20090702Mace Rebuttal.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE LANGLEY
GULCH POWER PLANT.
CASE NO. IPC-E-09-03
I DAHO POWER COMPANY
DIRECT REBUTTAL TESTIMONY
OF
MICHAEL MACE
1 Q.Please state your name, address, and
2 employment.
3 A.My name is Michael Mace.I am an
4 independent consultant. My address is 3416 Leland Street,
5 Rocklin, California 95765. I have over thirty years
6 experience in the electric utility industry, working for
7 both public and private electric utili ties as well as the
8 California iso. My resume is attached as Exhibit No. 12.
9 Q. On whose behalf are you testifying?
10 A. i am testifying on behalf of Idaho Power
11 Company. I have been engaged by the Company since February
12 2009 to assist in their economic and load forecasting
13 process.
14 Q.What is the purpose of your testimony?
15 A.The purpose of my testimony is to comment
16 and correct some of the assertions made by witnesses Yankel
17 and Mitchell with regards to economic conditions and
18 economic growth in the Idaho Power Company ("Idaho Power"
19 or "Company") service area as well as recent Company load
20 forecasts.I will also evaluate some of their assertions
21 by referencing Idaho Power's recently acquired
22 macroeconomic forecast from Moody's Inc.
MACE, DI REB 1
Idaho Power Company
1 Q.What is your response to Mr. Yankel' s claim
2 on page 2 of his testimony that the Company's decision to
3 build Langley Gulch is based upon outdated information?
4 A.Mr. Yankel goes to great lengths to
5 criticize Idaho Power's forecasting process without
6 addressing one of the central issues: The timing of these
7 forecasts with regard to lead time requirements of the
8 planning process. It is quite easy to criticize forecasts
9 that do not include the very most recent information, given
10 that hindsight is an exact science. The issue here is that
11 Idaho Power, like any other utility with significant lead
12 time requirements for power plant construction, is engaged
13 in decision making under uncertainty.
14 The construction of power plants requires forecasts
15 based on reasonable assumptions and practices. Load
16 forecasts must accommodate the necessary lead times
17 required for the siting and construction of new generation.
18 As per the testimony of Company witness Vern Porter, Idaho
19 Power was required to reserve and pay reservation fees for
20 critical equipment well in advance of when the Company
21 would otherwise choose to commit itself in order to bring
22 Langley Gulch on-line in time to meet the resource
23 requirements that were forecast at that point in time.
MACE, DI REB 2
Idaho Power Company
1 My review of the Company's August 2007, August 2008,
2 and May 2009 load forecasts leads me to conclude that these
3 forecasts were reasonable, especially in light of the rapid
4 economic growth experienced in the Idaho Power service area
5 over the last decade. Since the August 2008 load forecast,
6 economic conditions have worsened considerably, but last
7 fall's credit crisis and subsequent shock to the "real"
8 economy were outside the boundaries of "reasonable
9 forecasts," i. e., it was an event that could not have been
10 forecast to occur, not even in a worst case planning
11 scenario. The few economists who did forecast last fall's
12 events were considered extremist or delusional.
13 Q.Shouldn't Idaho Power have anticipated the
14 economic downturn that occurred last fall?
15 A.The financial panic that occurred during the
16 fall of 2008 changed everyone's assessment of the short-
17 term economic performance for Idaho, the U. S., as well as
18 most every other country worldwide. Very few professional
19 economists, including the macroeconomic forecasting
20 services such as Global Insight and Moody's, nor the Idaho
21 State Division of Financial Management ("DFM") had forecast
22 the severity of the economic downturn that began last fall.
23 This is demonstrated in Mr. Yankel' s testimony in his
24 discussion of the ratcheting down of the DFM economic
MACE, DI REB 3
Idaho Power Company
1 forecast for the state of Idaho. To illustrate how
2 recently the DFM forecast has changed, I have prepared
3 Exhibits Nos. 13 and 14, which compare recent DFM forecasts
4 of employment and housing stock additions for the state of
5 Idaho.
6 Q.What about the assertion that Idaho Power's
7 forecasts did not incorporate the worsening economic
8 conditions?
9 A.Idaho Power's load forecasts progressively
10 reflected a slowing economy in the Idaho Power service
11 area. Exhibit No. 15 shows a comparison of the different
12 Company forecasts of residential customers over the period
13 of August 2005 through December 2008. Clearly, the Company
14 forecasts were incorporating the most recent information
15 available with regards to the slowing housing market, but
16 do not reflect the severity of the crash that occurred last
17 fall.In fact, the graph demonstrates that the 2006 IRP
18 forecast initially under-forecast the residential customers
19 being added to the system.
20 Q.What changes were made to the Company's
21 recent May 2009 load forecast revision?
22 A.The May 2009 forecast revision was based on
23 the December 2008 forecast, which substantially reduced
24 customer growth for both the residential and commercial
MACE, DI REB 4
Idaho Power Company
1 classes. In fact, the May 2009 residential customer
2 forecast is currently under-predicting the residential
3 customers recently added to the Idaho Power system. The
4 May 2009 forecast also incorporates the latest changes to
5 Idaho Power's special contract industrial customers and is
6 about 555,000 MWh lower for 2009 than the forecast made in
7 August 2008. It is my understanding that the May 2009
8 forecast revision is the basis for the load/resource
9 balance presented by Company witness Bokenkamp in this
10 proceeding.
11 Q.Do you think that the May 2009 load forecast
12 does a better job of representing the impact of the
13 recession on forecasted loads for Idaho Power?
14 A.Compared to both the August 2008 forecast
15 and the December 2008 forecast, the May 2009 revision more
16 accurately reflects the short-term impacts of the current
17 recession.
18 Q.Does the current recession mean that rapid
19 economic growth will no longer occur in southern Idaho?
20 A.No. There is no doubt that economic
21 conditions are slow right now, but even the most recent DFM
22 forecast, referenced by Mr. Yankel in his testimony, shows
23 a recovery beginning later this year and continuing through
24 2010, 2011, and 2012.
MACE, DI REB 5
Idaho Power Company
1 Q.What is the basis for the expectation of
2 renewed economic growth in southern Idaho?
3 A.Southern Idaho has many economic advantages
4 compared to many other areas. First and foremost, Idaho
5 has relatively low costs for both consumers and businesses.
6 There are a lot of other amenities in the Idaho Power
7 service area that attract people from allover the country.
8 Boise is regularly feted in national magazines as one of
9 the best places to live. It may be the case that the
10 traditional "people-follow-jobs" thinking is more the case
11 of "j obs-following-people" for Idaho. The result of these
12 differences is that Idaho Power's service area population
13 growth rate has grown at two and one-half times the
14 national average rate over the last twenty years, much of
15 that due to in-migration from other states.
16 Considering the current economic and legislative
17 troubles in California, there could be a significant
18 increase in out-migration from California. While in-
19 migration has played a significant role in Idaho's growth,
20 the near term could see ever higher in-migration to Idaho,
21 higher than that forecast by the most recent Global Insight
22 forecast cited in Mr. Yankel' sand Ms. Mitchell's
23 testimonies.
MACE, DI REB 6
Idaho Power Company
1 While Idaho's economy more closely resembles the
2 national economy now as opposed to twenty-five years ago,
3 it is certainly not immune from recession. It is quite
4 possible that the Idaho Power service area could grow
5 rapidly even if the rest of the country is not doing well.
6 Attached as Exhibit No. 16 is a recent article from the
7 Idaho Statesman. The article quotes Addison Franz, a
8 Moody's economist, stating that Idaho may lead the country
9 out of the current recession. Both myself and other Idaho
10 Power personnel have had discussions with Ms. Franz about
11 the Boise MSA and Idaho economic forecasts.
12 Q.Both Ms. Mitchell and Mr. Yankel criticize
13 the Company's load forecasts for failing to reflect the
14 worsening economic conditions as a result. of the national
15 recession. Do their criticisms have merit?
16 A. In Ms. Mitchell's direct testimony on page 5
17 she states:
18 Without reviewing the underlying key
19 demographic and economic indicators20 that drive IPCs' PR 84 2009 IRP, it21 is not possible to determine the22 extent to which the more current23 load forecast reasonably reflects24 the near- and possibly longer-term25 effects of the current recession.26 However, on the face of it certainly
27 does not appear that the Company has
MACE, DI REB 7
Idaho Power Company
1 not adjusted its 2009 IRP load2 forecast per Staff Production
3 Request #84 or any other previous4 load forecasts to reflect the5 current recession.
6 Not only does witness Mitchell admit that she has
7 not reviewed "the underlying key demographic and economic
8 indicators" that drive the 2009 IRP forecast, she has also
9 failed to review and understand some of the key drivers of
10 the individual load forecasts. The conclusions she
11 attempts to develop in her Exhibit No. 207 are misleading
12 and misrepresent facts.
13 In Exhibit No. 207, Ms. Mitchell tabulates Idaho
14 Power's system average load (70th percentile) and system
15 peak demand (95 percentile) forecasts for the 2006 IRP,
16 August 2007, and August 2008. She also reports the monthly
17 differences between the more recent August 2008 forecast
18 and the August 2007 and August 2006 forecasts. The point
19 she is attempting to make is that Idaho Power has not
20 sufficiently adj usted its load forecasts downward as much
21 as she thinks they should have been due to the economic
22 condi tions that have changed over the past several years.
23 What she has failed to consider are the load impacts that
24 one customer, Hoku Materials, Inc., has had on the
25 forecasts of system load and system peak demand that she is
26 reporting in Exhibit No. 207. Prior to making her
MACE, DI REB 8
Idaho Power Company
1 supposi tions and drawing misleading conclusions concerning
2 the load forecasts, she should have made an effort to
3 understand the composition of the load forecast figures
4 being reported.
5 Mr. Yankel, in his testimony, makes the same
6 mistakes as witness Mitchell. In his table on page 19 of
7 his testimony labeled "Ave MW Forecasted at Different
8 Times," Mr. Yankel reports the monthly differences in 2009
9 between the 2006 IRP, 2008 IRP Update, 2009 IRP, and
10 December 2008 forecasts and compares the difference between
11 the December 2008 and 2006 IRP forecasts. The conclusions
12 he attempts to develop in his table are also misleading and
13 misrepresent facts.
14 Like Ms. Mitchell, Mr. Yankel does not include the
15 loads of Hoku Materials, Inc., in the 2006 IRP load
16 forecast; however, in the August 2007 forecast, Hoku's
17 forecast for 2013 was 40 aMW and 46 MW peak demand. In the
18 August 2008 forecast, Hoku's average load and peak demand
19 forecast nearly doubled from the August 2007 forecast and
20 for 2013 was 77 aMW and 87 MW peak demand. Hoku's impact
21 on the consecutive load forecasts is significant,
22 representing approximately one and one-half years of
23 typical Idaho Power system load and peak demand growth.
MACE, DI REB 9
Idaho Power Company
1 I have prepared Exhibit No. 17 which is a table
2 showing how the Hoku forecast has changed over successive
3 load forecasts.This table illustrates how the inclusion
4 of Hoku energy sales (in aMW) and peak demand (MW) figures
5 impacted the consecutive system forecasts. When the Hoku
6 figures are subtracted from the sales forecasts, it is
7 evident that each of the consecutive load forecasts is
8 lower than the previous forecast (see Exhibit No. 18).
9 Exhibi t No. 18 illustrates another point - that the
10 August 2008 load forecast did incorporate a near-term
11 recession. The load forecast that was prepared in August
12 2008 forecasts that 2009 system electricity sales (in MWh),
13 excluding Hoku, would only be 0.3 percent higher than 2008.
14 Q. You described the load impact of Hoku as a
15 new customer. Are there other new customers that influence
16 the forecast?
17 A.Generally speaking, new potential customers
18 contact Idaho Power as part of a larger site location
19 process, whereby many locations, including locations
20 outside of the Idaho Power service terri tory are under
21 consideration. This process can take many years and can be
22 influenced by many intervening factors, including market
23 conditions and operational requirements which are the
24 drivers of microeconomic forecasting. Thus, while
MACE, DI REB 10
Idaho Power Company
1 representing significant potential load increase, it is
2 uncertain load.
3 A key determinant for significant large-load
4 customers is power availability and reliability. This is
5 illustrated in Exhibit No. 19, which is a presentation made
6 on September 10, 2008, by Mr. Don Dietrich, Director, Idaho
7 Department of Commerce, to the Integrated Resource Planning
8 (" IRP") Advisory Council. A key issue salient to economic
9 development and power supply made by Mr. Dietrich was as
10 follows:
11 Adequate power is not always available12 in the company's timelines.
13 The "company" referred to by Mr. Dietrich is a prospective
14 new large load customer for Idaho Power. This "Catch-22"
15 of power availability represents uncertainty not only to
16 prospective customers but to Idaho Power forecasts of
17 future load. The ironic nature of such a "Catch-22" is
18 inherent in Ms. Mitchell's and Mr. Yankel' s testimonies.
19 Through the misapplication via a broad brush of macro-
20 economic doom and gloom they have concluded that future
21 growth is negative, yet, by constraining the obvious
22 impacts of the microeconomic elements such as the need for
23 adequate new power supply, their forecast becomes a self-
MACE, DI REB 11
Idaho Power Company
1 fulfilling prophecy by driving new customers to locations
2 outside of southern Idaho.
3 Gi ven the uncertainty of new power supply, Idaho
4 Power forecasters have excluded over 700 MW of active new
5 customers' potential load inquiries in its forecast.
6 Q.Have all classes of Idaho Power customers
7 experienced declines over the recent past?
8 A.While most customer classes have declined in
9 either customer growth and/or energy use, weather adjusted
10 electricity sales to the irrigation class have surged over
11 the last two years. I have prepared Exhibit No. 20 which
12 presents the historical and weather-adj usted sales as well
13 as the May 2009 forecast for 2009 irrigation sales. As can
14 be seen from the table, sales for the 2009 forecast year
15 are substantially lower than 2008 actual sales and may need
16 to be revised considerably upwards.
17 Q.Please respond to Ms. Mitchell's argument
18 that recent economic conditions have worsened in the Idaho
19 Power service area.
20 A.I have no disagreement with Ms. Mitchell's
21 short-term observations. But I believe that she needs to
22 be careful in the manner in which she cites the types of
23 statistics she uses in her testimony. Ms. Mitchell also
24 makes some questionable assumptions for the economic
MACE, DI REB 12
Idaho Power Company
1 recovery of the Idaho Power service area and continued load
2 growth therein.
3 Both Ms. Mitchell and Mr. Yankel use the April 2009
4 DFM State of Idaho forecast as a proxy for economic
5 condi tions in the Idaho Power service area. This is not an
6 "apples-to-apples" comparison. The significant maj ori ty of
7 economic growth in Idaho over the last twenty years took
8 place wi thin the Idaho Power service area and, in
9 particular, in the Boise Metropolitan Statistical Area
10 ("MSA"). The DFM analysis is for the entire state, which
11 includes many slow-growing rural areas outside the Idaho
12 Power service area which have significantly different
13 economic characteristics.
14 I have included Exhibit No. 21 which demonstrates
15 this growth differential as well as various population
16 statistics. It shows various geographic aggregations as
17 well as population totals. Most importantly, it shows that
18 the Boise MSA has doubled over the 1988-2008 time period
19 and represents nearly 80 percent of the Idaho population
20 growth for that period. This has resulted in very rapid
21 load growth. Energy use for the Idaho Power service area
22 averaged over 2.5 percent per year for the 1988-2008
23 period, well above the national average of 1.8 percent per
MACE, DI REB 13
Idaho Power Company
1 year for energy for the same period according to the Energy
2 Information Administration ("EIA").
3 Q.Does Idaho Power have an economic forecast
4 comparable to the April 2009 DFM forecast cited in both Mr.
5 Yankel' sand Ms. Mitchell's testimonies?
6 A.Yes.Idaho Power contracted with Moody's in
7 April 2009 to provide macroeconomic forecast data for Idaho
8 counties as well as the two maj or MSAs in the Idaho Power
9 service area - Boise and Pocatello. The Boise MSA is
10 responsible for a significant portion of the population
11 growth in the Idaho Power service area and, excluding the
12 irrigation sector, represents 50 percent of the Company
13 energy sales. I will therefore focus on the results of the
14 May 2009 Moody's forecast for the Boise MSA and compare
15 that to the assertions of a slow economic recovery made by
16 Ms. Mitchell and Mr. Yankel.
17 Q.How does the Moody's forecast for the Boise
18 MSA compare to Ms . Mitchell's claims of a very slow
19 economic recovery?
20 A.Ms. Mitchell chooses her economic statistics
21 very carefully to paint a very slow recovery for the Idaho
22 Power service area economy. For example, she states on
23 page 14 of her testimony that the construction sector is
24 the "greatest contributor to Idaho's stagnant GSP (Gross
MACE, DI REB 14
Idaho Power Company
1 State Product)" without mentioning that this sector
2 represents only 5-6 percent of the entire Idaho GSP in
3 2007-08. She goes on to state that housing starts
4 contribute to load growth without connecting the
5 relationship between housing starts, housing stock,
6 residential customers, households, and residential energy
7 sales. Many of these housing starts during recent years
8 became, in fact, unoccupied houses, which Idaho Power still
9 counts as residential customers. Empty housing units
10 generally use considerably less electricity than occupied
11 ones.
12 As far as the forecast of housing starts, she states
13 on page 12 of her testimony "the levels (of housing starts)
14 recorded in 2006 are not expected to return by the end of
15 2011." Besides my earlier comments on unoccupied housing
16 units, the problem here is that she uses one of the years
17 considered to be part of the "housing bubble," a year where
18 the housing market was characterized by rampant speculation
19 and over-building.I have attached Exhibit No. 22 that
20 shows a graph of housing starts for the Boise MSA that
21 clearly demonstrates the "housing bubble." It is unlikely
22 that the Idaho Power service area will see a return to
2 3 speculative building of large numbers of unoccupied housing
24 units for quite some time. Yet the graph, based on the
MACE, DI REB 15
Idaho Power Company
1 Moody's forecast for the Boise MSA, shows a return to a
2 robust level of residential customer growth similar to that
3 which existed before the "bubble" years of this decade.
4 Q.Does this mean that there will not be
5 increases in residential energy sales over the next few
6 years because there will be many fewer housing starts?
7 A.Not necessarily. Idaho Power estimates that
8 there are a substantial number of residential customer
9 accounts which are actually unoccupied housing units with
10 very little energy use. As a result, the weather-adjusted
11 residential use per customer has declined recently.
12 However, it is likely that residential energy use will
13 increase over the near term even without new houses being
14 built. Due to occupation by native and in-migration
15 household growth, the present vacant housing units will
16 shift from minimal maintenance level of use to occupied
17 consumption levels and the average residential use per
18 customer will increase. This will increase residential
19 energy sales over the next few years without an equivalent
20 increase in housing stock/starts, all of this the result of
21 over-building from the housing bubble.
22 Q.What about the income per capita graph shown
23 on page 13 of Ms. Mitchell's testimony that shows a rather
24 flat economic recovery for Idaho?
MACE, DI REB 16
Idaho Power Company
1 A.Once again, Ms. Mitchell uses a number for
2 the entire state of Idaho as a proxy for the Idaho Power
3 service area. A more representative number for the Idaho
4 Power Service area would be the Moody's forecast of income
5 per capita growth for the Boise MSA. My Exhibit No. 23
6 shows the May 2009 Moody's forecast of income per capita
7 for the Boise MSA and Idaho. The Moody's forecast for the
8 state of Idaho shows a pattern similar to Ms. Mitchell's
9 exhibit. However, the Boise MSA shows a robust recovery
10 that significantly exceeds the state growth rate conveyed
11 by Ms. Mitchell's exhibits (1. 5 percent growth for the
12 state of Idaho vs. 4.4 percent for the Boise MSA). I might
13 also add that there is a noticeable difference between the
14 level of income per capita for the Boise MSA versus the
15 level for Idaho as a whole. If one were to remove the
16 contribution of the higher Boise MSA income per capita to
17 the state of Idaho numbers, the difference would be even
18 more pronounced. Here I agree with Ms. Mitchell's
19 testimony; energy use is clearly correlated with incomes
20 and is something to be considered in load forecasts.
21 Q.Are there other relevant economic variable
22 comparisons from the recent Moody's forecast?
23 A.Yes. Ms . Mitchell discusses the slow
24 recovery from this recession to previous employment levels
MACE, DI REB 17
Idaho Power Company
1 as per the DFM forecast. On page 16 of her testimony, the
2 graph shows Idaho employment in 2011 substantially below
3 the levels of 2007. It is common knowledge that employment
4 is a lagging indicator in the business cycle. Once again,
5 there is a significant difference between the state of
6 Idaho numbers and the Idaho Power service area. My Exhibit
7 No. 24 shows the Moody's forecast of total non-agricultural
8 employment for the Boise MSA. While there are certainly
9 lingering effects on employment from this recession, the
10 forecast for the Boise MSA once again is much more robust
11 than that for the state of Idaho as per the DFM forecast.
12 A better indicator of economic recovery and
13 associated growth in demand for energy would be the Gross
14 Output measure or what is referred to as Gross State
15 Product ("GSP") on page 14 of Ms. Mitchell's testimony. I
16 have attached as Exhibit No. 25 a graph of the Moody's
17 forecast of Gross Output for the Boise MSA. This
18 demonstrates an earlier recovery to the current recession
19 followed by a continuation of the growth trend prior to the
20 current recession.
21 Q.Does the Moody's forecast fall wi thin the
22 reasonable consensus of economic forecasters?
23 A.Yes. In many ways the Moody's and the DFM
24 forecasts for Idaho as a whole are very similar. Many
MACE, DI REB 18
Idaho Power Company
1 economists expect a recovery to begin in the latter half of
2 2009. Moody's is not forecasting anything radically
3 different for the state of Idaho compared to the DFM
4 forecast. However, broad generalizations for the entire
5 state can lead to faulty conclusions when looking at the
6 Idaho Power service area economy.
7 Q.How do you respond to Ms. Mitchell's
8 concerns regarding Idaho Power's winter peak?
9 A.It is my understanding that Idaho Power is
10 capacity constrained in the summer and is not adding
11 resources to meet winter peak. This is exemplified in the
12 fact that in 2008, Idaho Power's all-time system winter
13 peak was exactly 750 MW lower, roughly 25 percent, than its
14 all-time summer peak.Idaho Power had a much more
15 pronounced winter peak 20-30 years ago when a much larger
16 share of the service area housing stock relied on electric
17 space heating. In fact, Idaho Power had annual system
18 peaks in the winter for both 1989 and 1993. With the
19 increasing share of natural gas space heating and water
20 heating in homes, it is doubtful that Idaho Power will
21 experience a winter peaking problem in the future.
22 Q.Why will natural gas space heating continue
23 to dominate the Idaho Power service area in the future?
MACE, DI REB 19
Idaho Power Company
1 A.It appears that the predominance of gas
2 space heating in the Idaho Power service area will continue
3 for the foreseeable future . Given the significant
4 additions to domestic natural gas reserves over the last
5 few years, natural gas should maintain the cost advantage
6 that it currently enj oys over electric space heating. When
7 natural gas prices reached $15/MMbtu in the forward gas
8 markets in late 2005, many people assumed that this
9 indicated "peak gas" and that these types of prices would
10 continue into the indefinite future due to the lack of
11 reserves. This now appears unlikely.
12 The Idaho Power service area cannot be compared to
13 most utilities in the Pacific Northwest. Those utilities
14 located west of the Cascades have a significantly different
15 climate that results in winter peaks. These winter peaks
16 are the result of high saturations of electric space
17 heating and much less use of summer air conditioning.
18 Since Idaho Power is not building capacity to satisfy
19 winter peak and natural gas space heating is likely to
20 dominate the Idaho Power service area for the foreseeable
21 future, it is very likely that programs targeted at winter
22 peak would not be cost-effective for Idaho Power.
23 Q.Does this conclude your testimony?
24 A.Yes it does.
MACE, DI REB 20
Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 12
Michael Wiliam Mace
3416 Leland St
Rocklin CA 95765
[phone]
mwmacetâatt.net
Education:
1975 B.A. Economics, University of California, Berkeley
1977 M.A. Economics, University of California, San Diego
Professional Experience
1977 -1979 Economic Analyst, Pacific Gas & Electric, San Francisco, Ca
Electricity and Natural Gas Forecasts, California Economic forecasts
1979-1986 Senior Economic Analyst, Idaho Power Company, Boise, Idaho
Electricity and economic forecasts for Southern Idaho, consumer survey/market
research, expert witness in avoided cost and rate regulation hearings
1981-1982 Adjunct Instructor in Economics - Boise State University
1986-1999 Senior Economist, Northern California Power Agency, Roseville, Ca
Long term and operational electricity forecasts, demand side and conservation
analysis, Super Efficient Refrigerator Program (SERP), customer marketing
surveys, regional macroeconomic assessments, California electric deregulation
policy evaluation
1999-2000 Market Monitoring Analyst, California ISO, Folsom, Ca
Analysis of market participant bidding behavior, market power evaluations for the
energy, capacity, and transmission markets
2000-2006 Senior Economist, Northern California Power Agency, Rosevile, Ca
Economic analysis of wholesale electricity and natural gas markets,
recommendations for the buying/sellng of long-term and short-term electricity
and natural gas contracts. Analysis of regional power markets, macroeconomic
conditions, and national/regional natural gas markets. Risk management.
2002-presentProfessor of Economics, Sierra College, Rocklin, Ca
February 2009 to Present: Consultant, Idaho Power Company
Exhibit No. 12
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 13
710,-
670,
650,
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610,
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Comparison of Recent DFM Total Non-Ai Employment Forecasts
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Exhibit No. 13
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 14
Idaho Housing Stock Additions. Various DFM Forecasts
zz,oo
ZO,OOO
18,000
16,000
14,000 -Actal
12,000 - - DFM April 2009 Forecast
10,00 ..... DFM July 2008 Forecast
8,000 ......... DFM Ju~ 2007 Forecast
6,000 \/
. .. DFM July 2005 Forecast\,~7
4,000
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~ ~ 00 ~ ~ ~ ~ 00 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ m ~
Exhibit No. 14
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 15
16,000
IPC Residential Customer Forecasts (12 month change)
8,000
14,000
12,000
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-Actual ----. December 2008 - - 20091RP. August 2008 - - - 20081RP Update. August 2007 ......... 20061 RP . August 2005
Exhibit No. 15
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 16
http://ww.idahostatesman.com/eyepiece/story/790130.htm I
June 03, 2009
Wìll Idaho lead the natÌon's recessìon recovery?
A growing population and high-tech work force could put the state first in line to improve, says an
economic research company.
BY 8ILL ROBERTS - BROBERTS(lIDAHOSTATESMAN.COM
Copyríght: ß) 2009 Idaho Statesman
A growing population and high-tech work force could put the state first in line to improve, says an
economic research company.
Idaho could be one of five states to lead the country out of recession - not at a dead run, but more like a slow crawL.
But Idaho will likely see some tough times before things get better in 2010, said Addison Franz, an assistant
economist for Moody's Economy.com. a company whose analysis predicts Idaho's leadership. The Pennsylvania
company provides economic analysis, data. and forecasting and credit-risk services.
"The near-term outlook is relatively bleak this year," Franz told the Idaho Statesman.
Oregon, Washington. Colorado. Texas and Idaho will be the first states to tum the corner, Moody's forecasts.
The three Northwest states will cash in on population growth, which helped them boom in the early part of the
decade. Those states and Colorado will also get a lift from a reviving high-tech industry, despite the loss of 6,000 jobs
at Micron Technology in Boise in the past six years, Franz said.
Idaho's business-friendly climate - including low business cots - and state government's prudent handling of its
recession-induced revenue declines wil help contribute to the rebound, Franz said.
Moody's analysis makes sense, said John Church, a Boise economist.
"We've got a labor force ... trained in high-tech that might be a plus," he said. When the economy really starts to pick
up at some point, Idaho is going to be one of the top five or 10 fastest-growing states in the country, he added.
Moody's logic also makes sense to Bob Lokken, chief executive offcer of Whitecloud Analytics. a new softare
company in Boise. But he's skeptical in the wake of the battered economy.
"I don't know anybody who would try to make sense out of predicting anything after the last 24 months." Lokken said.
PEOPLE ARE THE KEY
Idaho boomed in the years leading up to the recession. But even as the economy soured. people kept moving here.
In 2008. Idaho was the sixth fastest-growing state in the country, according to the U.S. Census. Forecasts call for the
state to exceed the national percentage increases for growth over the next three years.
Idaho has a young, professional labor force, Franz said. "It continues to grow," she said. "That tends to bring
business."
Before the recession, investors were poised to keep putting money in Idaho. She believes they wil again, once the
economy improves.
HIGH TECH'S UP CYCLE
As the recession eases. businesses across the country will begin to reinvest in their high-tech equipment. and that
could mean good times for Idaho's tech sector.
Exhibit No. 16
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 2
The loss of manufacturing, including Micron's memory-chip production lines. won't stop the growth. which could come
in high-tech research, Franz predicted. Each good-paying tech-research job can help create three additional local
jobs, from grocery store clerks to florists.
As the tech sector revives. it wil need other businesses. from graphic designers to law firms. to help. Those could be
some of the first companies to see increases in business, Lokken said.
ROUGH SPOTS FIRST
Exhibit No
Idaho hit the recession like a truck speeding down the highway whose driver suddenly pulls the emergency brake.
A Moody's report from April said Boise's economy was contracting at an "alarming" pace. The report noted, "Payroll
cuts are being made at almost double the U.S. rate."
Statewide unemployment could hit a 7.6 percent annualized rate in 2009 and 8.36 percent in 2010, Franz said.
But by 2010, the economy should start to show signs of improvement, even while the jobless numbers continue to
rise, Moody's said.
Exhibit No. 16
Case No. IPC-E-09-03
M. Mace, IPC
Page 2 of 2
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 17
HOKU Impact on 2010 and 2013 System Load and System Peak Demand Forecasts
2010 Forecast 70th Percentie Average Load (aMW)
JanlO FeblO MarlO AprlO MaylO JunlO JullO AuglO SeplO OctlO NovlO DeclO
2006 IRP Load Forecast 0 0 0 0 0 0 0 0 0 0 0 0
August 2007 Load Forecast 39 40 40 40 40 41 42 41 40 40 40 40
August 2008 Load Forecast 77 77 77 77 77 59 41 52 70 77 77 77
2010 Forecast 95th Percentie Peak (MW)
JanlO FeblO MarlO AprlO MaylO JunlO JullO AuglO SeplO OctlO NovlO DeclO
2006 IR Load Forecast 0 0 0 0 0 0 0 0 0 0 0 0
August 2007 Load Forecast 41 41 42 42 43 45 46 45 44 44 42 42
August 2008 Load Forecast 87 87 87 87 87 46 46 46 71 87 87 87
2013 Forecast 70th Percentie Average Load (aMW)
Jan13 Feb13 Mar13 Apr13 May13 Jun13 Jull3 Aug13 Sep13 Oct13 Nov13 Dec13
2006 IRP Load Forecast 0 0 0 0 0 0 0 0 0 0 0 0
August 2007 Load Forecast 39 40 40 40 40 41 42 41 40 40 40 40
August 2008 Load Forecast 77 77 77 77 77 77 77 77 77 77 77 77
2010 Forecast 95th Percentie Peak (MW)
Jan13 Feb 13 Mar13 Apr13 May13 Jun13 Jnll3 Aug13 Sep13 Octl3 Nov13 Dec13
2006 IRP Load Forecast 0 0 0 0 0 0 0 0 0 0 0 0
August 2007 Load Forecast 41 41 42 42 43 45 46 45 44 44 42 42
August 2008 Load Forecast 87 87 87 87 87 87 87 87 87 87 87 87
Exhibit No. 17
Case No. IPC-E-09-03
M. Mace,IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 18
System Sales Forecasts - 20061RP, August 2007, and August 2008 excluding HOKU Materials
(thousands of megawatthours)
18,000
17,500
17,000
16,500
16,000
15,500
15,000
2008
............. ...... ..;. .;.-;.-;'-. - ---............:.:;:___fl-
.......... fI--,......... -----------.....
2009 2010 2011 2012
-20061RP
...... August 2007 less Hoku
--- August 2008 less Hoku
2013
Exhibit No. 18
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 19
Attracting Business to
Idaho
Idaho Department of Commerce
Donald A. Dietrich, Director
Why Companies Move to Idaho
1. Cost of doing business
2. Locatio., / Proximity to Markets
3. Ease of doing business
4. Incentives
5. Quality of Life
6. Available Land / Future Expansion
7. Skilled Workforce
Exhibit No. 19
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 5
Cost of Doing Busin'essin Idaho
· Idaho ranks 46th in the Milken Institute's Cost
of Business report for 2007 (5th lowest cost)
- For electricity, Idaho is ranked 50th (lowest cost)
- For labor costs, Idaho is ranked 46th (5th lowest)
· Idaho ranks 39th in the Moody's Business
Cost Review 2005 (12th lowest)
- Once again, Idaho is ranked 50th for electricity
- Idaho Power's contribution to the state's low
costs is noted and appreciated
Business Attraction Catch-22
· Heavy power users appreciate Idaho's low
power rates
· Companies with high power demands would
benefit greatly from moving to Idaho
· Adequate power is not always available in
the company's timelines
Exhibit No. 19
Case No. IPC-E-09-03
M. Mace, IPC
Page 2 of5
Idaho's Incentives l
Site Selector Magazine compared incentives
that states offer in two areas
· 18 Financial Assistance Incentives and 15 Tax
Incentives
- Idaho offers only 5 of the Financial Assistance
Incentives, along with 7-9 of the 10 western states
- Idaho offers only 8 of the Tax Incentives, along
with 6-10 of the 10 western states
· Bottom line: Idaho competes on cost of doing
business, not incentives
Closed Projects
· 30 closed projects in the past few years with
great variance in power needs
· Idaho Commerce receives 2-6 inquiries per
month from companies wanting to move or
expand to Idaho
· Local economic development professionals
also receive additional inquiries
Exhibit No. 19
Case No. IPC-E-09-03
M. Mace, IPC
Page 3 of5
Examples of Some Recently
Closed Projects
ComtechAHA h¡irdware 50 $1.0 47
f~~H~~~~~~li ~1~Jt~~í.~!i~~~1f~r;1.~~~~t~~~~~~;rL~~~~ffl~3 ~~;~~fi:~$.~.a:;~~~~.t~~: ;~~tt~l~;~j~g:~t~~jli~~~
Ren ee Energv CO¡iL g¡isifcaon 150 $2 blll0n 100
The other 26 projects represent over 2,500 jobs
and more than $600 millon dollars in capital
expenditures
Pending Projects
· Of the 22 pending projects:
- 6 have power needs greater than 10 MW
- 8 have powèr needs less than 10 MW
- 8 have not provided power needs at this time
Exhibit No. 19
Case No. IPC-E-09-03
M. Mace, IPC
Page 4 of5
Pending Projects
The other 16 companies represent more than 3,000 additional
job for Idaho
Thank You
Donald A. Dietrich
Idaho Oepartment of Commerce
700 W. State Street
Boise, Idaho 83720
208-334-2470
donald .dietrich(§commerce. idaho.gov
Exhibit No. 19
Case No. IPC-E-09-03
M. Mace, IPC
Page 5 of 5
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 20
Actual and Weather-adjusted Irrigation Sales (MWh)
Aug 2008/ Change in
Weather May 2009 Change in Weather Change in
Actual Adjusted Forecast Actual Adjusted Forecast
2006 1,644,225 1,604,084
2007 1,899,556 1,700,832
2008 1,921,608 1,842,808
2009
2010
2011
2012
2013
1,678,716
1,674,792
1,683,636
1,685,694
1,679,404
255,330
22,052
96,748
141,976
-164,092
-3,924
8,844
2,059
-6,291.
Exhibit No. 20
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 21
Historical Population Growth Comparison - 1998 to 2008 ('OOOS)
Aggregates 1988-2008
Region 1988 2008 Change Pet Chng
State of Idaho 986.630 1525.580 538.950 54.6%
TotaliPC Srv Area 600.957 977.141 376.184 62.6%
Total: IPC Idaho Counties Only 572.086 942.973 370.887 64.8%
Total: Non-IPC Idaho Counties 414.544 582.607 168.063 40.5%
IPC Counties
1988-2008 Pet Share
Sub-Region Counties 1988 2008 Change PctChng of IPC Growth
Boise MSA Ada 195.500 380.670 185.170 94.7%50%
Adams 3.320 3.590 0.270 8.1%0%
Pocatello MSA Bannock 60.802 75.143 14.341 23.6%4%
Bingham 28.471 33.163 4.692 16.5%1%
Blaine 12.660 22.020 9.360 73.9%3%
Boise MSA Boise 3.165 7.384 4.219 133.3%1%
Camas 0.683 1.039 0.356 52.1%0%
Boise MSA Canyon 87.670 182.220 94.550 107.8%25%
Cassia 2.128 2.297 0.169 7.9%0%
Elmore 21.114 29.114 8.000 37.9%2%
Boise MSA Gem 11.540 16.690 5.150 44.6%1%
Gooding 11.680 14.440 2.760 23.6%1%
Idaho 1.474 1.679 0.205 13.9%0%
Jerome 15.010 20.370 5.360 35.7%1%
Lemhi 6.634 7.517 0.883 13.3%0%
Lincoln 3.350 4.550 1.200 35.8%0%
Minidoka 1.962 1.901 -0.061 -3.1%0%
Oneida 0.053 0.063 0.010 18.9%0%
Boise MSA Owyhee 8.430 10.990 2.560 30.4%1%
Payette 16.300 23.070 6.770 41.5%2%
Pocatello MSA Power 6.980 7.626 0.646 9.3%0%
Twin Falls 53.380 74.160 20.780 38.9%6%
Valley 5.725 8.554 2.829 49.4%1%
Washington 4.248 5.093 0.845 19.9%0%
Oregon Baker 2.998 3.210 0.212 7.1%0%
Oregon Harney 0.213 0.198 -0.015 -7.0%0%
Oregon Malheur 25.660 30.760 5.100 19.9%1%
Idaho MSAs
1988-2008 Pet Share
MSA 1988 2008 Change Pet Chng of IPC Growth
Boise MSA 297.875 586.964 289.089 97.1%78%
Pocatello MSA 67.782 82.769 14.987 22.1%4%
Source: Moody's May 2009 Forecast for Idaho & Idaho MSAs
Exhibit No. 21
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 22
Boise MSA Housing Starts: 1995.2015
Moody's May 2009 Forecast
14000
12000
10000
8000 ...............................................................................................-...........................
6000
4000
2000
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Exhibit No. 22
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 23
25500
125000
24500
Idaho and Boise MSA Real Income per Capita
Moody's May 2009 Forecast
33000
- - - Boise MSA Real Income per Capita
'"-
-Idaho Real Income per Capita
",,'/'.',~
A/",""--"--'-~~-"---"~..I "".... I ..,'", ......"',,'
I ",
I \ ..,"." .".._.._-ø.ø#, ..,,..'..'....,. ,..'........,--
...""í ~"-~\.-...~~"-,
~--~,,~-
32500
32000
31500
31000
30500
30000
29500
29000
28500
28000
27500
27000
26500
26000
24000
~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~~ ~~~ ~~~ ~ ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~å åå ~ å å å~å å å ~ å åå ~ å å å ~ å å å ~å å å ~ å å å ~åå å ~ å å å ~
Exhibit No. 23
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 24
Boise MSA Total Non-Ag Employment 2004-2013
Moody's May 2009 Forecast
300
290
280
270
260
250
240
230
g g a ~
å å a å
\l \l " "o 0 0 0
å å å å
Q\ Q\ 0 0o 0 PI PI
å å å å
PI PlNN i'i'PI PI PI PI PI PI
å å å å å å
~ ~
å å
Exhibit No. 24
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-03
IDAHO POWER COMPANY
MACE, 01 REB
TESTIMONY
EXHIBIT NO. 25
Real Gross Output - Boise MSA
Moody's May 2009 Forecast
23
22
21
20
19
18
17
16
g..
CJ
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å
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CJ
o 0.. ..
.. rtCJ ,CJ
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....
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Exhibit No. 25
Case No. IPC-E-09-03
M. Mace, IPC
Page 1 of 1