20090429Gale Supp Direct.pdf

esIDA~POR~
An IDACORP Company
BARTON L. KLINE
Lead Counsel
April 28, 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-09-03
LANGLEY GULCH POWER PLANT
Dear Ms. Jewell:
Enclosed for filing in the above matter are nine (9) copies each of the testimonies of
John R. Gale (supplemental direct) and Steve Stein (direct). One copy of each of the
testimonies has been designated as the "Reporter's Copy." In addition, a disk containing
Word versions of each of the above testimonies is enclosed for the Reporter and has been
marked accordingly.
Also enclosed for filing are nine (9) copies of Idaho Power's Certificate of Service
indicating who received copies. of the above testimonies.
Finally, I would appreciate it if you would return a stamped copy of this letter for
Idaho Power's file in the enclosed stamped, self-addressed envelope.
Very truly yours,(3.~
Barton L. Kline
BLK:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. ID 83702
r,.,CERTIFICATE OF SERVICE I: j
I HEREBY CERTIFY that on this 28th day of April 2009 I serveæM Al~incl~\ 4: 56
correct copies of the SUPPLMENTAL DIRECT TESTIMONY OF JOHN R. G~/1f'gE;.J:: ~
DIRECT TESTIMONY OF STEVEN STEIN upon the following named ~ffi~.¡~~(tØA(il¿;~;
method indicated below, and addressed to the following: .
Commission Staff
Scott Woodbury
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Industrial Customers of Idaho Power
and Northwest and Intermountain
Power Producers Coalition
Peter J. Richardson, Esq.
RICHARDSON & O'LEARY PLLC
515 North 27th Street
P.O. Box 7218
Boise, Idaho 83702
Dr. Don Reading
Ben Johnson Associates
6070 Hill Road
Boise, Idaho 83703
Invenergy Thermal Development
LLC
Dean J. Miler
McDEVln & MILLER LLP
420 West Bannock Street
P.O. Box 2564
Boise, Idaho 83701
Wiliam Borders
Assistant General Counsel
Invenergy Thermal Development LLC
One South Wacker Drive, Suite 1900
Chicago, Illnois 60606
-l Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-l Email Scott.WoodburyCcpuc.idaho.gov
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FAX
-l Email peterCcrichardsonandoleary.com
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-l Email dreadingCcmindspring.com
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-l Email joeCcmcdevitt-miler.com
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-l Email wbordersCcinvenergyllc.com
Snake River Allance
Ken Miler
Snake River Allance
P.O. Box 1731
Boise, Idaho 83701
Idaho Irrigation Pumpers
Association, Inc.
Eric L. Olsen
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391
201 East Center
Pocatello, Idaho 83204-1391
Anthony Yankel
Yankel & Associates, Inc.
29814 Lake Road
Bay Vilage, Ohio 44140
Idaho Conservation League
Betsy Bridge
Idaho Conservation League
710 North Sixth Street
P.O. Box 844
Boise, Idaho 83701
Northwest and Intermountain Power
Producers Coalition
Susan K. Ackerman
9883 NW Nottage Drive
Portland, Oregon 97229
Hand Delivered
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FAX
-l Email kmilerCcsnakeriverallance.org
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-l Email eloCcracinelaw.net
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-l Email tonyCcyankel.net
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-l Email bbridgeCcwildidaho.org
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-l Email Susan.k.ackermanCccomcast.net
f1/d~Barton L. Kline
L' ': ,,"\r\;;..';t,i.~ r
28 PM 4: 57
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AN NECESSITY FOR THE LAGLEY
GULCH POWER PLAT.
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
SUPPLEMENTAL DIRECT TESTIMONY
OF
JOHN R. GALE
1 Q.Please state your name and business address.
2 A.My name is John R. Gale 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 ("the
7 Company") as the Vice President of Regulatory Affairs.
8 Q.Have you previously submitted direct
9 testimony in this docket?
10 A.Yes, I submitted direct testimony addressing
11 the ratemaking and regulatory matters associated with Idaho
12 Power's March 6, 2009, filing for a Certificate of Public
13 Convenience and Necessity ("CPCN") for the Langley Gulch
14 Power Plant ("Langley Gulch" or "the Project") .
15 Q.What is the purpose of your supplemental
16 testimony in this matter?
17 A.I will provide an update to the status of
18 Idaho legislation previously discussed in my direct
19 testimony and describe the relationship of that legislation
20 to the Company's ratemaking request. I will also specify
21 Idaho Power's preference between the two ratemaking
22 alternatives.
GALE, SUPP DI 1
Idaho Power Company
1 Q.What is the status of the legislation
2 designated as Senate Bill 1123?
3 A.Senate Bill 1123 was signed into law on
4 April 9, 2009, and will become effective on July 1, 2009,
5 as Idaho Code § 61-541. For the convenience of the
6 Commission's review, I have included a copy of the enacted
7 legislation as Exhibit No. 8 to my testimony. This law
8 provides a public utility with the ability to file an
9 application with the Commission for an order specifying in
10 advance the ratemaking treatments that shall apply when the
11 costs of the proposed facility are included in the
12 utility's revenue requirement for ratemaking purposes.
13 Q.To obtain the benefits of Senate Bill 1123,
14 what does a utility need to include in its Application to
15 the Commission?
16 A.The utility requesting advanced ratemaking
17 determinations must provide a description of the proposed
18 project; how the utility plans to address the risks
19 associated with the project; the proposed date of lease,
20 purchase, or commencement of construction; the proposed
21 cost recovery; and any proposed ratemaking treatments.
22 Q.Has Idaho Power addressed these requirements
23 in its Application and supporting testimony?
24 A.Yes.
GALE, SUPP DI 2
Idaho Power Company
1 Q.Does Senate Bill 1123 require the Commission
2 to make certain determinations regarding Idaho Power's
3 activities as a regulated utility?
4 A.The law provides that the Commission will
5 determine whether:(1) the utility has a Commission-
6 accepted integrated resource plan in effect, (2) the
7 project is in the public interest, (3) the utility has
8 considered other resources, (4) the proj ect is reasonable
9 compared to other resource options such as energy
10 efficiency, demand-side management, and other alternative
11 sources of supply or transmission, and (5) the utility
12 participates in regional transmission planning.
13 Q.Based upon the information the Company has
14 presented in this case, will the Commission be able to make
15 these determinations with regard to Idaho Power?
16 A.Yes.
17 Q.With the enactment of Senate Bill 1123, does
18 Idaho Power wish to supplement and clarify its requested
19 ratemaking treatment of Langley Gulch?
20 A.Yes. Although my initially filed direct
21 testimony addresses most of these items specifically, the
22 Company requests that the Commission issue its order
23 finding:
GALE, SUPP OI 3
Idaho Power Company
1 1.The return on equity ("ROE") authorized
2 for Langley Gulch will be the same as the ROE authorized
3 for the rest of the Company's rate base when Langley Gulch
4 achieves commercial operation and that the ROE for Langley
5 Gulch will change with Commission-authorized changes to the
6 Company's ROE over the life of the Proj ect.
7 2.The depreciation life for the Proj ect
8 is 35 years asset deprecation for the production plant and
9 45 years asset depreciation for the transmission plant.
10 3.The construction of the Langley Gulch
11 Power Plant is consistent with Idaho Power's resource plans
12 and is an appropriate resource to supplement the Idaho
13 Power system.
14 4.The December 2012 on-line date is
15 consistent with Idaho Power's resource plans and the
16 anticipated load requirements of Idaho Power's retail
17 customers.
18 s.The approved total Commitment Estimate
19 is $427,366,729, which includes the power plant and the two
20 transmission interconnection projects described previously
21 in my testimony related to the Ontario-Caldwell connection
22 and the Caldwell-Willis connection.
23 6.The Commitment Estimate is subject to a
24 soft cap that provides retail customers with the full
GALE, SUPP DI 4
Idaho Power Company
1 benefit of the Project being completed under the Commitment
2 Estimate, while providing the Company with an opportunity
3 to justify any costs above the Commitment Estimate as
4 prudent should that be the case.
5 7.The Company can expect to include in
6 its rates, at the time of commercial operation, the
7 specific ratemaking determinations I described previously
8 in my testimony.
9 Q.With the enactment of Senate Bill 1123, both
10 ratemaking alternatives put forth by Idaho Power in its
11 initial direct testimony are legally available to the
12 Commission to incorporate into the final CPCN order. Does
13 Idaho Power have a stated preference between the
14 alternatives?
15 A.Before indicating a preference, there are
16 two points to call to the Commission's attention. First,
17 the two alternatives can work together, if the Commission
18 desires, and, second, a stated Company preference will
19 likely change with the circumstances present for both Idaho
20 Power and its customers.
21 Q.How would the two alternatives work
22 together?
23 A.The Commission could order the ratemaking
24 treatment provided under the Senate Bill 1123 and either
GALE, SUPP DI 5
Idaho Power Company
1 prospectively (as part of this proceeding) or subsequently
2 (in future proceedings) authorize inclusion of Construction
3 Work in Progress ("CWIP") associated with the Project
4 investment into rates. The Commission could also apply
5 CWIP to all or a portion of the Langley Gulch investment.
6 Q.What circumstances might influence a
7 decision regarding the preferred ratemaking al ternati ve .
8 A.The Company's cash flow requirements need to
9 be balanced against the state of the southern Idaho economy
10 and rate pressure on customers to recover other Company
11 costs. CWIP provides increased cash flow to fund
12 operations and new construction, while smoothing rate
13 changes. However, CWIP also increases rate pressure in the
14 short term.
15 Q.What is the preferred alternative under
16 current circumstances?
17 A.Given the current economic situation in the
18 service territory and rate demands created by costs other
19 than the Langley Gulch project, including a significant
20 Power Cost Adjustment presently before the Commission, the
21 Company prefers that the Commission issues an Order under
22 the provisions of Senate Bill 1123. However, it is
23 important to recognize that these are very unsettled times
24 in the economy and the capital markets and raising capital
GALE, SUPP OI 6
Idaho Power Company
1 in this scale is currently very problematic. There is no
2 guaranty the Company will be able to attract this amount of
3 capi tal under reasonable terms in the current environment
4 using anyone methodology. Therefore, including CWIP in
5 rate base must remain an option for the future.
6 Q.Does this conclude your testimony?
7 A.Yes, it does.
GALE, SUPP DI 7
Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
GALE, SUpp 01
TESTIMONY
EXHIBIT NO. 8
Sixtieth Legislature
LEGISLATURE OF TH STATE OF IDAHO
First Regular Session - 2009
IN THE SENATE
SENATE BILL NO. 1123
BY STATE AFFAIRS COMMITTE1 ~Acr
2 RELATIG TO PUBLIC UTLITY RATES; AMENDING CHAPTER 5, TITLE 61, IDAHO
3 CODE, BYTI ADDITION OF A NEW SECTON 61-541, IDAHO CODE, TO
4 DEFIN A TERM, TO PROVIDE THAT PUBLIC UTILITY COMMISSION BINDING
5 RATEKING TRATMNTS ARE APPLICABLE WHN COSTS OF A NEW
6 ELECTRC GENRATION FACILITY ARE INCLUDED IN RATES, TO PROVIDE
7 PROCEDURS AND TO PROVIDE FOR RULES.
8 Be It Enacted by the Legislature of the State of Idaho:
9 SECTION 1. That Chapter 5, Title 61, Idaho Code, be, and the same is hereby amended
10 by the addition thereto of a NEW SECTION, to be laown and designated as Section 61-541,
11 Idaho Code, and to read as follows:
12 61-541. BINING RATEMAKING TRAlMENS APPLICABLE WH COSTS
13 OF A NEW ELECTRC GENERATION FACILIT AR INCLUDED IN RATES. (1) As
14 used in this section, "certificate" meas a cerificate of convenience and necessity issued under
15 section 61~526, Idaho Code.
16 (2) A public utilty that proposes to constrct, lease or purchase an electric generation
17 facilty or transmission facilty, or make major additions to an electric generation or
18 transmission facilty, may file an application with the commission for an order specifying in
19 advance the ratemaking treatments that shall apply when the costs of the proposed facilty are
20 included in the public utilty's revenue requirements for ratemaking purposes. For purposes
21 of this section, the requested ratemaking treatments may include nontrditional ratemaking
22 treatments or nontraditional cost recovery mechanisms.
23 (a) In its application for an order under this section, a public utilty shall describe the
24 need for the proposed facilty,- how the public utilty addresses the risks associated with
25 the proposed facilty, the proposed date of the lease or purchase or commencement of
26 constrction, the public utilty's proposal for cost recovery, and any proposed ratemaking
27 treatments to be applied to the proposed facility.
28 (b) For purposes of this section, ratemakng treatments for a proposed facilty include but
29 are not limited to:
30 (i) The return on common equity investment or method of determining the return
31 on common equity investment;32 (ii) The depreciation life or schedule;
33 (ii) The maximum amount of cost that the commission wil include in rates at the
34 time detennined by the commission without the public utilty having the burden
35 of moving forward with additional evidence of the prudence and reasonableness of36 such costs;
37 (iv) The method of handling any variances between cost estimates and actual38 costs; and
Exhibit NO.8
Case No. IPC-E-09-03
J. Gale,lPC
Page 1 of2
2
1 (V) The treatment of revenues received from wholesle purchasers of serice
2 from the proposed facilty.
3 (3) The commission shall hold a public hearing on the application submitted by the
4 public utilty under this section. The commission may hold its hearng in conjunction with an
5 application for a certficate.
6 (4) Based upon the hearing record, the commission shall issue an order that addresses
7 the proposed ratemaking treatments. The commission may accept, deny or modify a proposed
8 ratemaking treatment requested by the utilty. In determining the proposed ratemaking
9 treatments, the commission shall maintain a fair, just and reasonable balance of interests
10 between the requesting utilty and the utilty's ratepayers.
11 (a) In reviewing the application, the commission shall also determine whether:
12 (i) The public utilty has in effect a commission-accepted integrated resource plan;
13 (ii) The services and operations resulting from the facilty are in the public
14 interest and wil not be detrimental to the provision of adequate and reliable15 electrc service;
16 (ii) The public utilty has demonstrted that it has considered other sources for17 long-term electric supply or transmission;
18 (iv) The addition of the facilty is reasonable when compared to energy effciency,
19 demand-side management and other feasible alternative sources of supply or20 transmission; and
21 (V) The public utilty paricipates in a regional transmission planning process.
22 (b) The commission shall use its best efforts to issue the order setting fort the
23 applicable ratemakng treatments prior to the date of the proposed lease, acquisition or
24 commencement of constrction of the facilty.
25 (c) The ratemakng tratments speified in the order issued under this section shall be
26 binding in any subsequent commission proceedings regarding the proposed facilty that is
27 the subject of the order, except as may otheiwise be estblished by law.
28 (5) The commission may not require a public utilty to apply for an order under this
29 section.
30 (6) The commission may promulgate rules or issue procedural orders for the purpose of
31 administering this section.
Exhibit NO.8
Case No. IPC-E-Q9-03
J. Gale, IPC
Page 2 of2