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HomeMy WebLinkAbout20091027Post-hearing Brief.pdfMichael C. Creamer, ISB #4030 Conley E. Ward, ISB # 1683 GIVENS PURSLEY LLP 601 W. Banock St. Post Offce Box 2720 Boise, Idao 83701-2720 Telephone: 208-388- 1 200 Facsimile: 208-388-1300 10495-1_695O_I.DO RECEI D 2009 OCT 27 PM~:, 3 iDAHO PUSL GUTILITIES COMM ~~it"',\f\iVlV'j~ Attorney for Interenrs The Bulding Contrors Assoiaton of Soutwester Id BEroD THE IDAHO PUBLIC mRITS COMMISSIO IN THE MATTER OF TH APPLICATION OF IDAHO POWER COMPAN FOR AUTHORI TO MODIF ITS RULE H LINE EXTENSION TAR RELATED TO NEW SERVICE ATTACHMNTS AN DISTRBUTION LINE INSTALLATIONS CASE NO. I1-E..n BURDING CONTRCTORS ASSOCIATION OF SOUTHWESTERN IDAHO'S POST-HEG BRIF The Building Contrtors Assocation of Southweser Idaho ("Buildig Contrctors"), by and thrugh its attorneys of rerd, Given Pusley LLP, an puruat to the Commission's direcon at the conclusion of its techncal hearng, submts this Post-Heang Brief in the aoove- captioned matter. Ths proceeing was initiated by Idah Power Company ( "Idah Power" or "Company") bas on its prse tht grwt is not paying for itself, and tht "reucing allowalcesand refuds (for line extenons to see new cuomer) will relieve one ar of upwar pres on rates and will tae a step towar grwt paying for itslf." Said Diret Testimony, Tr., p. 6, 11.20-22. The implication of ths statement is that the Company actually is incug costs to extend sece to new customer that caot be recver thugh its existig rate st. In BunING CONTRClORS ASIATION OF SOUTSTERN IDAHO'S PO-HEARG BRI- Page 1 other wors, the line extension/distrbution compnent of the Company's rate base is not being satisfied by the revenues generted by new customer, and hence, line extensions are a source of upward pressure on rates. Ths premse is wholly unpprted by fact. The Company has prvided no information whatsever to demonsate that its cuent rates do not produce a ret to the Company suffcient to recover its cut investments in distrbution facilties. 1 Indeed, the Company agree that, provided its pe-cutomer investment in line extenions is limited to an amout equa to its embeed costs in distrbution facilities, there is no "upwar pressu on rates" attbutable to line extenions serg new customer because the Company's cuent rates are "suffcient to recver the costs of the new facilities.,,2 So, reducing the Company's overl allowances for new residetial customer to a level well below its embedded costs for distrbution as propose does not "relieve one area of upward pressure on raes," because under the curent tarff which cotemplates a Company allowance that approximates th Company's embeded costs,3 there is no upward presure from that component to be relieved. 1 See Traript, p. 107,1. 22 -po 108, i. 2: Q. By Mr. Creer Has th Company submittd any documentaion in ths pree shwig th extet to which line extenion costs thmslves ar th soce of additina expe? A: By Mr. Said: No, and it's not my contetion tht tht's the sole drver of rae inases.2 See Tracript, p. 108, II. 2~25; p. 121, II. 1-8: Q. By Mr. Cream: An if th Compy absorb costs for new distbution facilties tht are equa to orles th the costs for exist customer tht upwa pre (on mte) is elite isn't it? A By Mr. Said: For tht compent. Q. By Mr. Cream To the extet tht th Company's investmnt in distribution facilties to see ne cutome doe not excee its curt emed co for ditrbution failties, th the Company's curt mtes ar suffcient to rever th costs of the new facilties; do you agr with tht? ABy Mr. Said: For tht parcuar element of rates.3 See Richad Slaughte Reconsidemtion Testimony, p. 243, i. 21 to p. 244, i. 3: From Sta Attchmt 9, page 2 of 4, it is clear tht under "Curt Rule H" aproved by Order 26780, the develop's "Net Cost" plus th $800 pe lot refu alt exactly equals th 'Work Or Cost pe lot,' which in tu ar alst exacly equa to the avege em cost of$I,232 compute by Sta" BUIING CONTRCTORS ASIATION OF SOUTWESTERN IDAHO'S POT-HEARG BRlF- Page 2 The Company repatedly has emphasized, however, that its cuent and anticipated costs for new genertion and transmission faclities are not beg rever under existing rates. It is apparent that the incras new customer charges for the Company's distrbution system beng prposed by the Company, and the resulting amounts eared by the Company on the new distnöution in excess of embeed costs, will go to pay other Company cost for gention and transmssion. Q. By Mr. Creamer In your resns on recnsidetion, you stated that the Compay's poition that becus of the sutantial invesents that are to be made in generation and transsion aset, the Compay th it's renable for the Commission now to adjus its policy concerng the level of Compay investment in line extensions; correc? A. By Mr. Said: Correct. Q. And to reuire more investment frm the ne customer for thos lie extenion facilities than in the past? A. That's corrt. Q. As a result, then, the new cutomer as th pay these costs fo the line extenion for the distrbuton faciliies, that helps offset pre on existing customer' rates from genertion and trsmission and other sources; isn't thtcorr? A. Well, its all customer from th point forwar in time, yes. see Trascpt, p. 288, 1. 9 - p. 289, 1. 2. The reult will be that to beme an "existing cuomer," the "new" cuomer mus pay up front for line extension costs an therafter pay, in addition, reidential rates tht include a porton which already provides the Company full reover for the spfic costs of those faclities Although the proposed incrased line extension charge to a new customer (manfested thugh a reced Company investment) would be identifiable to distrbution facilities tht see that new cutomer, the inclusion of embeded distrbution costs in existing rates that the new customer also would be required to pay would provide net beefits for the Company that inevitably would go to reduce the existing customer' shar of distrbution, generation and BunING CONTRCTORS ASIATION OF SOUTSTERN IDAHO'S POST-HEARG BRI-Paie 3 transmission costs (Le., costs that clearly are not specfically identifiable to the new customer). The Company's proposed tarff revision, then is simply a mean to make the new customer pay an upfront cost (ostensibly for the abilty to beme a new customer) that inevitably wil defray some of the costs that otherse would be chaged to existing customer for new genertion and transmission. That is what the Idao Supree Cour found objeconable in Idaho State Homebuilders v. Washington Water Power, 107 Idao 415,690 P.2d 350 (1984), and Boise Water Corp. v. Public Utilties Comm 'n, 128 Idao 534, 916 P.2d 1259 (1996). The Company concedes the lack of fact suggestig any differences beee new and existing residential customer with resect to their costs of serice, electrca consption or time, and natue or patter ofus of eleccity. Said Tesony, Trapt, p. 124,1. 8 - p. 125, 1. 10. The Company proposes to reduce its investment in facilities to sere new customer because they are new, and beuse ths reduce investment wil help the Company offet pressur on rates for its existig customer created by the need for new genertion and transmission. See Transcpt, p. 288, 1. 9 - p. 289, 1. 2. At leat in 1995, when the Company sought to reuce its line extenion allowances, it was wiling to provide an allowance at leat equa to its embede costs of facilities already included in rates because, as the Comany repested to the Commission, it would en that "new cutomers are treated the sae as existig cutomer in tens of the rates that they pay." Said Testimony, Transcrpt, p. 292, 11. 8-16, quotig frm his Rebutal Testimony submtted in Cas No. IPC-E-95- 18, marked for identification as Exhbit 206. The Company's position now is that so long as the new cutomer pays the same rates as existing customers after he or she has paid the prposed increased line extension charge and cea being an "applicant," there is equal treatment as among customers beause they then are BUIING CONTRCTORS ASOCIATION OF SOUTHWSTERN IDAHO'S POST-BEARG BRI- Page 4 all simply "existing customer." Another Company arguent appe to be that the proposed tarff is prope beaus it, at leat, treats all new applicants the sae "in ters of their contrbution to beome a customer." Trancrpt, p. 389,11. 11-18. The same arguent could have been ma in the Boise Water Corp. case-nce the applicants for new sece pad the increased hook-up charge, they too beame "existig cutomer" subjec to the same rates as other existing customer. But that did not change the fact that Boise Water's prposed incea contrbution to beome a customer bore no re relationship to the cost to interconnec but rather was cacuated to offset other cots attbutable to all cuomer, i.e., water trtment. Even Staff app to support a continuing level of Company invesent in line extensions, as refeced thugh allowances that can be reover though existing raes On pages 3 an 5 of its Comments, Staff indicates that Company investment should at leat equal the averge embeded cost per cuomer Sta believes that the goal in settng allowane and red amounts for distbution line extensions should be to eliminae the impac on exstig elecc rates. More specficaly, Staff believes the line extenon rules should provide a new cutomer allowance (Compay investmt) tht can be supported by electc rates paid by that cutomer over time. . . . Stafs poiton apartly is tht th Compay should contiue to prvie a pe-redential customer invesent for connons and line extensions equivalent to an amount that will be surted by the reenue stam embeded in the Compay's cut rates. Staf Comments at p. 4. If so, Building Contrctors agr. Using a reidential cutomer revenue str that is embeded in the Company's curt sales rate strct, Staff calculated the Company investment that can be supprted by cunt raes without applying either upwar or downwar pressure on the Company's rate strctu (i.e., "reenue netr") to be $1,232.44. BunING cONTClORS ASIATION OF SOUTTER IDAHO'S POST-HEG BRlF- Page 5 The Company objected to Staffs "revenue neutrl" computation methodology, but it proffered no numbe of its own. The most Mr. Said offer regaring the Compay's investment in line extension as compared to its actl embeded costs was that "cuently it's probably greater than embedded cost." The issue of risk and how it should be allocted as betwee the Company, its ratepayer and real estate develope is an. appoprate one to be considered in ths case. Changig ecnomic conditions have highlighted ths. There ar, however, ways to acknowledge and asign risk components in the line extenion taff pacularly by prviding a porton of the Company allowance as a refud to the develope when new cuomer in subdivisions take sece. Dr. Slaughter's Testimony on Reconsidertion suggested that an allowance equal to the Compay's embeded distrbution cost be given as a crit agait the total design cost. Ths approach, if given as an upfront allowance, does place more risk on the Company, but it was propose in the context of the Building Contractors' intertion of the limted scope of reconsidertion grted by the Commission (Le., that "allowance" but not "refuds" were to be addressed). Building Contractors agree with Staff Comments, however, to the effec that an "allowance" is simply the porton of Idao Power's line extension cost colleced thugh electrc rates reresenting the investment in new facilities. Buildig Contrctors believe the allowance ca be reaized in whole or in pa thugh refuds to redce Company risk that residential lots in subdivisions may not be develope. Mr. Said agree that providing the allowance as a refu reduces the investment risk of the Company. CONCLUSION The Company's application in this proceedg is based on an entirely unsupported asserion that by amending the tarff as requested, the Commission will relieve an area of upward BUILING CONTRCTORS ASSOCIATION OF SOUTSTERN IDAHO'S POST-HEARG BRIF- Page 6 pressure on raes. For ths to be tre, it would have to be shown that the Company's line extenion costs are not beng recovered under its existing rates, which the Company must admit, has not be shown. Upwar presur on rates is driven by existing and anticipated genertion and trsmission costs. The Company admttedly wishes to address these costs by charging new customer more for line extensions regardless of its abilty to fully recover, or over-reover, any allowance for line extenons tht doe not excee its embeded costs. Here, withut any supprting facts showing new cutomer' line extenion costs ar drvig rate incres or that new cuomer ar different than existing cutomer in the cost of serce, amount of energy consued, or the time, natue or patter of their use, the Company seks to change a sound, longstanding Commission policy that, heretofore, has fuer the rules concerng trent of new verus existing utilty cutomer esablished by decsions of the Idah Supre Cour. Without prtig supprtg facts and with a faulty premise, Idao Power propses changes to its line extension tarff that would have signficat negative ecnomic impacs on rea estate development, on the cost of new homes an on the pele who buy them. Prvided the Company's allowances ar maintained at a level equa to its embeded costs as under the curen tarff, the Commission is asur that it has addred the potential tht line extension costs would beme an ara of upwar preure on rates. Ther ar numerus mechansms th can be employed to addres the generation an trsmission components of the Company's costs that admittedly are affecting rates. Reducing Company allowance and charging new cutomers a higher "contrbution to beme a cutomer" is not an approprate mean to that end. For the foregoing reasns, Building Contrctors respectly request that the Company's proposal to establish a unfon$ 1,780 terinal facilities allowane for new residential serce be BUIDING CONTRACTORS ASIATION OF SOUTHSTERN IDAHO'S POT-HEARG BRI-Page 7 denied and that the Commssion rescind Orer 30853 in that regar. Building Contrctors fuer request that a $ 1 ,233 per residential customer allowance be established and maintained uness and until facts are presented in a futue proceeing establishing a new embeded cost number warting an adjustment to such allowance. In residential subdivisions, that portion of the $1,233 allowance in excess of the Company's investment in temal facilties serng the subdivision could be provided as a refud to the developer to reuce risk to the Compay that lots will not be occupied and sered. Respectfly submitted this 27th day of October, 2009. GIVNS PURSLEY, LLP BY.~tiD-~ Attorneys for Interenor The Building Contractors Association of Southwester Ida BUILING CONTCTORS ASSOCIATION OF SOUTHWESTERN IDAHO'S POST-HEARG BRIF-Page 8 CERTIFICATE OF SERVICE I hereby cerify that on the 27th day of Octobe, 2009, a tre and correct copy of the foregoing was sered upon the following individual(s) by the meas indicated: Origial aDd 7 Copies Fll: Jea D. Jewell, Secretar Idah Public Utilities Commission 472 Wes Washington Street P.O. Box 83720 Boise, Idah 83720-0074 Serve Copies: Lisa D. Nordstrom Baron L. Kline Idaho Power Company POBox 70 Boise, ID 83707-0070 Inordstrom(iidahopower.com bkline!idahopower.com Scott Spaks Grgory W. Said Idao Power Company POBox 70 Boise, ID 83707-0070 ssparkscgdahopower.com gsaid(iidahopower.com Krstine A. Sas Deputy Attorey General Idao Public Utilties Commission 472 W. Wasgton POBox 83720 Boise,ID 83720-0074 krs.sasseruc.idao.gov U.S. Mail, postage prepaid Expres Mail Hand Deliver Facsimile Eleconic Mail U.S. Mail, postage prepaid Express Mail Han Deliver Facsimle Elecnic Mail u.S. Mail, postage preaid Express Mail Hand Deliver Facsimile Electrnic Mail U.S. Mail, postage prepaid Expres Mail Hand Deliver Facsimile Elecnic Mail BUILDING CONTRClOR ASIATION OF SOUTHTERN IDAHO.S POST-HEG BRIF-Pace 9 Matthew A. Johnson Davis F. VanderVelde White, Peterson, Gigray, Rossman, Nye & Nichols, P.A. 5700 E. Frain Rd., Ste. 200 Nampa, ID 83687 mjohnnrgwhiteptern.com dvandereldergwhitepetern.com Attorneys for The City of Nampa and The Association of Canyon County Highway Districts Michael Kur Kur J. Boehm Boehm, Kurz & Lowr 36 E. Seventh St., Ste. 1510 Cincinnati, OH 45202 mklßKLlawfinn.com KboehmrgBKLlawfirm.com Attorneys for The Kroeger Co. Kevin Higgns Energy Strategies, LLC Parkside Towers 215 S. State St., Ste. 200 Salt Lake City, UT 841 i 1 khggisrgenergytrt.com Representing The Kroeger Co. Scott D. Spear Ada County Highway Distrct 3775 Adams Street Garden City, ID 83714 sspearcgchd.adaid. us U.S. Mail, postage prepaid Express Mail Hand Deliver Facsimile Electrnic Mail u.S. Mail, postage prepaid Express Mail Hand Deliver Facsimile Electronic Mail u.S. Mail, postage prepaid Express Mail Hand Deliver Facsimile Electrnic Mail u.S. Mail, postage prepaid Expres Mail Hand Deliver Facsimile Electronic Mail BUIDING CONTRACTORS ASSOCIATION OF SOUTHWESTERN IDAHO'S POST-HEARG BRIF- Page 10