DI 2
Idaho Power Company
1 A.My testimony in this proceeding is intended
2 to propose to the Commission that as the next step in
3 promoting cost-effective demand-side management ("DSM")
4 resources, the Commission should consider funding sources
5 beyond or in addition to the Rider funding approach. The
6 Irrigation Peak Rewards demand response program ("Peak
7 Rewards") detailed in Mr. Tatum's testimony provides the
8 opportunity to fund specific DSM program expenses in a
9 manner identical to funding a generation-side resource.
10 Based upon that premise, I propose a method for recovering
11 Peak Rewards program expenses via the Company's PCA
12 mechanism.
13 Q.Please describe how the Peak Rewards program
14 described by Mr. Tatum is similar to power purchase
15 agreement with a third-party-owned generation resource.
16 A.The Peak Rewards program described by Mr.
17 Tatum gives the Company the ability to curtail irrigation
18 customer demand for energy during the highest system demand
19 weeks of the year. The reduction of load comes at the cost
20 as detailed in the program. The cost of reducing load will
21 be lower than the alternative cost of serving the load if
22 it was not curtailed. As such, the Peak Rewards program
23 operates much like a dispatchable peaking resource owned by
24 numerous irrigation customers, but contractually available
SAID, DI 3
Idaho Power Company
1 to Idaho Power.
2 Q.How are generation resource-related costs
3 recovered by the Company?
4 A.Generation resource-related costs are
5 initially established in general rate case proceedings.
6 Investments in generation resources are included in rate
7 base on which the Company has an opportunity to earn a
8 reasonable rate of return for its shareholders. Generation
9 related expenses are also included in base rates and are
10 anticipated to be recovered dollar for dollar.
11 Within generation-related expenses are what have
12 specifically been referred to as power supply expenses,
13 which consist of fuel expenses and purchased power expenses
14 reduced by surplus sales revenues. These power supply
15 expenses are "normalized" in general rate cases by
16 averaging the expenses resulting from a full range of
17 potential scenarios reflecting differing conditions
18 affecting expenses such as levels of stream flows and
19 market prices.
20 Once base rates have been established in a general
21 rate case proceeding, the Company tracks actual power
22 supply expenses through the PCA and rates are adjusted
23 annually to reflect deviations of actual power supply
24 expenses from the normalized levels included in base rates.
SAID, DI 4
Idaho Power Company
1 Q.Under currentDSM recovery methodologies how
2 would the Company recover the Peak Rewards program
3 expenses?
4 A.Under current DSM recovery methodologies,
5 100 percent of the Peak Rewards program expenses would be
6 funded by applying DSM rider funds. The current DSM rider
7 fund collection is set at 2.5 perèent of revenues derived
8 from retail sales. As Mr. Tatum has described in his
9 testimony, the anticipated annual cost of the Peak Rewards
10 program will be $6.7 million in 2009 and will increase to
11 $10.8 million by 2011. Therefore, to fund the Peak Rewards
12 DSM rider funds, DSM rider funding would need to be
13 increased to approximately 4%.
14 Q.Why is the Company proposing an alternate
15 method of recovering the Peak Rewards program expenses?
16 A.Because the Peak Rewards program operates
17 much like a generation resource that can be dispatched by
18 Idaho Power, but is owned by irrigation customers, the
19 Company proposes that the incentive payments associated
20 wi th the Peak Rewards program be recovered in a manner
21 similar to expenses incurred to purchase energy from PURPA
22 Qualifying facilities ("Qfs"). The remainder of the Peak
23 Rewards program's expenses, including equipment
24 installation costs, program labor costs, and other direct
SAID, DI 5
Idaho Power Company
1 administrative costs, would continue to be funded by the
2 DSM Rider.
3 A normal level of expenses related to the Peak
4 Rewards incentive payments, in this case $4.9 million,
5 would be placed in base rates in a general rate case. Then
6 annually, as part of the PCA case, actual incentive payment
7 expenses provided under the Peak Rewards program would be
8 compared to the level included in base rates. Like QF
9 expenses, 100% of the deviation of actual incentive payment
10 expenses from base levels would be reflected in the
11 resulting PCA rate and the benefits of the program would be
12 reflected in changes to fuel expenses, purchased power
13 expenses and surplus sales revenues. Overall recovery of
14 program expenses will be identical to recovery provided via
15 a rider fund methodology; however, the impact to Rider fund
16 collection percentage would be significantly lessened.
17 Q.Because the current Peak Rewards program
18 request is not part of the pending general rate case, how
19 will the Company initially recover the Peak Rewards
.20 incentive-related expenses?
21 A.Prior to the time in which a normal level of
22 Peak Rewards program incentive-related expenses are
23 included in the Company's base rates, all of the Peak
24 Rewards program incentive-related expenses will be included
SAID, DI 6
Idaho Power Company
1 in PCA rates. If the Company's Peak Rewards program
2 proposals are accepted, anticipated Peak Rewards program
3 incentive-related expenses for 2009 will be reflected in
4 the Company's 2009 PCA rates.
5 Q.Do you view the load reduction benefits
6 associated with the Peak Rewards program as providing a
7 system benefit?
8 A.Yes. The load reduction resulting from the
9 Peak Rewards program will benefit the Idaho Power system by
10 reducing the costs associated with serving peak load.
11 Q.Under the proposed PCA method of funding the
12 Peak Rewards incentive payments, does the Company plan to
13 allocate the incentive payment costs to all jurisdictions
14 as it would other power supply expenses?
15 A.Yes. The proposed PCA method of funding
16 recognizes that the Peak Rewards program provides a system
17 benefit and spreads program costs to all jurisdictions
18 accordingly. That is, the incentive payment expenses will
19 be assigned to the Company's jurisdictions in a manner
20 similar to that used in allocation of other power supply
21 expenses.
22 Q.Why should the Commission adopt a PCA method
23 for funding the incentive payments provided under the Peak
24 Rewards program rather than just increasing the DSM Rider
SAID, DI 7
Idaho Power Company
1 funding rate?
2 A.To answer this question, I will provide a
3 government funding principle as an analogy. Idaho state
4 government is typically funded through taxes, primarily
5 income taxes, property taxes, and sales taxes. The reason
6 that multiple tax sources are used is in part to recognize
7 that citizens taxed solely via one method can be advantaged
8 or disadvantaged because of the single source method.
9 However, in addition to that reason, multiple tax sources
10 are also implemented so that no single tax source is viewed
11 as overly burdensome. My concern is that, in time,
12 continuing increases in the DSM Rider funding rate will
13 appear. burdensome and create an adverse perception of new
14 DSM activities in the minds of the Company's customers.
15 Providing an additional avenue, in this case the PCA
16 mechanism, to fund the Peak Rewards program will relieve
17 upward pressure on the DSM Rider and diversify cost
18 recovery approaches for demand-side resources.
19 Q.Does that conclude your testimony?
20 A.Yes, it does.
SAID, DI 8
Idaho Power Company