20100126Gale Direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF I DAHO POWER COMPANY FOR
A PRUDENCY DETERMINATION OF
ENERGY EFFICIENCY RIDER FUNDS
Spent in 2002-2007.
Case No. IPC-E-O 9-0 9
IDAHO POWER COMPANY
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.Please describe your educational background
9 and business affiliations.
10 A.I received a BBA in 1975 and an MBA in 1981
11 from Boise State Uni versi ty. I maintain a close
12 affiliation with the Uni versi ty and serve as Vice Chair of
13 the College of Business and Economics' Advisory Council. I
14 have also attended the Public Utili ties Executive Course at
15 the University of Idaho and am now on the faculty of that
16 program leading the section on "Regulation and Ratemaking ."
17 I am an active member of the Edison Electric
18 Institute's ("EEI") Rates and Regulatory Affairs Committee,
19 which is the committee that is concerned primarily with
20 regulatory issues and ratemaking methods.I am the current
21 Chair of this committee. I am also a member of EEI's
22 Retail Energy Services Executive Advisory Committee.
23 Q.Please describe your work experience.
GALE, DI 1
Idaho Power Company
1 A.From 1976 to 1983, I was employed by the
2 State of Idaho primarily as an analyst in the Department of
3 Employment. In October 1983, I accepted a position at
4 Idaho Power Company as a Rate Analyst in the Rate
5 Department. I initially worked on rate design, tariff
6 administration, and line extension issues. In March 1990,
7 I was assigned to the Company's Meridian District Office
8 where I held the position of Meridian Manager, which was a
9 one-year cross-training position established to provide
10 corporate employees with an extensive field experience. I
11 returned to the Rate Department in March 1991 and in June,
12 I was promoted to Manager of Rates. In July 1997, I was
13 named General Manager of Pricing and Regulatory Services.
14 In March 2001, I was promoted to Vice President of
15 Regulatory Affairs, my current position.
16 As Vice President of Regulatory Affairs, I oversee
17 and direct the acti vi ties of the Pricing and Regulatory
18 Services Department. These acti vi ties include the
19 development of jurisdictional revenue requirements, the
20 oversight of the Company's rate adjustment mechanisms, the
21 preparation of class cost-of-service studies, the
22 preparation of rate design analyses, and the administration
23 of tariffs and customer contracts. In my current position,
24 I have the primary responsibility for policy matters
GALE, DI 2
Idaho Power Company
1 related to the economic regulation of Idaho Power Company.
2 I have testified frequently before the Idaho Public
3 Utilities Commission ("the Commission") on a variety of
4 rate and regulatory matters. I have also testified before
5 or submitted direct testimony to the regulatory commissions
6 in Nevada and Oregon, the Federal Energy Regulatory
7 Commission ("FERC"), the Bonneville Power Administration,
8 and the United States Senate Committee on Energy and
9 Natural Resources.
10 Q.What is the purpose of your testimony in
11 this matter?
12 A.My testimony supports a settlement
13 stipulation ("Stipulation") entered into by Idaho Power
14 Company and the Commission Staff that provides resolution
15 to Case No. IPC-E-09-09. This case pertained to the
16 prudency of the Energy Efficiency Rider ("Rider") fund
17 spent from 2002 through 2007.
18 Q.What is the history of Case No. IPC-E-09-09?
19 A.Idaho Power Company first asked this
20 Commission for a prudency determination on $28,961,716 of
21 Rider funds spent during 2002 through 2007 as part of its
22 2008 Idaho general rate case filing, Case No. IPC-E-08-10.
23 On February 18, 2009, the Company and the IPUC Staff filed
24 a stipulation in Case No. IPC-E-08-10 agreeing that
GALE, DI 3
Idaho Power Company
1 $14,303,745 of Rider-funded expenditures was prudently
2 incurred. The Commission approved this stipulation in
3 Order No. 30740 issued March 6, 2009. Following the
4 implementation of Order No. 30740, the Company and the
5 Staff exchanged information regarding the remaining
6 $14, 657, 971 of Rider funds that had yet to have a prudency
7 determination. Such a prudency determination of remaining
8 Rider expenditures became the subj ect of the current case.
9 Q.What event facilitated reaching settlement
10 in this case?
11 A.The IPUC Staff convened a workshop on
12 October 5, 2009, with Idaho Power, Avista Utilities, and
13 PacifiCorp (d/b/a Rocky Mountain Power) - the three
14 investor-owned utili ties serving the state of Idaho. The
15 purpose of the workshop was to discuss the contents of a
16 more comprehensive utility Demand-Side Management ("DSM")
17 report that would demonstrate a commitment to, and
18 accomplishment of, an obj ecti ve and transparent evaluation
19 of DSM efforts. The agreed upon principles stemming from
20 that workshop and subsequent discussions resulted in the
21 signing of a Memorandum of Understanding ("MOU") between
22 the three utili ties and the Commission Staff. This MOU is
23 Attachment No. 1 to the Stipulation.
GALE, DI 4
Idaho Power Company
1 Q.Please describe the MOU, Attachment No. 1 to
2 the Stipulation.
3 A.There are four areas of understanding:(1)
4 Utility DSM Annual Report Requirements, (2) Prudency
5 Determination, (3) Treatment of 2008 and 2009 Expenditures,
6 and (4) The Commission's interaction with the MOU.
7 Q.What are the DSM Annual Report Requirements
8 specified by the MOU?
9 A.It was agreed that Idaho Power's 2008
10 Demand-Side Management Annual Report would be used as the
11 starting point for enhanced reports beginning in 2009.
12 Subsequent reports will contain an enhanced table of
13 contents and an introduction that includes an overview of
14 the Process Evaluations and Impact Evaluations begun or
15 completed during the previous year, process and program
16 modifications made as a result of the evaluations, as well
17 as planned evaluations and modifications for the coming
18 year.
19 Each DSM report will include a "Cost-Effectiveness"
20 section, "Evaluation" section, and "Program Specific"
21 section. The "Cost-Effectiveness" section will include a
22 table listing individual programs/measures and the basis
23 for estimates of their cost-effectiveness. The
24 "Evaluation" section will include a table showing the
GALE, DI 5
Idaho Power Company
1 schedule for evaluations that includes impact assessment,
2 assumptions, source review, field impact measurement
3 schedule, and completion date. The" Program Specific"
4 section will be reported by sector or customer class, with
5 a description of individual programs offered and a summary
6 of the measures within each program. Each "Program
7 Specific" section will reference process, impact, cost-
8 effectiveness, and market effects (including Northwest
9 Energy Efficiency Alliance) evaluations, as well as
10 completed or planned changes related to these evaluations.
11 Finally, expenses that do not result in direct
12 energy savings, such as education and outreach, will be
13 identified and may be considered reasonable and necessary
14 expenses for a broad-based DSM portfolio.
15 Q.How is prudency to be determined?
16 A.The parties to the MOU recognize that
17 evaluating DSM acti vi ties is not a precise science and
18 utili ties are encouraged to continually review programs and
19 make appropriate improvements. A showing by the utility of
20 a good faith effort to reasonably perform within the
21 guidelines specified in the MOU constitutes prima facie
22 evidence that the utility's DSM expenses were prudently
23 incurred for cost recovery purposes.
GALE, DI 6
Idaho Power Company
1 Q.How are the 2008 and 2009 DSM expenditures
2 proposed to be treated?
3 A.The parties to the MOU recognize that 2008
4 and 2009 DSM expenditures have already been incurred at the
5 time of signing of the MOU and the Stipulation and that the
6 2008 DSM annual report has already been filed. Exact
7 compliance to the terms of the MOU for the 2008 and 2009
8 expendi tures is not possible. Accordingly, as a
9 transitional step, the parties will include as many
10 components as possible in the Demand-Side Management 2009
11 Annual Report filed in 2010 and the Staff will provide
12 reasonable and necessary leeway for implementation of these
13 guidelines for 2010.
14 Q.Is the Commission bound by the MOU?
15 A.No. The MOU only binds the Staff. The MOU
16 has no explicit or implicit authority to bind the IPUC.
17 Q.How does the MOU relate to Case No. IPC-E-
18 09-09?
19 A.The MOU applies to each signing utility in
20 their individual prudency dockets. In Idaho Power
21 Company's instance, it is Case No. IPC-E-09-09. The
22 application of the MOU is through the Stipulation signed by
23 the Company and the Staff.
24 Q.Please describe the Stipulation.
GALE, DI 7
Idaho Power Company
1 A.The Stipulation is filed contemporaneously
2 with my testimony in this case. It is an agreement between
3 Idaho Power and the Commission Staff and is unrelated to
4 the other investor-owned utili ties DSM acti vi ties. The
5 Stipulation recognizes the application of the MOU between
6 the Staff and the utili ties. Finally, the Staff - upon its
7 review of the Company's DSM-related expenditures - agrees
8 the remaining balance of $14,657, 971 of Rider-funded
9 activities spent between 2002 and 2007 were prudent
10 expendi t ure s .
11 Q.Why is resolution of this issue of
12 particular importance to Idaho Power?
13 A.Idaho Power has often stated to this
14 Commission and over the last five years has demonstrated
15 its commitment to energy efficiency and demand-side
16 acti vi ties through programs, funding, and human resources.
17 Annual spending for Rider-funded acti vi ties now exceeds $30
18 million. The Company has ratcheted up its Energy
19 Efficiency Rider several times since its inception and the
20 current level of 4. 75 percent of base rates is among the
21 highest in the West. However, at this time any
22 disallowances of DSM expenditures have no corresponding DSM
23 earnings' opportunities to be taken from; therefore, should
24 such disallowance occur, it would reduce the earnings from
GALE, DI 8
Idaho Power Company
1 the Company's other operations. With this business model,
2 it is of utmost importance that the Company understands
3 Staff's and the Commission's expectations of what
4 consti tutes a prudent expenditure. The MOU and Stipulation
5 provide much more clarity and guidance to confidently
6 continue with energy efficiency as one of the Company's
7 highest priori ties.
8 Q.Do you believe that the Stipulation is in
9 the public's interest and should be approved by this
10 Commission?
11 A.Yes.
12 Q.Does this conclude your testimony?
13 A.Yes.
GALE, DI 9
Idaho Power Company