20110427Reply Comments.pdf

isIDA~POR~
An IDACORP Company
JASON B. WILLIAMS
Corporate Counsel
iwilliams~idahopower.com
April 27, 2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-11-04
IN THE MATTER OF THE APPLICA TlON OF IDAHO POWER COMPANY
TO INCREASE ITS RATES FOR ELECTRIC SERVICE TO RECOVER ITS
2010 PENSION CASH CONTRIBUTION
Dear Ms. Jewell:
Enclosed for filng please find an original and seven (7) copies of Idaho Power
Company's Reply Comments in the above matter.
JBW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
LISA D. NORDSTROM (ISB No. 5733)
JASON B. WILLIAMS
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
Inordstromcæidahopower.com
jwilliamscæidahopower.com
RECEIVED
231 I APR 27 PM 4=45
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
INCREASE ITS RATES FOR ELECTRIC
SERVICE TO RECOVER ITS 2010
PENSION CASH CONTRIBUTION.
)
) CASE NO.IPC-E-11-04
)
) IDAHO POWER COMPANY'S
) REPLY COMMENTS
)
Idaho Power Company ("Idaho Powet' or "Company"), by and through its
attorney of record, Lisa D. Nordstrom, and in response to the Notice of Modified
Procedure issued in Order No. 32215 and Comments filed on April 20, 2011,
respectfully submits the following Reply Comments.
i. BACKGROUND
Idaho Power made a $60 millon contribution to its defined benefit pension plan in
September 2010 to satisfy requirements of the Employee Retirement Income Security
Act ("ERISA"). On March 15, 2011, Idaho Power filed an Application requesting an
$11.7 milion increase in customer base rates to recover the Idaho-allocated share of
the $60 millon contribution. The Company proposed to collect this amount over three
years starting June 1, 2011.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
On April 20, 2011, the Idaho Public Utilties Commission ("Commission") Staff,
and the Industrial Customers of Idaho Power ("ICIP") filed comments on Idaho Powets
Application. In the paragraphs that follow, Idaho Power responds to several of their
assertions.
II. POTENTIAL IMPACT OF THE REQUESTED INCREASE
The ICIP suggests on page 4 of its Comments that "this is but one of many
upcoming pension fund cases which cumulatively wil be equivalent to a one-time rate
increase of approximately 20 percent. . .." This statement is incorrect because it
erroneously suggests that Idaho Power would request a one-year recovery of $208
milion in cumulative cash contributions associated with the 2010-2015 period. The ICIP
has no basis upon which to presume that Idaho Power would seek recovery of six years
of expenses in a single year. This approach is inconsistent with traditional ratemaking
principles and, in fact, is counter to the Company's current request in this proceeding
where it requests recovery of a single year's expense over a three-year period. The
ICIP's 20 percent increase assertion dramatically overstates the potential rate impact to
customers and should be disregarded.
The ICIP further states incorrectly that "combined with the $60 millon contributed
in 2010 at issue in this case, that means the Company's contributions yet to be
recovered in rates wil be at least S208 milion by 2015." (Emphasis in originaL.) As
support for this assertion, ICIP cites the Company's 2010 Form 10-K filed with the
Securities and Exchange Commission and quotes as follows:
Unless IDACORP and Idaho Power elect an alternativeamortization schedule under the new legislation . . .,
minimum required contributions to the defined pension plan
are estimated to be approximately $3 milion in 2011, $46
million in 2012, $36 milion in 2013, $32 milion in 2014, and
$31 milion in 2015.
Comments of ICIP at 4 (emphasis added).
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
ICIP misunderstands the use of the word "minimum" in this quotation. The term
is not intended to refer to the low range of possible required contributions in a set of
future scenarios. In fact, the cited numbers most closely correspond with the 50th
percentile in Table 1 of the Company's Supplemental Report filed in Case No. IPC-E-
!10-25 and cited by Staff in its Comments in this case. The amounts ultimately requiréd
to be contributed in each year could be more or they could be less than the estimates
disclosed in the Company's Form 10-K and cited by ICIP. With the use of the term
"minimum," the statement was intended to express simply that when each yeats
required contribution is finally determined by Idaho Powets actuary, the Company wil
be required to contribute at least that amount by the contribution's due date.
II. LENGTH OF THE AMORTIZATION PERIOD
On page 8 of its Comments, the ICIP recommends a five-year amortization
period rather than the three years proposed by the Company. According to the ICIP,
this would lower the rate increase from the $11.7 millon annually over the next three
years to $4.9 milion per year, or a 0.61 percent annual increase. ICIP Comments at 8.
Idaho Power agrees with the Commission Staff that a three-year period is more
appropriate. Staff noted on page 5 of its Comments that "under every scenario, the
amount requested by the Company to be recovered from customers wil not be sufficient
to pay down the balance in the regulatory asset balancing account until at least 2019."
Therefore, extending the proposed amortization period beyond the 3 years only
exacerbates the time frame of the pay down of the balancing account. The Staff
correctly recognizes that extending the amortization period beyond the recommended
three-year period could result in "larger increases in future years." Staff Comments at 5.
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
IV. PERCENTAGE OF EMPLOYEE COMPENSATION
Table 3 on page 6 of Staffs Comments titled "Pension Recovery Percentage of
Employee Compensation" provides estimates of pension recovery as a percentage of
employee compensation, including an estimate of "Avg % Comp 2010-2019." Although
the estimates set forth in Table 3 may be ilustrative of the near future, the data would
be more complete if Staff had included an estimated average for the 2004-2019 period.
Pension benefits accrue at a reasonably level rate from year-to-year, while actual cash
contributions are more variable from year-to-year. As pension recovery is based on the
amount of actual cash contributions, it is not realistic or appropriate to focus on a period
when cash contributions come due, while ignoring an extended period like 2004 through
2010 when pension benefis were accruing but no contributions were necessary and no
recovery was allowed. In those years when no contributions were necessary and no
recovery allowed, the pension recovery as a percentage of employee compensation
would have been zero percent.
"V. CONCLUSION
As set forward in its previously filed Application and testimony, Idaho Power
respectfully requests the Commission issue its Order increasing amounts currently
included in rates for recovery of the Company's Idaho-allocated pension cash
contribution from $5.4 milion to approximately $17.1 milion.
DATED at Boise, Idaho, this 2ih day of April 2011.
~¿'ALA NORDSTROM
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 2ih day of April 2011 I served a true and correct
copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Industrial Customers of Idaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street
P.O. Box 7218
Boise, Idaho 83702
Dr. Don Reading
Ben Johnson Associates
6070 Hil Road
Boise, Idaho 83703
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
-l Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-l Email Weldon.Stutzmancæpuc.idaho.gov
Hand Delivered
-l U.S. Mail
_ Overnight Mail
FAX
-l Email petercærichardsonandolearv.com
gregcærichardsonandolearv.com
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FAX
-l Email dreadingcæmindspring.com
~ ~~c;~,
i D. Nordstrom
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