20080107Goins rebuttal.pdf

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Department of Energy
Washington, DC 20585
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Januar 4,2008
VIA FEDERAL EXPRESS
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
P.O. Box 83720
Boise, ID 83720-0074
RE: Case No. IPC-E-07-8
Dear Ms. Jewell:
Enclosed please find an original and ten (10) copies of the Rebuttal Testimony and
Exhibits of Dennis W. Goins on behalf of the United States Departent of Energy in the
above-captioned proceeding. Also enclosed is an additional copy of each of these items
that I request be date-stamped and returned in the enclosed postage paid envelope. If you
have any questions concerning this filing, please contact me at [phone].
Sincerely yours,
i
Arhur Perr Brudh, Esq.
Office of the General Counsel
United States Deparent of Energy
i 000 Independence Avenue
Washington, D.C. 20585
Arhur.Bruderêhq.doe.gov
[phone]
* Printed with soy ink on recycled paper
CERTIFICATE OF SERVICE - CASE NO. IPC-E-07-8
I hereby certify that I have, this 4th day of January, 2008, served or caused to be served a
tre and correct copy of the attached Rebuttal Testimony and Exhibits of Dennis W.
Goins on Behalf of the United States Departent of Energy upon each of the parties
listed below, by placing the same in the United States Mail, postage prepaid.
Barton L. Kline
Lisa D. Nordstrom
Idaho Power Company
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707-0070
John R. Gale
Vice President, Regulatory Affairs
Idaho Power Company
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707-0070
Weldon Stutzman
Neil Price
Deputy Attorneys General
Idaho Public Service Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
Peter J. Richardson
Richardson & O'Leary
515 N. 27th St.
P.O. Box 7218
Boise, ID 83702
Dr. Don Reading
Ben Johnson Associates
6070 Hil Road
Boise, il 83703
Eric L. Olsen
Racine, Olson, Nye, Budge &
Bailey, Chartered
P.O. Box 1390;
201 E. Center
Pocatello, il 83204-1391
Anthony Yankel
29814 Lake Road
Bay Vilage, OH 44140
Michael Kurtz, Esq.
Kur J. Boehm, Esq.
Boehm, Kurz & Lowry
36 E. Seventh Street, Suite 1510
Cincinnati, OH 45202
Conley E. Ward
Michael Creamer
Givens Pursley LLP
601 W. Bannock Street
PO Box 2720
Bois, ID 83701-2720
Dennis E. Peseau, Ph.D.
Utility Resources, Inc.
1500 Liberty Street, Suite 250
Salem, OR 97302
~Arhur Perry Brud r, Esq.
Office of the General Counsel
United States Deparent of Energy
Washington, DC 20585
-2-
immlati - J 9: 54
STATE OF IDAHO
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-07-08
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY
FOR AUTHORITY TO INCREASE ITS RATES AND
CHARGES FOR ELECTRIC SERVICE TO ELECTRIC
CUSTOMERS IN THE STATE OF IDAHO
REBUTTAL TESTIMONY OF
DR. DENNIS W. GOINS
ON BEHALF OF THE
U.S. DEPARTMENT OF ENERGY
January 4,2008
TABLE OF CONTENTS
Page
INTRODUCTION ................................................................................................................... 1
CONCLUSIONS......................................................................................................................2
RECOMMENDATIONS ............................................................................................................ 3
Case No. IPC-E-07-08
Dennis W. Goins - DOE - Di-Reb
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2 Q.
INTRODUCTION
3 ADDRESS.
PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS
4 A.My name is Dennis W. Goins. I operate Potomac Management Group, an
5 economic and management consulting firm. My business address is 5801
6 Westchester Street, Alexandria, Virginia 22310.
7 Q.
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DID YOU PREVIOUSLY FILE DIRECT TESTIMONY IN THIS CASE?
Yes. I filed direct testimony on December 10, 2007, on behalf of the U.S.
Departent of Energy (DOE) representing the Federal Executive Agencies (FEA),
which is comprised of all Federal facilities served by Idaho Power Company
(IPC). Two of the larger FEA facilities are the Deparent of Energy's Idao
National Laboratory (DOE/INL) and Mountain Home Air Force Base.
DID YOU REVIEW THE DIRECT TESTIMONY FILED BY OTHER
PARTIES RELATED TO COST-OF-SERVICE AND REVENUE SPREAD
ISSUES?
Yes. I reviewed direct testimony conceming these issues fied by Staff witness
Keith D. Hessing, Micron witness Dr. Dennis E. Peseau, Industral Consumers of
Idaho Power (nCP) witness Dr. Don C. Reading, and Idaho Irrgation Pumpers
(Irrgators) witness Anthony J. YaneL.
WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?
The purose is to respond briefly to Staff witness Hessing's testimony related to
his proposed revenue spread and the cost-of-service study on which the spread is
based. In addition, on the basis of my review of the testimony I just cited, I have
concluded that any revenue increase that Idaho Power Company (IPC) receives in
Case No. IPC-E-07-08
Dennis W. Goins - DOE -Di-Reb
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this case should be spread among customer classes on an across-the-board basis.
In my direct testimony, I recommended a different revenue spread.
CONCLUSIONS
WHAT CONCLUSIONS HAVE YOU REACHED?
On the basis of my review and evaluation of the direct testimony fied by
witnesses Hessing, Peseau, Reading, and Yankel, I have concluded the following:
1. Cost of Service. Each witness discusses the dramatic shifts in interclass
class cost allocations that have occured in cost studies IPC has fied in
recent rate cases. Unfortnately, there is no uniformity among the
witnesses regarding either the causes of these dramatic shifts, or the proper
methods to ensure that IPC's costs are properly allocated. As a result, we
now have in this case at least six different recommended cost-of-service
studies and six different recommended revenue spreads. i The cost-of-
service studies filed by Staff and intervenors produce significantly
different cost allocations and implied revenue spreads among customer
classes compared to ¡PC's recommended 3CP/12CP cost study. These
different results arise from the different approaches each par has taken to
address critical deficiencies in IPC's cost analyses-for example, IPC's
use of a futue test year or improper classification of selected production
costs.
2. Revenue Spread. Staff recommends an overall 2.82 percent revenue
increase for IPC. Using results from its cost study, Staff proposes a
revenue spread with nonuniform class increases ranging from zero percent
to ten percent. The cost study on which Staff relies for its revenue spread
is characterized by many of the same deficiencies as IPC's recommended
i These counts include not only the four different cost studies and revenue spreads recommended by Staff,
Micron, IICP, and the Irrgators, but also the cost studies and revenue spreads proposed by IPC and DOE.
Case No. IPC-E-07-08
Dennis W. Goins - DOE -Di-Reb
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cost study. In paricular, Staff improperly classified IPC's production
plant and FERC Account 555 purchased power costs-that is, Staff
classified these costs the same as IPC classified them.2 These improper
classifications produced cost allocations that led Staff to recommend
increases for special contract customers that ranged from nearly 130
percent to more than 200 percent above Staffs recommended 2.82 percent
overall increase. Such increases are not supported by a cost study in which
IPC's production plant and Account 555 costs are properly classified.
Staff also recommends recovering its assigned class rate increases (with
the exception of the Irrgation Schedule 24) via increases in energy (kWh)
rates.
RECOMMENDATIONS
DO YOU HAVE ANY ADDITIONAL RECOMMENDATIONS ON THE
BASIS OF THESE CONCLUSIONS?
Yes. I continue to support the recommendations cited in my direct testimony,
subject to the following additions and/or modifications:
1. Reject Staffs cost-of-service study. The study reflects the same improper
classifications of IPC's production plant and Account 555 purchased
power costs that I discussed in my direct testimony.
2. Reject Staffs proposed revenue spread, which is based on its flawed cost
study results.
3. Reject Staffs proposal to recover any approved class rate increases solely
through kWh charges. Instead, rate increases for classes with demand
charges should be recovered through increases in non-energy (kW) prices.
Demand is a primary driver behid IPC's growing revenue requirements.
2 I discussed the deficiencies in IPC's classification of these costs in my direct testimony at pages 11 - 17.
Case No. IPC-E-07-08
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Providing proper price signals implies strengthening the linkage between
customer demands and customer prices. For customers served under rates
with non-energy charges, this means recovering all-or at least most-of
any allowed increase though higher demand charges.
4 Spread any allowed rate increase uniformly across all customer classes. In
my direct testimony (pages 20-21), I presented a 4-step approach for
allocating any revenue increase that IPC receives. However, after
reviewing testimony filed by other paries, I am convinced that an across-
the-board spread is the fairest and most reasonable method to recover any
rate increase that the Commission grants IPC. In my opinion, the
Commission faces an impossible task tring to resolve the widely
divergent costing approaches and revenue spreads proposed in this case
withn the time constraints imposed by the current procedural schedule.
These major differences cannot be properly resolved without fuer in-
depth investigation by the Commission and interested stakeholders. I
recommend that the Commission defer decisions on the various cost
classification and allocation issues raised in this case to IPC's next rate
case or to a separate proceeding that focuses solely on how IPC's costs
should be classified and allocated. If the Commission agrees, then an
across-the-board revenue spread is the most equitable approach for
allocating any Commission-approved increase in this case.
DOES THIS COMPLETE YOUR REBUTTAL TESTIMONY?
Yes.
Case No. IPC-E-07-08
Dennis W. Goins - DOE -Di-Reb
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