20091222Ottens Direct in support.pdf

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HECt.
1.~1J~ un: 2. i ? '" 3~ i ß
Brad M. Purdy
1 Attorney at Law
BarNo. 3472
2 2019 N. 17th St.
3 Boise,ID. 83702
[phone] (Land)
4 [phone] (Fax)
bmpurdyúYhotmail.com
5 Attorney for Petitioner
Communty Action Partnership
6 Association of Idaho
7 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
8 IN THE MATTER OF THE APPLICATION ) CASE NO. IPC-E-09-30
9 OF IDAHO POWER COMPANY FOR AN )ACCOUNTING ORDER TO AMORTIZE )
10 ADDITIONAL ACCUMULATED DEFERRTAL )
INCOME TAX CREDIT AND APPROVING A )
11 RATE CASE MORATORIUM )
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15 COMMUNITY ACTION PARTNERSHIP ASSOCIATION OF IDAHO
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DIRECT TESTIMONY OF
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I. INTRODUCTION
Please state your name and business address.
My name is Teri Ottens. I am the Policy Director of the Community Action Parership
Association ofIdaho headquartered at 5400 W. Franlin, Suite G, Boise, Idaho, 83705.
On whose behalf are you testifying in this proceeding?
The Community Action Parnership Association of Idaho ("CAP AI") Board of Directors
asked me to present the views of an expert on, and advocate for, low income customers 0
AVISTA.
Please describe CAP AI's organization and the fuctions it performs, relevant to its
involvement in this case.
CAPAI is an association of Idaho's six Community Action Parnerships, the Communty
Council of Idaho and the Canyon County Organization on Aging, Weatherization and
Human Services, all dedicated to promoting self-sufficiency through removing the causes
and conditions of poverty in Idaho's communities.
What are the Community Action Parnerships?
Community Action Parerships ("CAPs") are private, nonprofit organizations that fight
poverty. Each CAP has a designated service area. Combining all CAPS, every county in
Idaho is served. CAPS design their various programs to meet the unque needs of
communties located within their respective service areas. Not every CAP provides all of
the following services, but all work with people to promote and support increased self-
suffciency. Programs provided by CAPS include: employment preparation and dispatch,
education assistance child care, emergency food, senior independence and support,
clothing, home weatherization, energy assistance, affordable housing, health care access,
and much more.
Have you testified before this Commission in other proceedings?
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Yes, I have testified, for the better part of a decade, on behalf of CAP AI in numerous
cases of varying types involving PacifiCorp, Idaho Power Company, Intermountain Gas,
A VISTA, and United Water Idaho as well as issue-specific and generic cases.
II. SUMMARY
Please summarze your testimony in this case?
The purpose of CAP AI's involvement in this case is to explain why CAP AI has executed
the Settlement Agreement in this case between Idaho Power Company, CAP AI, the
Commission Staff, the Industrial Customers of Idaho Power, the Idaho Irrigation
Pumpers' Association ofIdaho, Inc., Micron Technology, the United States Deparent
of Energy, and Kroger, Co.
What is the essence of the settlement agreement?
Rather than provide a detailed explanation of the agreement in my testimony, I note that
it can be found as Attachment 1 to the Company's November 6,2009 Application, and is
explained in detail in that Application. Having said that, the effect of the Settlement is an
attempt by Idaho Power to stabilze the potential to ear its authorized rate of retu
though the acceleration of the wrte-off of accumulated deferred tax credits and the use
of Power Cost Adjustment (PCA) mechanism rate changes.
What is the quid pro quo for the agreement?
In exchange for authorizing Idaho Power to take measures that could stabilze its
earngs, the utility has agreed to not fie any application or proceeding with the
Commission that would result in an increase in rates that would tae place prior to
Januar 1,2012 (the "Rate Moratorium"). There are several exceptions to this agreement
including, among other things, the annual PCA, an FCA, and a filing allowing the utilty
to seek changes to its low-income weatherization program.
Are there other critical aspects of the Settlement?
DIRECT TESTIMONY OF TERI OTTENS
1 A.Yes. First, for all regulatory matters that might occur prior to January 1,2012, the
2 Settlement states that Idaho Power's curent authorized rate of retur of 10.5% will
3 remain in effect. Second, in order to provide the Company with the potential to stabilze
4 its retur on equity, the paries to the Settlement established a symmetrical sharng
5 mechanism as follows: For the years 2009-2011, ifIdaho Power's actual Retur on
6 Equity falls below 9.5%, then it will be permitted to amortize additional Accumulated
7 Deferred Investment Tax Credits (ADITC) up to $45 milion over the period 2009-20011
8 sufficient to achieve an actual Retur on Equity of9.5% for Idaho operations. For the
9 year 2009, the maximum accelerated ADITC that the Company may use to achieve actual
10 ROE of9.5% is $15 milion.
11 Q.What will occur if the Company ears in excess of9.5% durng the years 2009-2011?
12 A.In that case, the Company wil not utilze any additional ADITC during that period.
13 Q.What if the Company's actual earings exceed 10.5% durng 2009-2011?
14 A.In that event, a "sharing" of the excess earings takes place in which the excess earings
15 above 10.5% wil be split 50-50 with ratepayers though a reduction in rates.
16 Q.Is there an issue regarding Idaho Power's Power Cost Adjustment (PCA) mechansm that
17 is dealt with in the Settlement?
18 A.Yes. Prior to implementing the June 1, 2010 PCA, Idaho Power wil seek, in a separate
19 proceeding, to change its base net power supply costs for both base rate and PCA
20 calculations. The expectation by the Company is that there wil be a substantial reductio
21 in rates on June 1, 2010 due to the PCA. The paries to the Settlement have agreed that
22 said rate reduction wil be shared between the Company and ratepayers, as set fort in the
23 Stipulation, which is what enables Idaho Power to agree to a rate moratorium until
24 Janua 1,2012.
25 Q.Does the foregoing sumar fully explain the Settlement?
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No. Due to the complicated nature of the Settlement, the fact that other parties have or
will more fully explain the Settlement, and that the Settlement itself is attched to the
Company's Application, I have only attempted to highlight the major points of the
agreement.
Did the Company's Application originally sta out in a different context?
In essence, yes. Idaho Power originally fied a sixty (60) day Notice ofIntent to File
General Rate Case. As already explained, the Company, through the Settlement
Agreement, has waived all rights to fie a general rate case that would go into effect prior
to Januar 1,2012
How did Idaho Power's initial Intent to File General Rate Case change into what is now
reflected in the Settlement Agreement under consideration?
Beginning in September, 2009, the Company invited a number of parties who typically
paricipate in Company proceedings to commence a series of negotiations to determine
whether there might exist a preferable alternative to a general rate case while stil
supporting the potential for the Company to actually achieve its authorized rate of retu.
CAP AI was one such pary at the negotiating table.
What transpired as a result of this initial meeting?
Among other things, the non-Company paries proposed the idea of a rate moratorium.
As a result, there were conducted a number of follow-up meetings discussing the
technical, practical and procedural aspects of the varous proposals that were put fort for
consideration by the Company, and the various other stakeholders at the table.
Did CAPAI participate in all of the numerous meetings and other aspects of
communcation constituting negotiations leading to the final Settlement Agreement?
Yes. CAPAI was a full participant in all aspects of this proceeding commencing with the
initial September, 2009 meeting, through the preparation and fiing of this testimony.
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Furermore, should there be any additional efforts required of CAP AI, including the
possibilty of a techncal hearng, CAP AI wil fully participate in such tasks.
III. RECOMMENDATIONS
What is it, specifically, that leads you to believe that the Settlement Agreement is in the
best interests of Idaho Power's low-income customers?
As stated, had the Settlement not been reached, it is likely that Idaho Power would have
proceeded forward with a general rate case. Given the Company's recent, substantial
investments in infrastructure known as "plant" that is included in "rate base" and
included through depreciation charges in rates, and given that the Company had incured
certin, relatively high costs during the test year, CAP AI believes that a general rate case
would likely have resulted in an end result more costly to Idaho Power's ratepayers than
what the Settlement Agreement, if approved, would result in. Indeed, it is unlikely that
Idaho Power would seek a rate change if it did not believe that it wasn't currently earing
its authorized rate of return or otherwise recovering authorized costs. By deferring the
recovery date of any future rate increases, with certain limited exceptions, ratepayers
receive one of several benefits.
What impact does the Company's agreement to "share" actual returs in excess of 10.5%
and to use a limited amount of additional ADITC to stabilize earings have on your
support for the Settlement?
First, the benefit to Idaho Power of having a mechanism in place that enhances its ability
to stabilze earings in the near future, during these difficult economic times, also
advantages ratepayers in that it, theoretically, enables the utilty to access the financial
markets in a strengthened position which, in tur, might reduce the cost of borrowing
necessary fuds for operation or plant investment puroses. These reduced costs of
financing wil ultimately be passed on to ratepayers. Furhermore, the Company is
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eventually entitled to recover its ADITC regardless ofthe Settlement in this case.
Allowing the Company to accelerate the use of ADITC in years where it does not achieve
its authorized rate of retur, in exchange for a rate moratorium, is an advantageous
alternative to Idaho Power's low-income customers as opposed to a traditional, general
rate case, under curent circumstances. Furhermore, the Settlement is fair to both the
utilty and ratepayers through the "sharing" mechanism described above. Though I am
not an economist or financial expert, it appears that the sharing aspect of the mechansm,
whether actual earings are higher or lower than the curently authorized 10.5%, ensures
a process by which the Company's ratepayers are not unfairly advantaged or prejudiced
and, as explained, defers what is likely to be an inevitable rate increase and might well
result in lower rates in both the long and short term.
Are there other bases for your support of the Settlement?
Natually, the focus of CAP AI in this case, as in all cases, is to concern itself with the
interests of low-income, utilty customers. While CAP AI, and all other paries, are
prohibited by the Settlement Agreement from discussing the details of statements made
and positions taken during the course of negotiations leading up to execution of the
Settlement,
1 it is fair to say that CAP AI weighed in on a number of issues, both
procedural and substantive. Whle all signatories to the Settlement are required to
support the Settlement, and all aspects of it, in its entirety, 2 clearly not every par
agreed with every other pary on every aspect of every issue. As with any global
settlement ofthis nature, there was give and take and, presumably, each signatory to the
Settlement Agreement analyzed the Settlement on the whole and made a decision
i Section IV(9)
2 Id.25
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whether to execute it based on whether the Settlement was in the best interests of their
respective clients.
iv. OTHER
Are there any specific aspects of the Settlement or the procedure by which it was handled
that you wish to comment upon?
Yes. First, as noted above, detailed statements made and positions taken durng the
settlement negotiations in this case, are confidential and inadmissible as evidence.
Specifically, Section IV(9) states, in par:
rOlther than any testimony fied in support of the approval of this
Stipulation, and except to the extent necessar for a Pary to explain
before the Commission its own statements and positions with respect to
the Stipulation, all statements made and positions taken in negotiations
relating to this Stipulation shall be confidential and wil not be
admissible in evidence in this or any other proceeding. (Emphasis
added).
Do you have statements made or positions taken that need to be explained to the
Commission pursuant to Section IV(9), as stated above?
Yes, to a limited extent. Without violating the foregoing confdentiality provision of the
Settlement Agreement, it is fair to state that this case took a procedural path that, to the
best of CAP AI's knowledge, is quite unique. That is to say, the signatories to the
Settlement negotiated what was originally intended to be a General Rate Case into
something quite different. Moreover, there was not even an application on file or a case
number assigned to this matter when negotiations first began and concluded. It was only
afer the Settlement was reached that an application was fied and a Case number
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Did CAP AI have differing points of view from other paries, including the Commission
Staff, regarding the appropriate procedural handling of this case durng negotiations?
Yes. Without explaining the details of its position taken or statements made durng
negotiations, CAP AI voiced a markedly different perspective on procedure than Staff and
perhaps others.
Does this in any way undermine or lessen CAP AI's support for the Settlement
Agreement?
No. CAP AI simply wishes to point out that it was under the belief when it executed the
Settlement Agreement, that a technical hearing would be conducted. This belief was
confirmed by Commission Order No. 30949 issued in this case in which the Commission
established the normal initial deadlines for cases that proceed to technical hearng. It
wasn't until December 82009, the day after the intervention deadline, that the
Commission issued Order No. 30960 essentially converting this case to Modified
Procedure. CAP AI had already executed the Settlement Agreement and intervened in the
curent case by that point.
Is it CAP AI's position that the procedure taken somehow renders the substance of the
Settlement Agreement defective?
No. Though CAP AI believes that the procedure taen might need to be scrutinized by
the Commission for the purose of future cases, CAP AI unconditionally supports the
substace of the Settlement Agreement in this proceeding and will continue to stand
behind it. CAP AI believes that the substance of the Settlement Agreement is in the best
interests of all Idaho Power ratepayers.
Does this conclude your testimony in this proceceding?
Yes, it does.
DIRECT TESTIMONY OF TERI OTTENS
1 CERTIFICATE OF SERVICE
2 I HEREBY CERTIFY, that on December 22,2009, I caused the foregoing
3 testimony ofTeri Ottens on the following via email attachment, to be
4 followed by hard copy, U.S. Postage.
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Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 W . Washington St.
Boise, Idaho 83702
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9 Peter J. Richardson
515 North 27th St.
P.O. Box 7218
Boise, ID 83702
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Eric L. Olson
P.O. Box 1391
201 E. Center
Pocatello,ID 83204-1391
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Kur J. Boehm
15 36 East Seventh St., Suite 1510
Cincinnati, Ohio 45202
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Conley Ward
601 West Banock St.
P.O. Box 2720
Boise,ID 83701-2720
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Artur Perry Bruder
U.S. Dept. of Energy
1000 Independence Ave., SW
Washington, D.C. 20585
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Ken Miler
Snake River Allance
P.O. Box 1731
Boise,ID 83701
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Betsy Bridge
1 Idaho Conservation League
710 North Sixth St.2 P.O. Box 844
3 Boise,ID 83701
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Betsy Bridge
1 Idaho Conservation League
710 North Sixth St.2 P.O. Box 844
3 Boise,ID 83701
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DIRECT TESTIMONY OF TERI OTTENS
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