20090417R A Slaughter Direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMSSION
IN THE MATTER OF THE
APPLICATION OF IDAHO POWER
COMPANY FOR AUTHORITY TO
MODIFY ITS RULE H LINE EXTENSION
TARFF RELATED TO NEW SERVICE
ATTACHMENTS AN DISTRIBUTION
LINE INSTALLATIONS.
CASE NO. IPC-E-Ø8-22
BUILDING CONTRACTORS ASSOCIATION OF SOUTHWESTERN IDAHO
DIRCT TESTIMONY
OF
RICHAR SLAUGHTER
ORiGiNAL
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1 Q.
2 A.
Pleae state your name and business address for the recrd.
My name is Richard Slaughter. My business address is 907 Harson Blvd, Boise, Idao
3 83702.
4 Q.Have you prepared a statement of your quaifications to offer testimony in ths
5 proceeing?
6 A.
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19 A.
I have. It is attached to this testimony as Attchment A. Expanding on the quaificaons
detailed in Attchment A, betee 1998 and 200 1 I consulted in Kazakstan and
Kyrgystan on tax policy and revenue estimation. The work in Kyrgystan was
supprted by the Asian Development Ban ("ADB"). My reprt CR be found in ADB
Techncal Assistance No. 3106-KGZ, Benchmark Reprt Section V "Economic and Tax
Analysis." The implications of that work for third world economic development are
presented in the Sumer 2002 issue of The National Interest, a public policy joural.
My comments on the Former Soviet Union (FSU) and third world economic development
are grounded in my academc work in interational politics and economics, alost fifty
year as a close obserer of the Soviet Union and comparative politics, my work as Chief
Economist for the Idaho Division of Financial Management, and my consulting work in
the region.
Are you offerng any exhibits in supprt of your testimony?
Yes. I am spnsoring Exhibits 201 through 204.
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Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 Q.What is the purse of your testimony?
2 A.I have been asked by the Building Contrctors Association of Southwest Idaho ("BCA")
3 to prvide to the Commission my analysis and opinions conceg Idaho Power
4 Company's ("Idaho Power" or "Company") proposed Rule H taff modfications.
5 Q.Have you previously testified before ths Commssion?
6 A.Yes. In 1995 I provided testimony to the Commssion on behalf of the BCA concerg
7 proposed modifications of the Company's Rule H taffin Case No. IPC-E-95-18. I also
8 have testified in numerous other cases before ths Commission involving avoided cost
9 and cost of capita.
10 Q.Please sumarze the scope of your analysis concerg the Company's proposed Rule H
11 tarff revsions.
12 A.I have reviewed the Company's Application and supporting testimony in this proeding
13 and the Company's responses to Staff and BCA production requests. I also have
14 reviewed the pleadings, testimony and exhbits and Commission Order in the
15 Company's prior Rule H tarff proceeing, IPC- E-95-18, as well as subsequent
16 Commission order having relevance to the Company's cost of serce, avoided costs and
17 embedded costs and rates, including the Commission's recent Order No. 30722 in the
18 Company's 2008 rate case, IPC-E-08-10. I also have analyzed available economic data
19 relative to inflation and cost pressues on Idaho Power's rate base.
Page 3
Richard A. Slaughter
Building Contrctors Association of Southwes Idaho
Case No. IPC-E-08-22
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1 Summary
2 Q.
3 A.
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Wil you also please sumarze testimony?
My testimony addresses four priar areas. First, I will discuss why the Company's
proposed tarff modifications are inconsistent with the Commssion's existing policy
statements and with economic theory. Second, I will testify concerg the fallacy in
Idaho Power's asserion that increased distbution costs ar drven by grwt itself, as
opposed to inflation. Thrd, I wil address the advere economic impacts of adopting the
Compay's proposed tarff modifications. Four I will propose an upted basis for
computing the appropriate allowances and adinisterng vested interest refuds.
10 Company rationale and Commssion policy
11 Q.
12 A.
What is your undertanding of the Company's intent in filing in ths case?
In his testimony on behalf of the Company, Greg Said has made clear that Idaho Power
13 desires ultimately to impose the ful marginal cost of growt (including costs of new
14 generation, transmission and distrbution) on new development to eliminate the upwar
15 pressue that the addition of new facilities imposes on rates. This Rule H filing is merely
16 the opeing salvo in the Company's strategy.
17 Q.
18 A.
Can you provide support for that conclusion frm Mr. Said's testimony?
Yes. The following colloquy from Mr. Said's testiony descrbes that intent, and
19 includes Mr. Said's admission that Idao Power ultiately is as interested in trsferg
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Richard A. Slaughter
Building Contrctors Assocation of Southwest Idaho
Case No. IPC-E-08-22
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1 generation and trsmission costs to new customer as it is in trferng line extension
2 costs:
3 "Q. Please descnòe the instrctions you gave to Mr. Spars regarding the
4 improvements that the company desired be made to Rule H.
5 "A. I identified thee primar goals for Mr. Spars to achieve. ... Third, I asked Mr.
6 Sparks to tae a close look at line instalation allowances and refuds with an eye
7 toward reducing both allowances and refuds.
8 "Q. Why is the Company desirous of reducig line instalation allowances and9 refuds?
1 0 "A. As the Commssion is well aware, the Company has fied genera rate case
11 proceedings in 2003, 2005, 2007, and 2008. In addition, the Company has also
12 filed cases for the inclusion into rate base of the Benet Mountain gas-fied plant
13 in 2005 and the inclusion of the Danskin gas-fired plant in 2008. With. the reent
14 frequency of rate proceeings, a peristent question arses: Is growt paying for
15 itselt? The clear answer is no. Additional revenues generated from the addition
16 of new customer and load growt in general is not keeing pace with the
17 additional expeses crated and required to prvide ongoing safe and reliable
18 serce to new and existing cutomers. Whle the provisions of Rule H have
19 required some contrbutions in aid of constrction for new distrbution facilities,
20 there are no requirements for contrbutions in aid of constrction for new
21 trsmission or generation facilities which (sic) are also tyically required to
22 sere customer growt. Reducing the Company's new customer-related
23 distrbution rate base by reducing allowances and refuds wil relieve one area of
24 upward pressure on rates and will tae a step toward grwt payig for itself."
25 (Said, DI, p. 5, 1 23 to p. 6, line 22) (emphasis added).
26 This statement, together with Mr. Said's instrctions to Mr. Sparks to "take a close look
27 at line installation allowance and refuds with an eye toward reducig both allowance
28 and refuds (SAID, DI, p. 4, lines 20-22)," is clea indication that Idaho Power desires
29 that new connections pay the full marginal cost of capita. His languge suggests a belief
30 that rates should forever be stable in nominal ters, and declinig in real ter, for those
31 customers who are cutly on the system and who never move to a new residence.
Page 5
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Cas No. IPC-E-08-22
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1 It is also tellng that Mr. Said's instrctions were for the purose of arbitrarly "reducing
2 both allowances and refuds." There is no attempt whatsoever to lay a theoretical or
3 empirical bas for the Rule H proposa. He does not, excet in the most general
4 conventional wisdom sense, tie the proposal to changes in the Company's specific costs,
5 nominal or rea.
6 Q.Does Mr. Said suggest that it wil be the Company's policy to recover from new
7 customer the margial costs for expansion of Idaho Power's geeration and tranission
8 plant?
9 A.Yes, that would appear to be the case.
10 Q.Please explain.
11 A.Mr. Said complai that "growt does not pay its way." He states that all aras of the
12 Company's costs have been rising, and attbutes those increases to grwt; citing several
13 Company rate cases over the past decade. He then instrcts Mr. Spars to design
14 proposals that would "take a step towar grwt payig for itself." There is no other
15 logical interretation to make.
16 Q.What has been the Commission's public policy recrd on ths issue?
17 A.Broadly speaking, inIPC-E-95-18, the Commission deterined that new customer
18 should receive credit for the embedded costs of providing distrbution/terinal serces.
19 In Order 26780, the Commission found, among other things, that:
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Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
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· . .. new customer are entitled to have the Company provide a
level of investment equal to that made to sere existing cuomers in the
same class; and
· To the extent that any allowance is ordered, some porton of
distrbution cost wil continue to be recver though rates. (Order
26780, IV (C) Commssion Findings, ~ 2.)
What rationale supports ths policy?
In par, it is the recogntion that uness new customer reeive credt for their
contrbutions to the cost of new facilties and some or all of the embedded costs of
existing distrbution/terinal facilties, then the rates for existig customer are
suppressed below the actual cost of serce, which in tu suppresses the consumer's
incentive to limit his or her electrcity use.
Please explain.
Embedded distrbution costs greatly undertate both the replacement cost and the
15 economic value of distrbution servces. As wil be descrbe later in my testimony, the
16 ratepayer pays for cuent deprecation and for retu on capital for the un-depreciated
17 portion of the distrbution system. Because the economic life of the system is longer than
18 the depreciation perod, much of the existing system costs nothng in rate schedles, even
19 though. value contiues to be provided to the ratepayer.
20 Q.
21 A.
Is there other rationale supportng the Commission's decision in IPC- E-95-18?
Yes. In the 1995 Rule H case, the BCA provided evdence concerng the advere
22 ecnomic impacts that would result ifnew cutomer were required under the Company's
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Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 proposed Rule H Tarff modifications to pay all costs of new distrbution facilities in
2 excess of embeded investment. The Commission speifically found that requing
3 payment of all these costs frm new customers could have severe ecnomic effecs.
4 Q.Has the Commission's recgntion of the rationale and policy in been cared forward in
5 subsequent order?
6 A.At least with respect to its policy of sending appropriate maret signals to the Company's
7 customers, yes. The Commission has quite recently affrmatively recognized that the
8 nee to constrain unbridled demand grwth requires that more accute market signals be
9 provided to customers. For example, average cost prcing, by design, has proteced Idaho
10 Power customer from the full effects of inflation and of the costs of fuel switchin and
11 other changes in the cost of deliverng energy.
12 In IPC-E-08-10, the Commission adopted the Company's proposed "invered block" rate
13 schedule for residential customer, in which an initial block at lowest price was set at
14 approximately 60% of the average residential monthy use, with a higher price for energy
15 in excess of that monthy amount. The Commission also cotinued to support higher
16 rates for sumer use, in recogntion of the fact that residential suer demand
17 contrbutes to the Company's pea demand. The Compay proposed, and the
18 Commission approved, an increase in the rate differtials betwee the Tier 1 and Tier 2
19 blocks to 20%, to recognize higher suer energy cost, and to "send a stronger price
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Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 signal to customers encourging the effcient use of energy. ..." (IPC-E-08-10 transcrpt,
2 p.728).
3 Q.Does the Company's Rule H proposa conform to both the Company's above-describe
4 intent concerng its residential rate prposal in IPC-E-08-1 0 and Commssion policy?
5 A.No. In fact Idaho Power's curent Rule H modification proposal is diametcally opposed
6 to the Company's IPC-E-08-10 proposal and the Commission's decision.
7 Q.In what way?
8 A.The proposed Rule H seeks to place the full marginal cost of distrbution system
9 expansion onto "new" customer. Rather than sending a prce signal to existing
10 customer that caital cost inflation exists, it seeks to remove growth entirely from rate
11 base. Ths would cause rate base to gradually decline over time due to depreciation.
12 The only distrbution inflation reflected in rate base under the Company's proposal
13 accres because of system maintenance and replacement, if, as, and once it occu.
14 Because the economic life of distrbution plant tends to be longer than the depreciated
15 life, un-depreciated distrbution plant, and thus rate base, will decline over time.
16 Consequently, rates wil not reflec the actal (hgher) cost of serice or the increased
17 (and accruing but not-yet-incued) cost of maitenance and replaceent of the existing
18 distrbution system.
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Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 Q.What effect would Commission support for the Company's curent Rule H proposal have
20n ratepayer?
3 A.It would undercut the price signal the Commission's decision in IPC-E-08-10 was
4 intended to provide by removing inflation from a major component of energy costs. This
5 is a subsidy to existing customer. Causing cutomer to believe that energy costs les
6 than it actually does wil cause overall demand to rise above the level that might be
7 expected from cuent policy.
8 Rising costs, inßation, and market signals
9 Q.Is ther reason to believe that Mr. Said is confsing nominal with real costs, and that the
10 nominal costs for new terinal serces do not in fact represent "higher costs of grwt?"
11 A.Yes. The conclusion that "grwt does not pay its own way" can only be reached by a
12 simple comparson of embeded distrbution costs with that of new serce. In Mr.
13 Said's view, since new serice costs more than the average of the existig rate base, rapid
14 growt results in nominal rate increases.
15 Q.Is Mr. Said's comparson accuate?
16 A.No, because Mr. Said is comparng apples and oranges. First, as mentioned earlier, the
17 Company's existing system contans substtial distrbution asses that ar fully
i 8 depreciated. Thus, even if inflation were zer, Idao Power's embeded costs would be
19 below that of new plant, simply beuse the economic life of new plant is longer than the
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Richard A. Slaughter
Building Contrctors Assocation of Southwest Idaho
Case No. IPC-E-08-22
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1 deprecation schedules. Second, the Company's existing system is of lower quality and
2 capacity than new plant because of its age. As a result, the additional distrbution system
3 provided for new cutomer is of signficantly higher quality, has a higher capacity, a
4 longer expected life, and lower maintenance costs than the aging, depreciated system that
5 existing customer are charged for as par of their rates.
6 Q.
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Please elaborate.
For the past quaer centu the portion ofIdaho sered by Idaho Power, parcuarly the
Treasure Valley, has grwn raidly. Ths growt is consistent with curent public policy
of the State, the City of Boise and business and public entities in the Treasure Valley. It
has caused Idaho Power's overl distrbution system to be younger than it otherise
would be. Whle one result is rising average costs, the reduction in averge system age
also wil caus maintenance costs to be lower than would otherse be the case -
reducing costs down the road. In other words, new customer who generate the nee for
new distrbution plant, in the long ru reduce real costs for all customer.
So growth is not a cause of rea cost incrases?
No. To quote my prior testimony, "growt, espeally acceleratig growt, will cause the
17 effects of an underlying cost change to be felt more quickly. In itself, however, growt
18 does not cause higher costs. In inflation adjusted ters, if the same facilities are
19 provided at the same real unt cost, then averge real cost per customer wil not change.
20 This is tre regardless of the rate of growt."
Page 11
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 Q.Did you provide an example?
2 A.Yes. Exhibit 203 ilustrates four hypthetical customers coming onto the system over
3 four year, each requiring a $100 investment. The investments in the examle have a
4 four-year life, depeciated strght line.
5 As the ilustration shows, tota depreation cost does indee grw, until after the four
6 year, when the last customer is added. From tht time forwar, depreiation cost remains
7 constat. Even adding replacement investment does not cause th total cost to rise.
8 Averge cost remains constant over the perod. Absent infation, growt canot cause
9 pe customer cost to rise.
10 Ths example demonstrates that the phre "grwth should pay for itself," while an
11 appaling political slogan, is devoid of analytcal insight insofar as it relates to costs of
12 serce.
13 Q.Is there a reason why Commission policy should discourge the arficial agig of the
14 distrbution system?
15 A.Yes, there are severaL. First, arificially suppessed energy prices encourage excess
16 demand, and result in higher costs later, as the Commission recgnzed in Order No.
17 30722 when it approved an invered-block rate strct for the Company. Secnd,
18 extending the economic life of distrbution assets to hold rates down can have advere
19 ecnomic consequences.
Page 12
Richad A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
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1 Q.Please give examples:
2 A.Example 1:
3 In the former Soviet Union (FSU) the goverent used heavily subsidized utilities asa
4 social safety net, in a centrly-directed economy in which markets and prces as we
5 know them did not exist. Subsequent to independence, it has been politically impossible
6 for goverents to charge rates suffcient to supprt the existing utilty infrastrcte.
7 The result in the FSU has been a steady deteroration of trmission and distrbution
8 plant, with increasing outages and insuffciently reliable serce to support ecnomic
9 growt:
10 "Estiates of electrcal power consumption show that a full thrd is lost to poor
11 quality trsmission and distrbution systems ... . Much of the electrcal usage is
12 not metered or the meter not read. Additionally, desite the extremely low prce,
13 much of the power is not paid for, especally in rual areas. As such, it amounts to
14 a de facto subsidy to the poorest in the population. The price paid for the subsidy
15 is an uneliable and inadequate supply." (Asian Development Ban Techncal
16 Assistance No. 3106-KGZ Benchmark Reprt - Economic and Tax Analysis,
17 Page V-25)
18 "For most consumer, there is little incentive to consere electrcity and much
19 incentive to waste gas. Our house in Jalal-Abad had an electc fuace, while the
20 cokhouse had a gas stove and a gas-fired heater for washing and for the sauna.
21 The electricity was metered at six mills per kilowatt-about a fift the cost ofits
22 production and deliver. The gas was metered, too, but because the meter only
23 had thr digits, the monthy bil was negotiated with the meter reader. Ou
24 landlady would regularly tu the elecc fuace off at six ever mornng, in
25 frezig weather, to save 'that expeive eleccity,' but she cared les abut the
26 gas, even though the burer are so crde that they wase most of the energy us.
27 We once fired the sauna for four hour; because the gas pressur was low, it
28 would not heat to the required temperatue. From the stadpoint of the individual
29 consumer, such profligate behavior is entirely rational." (Richard Slaughter, "Poor
30 Kyrgysta," The National Interest, Sumer 2002)
Page 13
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
1 Whle no one expects Idaho Power's system to deterorate to anywhere near ths extent,
2 real examples exist to validate economic theory regarg subsidies, market signals and
3 demand in the context we are discussing here today. The policy proposed in the cut
4 proceeding attempts to hide from ratepayer the tre economic value of the seces they
5 receive, and in so doing encourages excess consumption. The followig example
6 ilustrates that while not as acute, the same problem does exist with Idaho Power's
7 system:
8 Example 2:
9 The distrbution system in Boise's Nort End, like much of the Company's serce
10 tertory, is several decades old. When that system was place in serice, the average
11 home did not have today's ary of computer, kitchen appliances, saunas, hot tubs, air
12 conditioners, and other electrca consumer. Today, the distrbution system built to
13 sere a typcal 1940s load can be incapable of handling cuent demands:
14 "In December 1990 we wer livig in Boise's Nort End on 18th street. It
15 was extremely cold with perods oflows in the -20 degree rane and some
16 daily highs not exceeing zero. Durg the later par of the month we
17 experenced reoccung power outages. Dung one of the outages I
18 taed with an Idaho Power lineman who was working to restore power in
19 the aley behind our house. I asked him why the system wasn't staying on,
20 even after repair. He told me in older areas, like the Nort End, since the
21 lines were put in, homes now had signficantly more electonic items -
22 electrc heat, microwaves, computers, television sets, etc. - that put a load
23 on the system that was higher than anticipated when the system was built.
24 Therefore, due to the higher loads per household, durg an extremely
25 cold perod like we're having, the system couldn't keep up." (Don
26 Reading, former IPUC Policy Administrtor, anecdote frm peronal
27 expeence while livig on 18th stret in Boise)
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Richard A. Slaughter
Building Contrctors Assocation of Southwest Idaho
Case No. IPC-E-08-22
1 Ths is anecdotal evidence. But for customer in many of Boise's older neighborhoods,
2 Dr. Reading's description of his experence over 18 year ago could be a fair statement of
3 their own contemporar serce experence in cold, or hot, or widy circstaces.
4 Another example occurred in the late i 990s when an Idaho Power transmission line,
5 heated by high load, shorted on a tree in souther Idaho causing multiple hour' power
6 outage in several states.
7 Q.Your first example compares moder utility reguation with the collapse of a centrally-
8 directed economic system. Is that appropriate?
9 A.More than Idaho Power may realize. Whle Idaho Power enjoys a monopoly-lock on its
10 eleccal customer, unlike moder telephone or cable companies, it does not enjoy a
11 lock on all energy customer, and fuel switching is not only possible, it is practice.
12 Unlke the Soviet-contrlled energy supply and distrbution system discued above,
13 Idaho Power does not have control over its own customer' choices. Idaho Power's
14 existig customer can and do shift portons of their overall demand between energy
15 soures in response to changing non-subsidized natu gas and oil prices.
16 Q.Please give an example.
17 A.There are thee specific area, each of which undercuts the Company's view that new
18 growt is the primar contrbutor to higher costs. First, most of the Company's existig
19 customer have the capacity to substitute electrc heat, through room heater, for ga or
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Richard A. Slaughter
Building Contrctors Association of Southwest Idah
Case No. IPC-E-08-22
1 oiL. As gas and oil prices rise relative to electrcity, those substitutions can be and are
2 beg made.
3 Second, there is a growing national movement to replace gasoline with electrcity
4 for short-distance automotive commuting. Whle the proposals generly envision
5 captug exsting off-peak capacity though "smar grds" and nightte recharg,
6 these emerging energy policies and technologies inevtably will reult in requirements
7 from existing customer for more generation and tranmission.
8 Thrd, average electrcity consumption is rising, as it has for the past half centu.
9 Homes now featue multiple televisions, computer, hot tubs, saunas, laundr equipment,
10 outdoor lighting, air conditioning, and many other electrc consumer - many of them
11 never fully tued off - that did not exist in prior year. These demands come from
12 existing, as well as new, customer, and are a reason for the demand management
13 policies discussed earlier.
14 Q.What does this mean for the Company's underlyig thesis?
15 A.There ar two effects, which togeter mea that ths attempt to protect existing cutomer
16 frm energy costs is futile and self-defeating. The attempt should be abandoned.
17 Q.Please elaborate.
18 A.First, it is the policy of the State and local goverents thrughout Idao, and ofIdao
19 Power for all of my memory going back to the 1950s, to encourage demand growt.
Page 16
Richard A. Slaughter
Building Contractors Assocation of Southwest Idaho
Case No. IPC-E-08-22
1 From the days of "Reddy Kilowatt" until Idaho Power recently became capacity
2 constrined, growth has be delibeely sought on the basis oflow hydro energy costs.
3 Q.How does the Company propose to handle the conflct beee the attaction oflow
4 energy prces and its capacity constraints?
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As a short-ter strategy, the Company recently completed a customized sales agreeent
with a new industral facility, Hoku Materals, whose demand excees 25 MW, for the
purpse of managing the costs of ths specific large industral expansion. (Order No.
30748, Case No. IPC-E-08-21) Demand up to 25 MW is to be supplied thugh the
existig large industral tarff, while demand in excess of that amount is to be supplied at
the existing PURP A avoided cost rate. That rate represents Idaho Power's cost of
additional energy and capacity in lieu of its marginal energy costs from capacity that is
no longer in sulus. For the longer ter, the conflct is not resolved.
What is the second effec you refer to?
The secnd effect is fuel switching by existig cutomer, as descrbe earlier. Thus, low
15 electcity prces attact grwt, both industral and residential, which results over time in
16 new requirements for capacity and trsmission. Furer, customer can and will
17 substitute fuels to save money. You caot have it both ways, as the Company is
18 attemptig to do with ths prceeing. The attempt should be abandoned.
19 Q.Why is it useful to examine the source of nominally higher distrbution costs?
Page 17
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
1 A.As I explained in my testimony in IPC- E-95-18, rising costs for new distrbution plant
2 can be attbuted to only thee sources: reduced density, ineffciencies, and inflation.
3 The first two of these sources can be dismissed:
4 · Density: If new constrcton is, on average, less dense than existig constrcton, then
5 for the most par the associated costs are accounted for in installation work order. For
6 that reaon, lower density should not contrbute to higher average costs becaus the
7 develop or new cutomer capitaizes line extensions. Additionally, much reidential
8 growt is to be found in high-denity development. Thus, while the averge single-
9 family reidential lot (and associated common area or ope space) may be larger than it
10 used to be, the averge line and terinal facilties costs may not be.
11 · Ineffciencies: If the Company or its contrctors have become less effcient, then they,
12 and not new grwt, wil have caused real, as well as nominal, costs to rise. I am not
13 aware of any facts disclosed in this proceeing that would indicate that the Company or
14 its contrctors have become less effcient over time, and for the purse of ths discussion
15 I will assume that Idaho Power and its contractors have not become prgressively less
16 effcient over time.
17 · Inflation: The thrd potential caus for incras distrbution facilities costs is
18 inflation or incrases in commodity or labor. In my opinion, inflation is the rean for
19 higher costs of new distrbution facilities.
20 Q.Why does ths matter for the Company's propose tarff modifcations?
Page 18
Richar A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1 A.Inflation is a rise in the general price level, or put another way, a deprecation of the
2 curency. Rising commodity or labor prices contrbute to higher costs, but in so doing
3 they also raise the nominal value of existing plant in the same way they contrbute to
4 increases in the nominal value of other assets, including houses. Since these prce
5 changes alone do not change the real economic value of all distrbution serces, and
6 because, as explained earlier, new facilities present lower ongoing costs to the system
7 than existig plant, there is no rationale for prtecting existing ratepayer from those
8 costs.
9 Q.In his pre-fied direct testimony, a portion of which you quoted above, Mr. Said poses,
10 and then anwer, the question "is growt is paying for itself?" His answer is that
11 "clearly the answer is no." Do you agree?
12 A.I do not agree. The only way to agree with his statement is to fuly discount the facts
13 that: 1) existing cutomer contrbute to the need for new generation, trsmission and
14 distrbution facilities when their energy consuption rises; 2) the nominal embeded
15 investment in existing plant is far less than both replaceent cost and economic value; 3)
16 inflation is the source of higher nominal costs for new plant; and 4) new customer reult
17 in the installation of higher quality facilities that have lower maintenance costs, which
18 tends to lower average costs for all ratepayer.
19 Contr to Mr. Said's conventional wisdom, growt DOES pay its own way. Actly,
20 for the reasons discused above, growt pays more than its own way when it pays costs
Page 19
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1 above embedded cost. That is because the plant purhased by new development is un-
2 depreciated and higher quaity than the plant represeted by embeded costs. For
3 existig customer to receive ths new plant at zero cot repents a large trfer of
4 capital value from new customer to existing cutomer. Ths shift of capitaization from
5 the Company to the customer also repreents a major change in utility regulatory policy,
6 where normally the customer effecively leases the use of plant frm the Compay. The
7 Company's contiued legal ownerhip and control of new plant fuher supports this
8 view.
9 Q.Is ths a new revelation? Are these arguents based on new facts?
10 A.No. Thes facts were before the Commssion in 1995, and supprted the Commssion's
11 findings in Order 26780 addressing the question of the level of support to be provided
12 new cutomer by the Company. The Commission's fiding in this regard bea
13 repeating here:
14 "We find that new cutomer are entitled to have the Company provide a
15 level of investment eqal to that made to sere existig cutomer in the
16 sae class. Recover of those costs in excess of embedded costs must
17 also be provided for and the impact on the rates of existing customer is an
18 important par of our consideration. We also recognze that reqring the
19 payment of all costs above embedded investment frm new customer
20 could have severe ecnomic effect." (Order 26780, IV. C. Commssion21 Findigs,.1f 2)
22 Economic effects of the proposed rule
23 Q.You have testified that the Company's prposal would fuer shift the capital cost of
24 new distrbution serces frm rae base to the developer, and by implication, to the home
Page 20
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1 purchaser. The home purchaser, of coure, contiues to pay for embedded capital costs
2 though rates. Does ths capital shift have ecnomic impacts other than "grwth payig
3 its way?"
4 A.Yes. Because assessed valuation for all propeies in a taxing distrct are impacted by the
5 prices of new residences, it has a potential impact on prpey taxes as well as affectng
6 the overll market and the abilty of individuals to purchase houses.
7 Q.Have you an ilustrtion of how ths works?
8 A.Yes. In a colloquy from my IPC- E-95-18 testimony, I explain the process. Note that
9 much of the problem arses from the fact that a cost formerly capitaized in the
10 Company's rate base is now (for new customer only) also capitalized in the prce - and
11 thus assessed value - of their house:
12 "A. ... I have shown that the 'cost of new distrbution facilties,' to the extent
13 they are higher than embedded costs, are higher becaus of inflation, not
14 changes in the natue of the facilities. I have also demonstrted that
15 growt itself does not cause higher costs. What the existig customer sees
16 when rates rise is an adjustment of his payment to more closely reflec
17 curent market value, NOT a new cost for which there should be a "new
18 benefit." Furer, ther is no benefit delivered to the new customer (that)
19 the existing customer does not already enjoy.
20 "Q. Is there is an offsettng cost reducton for the ratepayer, such that for all21 ratepayer there is a zero impact?
22 "A. Unfortately, no. There is prospectively an offsetng benefit frm reduced
23 rates in the futue. Becuse the fee becomes capitalized in the price of the
24 house, however, it has other undesirble consequences.
25 "Q. Pleae elaborate.
Page 21
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1 "A. In the longer ter, a cost increase of between $1200 and $3000 to the
2 developer wil result in a prce increase for the finished house of from
3 $2000 - $4000, since both develope and builder must mark up their costs
4 to cover overhead and profit. At the higher ranges it wil have a defite
5 effect on the abilty of buyer to enter the market, and on the payments of
6 all home buyers.
7 "Q. Can't they just buy an existing home, as suggested by one witnes?
8 "A. No, because the price increase for new prperes will be reflected in existng
9 properes as well. New and existing homes ar economic substitutes for
10 each other. Since additions to the supply of housing must for the most
11 par be new homes, the cost of development and constrction sets the
12 value of older homes as well. Aside from differences in physical
13 condition and location, the value of any existing house is deterined by its14 replacement cost.
15 "Q. That sounds as though the increase would create new wealth for all existing
16 homeowners, much as when the price of a stock rises. Why is that bad?
17 "A. Because it has occurred for arficial, non-economic reasons, and beause
18 higher values tend to trslate into higher propery taxes. It is quite
19 possible that existing ratepayer might find themselves paying more in ta20 than they save in rates.
21 "Q. Can you roughy calcuate the relative effects?
22 "A. Yes. Assume tht the additional cost is $300 to the developer, and a total of
23 $3500 to the homeowner. At 8% intert, the monthy mortgage would
24 rise by $23. Since Idaho law curently allows local goverent full
25 recver of value for new prper, his ta bil wil rise by an estimated
26 1.5% of $3500, or over $4 pe month. The increased monthy cost, which
27 would add about 4% to the average mortgage, would have a signficatly
28 negative impact on the ability of some individuas to purhas acqui29 financing.
30 "Q. Pleae esmate the rate savings.
31 "A. Intial savings on rates would of coure be zero. By the end of ten years,
32 assuming that 1 ø per kwh of curent rates is for distrbution and that
33 poon would otherse grow by 3% pe yea, the monthly savigs for all
34 customers would be .35Ø per kwh, or $3.50 per month.
35 "Q. What then is the net savings?
Page 22
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1
2
3
4
5
6
7
8 Q.
9
10
11
12 A.
"A. The new customer is obviously worse offby $27 per month from the
beginning, because he is paying not only the additional fee but also
interest on amortzation of that fee. The existig customer is also wors
off. His property tax, given whatever lag is necesar for assessment and
serces budgets to catch up with his increase, will have rise an estiated
$4 per month. He must wait for a peod in excess of ten year for the
savings on rates to amount to that much."
Aside frm the Company's current intent (as extrapolated from Mr. Said's testimony) to
shft the entire marginal cost of grwt (including all costs of new generation,
trmission and distrbution) to new development, what if anytng is different frm its
curent taff modification proposal and its previous proposal in Case No. IPC-E-95-18?
The most signficant differences are the economic climate, its effects on the Company's
13 costs, and the extent of the advere economic impact that the proposed tarff modification
14 wil have.
15 Q.
16 A.
Please explain.
When the Company proposed its taff modification in 1995, it was expeencing - and
17 thereafter continued to expeence - a peod of relatively robust and consistent
18 cutomer growt. The signficant economic downtu beng experenced nationally and
19 locally has stuted grwth ofIdaho Power's commercial and reidential customer. In
20 fact as shown in Table 2, the numbe of new customer in these two classes has bee
21 approximately halved in each of the past two years. Consequently, the assered
22 incrasing "burden" of new growt on the Company's assets now is questionable, even if
23 one were to agree with its assumption that growt is not payig its way. Furer, the total
24 cost of new facilties above embedded costs reflects only one pecent of the Company's
Page 23
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
1 total plant. In other words, it is insgnficant in comparson to other factors affecting
2 rates.
3 On the other hand, the serous economic impacts that the Commssion found would result
4 frm the Company's 1995 Rule H tarff modifi.cation. are only compounded in the face of
5 the cuent economic conditions. Parcuarly for souther Idaho home buyer and the
6 BCA's member who provide the materals and serces to build those homes, the
7 increase in the purchase price of a new home that would need to be imposed to recover
8 the cost-shifting proposed by Idaho Power, should be expeced to prce-out hundreds of
9 potential home buyer.
10 Using a computation metodology endorsed by the Natonal Assoation of Home
11 Builders ("NAHB") and economic data for the Boise City-Nampa, ID Metrpolita
12 Statistical Ara, the BCA estimates that for each additional $1,00 of cost in the prce of
13 a home, an additional 538 households Will be "priced-out" or unable to purchase a home.
14 I have attched the NAHB analysis supprtng these estimates as Exhbit 203 to my
15 testimony.
16 Q.Does the Company's prposal constitute discrmination againt new customers?
17 A.Definitely. While such a policy mayor may not be judged unconstutional, it clealy
18 places the two groups - existing and new customers - in ver different positions
19 relative to their cost of energy, without a rational basis for doing so. "New" customer
20 will have paid full margial cost for thei distrbution sece, while "existig" customer
Page 24
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
1 continue to pay depeciated average cost - and, at the same time enjoy the reduced
2 maintenance cost made possible by the newer plant. Put another way, the new customer
3 will be required to fully capitalize his terinal serce - without beefit of ownerhip,
4 whie the existing customer leas capita facilities provided by the Company. And of
5 course, the new customer also is required to join the existing customer in paying the cost
6 of the existing system - essentially paying on two fronts for the same serice an exstng
7 cutomer receives.
8 Q.
9 A.
10
11
12
13
14
15 Q.
Does it matter whether this discmination is judged constitutional or not?
Not really. Like the laws of physics, the laws of economics tend to ignore human
politics. As shown ealier, customer are not confined to Idaho Power for energy. In
making their choices among fuels, they will defeat any attempt to arficially suppress the
prce of one fuel relative to other. They wil move to the cheape fueL. Ths fuel
switchig abilty makes expanion of supply (i.e., genertion, transmssion and
distbution) inevitable, regardles of grwt.
Nevereless, do you believe that cern modifications to the Company's Rule H taff
16 would be appropriate?
17 A.Yes, I do, although they are in the direcion of increaed refuds and allowances to the
18 new customer rather than their elimination, as proposed by the Compay.
Page 25
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
1 Reconcilg allowances and inflated costs
2 Q.Do you have a proposal for calcuating an appoprate refud?
3 A.Yes. The reason that allowances and refuds fallout of date over time would appe to
4 be infation. Cernly the Company, in its application and testimony, has provided no
5 other reason, nor have they quantified the presumed disparty.
6 Thus, it is fully approprate that these costs be kept in line for perods of time betwee
7 gener rate cases, and adjusted at that point to kee the allowances and refuds in a
S generlly consistent relationship with embeded costs.
9 Q.How do you propose to do that?
10 A.To keep the costs aligned with real costs, and to send the correct prce signal to
11 customer, allowances and refuds should be indexed anualy to an apropriate infation
12 measlte. Ths could be done as par of the Power Cost Adjustment mechansm, which
13 kees rates cuent with fuel prces.
14 One eaily available and consative index is the implicit prce deflator for the Grss
15 Domestic Product. Applying this deflator, PGDP, to the 1995 and prior refud
16 allowances of $SOO and $1200, respectively, yields the following information:
Page 26
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-OS-22
1 Table 1
GDP Imlicit price deflator
Year PGDP Refud $800 Refud $1200
1995 0.025 800 1,200
1996 0.037 830 1,244
1997 0.045 867 1,300
1998 0.042 903 1,355
1999 0.045 944 1,416
2000 0.037 979 1,468
2001 0.008 987 1,480
2002 0.016 1,003 1,504
2003 0.025 1,028 1,541
2004 0.036 1,065 1,597
2005 0.029 1,095 1,643
2006 0.028 1,126 1,689
2007 0.02 1,149 1,723
2008 0.013 1,164 1,745
2 Q.What is the curent embedded cost?
3 A.The 2008 cost of serce study used in IPC- E-08-1 0 shows distrbution rate base per
4 customer of $1,002 for residential serce (Exhbit 204). Thus, the inflation-adjusted
5 refund from IPC-E-95-18 appe to be supprted by cuent embeded costs.
6 Q.How do the per lot costs under the existing Rule H compare with this analysis?
7 A.Given the analysis provided by the Company in respnse to our prcton request
8 (Exhbit 202), under the existing Rule H total rate-based costs are $1,964, $1,140, and
9 $1,159 for developments of3,10, and 32 lots respectvely. Under the prposed Rule,
10 those costs fall to $1,187, $178, and $222. The existing Rule shows some consistency as
11 development size increaes; the proposed Rule is totally inconsistent beteen ver small
Page 27
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
1 and larger developments, and attempts to force the new customer to fully capitalize these
2 costs, contr to long-standing utility costg principles.
3 Q.What do you recommend?
4 A.For reans stated above, I recommend the Commission require that terinal facilities be
5 provided and included in rate base, as they were prior to IPC-E-95-18. I fuer
6 recmmend that the per-lot refud for line extensions be raised to $ 1000 per lot and
7 indexed to the GDP implicit price deflator, adjusted anually togeter with the PCA
8 mechansm between gener rate cases.
9 Following my earlier analysis, it is wholly apropriate that new plant intruce
10 into rate bas be costed at a level slightly higher than cuent embedded cost, as would be
11 accomplished by adoption of my recommendations. Ths practice will caus additional
12 plant to be priced at a level comparble to replacement plant, appropriately reflect the
13 economic value of new plant to the sysem and to all rate payers, and avoid the
14 discrination inherent in the Company's proposal.
15 Q.Does the Company provide quatitative support for its proposal that terinal facilties
16 plus an allowance be replaced by a flat $1780 per trsformer?
17 A.No, it does not. For that reaon, and the reasons stated above, ths proposal should be
18 rejected, in favor of the practice prior to the IPC-E-95-18 cae.
19 Q.What do you recommend for general overhead?
Page 28
Richar A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-08-22
. .
1 A.Overhead is an extremely diffcult area to analyze without a full audit of the CompanY'$
2 opeations. I do not have a specific recmmendation. There are many areas of the
3 Compay's operations that have ver little to do with line extensions: generl corprate
4 opertions, generting and transmission plant, biling and receivables management,
5 power purchases and sales, and other. Engineeng is already included at cost; cerainly
6 some management, secretaral, offce, inventory, and other costs ar appropriate. So
7 while the existing overhead rate of 1.5% may be too low, adopting a company-wide rate
S on an arbitr basis would appear to be excessive. It would also, pending the next
9 generl rate cae, cause double collection of those costs.
10 Q.
11
12 A.
13
14
15
16
17
is
19
20
21
How important is ths issue to Idaho Power's other ratepayer? How much presu do
distrbution costs from new constrction place on rates?
Not ver much, parcularly in today's economy. Residential growt has bee slowing,
falling from a high of 4.0% in 2005 to just under 1 % in 200S, makng ths issue
sometng less than urgent. There were 3,736 new residential customer in 2OOS.
Assuming that each represents a new lot on which an $Soo was refuded, plus
apprximately $3000 pe transformer, that totas just under $3 milion of new di$trbution
cost, out of $445 milion of residential distrbution plant (0.9%), or of$1.5 bilion of total
plant (0.27%). In fact, many of the new customer are in high~enity aparent blocks,
reducing costs significantly. The impact on averge retail rates could not be more than
$.06 x .01, or six-tenths of one mil, rather smaller than the 3% inflation experenced in
the rest of the economy.
Page 29
Richard A. Slaughter
Building Contrctors Assocation of Southwest Idaho
Case No. IPC-E-OS-22
1 Table 2
Idao Power Residential customer, en of year
1995
1996
1997
1998
1999
200
2001
2002
2003
200
2005
2006
2007
2008
2
Cutomer
281,792
291,116
299,696
308,432
318,896
326,922
335,285
344,447
354,704
366,218
380,952
393,338
400,637
404,373
Added
8,596
9,324
8,580
8,736
10,464
8,026
8,363
9,162
10,257
11,514
14,734
12,386
7,299
3,736
% grwth
3.1%
3.3%
2.9%
2.9%
3.4%
2.5%
2.6%
2.7010
3.0%
3.2%
4.0%
3.3%
1.9%
0.9%
Source: IPCo Respnse to BCA First Producton Reques page 42
3 Q.The Company proposes that to reduce administrative costs the tie allowed for vested
4 interest refuds should be reduced frm five year to four. Can you support that
5 proposal?
6 A.No. The Company's proposal would appea to be based on the assered diffculty of
7 maintaining curent addresses for develope beyond a ver short time period. To fuer
S reuce the perod for recover of vested interts is arbitr and inappopriately
9 designed for the need.
10 Q.Do you propose an alterative method?
11 A.Yes.. In today's economic environment, with grwt substatially slowed, the recver
12 perod should not be reduced, but expanded. In my opinon, a ten-year perod would
Page 30
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-OS-22
. c
1 more appropriately track the connecion of new customer with distrbution facilities.
2 Ther is no reason that the Company's accounting canot track the accounts for that
3 perod oftime.
4 Q.How do you propose to handle the problem of missing addresses or contact information?
5 A.That burden could be shifted frm the Company to the owner of the vested interest. The
6 contract creating the vested interest might simply require the developer or other owner to
7 maintain cuent contact information with the Company. The Compay could then be
S relieved of its refuding obligation after a reanable peod dung which a vested
9 interest owner did not have valid information on fie with the Company.
10 Q.Does ths complete your testimony?
11 A.Yes, it does.
Page 31
Richard A. Slaughter
Building Contrctors Association of Southwest Idaho
Case No. IPC-E-OS-22
. ,
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-3-08-22
BUILDING CONTRACTORS ASSOCIATION OF
SOUTHWST IDAHO
SLAUGHTER, RICHAR
EXHIBIT NO. 201
Cost of Growth Example
Cost of Growth Example
Yea-~1 2 3 4 5
Inv.~Inv.Depr.Inv.Depr.Inv.~Inv.~
Cutome 1 100 25 25 25 25 100 25
Cusom 2 100 25 25 25 25
Customer 3 100 25 25 25
Customer 4 100 25 25
Tot 100 25 100 50 100 75 100 100 100 100
Averge 25 25 25 25 25
Anua investmen an deiation co for four cusomrs over five yea. Investment for eah customer is
$100, witafour.yealife.
Exhibit 201
Dire Tesmony ofRichan Slaughter (BCA)
IPUC Cas No. IPC-E-08-22
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-3-08-22
BUILDING CONTRACTORS ASSOCIATION OF
SOUTHWST IDAHO
SLAUGHTER, RICHAR
EXHIBIT NO. 202
Comparison of Existing and Proposed
Rule H Cost Distribution
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMSSION
CASE NO. IPC-3-08-22
BUILDING CONTRCTORS ASSOCIATION OF
SOUTHWST IDAHO
SLAUGHTER, RICHA
EXHIBIT NO. 203
NAHD Calculation of Households Priced Out of a Market
B' CitN ID MSA Ho hol that ca Afor to B H Wh P' Deroisampaenuyaousnneeines
Mohly Taxes Minimum Houehds
Morage Hose Morte and Ince That Can
Ara Rate Pri Paymen Insurance Need Aford House
Bo Cltmpa, 10 MSA 5.00"0 $214,99 $1,093 $172 $5,186 107,374
Boise Cit-Nmpa,IO MSA 5.00%$215,99 $1,098 $173 $5,43 106,836
Diference $1.00 $5 $1 $252 -536
Calculation assume a 10% do payment an a 45 bais pont fee for pnvae mogae insuranc.
A Houhod Qualifes for a Mortage if Moga Payments, Taxe, and Insurance are 28% of Inco
Boise CitNamp ID MS Household Incme
Dlsbution fo 208
Incoe Range:Housds Cuative
$0 to $10,397 11.33 11,33
$10,398 to $15,596 11,711 23.041
$15,597 to $2,79 9,472 32,513
$20,796 to $25,99 13,951 46.46
$25,99 to $31,192 15,471 61,93
$31.193 to $3391 13,703 75,637
$36,392 to $41,590 13,535 89.173
$41,591 to $4,789 11,839 101,012
$46,790 to $51,98 11.60 112,615
$51,989 to $6,386 22,186 134,801
$62,387 to $77,98 25,86 160,46
$77,98 to $103,977 26,465 186,931
$103,978 to $129,972 14,88 201.14
$129,973 to $155,98 7,717 20,531
$155,967 to $27,95 7,03 216,56
$207,956 to Mo 8,112 224,677
Exhibit 203
Di Tesmony of Richa Slaughter (BCA)
IPUC Cas No. IPC-E-oS-22
Natonal Association of Hom Builders, bas on data from th 2007 Amercan Communit Survey, U.S. Cesus Bueau.
~NA
Determing the Number of Household Priced Out of a Market
The issue of hous price changes and thei impa on affordabilty arse in a numbe of contexts, such
as when considerg policies that impose fee on new constcton. A relatively stghtforward
approach often used by NAHB to analyze ths sitution is basd on mortgage underting standar.
Under those stadas, it is relatively eay to caculate the number of housholds that ca quaify for a
mortgage before an incras in a reentative home price, but not afterar. The differc.e is the
number of households that are 'prced out' of the maret fora reptative home.
A priced out analysis doen't answer all possble quetions about impa on housing marets, such as
what the differce in home saes or housing sta would be. Although these ar important quesons,
a renable attempt to answer them reui estimates of key ecnomic pareter such as the
willingness of housholds to acct homes that ar somewhat smaller or have fewer amenties to
achieve afordailty, the relationsips among differt seents of the housing market in question,
and the adjustments builders mae in the proucts they offer in repons to chaged affordability
conditions on the rise. Goo. estiates of thes paeter ar seldom available. In comparson, a
priced out analysis that simply shows how many housholds in an ar crss a parcular afordabilty
thold is relatively eay to undertad and can be caculated in a stghtforward maner using da
tht ar available for any housing market in the U.S.
According to the Amercan Housing Surey (which is fice by HU and conducted ever other
year by the U.S. Cens Bureau), only about one-fift of home buyer purhase thei homes for cash.
Thus, affordability for most prospecve buyer is tied tightly to abilty to qualify for a mortgage, and
mortgage underting stadards prvide a resonable basis for estimatig affrdabilty. Indee in the
ret ecnomic envionment charerzed by many fiancial institutions trng to rever frm pat
errrs in jugment, lender have beome ver conserative and ar more likely th ever to apply
conventiona underting stadar with litte flexibilty.
Stadads to quaify fora mortgage are tyically expres as a frcton of prospecve buyer' income.
One common standar is based on what the indutr cals a "frnt end ratio"-the pecetage of
income tht would be consumed by paying principal and in interest on the mortgage, as well as
prope taes and prper insurce. The front end ratio ca eaily be computed for a se of
asumptions about the mortgage and houshold income.
The assumptions NAHB tyicaly us in "prce-out" computations ar a downpayment equa to 10
pet of the purchas price and a 3O-yea fixed rate mortgage. For a loan with ths downpayment,
lender would tyically require mortgage insurce, so NAH also assumes an anua prum of 45
basis points for private mortgage insuce. Local information about prpe taes and prope
ince pe dollar of home value can be coputed fr the Censu Burea's most ret (2007)
Amercan Community Survey (ACS) data.
Deled 2007 income distrbutions for all states an metpolita area ar also available frm the
ACS. NAHB makes relatively minor adjusents to the ACS incoe distrbutions to accunt for
income and population change that may have occed since 2007. Dollar boundares of the income
distbution ar adjusted based on peentage chages in the median famly income esates tht HUD
produce anualy for all states and metopolita ar. The numbe of households in eah income
bracket is adjusted using the 200-2007 peentage change in the number of households rerted in
the ACS, assuing that this household growth rate applies evenly acss all income brackets rate in the
peod after 2007.
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-3-08-22
BUILDING CONTRACTORS ASSOCIATION OF
SOUTHWST IDAHO
SLAUGHTER, RICHA
EXHIBIT NO. 204
Idaho Power Company's Alocation of
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~
CERTIFICATE OF SERVICE
I hereby cerfy that on the 17th day of April, 2009, a tre and correct copy of the
foregoing was sered upon the following individual(s) by the mean indicated:
Jean D. Jewell, Secretar
Idaho Public Utilities Commission
472 West Washington Strt
P.O. Box 83720
Boise, Idaho 83720-0074
Lisa D. Nordstrom
Baron L. Kline
Idaho Power Company
POBox 70
Boise,ID 83707-0070
Inordstrom(ßidahooower.com
bkline(ßidahooower.com
Scott Sparks
Gregory W. Said
Idaho Power Company
POBox 70
Boise, ID 83707-0070
ssparks(ßidahopower.com
gsaid(ßidahopower.com
Krstine A. Sasse
Deputy Attorney General
Idaho Public Utilities Commssion
472 W. Washington
POBox 83720
Boise,ID 83720-0074
krs.sasser(ßpuc.idaho. gov
Origial Filed:
Servce Copies:
U.s. Mail, postage prepid
Express Mail
Hand Deliver
Facsimile
Electonic Mail
U.S. Mail, postage prepd
Express Mail
Hand Deliver
Facsimile
Electonic Mail
U.S. Mail, postage prepaid
Express Mail
Hand Deliver
Facsimile
Eleconic Mail
U.S. Mail, postage prepaid
Express Mail
Hand Deliver
Facsimile
Electonic Mail
Page 41
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22
Matthew A. Johnson
Davis F. VanderVelde
White, Peteron, Gigray, Rossman, Nye &
Nichols, P.A.
5700 E. Frain Rd., Ste. 200
Nampa, in 83687
mjohnnaywhitepetern.com
dvandereldeaywhitepeteron.com
Attorneys for The City of Nampa and The
Association of Canyon County Highway
Distrcts
Michael Kur
Kur J. Boehm
Boehm, Kur & Lowr
36 E. Seventh St., Ste. 1510
Cincinnati, OH 45202
mkcqKLlawfirm.com
KboehmayBKLlawfirm.com
Attorneys for The Kroeger Co.
Kevin Higgins
Energy Strategies, LLC
Parside Tower
215 S. State St., Ste. 200
Salt Lae City, UT 841 i 1
khgginsaygenergystrat.com
Representing The Kroeger Co.
u.s. Mail, postage prepaid
Express Mail
Hand Deliver
Facsimile
Eleconic Mail
u.s. Mail, postage prepaid
Express Mail
Hand Deliver
Facsimile
Electronic Mail
U.S. Mail, postage preaid
Expres Mail
Hand Deliver
Facsimile
Electronic Mail
Page 42
Richard A. Slaughter
Building Contractors Association of Southwest Idaho
Case No. IPC-E-08-22