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HomeMy WebLinkAbout20111019Youngblood Di, Exhibits.pdf'" ,iri"" :r i"t::. t: \,) t:~ porT I q 4: 20¡ ¡ ''o ~ .. BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO CONVERT SCHEDULE 54 - FIXED COST ADJUSTMENT - FROM A PILOT SCHEDULE TO AN ONGOING, PERMANENT SCHEDULE. CASE NO. IPC-E-11-19 IDAHO POWER COMPANY DIRECT TESTIMONY OF MICHAEL J. YOUNGBLOOD 1 Q.Please state your name and business address. 2 A.My name is Michael J. Youngblood. My business 3 address is 1221 West Idaho Street, Boise, Idaho. 4 Q.By whom are you employed and in what capacity? 5 A.I am employed by Idaho Power Company ("Idaho 6 Power" or "Company") as the Manager of Rate Design in the 7 Regulatory Affairs Department. 8 Q.Please describe your educational background. 9 A.In May of 1977, I received a Bachelor of 10 Science Degree in Mathematics and Computer Science from the 11 University of Idaho. From 1994 through 1996, I was a 12 graduate student in the Executive MBA program of Colorado 13 State Uni versi ty. Over the years, I have attended numerous 14 industry conferences and training sessions, including 15 Ed~son Electric Institute's "Electric Rates Advanced 16 Course. " 17 Q.Please describe your work experience with 18 Idaho Power. 19 A.I began my employment with Idaho Power in 20 1977. During my career, I have worked in several 21 departments and subsidiaries of the Company, including 22 Systems Development, Demand Planning, Strategic Planning, 23 and IDACORP Solutions. Most relevant to this testimony 24 though is my experience within the Regulatory Affairs 25 Department. i From 1981 to 1988, I worked as a Rate Analyst YOUNGBLOOD, DI 1 Idaho Power Company 1 in the Rates and Planning Department where I was 2 responsible for the preparation of electric rate design 3 studies and bill frequency analyses. I was also 4 responsible for the validation and analysis of the load 5 research data used for cost-of-service allocations. 6 From 1988 through 1991, I worked in Demand Planning 7 and was responsible for the load research and load 8 forecasting functions of the Company, including sample 9 design, implementation, data retrieval, analysis, and 10 reporting.I was responsible for the preparation of the 11 five-year and twenty-year load forecasts used in revenue 12 proj ections and resource plans as well as the presentation 13 of these forecasts to the public and regulatory 14 commissions. 15 In 2001, I returned to the Regulatory Affairs 16 Department and have worked on special proj ects related to 17 deregulation, the Company's Integrated Resource Plan, and 18 filings with both the Idaho Public Utilities Commission 19 ("IPUC" or "Commission") and the Oregon Public Utility 2 0 Commission ("OPUC"). 21 In 2008, I was promoted to my current position of 22 Manager of Rate Design for Idaho Power. It is in this 23 position that I am currently responsible for the management 24 of the rate design strategies of the Company, as well as 25 the oversight of all tariff administration. YOUNGBLOOD, DI 2 Idaho Power Company 1 Q.What is the purpose of your testimony in this 2 matter? 3 A.In my testimony, I will discuss the Company's 4 proposal to remove the temporary "pilot" status of Schedule 5 54, Fixed Cost Adjustment ("FCA") and convert the FCA to an 6 ongoing, permanent tariff schedule. I will also discuss 7 the derivation of the Fixed Cost per Customer (" FCC") and 8 Fixed Cost per Energy (" FCE") rates which would result from 9 the functionalized and classified revenue requirement data 10 prepared as part of the Settlement Stipulation in IPUC Case 11 No. IPC-E-11-08, the Company's most recently filed general 12 rate case. If the Settlement Stipulation is approved and 13 the general base rates are adopted as filed, these would be 14 the FCC and FCE rates the Company would propose to be used 15 in determining the annual adj ustment under Schedule 54, 16 Fixed Cost Adjustment. 17 Q.Are there any others that will be providing 18 testimony in this matter? 19 A.Yes. Ralph Cavanagh, Energy Program Director 20 for the Natural Resources Defense Council, is also 21 providing testimony in support of converting the FCA to a 22 permanent tariff schedule. Mr. Cavanagh is a nationally 23 recognized advocate of energy efficiency, has been directly 24 involved with the initial development of the FCA as a 25 YOUNGBLOOD, DI 3 Idaho Power Company 1 pilot, and has remained supportive of the true-up mechanism 2 throughout its pilot status for the last five years. 3 Q.Please describe the Fixed Cost Adj ustment 4 mechanism. 5 A.The FCA is a rate mechanism designed to remove 6 the financial disincentive to utili ty acquisition of 7 demand-side management ("DSM") resources. The mechanism 8 accomplishes this goal by severing the link between energy 9 sales and the recovery of fixed costs. Currently, the FCA 10 applies only to Residential Service (Schedules 1, 3, 4, and 11 5) and Small General Service (Schedule 7). The annual FCA 12 amount is determined according to the following formula: 13 FCA = (CUST X FCC) - (NORM X FCE) 14 Where: 15 FCA = Fixed Cost Adjustment; 16 CUST = Actual number of customers, by class; 17 FCC = Fixed Cost per Customer, by class; 18 NORM = Weather-normalized energy, by class; 19 FCE = Fixed Cost per Energy, by class. 20 Q.What values are required to calculate the FCA 21 amount annually? 22 A.As outlined in the above formula, for each 23 class (Residential Service and Small General Service), the 24 actual number of customers, the fixed cost per customer, 25 weather-normalized energy, and the Fixed Cost per Energy YOUNGBLOOD, DI 4 Idaho Power Company 1 are required to determine the FCA amount. Two of these 2 variables (CUST and NORM) are determined at the end of each 3 year based upon the Company's actual billing records. The 4 other two variables (FCC and FCE) are updated each time the 5 Company files a general rate case and are based on the 6 results of the class cost-of-service study. 7 Q.Why is the Company now proposing to make 8 Schedule 54, Fixed Cost Adjustment, an ongoing, permanent 9 tariff schedule? 10 A.As established in Order No. 30267 issued in 11 Case No. IPC-E-04-15, the FCA mechanism was originally 12 approved as a three-year pilot program running January 1, 13 2007, through December 31, 2009. In Order No. 31063, Case 14 No. IPC-E-09-28, the Commission extended the pilot for an 15 additional two years, beginning January 1, 2010. The FCA 16 pilot is currently scheduled to terminate December 31, 17 2011. The Company filed as part of its most recent general 18 rate case, Case No. IPC-E-11-08, its proposal to remove the 19 pilot status of the current FCA and establish an ongoing, 20 permanent tariff schedule. As part of the Settlement 21 Stipulation that was submitted in the general rate case on 22 September 23, 2011, Idaho Power moved the Commission to 23 remove the FCA issues from the rate case and initiate a 24 separate proceeding to consider the permanency of the FCA. 25 Order No. 32380 granted that motion and directed the YOUNGBLOOD, DI 5 Idaho Power Company 1 Company to initiate anew, separate proceeding for the FCA 2 issues as soon as possible. 3 Q.What is the purpose of the FCA pilot? 4 A.The purpose of the FCA pilot is to test a 5 fixed cost adj ustment mechanism designed "to true-up the 6 collection of fixed costs per customer to recover the 7 difference between the fixed costs actually recovered 8 through rates and the fixed costs authorized for recovery 9 in the Company's most recent rate case." Case No. IPC-E- 10 04-15, Order No. 30267. Results from the first three years 11 of the pilot, and now the last year and a half of the 12 extended pilot, indicate that the true-up mechanism is 13 working as intended and operating to mitigate adverse 14 financial effects to the Company from DSM by ensuring that 15 the fixed costs authorized for recovery are being trued-up 16 via the FCA mechanism. The mechanism has proven to be fair 17 to both the customer and the Company, providing both a 18 refund and a surcharge throughout the pilot years. The 19 mechanism has also been proven to be reasonable as the 20 individual customer bill impacts, both up and down, have 21 been relatively small. 22 Q.Have customers benefited from the FCA pilot 23 during its implementation? 24 A.Yes. The FCA's true-up mechanism benefits 25 customers three ways. First, cost-effective energy YOUNGBLOOD, DI 6 Idaho Power Company 1 efficiency and DSM programs can lower customer costs. 2 Customers benefit from the FCA true-up mechanism because 3 the Company is not financially harmed by decreases in 4 energy sales wi thin the residential and small general 5 service customer classes, nor is it financially benefited 6 from increases in energy sales. Thus, the FCA removes a 7 disincenti ve that would otherwise discourage the Company 8 from pursuing additional DSM programs and expenditures. 9 The implementation of the FCA pilot has facilitated 10 significant increases in the Company's promotion and 11 expenditures to pursue energy efficiency and DSM programs, 12 which have resulted in significant energy efficiency 13 savings. Exhibit No. 1 depicts how the Company has 14 increased the number of DSM programs and substantially 15 increased its level of expenditures for energy efficiency 16 and demand response programs since the inception of the FCA 17 pilot on January 1, 2007. 18 Q.What are the other ways customers have 19 benefited from the FCA pilot during its implementation? 20 A.The second way the FCA pilot has benefited 21 customers during its implementation is in the way the FCA 22 true-up mechanism stabilizes customer bills when loads are 23 increasing because the fixed cost component being recovered 24 through the energy rate is less than the total energy rate. 25 As a result, when average use per customer increases during YOUNGBLOOD, DI 7 Idaho Power Company 1 a year, the resulting FCA provides a refund to customers 2 for fixed costs recovered by the Company which were above 3 the authorized level of recovery. Because of the 4 reciprocal nature of the FCA, the Company is not allowed to 5 keep the additional revenue as it did before the FCA was 6 implemented. Customers' bills are less with the FCA than 7 they would be without the mechanism. 8 Third, customers benefit from the FCA when loads are 9 decreasing because it gives the Company a better 10 opportunity to recover more of the fixed costs it incurs to 11 provide electric service to customers. 12 Q.Does anyone other than Idaho Power acknowledge 13 the benefits of the FCA? 14 A.Yes. In the Company's earlier filing to make 15 the FCA a permanent tariff schedule (Case No. IPC-E-09-28), 16 all the parties who commented, with the exception of the 17 American Association of Retired Persons ("AARP"), indicated 18 that they supported the FCA and recognized the positive 19 benefits customers obtained by implementation of the FCA. 20 In addition to the Staff and Intervenors in that case, 21 other entities in the state of Idaho also acknowledged the 22 benefits flowing from the FCA. 23 Q.What other entities acknowledged the benefits 24 flowing from the FCA? 25 YOUNGBLOOD, DI 8 Idaho Power Company 1 A.Governor Otter, in his March 19, 2009, letter 2 to the United States Secretary of Energy, written in 3 support of Idaho's effort to obtain stimulus funds, cited 4 the fact that he "has requested that the Commission 5 continue their successful decoupling efforts .." as 6 evidence that Idaho deserved a share of the $3.1 billion in 7 federal funding for the state energy program. 8 Another instance where the FCA was cited posi ti vely 9 was in the Commission and the Idaho Office of Energy 10 Resource's ("OER's") December 11, 2009, Joint Report to the 11 Legislature regarding the successful implementation of the 12 2007 Idaho En~rgy Plan ("Joint Report"). In the Joint 13 Report, the OER and the Commission specifically identified 14 the fact that the Commission had adopted one of the 15 nation's first electric decoupling mechanisms designed to 16 remove financial disincentives for Idaho Power to implement 17 energy cost efficiency programs. In its Report, the OER 18 and the Commission describe the FCA as a posi ti ve step to 19 encourage Idaho Power to aggressively and cost-effectively 20 pursue energy efficiency and DSM programs. 21 Q.Are there more examples where the benefits 22 flowing from the FCA have been acknowledged? 23 A.Yes. In Case No. GNR-E-08-04, the Commission 24 fulfilled its obligation under the Energy Independence and 25 Security Act of 2007 (16 USC § 2621 (17) (B) (i) )by YOUNGBLOOD, DI 9 Idaho Power Company 1 considering policies that "remove the throughput incentive 2 and regulatory and management disincentives to energy 3 efficiency. " In that case, the Commission found that "it 4 has or is presently considering energy efficiency programs 5 such as fixed cost adj ustments, tiered rates, time of use 6 rates, seasonal rates, and decoupling" such that it has 7 "already adopted comparable standards for rate design 8 modifications to promote energy efficiency investments by 9 utilities. "(Order No. 30966, p. 6.) 10 Finally, the FCA is recognized by the financial 11 community as a posi ti ve indication of proactive regulation. 12 Various utility equity analysts have identified the FCA as 13 a posi ti ve attribute in assessing whether to recommend 14 buying IDACORP, Inc. stock. RBC Capital Markets, Wells 15 Fargo Bank, and Key Banc are equity research firms which 16 have identified the fact that Idaho Power has a decoupling 17 mechanism in place in the state of Idaho as an indication 18 of a posi ti ve regulatory environment in Idaho. 19 Q. You have stated that the FCA has performed as 20 intended. Please explain your statement further. 21 A. During the workshops that led up to the 22 submittal of the Stipulation in Case No. IPC-E-04-15 which 23 created the FCA, the workshop participants developed a list 24 of criteria that any regulatory mechanism for decoupling 25 YOUNGBLOOD, DI 10 Idaho Power Company 1 utility energy sales from fixed cost recovery should meet. 2 The criteria developed by the participants are as follows: 3 a.Stakeholders are better off than they 4 would be without the mechanism.(Stakeholders include both 5 customers and shareholders.) 6 b.Cross-subsidies are minimized across 7 customer classes. 8 c.Financial disincentives are removed. 9 d.The acquisition of all cost-effective 10 DSM is optimized. 11 e.Rate stability is promoted. 12 f.The mechanism is simple. 13 g.Administrative costs and the impacts of 14 the mechanism are known, manageable, and not subject to 15 unexpected fluctuation. 16 h.Short-term and long-term effects to 17 customers and the Company are monitored. 18 i.Perverse incentives are avoided. 19 j .A close link between the mechanism and 20 desired DSM outcomes is established. 21 Q.Does the Company believe that the FCA has met 22 the criteria originally established? 23 A.Yes.The FCA provides a symetrical 24 (surcharge/credit) true-up mechanism for when the fixed 25 cost recovery per customer varies above or below a YOUNGBLOOD, DIll Idaho Power Company 1 Commission-established base. Since the FCA was first 2 implemented, customer rates have both increased and 3 decreased as a result of the FCA. As a result, the Company 4 has become indifferent to reduced energy consumption and 5 demand from the participating customer classes. Idaho 6 Power's recovery of fixed costs is more stable as are its 7 customers' bills. 8 Q.Has implementation of the pilot FCA affected 9 the Company's efforts toward promoting energy efficiency 10 and DSM acti vi ties? 11 A.Since the inception of the pilot FCA, the 12 Company has actively pursued new opportunities to promote 13 energy efficiency and DSM. By removing the financial 14 disincenti ve to invest in DSM programs, the FCA has 15 provided the Company an opportunity to enhance and expand 16 its portfolio of cost-effective demand-side resources. 17 Q.Please summarize the Company's DSM investments 18 and energy savings since inception of the FCA pilot. 19 A.In total, the Company increased its level of 20 investment toward energy efficiency and demand response 21 programs annually since the inception of the FCA pilot on 22 January 1, 2007. Exhibit No. 1 demonstrates the Company's 23 enhanced DSM investment and energy impacts from 2006 to 24 2010. A complete description of all energy efficiency 25 YOUNGBLOOD, DI 12 Idaho Power Company 1 acti vi ties can be found in the Company's Demand-Side 2 Management Annual Reports, which are filed annually with 3 the Commission. 4 Q.What types of programs has the Company 5 utilized to promote energy and demand savings by customers? 6 A.Idaho Power has utilized four types of 7 programs to promote energy and demand savings:(1) Demand 8 Response, (2) Energy Efficiency, (3) Market Transformation, 9 and (4) Other Programs and Acti vi ties. 10 Q.How has the Company enhanced its efforts in 11 Demand Response and Energy Efficiency programs? 12 A.The Company has enhanced its efforts to 13 acquire Demand Response and Energy Efficiency by continuing 14 to support existing and proven programs and by aggressively 15 pursuing new cost-effective DSM programs. For instance, 16 from 2006 to 2010, the estimated reduction in demand 17 related to the Company's Demand Response programs increased 18 from 38.1 megawatts ("MW") to 336.2 MW. Energy savings 19 resulting from the Company's Energy Efficiency programs 20 increased from 67,026 megawatt-hours ("MWhs") in 2006 to 2 1 1 8 7 , 6 2 6 MWh in 2 0 1 0 . 22 Q.Has the Company enhanced its efforts in Market 23 Transformation and Other Programs and Activities? 24 A.Yes. The Company continues to financially 25 support Market Transformation through membership and YOUNGBLOOD, DI 13 Idaho Power Company 1 coordinated acti vi ties with the Northwest Energy Efficiency 2 Alliance ("NEEA"). The Company's membership and 3 participation with NEEA has enhanced the Company's ability 4 to pursue appliance code standards and increased energy 5 efficiency requirements in Idaho building codes. 6 The Company has enhanced its involvement in Other 7 Programs and Acti vi ties through research, development, 8 education, and program marketing. More specifically, the 9 Company has increased the broad availability of efficiency 10 and load management programs, increased customer awareness 11 through the Residential Energy Efficiency Education 12 Initiative, and contracted with third-party consultants to 13 verify program specifications and energy savings. In 14 addition, Idaho Power has updated Company facilities with 15 energy efficient equipment and building products to 16 internally promote and encourage energy efficiency. 17 Q.What other ini tiati ves has the Company pursued 18 to encourage energy efficiency since inception of the pilot 19 FCA? 20 A.In the Company's 2008 general rate case, Case 21 No. IPC-E-08-10, several new price-based rate designs were 22 approved in support of the Company's obj ecti ve of 23 encouraging the wise and efficient use of electricity. 24 Year-round tiered block rates, expanded time-of-use 25 pricing, and the introduction of load-factor pricing were YOUNGBLOOD, DI 14 Idaho Power Company 1 all efforts toward encouraging the efficient use of 2 electricity. 3 Q.Does the FCA only recover the fixed costs 4 directly associated with DSM programs? 5 A.No. While the intent of the FCA is to remove 6 the financial disincentive for the utility to invest in DSM 7 acti vi ties, there are other factors which may affect the 8 Company' s ability to recover its fixed costs, both 9 positively and negatively. It is difficult to determine 10 with precision the exact amount of unrecovered fixed costs 11 directly resulting from DSM acti vi ties. However, as a 12 practical matter, the same financial disincentive extends 13 to other load reducing acti vi ties as well. Some of these 14 non-DSM related variables include building code changes, 15 federal weatherization programs, tax incentives and 16 appliance rebates, federal marketing programs, 17 technological changes, substitutions between gas and 18 electric equipment, rate design changes consistent with 19 energy efficiency, shifts in the economy, customer 20 education and information, and other behavioral changes. 21 Idaho Power can assist in promoting many of the above- 22 mentioned non-DSM program initiatives that benefit 23 customers. The Company should be encouraged to pursue all 24 legitimate load reducing activities and the FCA mechanism 25 should appropriately capture all of the impacts to fixed YOUNGBLOOD, DI 15 Idaho Power Company 1 cost recovery that flow from these acti vi ties. Removing as 2 many disincentives to load reduction acti vi ties as possible 3 is in the public interest. 4 Q.Does this mean that the Company is allowed to 5 benefit from acti vi ties that are not directly DSM related? 6 A.No. Under the current structure of the FCA 7 mechanism, the Company is only allowed to recover the level 8 of fixed costs previously authorized by the Commission in 9 its last general rate case. If the Company recovers more 10 than the level of fixed costs authorized, it will provide a 11 refund to the customers for the amount over-recovered. The 12 Company only recovers the authorized level of fixed costs, 13 no more and no less. 14 Q.Is the Company proposing to expand the FCA to 15 classes other than the Residential and Small General 16 Service classes? 17 A.No, not at this time. In this case, the 18 Company is only proposing to make the FCA an ongoing 19 permanent tariff schedule for the Residential classes 20 (Schedules 1, 3, 4, and 5) and Small General Service 21 customers (Schedule 7). 22 Q. How does the Company propose to distribute the 23 annual Residential and Small General Service FCA balances 24 if Schedule 54 is changed to a permanent tariff? 25 YOUNGBLOOD, DI 16 Idaho Power Company 1 A.For the first four years of the FCA pilot, 2 either the Commission ordered or the Company proposed to 3 recover or refund the FCA deferral balance equally to both 4 classes. Under the proposed permanent tariff, the Company 5 proposes to true-up the Residential and Small General 6 Service FCA by combining the deferral balances of each 7 class and implementing rates for each class that represent 8 a uniform percent change. This method of recovery or 9 refund is consistent with the first four years of the FCA 10 Pilot. In addition, by combining the Residential and Small 11 General Service FCA balances and determining the rate 12 adders based on an equal FCA rate adjustment for each 13 class, the overall rate impact to customers in these 14 classes is a more representative total amount of the 15 required fixed cost recovery for each class. 16 Q.Upon conversion to a permanent FCA, are you 17 proposing any other changes to the pilot FCA provisions set 18 forth in Case No. IPC-E-04- 15, Order No. 30267? 19 A.Yes. Under the pilot, the Company was 20 required to document each year specific ways it had 21 increased its investment in energy efficiency and DSM as a 22 result of the FCA mechanism. The Company believes that 23 this increased commitment to invest in energy efficiency is 24 now evident and a separate annual reporting requirement is 25 duplicative and no longer needed with the permanent YOUNGBLOOD, DI 17 Idaho Power Company 1 Schedule 54. If questions arise as to the Company's 2 commitment toward the acquisition of all cost-effective 3 DSM, one can simply review the Company's DSM Annual Report 4 which is filed with the Commission in March of each year. 5 The Company will continue reporting the monthly FCA balance 6 as it now does and will continue to file annual 7 applications seeking approval of the FCA true-up balances. 8 All other provisions will remain the same. 9 Q.What effective date is the Company proposing 10 for converting Schedule 54 from a pilot schedule to a 11 permanent schedule? 12 A.The Company is proposing to make Schedule 54 13 an ongoing, permanent schedule immediately following the 14 completion of the extended pilot which ends December 31, 15 2011. Therefore, the Company proposes that Schedule 54 16 become a permanent tariff schedule , effective January 1, 17 2012. 18 Q.Have you updated the FCC and FCE rates that 19 would be in effect if the Commission approves the 20 Settlement Stipulation in IPC-E-11-08 and the base rates 21 resul ting from the approval were to be made effective 22 January 1, 2012? 23 A.Yes. I have updated the FCC and the FCE rates 24 using the functionalized and classified revenue requirement 25 data developed for the Settlement Stipulation. The updated YOUNGBLOOD, DI 18 Idaho Power Company 1 FCC and FCE rates have been included on the revised 2 Schedule 54, Fixed Cost Adjustment. 3 Q.Please describe the process used to determine 4 the FCC and FCE rates for the FCA mechanism. 5 A.The FCC and FCE rates submitted are based upon 6 the 2011 test year and the functionalized and classified 7 revenue requirement data prepared as part of the Settlement 8 Stipulation in IPUC Case No. IPC-E-11-08. These rates most 9 accurately represent the Company's current fixed costs. 10 Exhibit No.2, Tables I, II, and III detail the 11 computational process that was used to determine these 12 class-specific fixed cost amounts. 13 The first step in this process is a determination of 14 the 2011 test year fixed cost recovery embedded in the 15 energy charges for Residential Service and Small General 16 Service customers. As can be seen in Exhibit No.2, Table 17 III, column J, for Residential Service, $258,560,620 of 18 fixed costs are to be recovered from the residential 19 customers through energy charges. For Small General 20 Service, $10,222,650 of fixed costs are to be recovered 21 from the energy charges. 22 Q.Do these fixed cost amounts for the 23 Residential and Small General Service customer classes 24 include more than their actual class cost-of-service? 25 YOUNGBLOOD, DI 19 Idaho Power Company 1 A.Yes. There is a difference between the class 2 cost-of-service numbers and the amount of requested revenue 3 requirement. This difference is a result of the cross- 4 class subsidies that are currently present in the Company's 5 rate structure. The total cross-class subsidies as well as 6 the fixed cost portion of those subsidies are identified in 7 Exhibit No.2, Table II. 8 Q.Why is it important to include these fixed 9 cost subsidies for the Residential and Small General 10 Service classes? 11 A.When fixed costs are recovered through a 12 volumetric rate, the effects of any conservation program 13 that reduces energy consumption results in a loss in the 14 recovery of those fixed costs. In the case of both the 15 Residential and Small General Service customer classes, the 16 reduction of energy consumption through conservation 17 measures not only prevents the Company from recovering the 18 fixed costs associated with those classes, but in addition, 19 prevents the fixed cost recovery of the subsidies which are 20 incorporated in their energy rates. 21 Q.How are the class-specific fixed cost amounts 22 established in the initial step used to derive the updated 23 FCC rates? 24 A.The determination of the FCC rate utilizes the 25 annual average number of customers for the Residential YOUNGBLOOD, DI 20 Idaho Power Company 1 customer class and Small General Service customer class. 2 As can be seen in Exhibit No.2, Table III, column A, the 3 2011 average number customers is 397,403 for the 4 Residential customer class and 28,351 for the Small General 5 Service customer class. 6 Wi th these two principal base level values, the FCC 7 rate can be determined. The annual fixed costs recovered 8 through the energy charges divided by the 2011 average 9 number of customers results in an annual fixed cost 10 recovery per customer, or the FCC rate, shown in Exhibit 11 No.2, Table III, column K. For the Residential class, the 12 annual fixed cost recovery per customer is $ 650.63 13 ($258,560, 620 / 397,403). For the Small General Service 14 class, the annual fixed cost recovery per customer is 15 $360.57 ($10,222,650 / 28,351). 16 Q.How are the class-specific fixed cost amounts 17 established in the initial step used to derive the updated 18 FCE values? 19 A.The determination of the FCE rate utilizes the 20 Residential and Small General Service weather-normalized 21 energy consumption for the 2011 test year. As can be seen 22 in Exhibit No.2, Table III, column B, the 2011 weather- 23 normalized annual energy consumption for the Residential 24 customer class is 5,010,676,610 kilowatt-hours ("kWh") and 25 YOUNGBLOOD, DI 21 Idaho Power Company 1 annual energy consumption for the Small General Service 2 class is 148,946,670 kWh. 3 Wi th these additional principal base level values, 4 the FCE rate can be determined. The annual fixed cost 5 recovered through the energy charges divided by the 6 normalized energy results in an annual fixed cost recovery 7 per kWh, or the FCE rate, shown in Exhibit No.2, Table 8 III, column L. For the Residential class, the fixed cost 9 recovery per kWh is $0.051602 ($258,560,620 / 10 5,010,676, 610). For the Small General Service class, the 11 annual fixed cost recovery per kWh is $ 0.068633 ($ 10,222,650 12/148,946,670). 13 Q.Is the methodology used to establish the FCC 14 and FCE rates in this proceeding the same as that used 15 previously to establish the FCC and FCE rates in Case Nos. 16 IPC-E-07-08 and IPC-E-08-10? 17 A.Yes, it is. 18 Q.How do the FCC and FCE computed in this filing 19 compare to the FCC and FCE established in the Company's 20 last general rate case, Case No. IPC-E-08-10, Order No. 21 30754. 22 A.Both the FCC and FCC rates are greater than 23 those currently in effect, which were established using the 24 functionalized classified revenue requirement data in the 25 Company's last filed general rate case, Case No. IPC-E-08- YOUNGBLOOD, DI 22 Idaho Power Company 1 10, Order No. 30754. The Company has made significant 2 investments in its infrastructure since that time, and the 3 newly calculated FCC and FCE rates reflect those fixed 4 costs that are being recovered through the Residential and 5 Small General Service energy charges. The magnitude of the 6 amount of fixed costs being recovered through a volumetric 7 rate emphasizes the Company's need to have an FCA true-up 8 mechanism in place. 9 Q.Does this conclude your direct testimony in 10 this case? 11 A.Yes, it does. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 YOUNGBLOOD, DI 23 Idaho Power Company BEFORE THE IDAHO PUBLIC UTiliTIES COMMISSION CASE NO. IPC-E-11-19 IDAHO POWER COMPANY YOUNGBLOOD, DI TESTIMONY EXHIBIT NO.1 i: OJ ==.-~=rJ i.=~~..i:i..-~ "' ===i:~i.=...-"' ==~c.~~ ~rJ~ =~=Mi\C==M ~== == ==~ .. Ql= eiQl =e, ~- ..it u rIei=...;00 := ~ ~~ --..rI-...~ .. Ql âš eie, =- ~Ql ..~ U ~- rI o~~ Ql "'~ - 0000 .a "'~Q ..."C - -; âš ~~ c.~ ~ ~ ~ ~ ~\0 - - -~ "' - ~ ~r-O'"'"'o l. r- \0 "'~~l.~~ v5 l. 00 \O~ v5C'"'0"'C' q ,.~ lr ,.~ 'O~r--oo~r-\0 0' C' "' 00- -- ~ ~ ~ ~\0 l. "' C'~ ~ \0 ~ r-o\O-r- C' \0 l.~ ~ ~ 00 C' ~ \0 C'\OO'"'~\0-0000 l. -~ "'~ l.-C'~"'tA tA tA tA ~ rIQ e- ~Ql _ 0 0 C' l. l. ,. ei C' C' C' C' C'e Q= -Z ~ -1cr-OCc:=~====~~~~~~~ -'l'l=~ ~ =Q U 5~-=.. .=...; ~æ'--.~...'t=~Q" ~'t~'" ~tQ ~ "¡===~=..=N.. ~i= ~~~i:...00ii:== ~~ ~i.=Q00 Exhibit No. 1 Case No. IPC-E-11-19 M. Youngblood, IPC Page 1 of 1 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION CASE NO. IPC-E-11-19 IDAHO POWER COMPANY YOUNGBLOOD, DI TESTIMONY EXHIBIT NO.2 '" s : ( ) m Il . I I X IO ~ C I : J eD O e D e ' -- I : Z ; : c: : : 0 Z _1 0 , 0 W 0 " - . Õ ' " I \ o ( ) Co i - m - i '" - - () i " --CO ID A H O P O W E R C O M P A N Y De v e l o p m e n t o f F i x e d C o s t A d j u s t m e n t R a t e 20 1 1 T e s t Y e a r Ta b l e I Cl a s s C o s t o f S e r v i c e F u n c t i o n a l i z e d C o s t s Ba s e d U p o n G R C S e t t l e m e n t S t i p u l a t i o n . I P C . E . 1 1 . 0 8 . F i l e d S e p t e m b e r 2 3 , 2 0 1 1 A B C D E F Ra t e CO S Dis t r i b u t i o n a n d Li n e Sc h e d u l e Re v e n u e Ge n e r a t i o n Tr a n s m i s s i o n Cu s t o m e r To t a l Fi x e d C o s t No . Un i f o r m T a r i f f S c h e d u l e s No . Re q u i r e m e n t Fi x e d C o s t s Fi x e d C o s t s Fi x e d C o s t s Fi x e d C o s t s % o f T o t a l C o s t B+ C + D E+ A Re s i d e n t i a l S e r v i c e 1, 3 , 4 & 5 38 1 , 4 5 5 , 1 5 0 88 , 6 8 7 , 8 1 7 39 , 4 9 1 , 9 4 2 14 5 , 5 0 8 , 2 9 6 27 3 , 6 8 8 , 0 5 6 71 . 7 % 2 Sm a l l G e n e r a l S e r v i c e 7 15 , 5 0 4 , 9 2 7 2, 0 7 9 , 7 7 4 95 6 , 0 9 5 9, 2 0 9 , 6 5 2 12 , 2 4 5 , 5 2 0 79 . 0 % 3 La r g e G e n e r a l S e r v i c e 9 18 5 , 7 6 4 , 5 7 9 49 , 5 1 3 , 1 0 7 21 , 2 9 6 , 5 6 5 40 , 8 2 7 , 0 3 9 11 1 , 6 3 6 , 7 1 1 60 . 1 % 4 Du s k / D a w n L i g h t i n g 15 48 4 , 2 7 0 14 , 0 0 1 (1 , 2 4 8 ) 37 3 , 9 1 1 38 6 , 6 6 3 79 . 8 % 5 La r g e P o w e r S e r v i c e 19 85 , 4 2 0 , 3 4 2 23 , 7 6 4 , 6 1 6 10 , 5 0 9 , 6 2 7 8, 5 1 6 , 7 2 9 42 , 7 9 0 , 9 7 2 50 . 1 % 6 Ir r i g a t i o n S e r v i c e 24 12 5 , 6 2 4 , 2 1 8 32 , 0 0 6 , 9 7 5 15 , 0 2 2 , 2 2 0 41 , 1 0 4 , 4 1 5 88 , 1 3 3 , 6 1 0 70 . 2 % 7 Un m e t e r e d S e r v i c e 40 1, 0 7 9 , 8 9 5 17 2 , 9 0 8 76 , 7 0 3 48 7 , 8 0 6 73 7 , 4 1 7 68 . 3 % 8 Mu n i c i p a l S t r e e t L i g h t i n g 41 1, 9 9 3 , 5 0 6 66 , 3 5 5 21 , 7 1 1 1, 4 8 8 , 7 4 2 1, 5 7 6 , 8 0 8 79 . 1 % 9 Tr a f f i c C o n t r o l L i g h t i n g 42 26 5 , 2 4 9 43 , 5 0 3 23 , 6 7 8 11 4 , 9 9 2 18 2 , 1 7 3 68 . 7 % 10 Sp e c i a l C o n t r a c t s 26 , 2 9 , 3 0 & 3 2 72 , 4 1 2 , 9 1 5 16 , 2 4 3 , 7 6 1 8, 2 9 3 , 2 1 3 2, 1 3 6 , 5 0 7 26 , 6 7 3 , 4 8 1 36 . 8 % 11 To t a l U n i f o r m T a r i f f S c h e d u l e s 87 0 , 0 0 5 , 0 5 1 55 8 , 0 5 1 , 4 1 0 ID A H O P O W E R C O M P A N Y De v e l o p m e n t o f F i x e d C o s t A d j u s t m e n t R a t e 20 1 1 T e s t Y e a r Ta b l e I I Id e n t i f i c a t i o n o f I n t e r c l a s s R e v e n u e S u b s i d y Ba s e d U p o n G R C S e t t l e m e n t S t i p u l a t i o n - I P C - E - 1 1 - 0 8 - F i l e d S e p t e m b e r 2 3 , 2 0 1 1 "' s : ( ) m Il . I I X co - - ( / : T CD Ò ' C D õ ' i' C z ; : o : J 0 Z _c o . 0 (. C " - . Õ " ' i ' o ( ) a. i - m - i "' . . () i " ..co A B C Pr o p o s e d CO S Li n e Sc h e d u l e Ba s e R a t e Re v e n u e No . Un i f o r m T a r i f f S c h e d u l e s No . Re v e n u e Re q u i r e m e n t Di f f e r e n c e Ta b l e I , C o l . A A- B Re s i d e n t i a l S e r v i c e 1, 3 , 4 & 5 39 6 , 3 8 3 , 7 7 2 38 1 , 4 5 5 , 1 5 0 14 , 9 2 8 , 6 2 2 2 Sm a l l G e n e r a l S e r v i c e 7 14 , 9 6 2 , 2 7 1 15 , 5 0 4 , 9 2 7 (5 4 2 , 6 5 6 ) 3 La r g e G e n e r a l S e r v i c e 9 19 7 , 0 0 9 , 2 1 7 18 5 , 7 6 4 , 5 7 9 11 , 2 4 4 , 6 3 8 4 Du s k / D a w n L i g h t i n g 15 1, 1 7 6 , 0 1 4 48 4 , 2 7 0 69 1 , 7 4 4 5 La r g e P o w e r S e r v i c e 19 86 , 3 4 2 , 9 7 2 85 , 4 2 0 , 3 4 2 92 2 , 6 3 0 6 Ir r i g a t i o n S e r v i c e 24 10 7 , 3 8 3 , 2 5 6 12 5 , 6 2 4 , 2 1 8 (1 8 , 2 4 0 , 9 6 2 ) 7 Un m e t e r e d S e r v i c e 40 1, 1 0 6 , 5 9 8 1, 0 7 9 , 8 9 5 26 , 7 0 3 8 Mu n i c i p a l S t r e e t L i g h t i n g 41 2, 9 0 3 , 4 3 9 1, 9 9 3 , 5 0 6 90 9 , 9 3 3 9 Tr a f f i c C o n t r o l L i g h t i n g 42 16 6 , 9 0 1 26 5 , 2 4 9 (9 8 , 3 4 8 ) 10 Sp e c i a l C o n t r a c t s 26 , 2 9 , 3 0 & 3 2 62 , 5 7 0 , 6 1 2 72 , 4 1 2 , 9 1 5 (9 , 8 4 2 , 3 0 3 ) 11 To t a l U n i f o r m T a r i f f S c h e d u l e s 87 0 , 0 0 5 , 0 5 2 87 0 , 0 0 5 , 0 5 1 (1 ) We i g h t e d A v e r a g e Fi x e d C o s t % of S h o r t - F a l l 58 . 9 % D E F G Re v e n u e Fix e d C o s t Fi x e d C o s t Sh o r t - F a l l Re v e n u e %o f Po r t o n o f R e v . Id e n t i f i e r Sh o r t - F a l l To t a l C o s t Sh o r t - F a l l Ta b l e i , C o l . F Ex F X (5 4 2 , 6 5 6 ) 79 . 0 % (4 2 8 , 5 8 0 ) X (1 8 , 2 4 0 , 9 6 2 ) 7 0 . 2 % (1 2 , 7 9 7 , 2 2 8 ) X X (9 8 , 3 4 8 ) 6 8 . 7 % (9 , 8 4 2 , 3 0 3 ) 3 6 . 8 % (2 8 , 7 2 4 , 2 6 8 ) (6 7 , 5 4 5 ) (3 , 6 2 5 , 4 3 7 ) (1 6 , 9 1 8 , 7 9 1 ) ID A H O P O W E R C O M P A N Y De v e l o p m e n t o f F i x e d C o s t A d j u s t m e n t R a t e 20 1 1 T e s t Ye a r Ta b l e I I De r i v a t i o n o f F i x e d C o s t p e r C u s t o m e r a n d F i x e d C o s t p e r E n e r g y R a t e s Ba s e d U p o n G R C S e t t l e m e n t S t i p u l a t i o n . I P C . E . 1 1 . 0 8 . F i l e d S e p t e m b e r 2 3 , 2 0 1 1 A B C D E F 20 1 1 20 1 1 S a l e s Sh a r e o f To t a l Li n e Sc h e d u l e Av g . N u m b e r o f No r m a l i z e d CO S CO S Re v e n u e Ba s e R a t e No . Un i f o r m T a r i f f S c h e d u l e s No . Cu s t o m e r s (k W h ) Fi x e d C o s t Va r i a b l e C o s t Sh o r t - F a l l / S u b s i d y Re v e n u e Ta b l e i , C o l . E Ta b l e i , C o l . A - C o l . C Ta b l e I I , C o l . C C+ D + E Re s i d e n t i a l S e r v i c e 1, 3 , 4 & 5 39 7 , 4 0 3 5, 0 1 0 , 6 7 6 , 6 1 0 27 3 , 6 8 8 , 0 5 6 10 7 , 7 6 7 , 0 9 4 14 , 9 2 8 , 6 2 2 39 6 , 3 8 3 , 7 7 2 2 Sm a l l G e n e r a l S e r v i c e 7 28 , 3 5 1 14 8 , 9 4 6 , 6 7 0 12 , 2 4 5 , 5 2 0 3, 2 5 9 , 4 0 6 (5 4 2 , 6 5 6 ) 14 , 9 6 2 , 2 7 1 3 La r g e G e n e r a l S e r v i c e 9 30 , 5 6 2 3, 4 9 2 , 1 4 0 , 6 5 1 11 1 , 6 3 6 , 7 1 1 74 , 1 2 7 , 8 6 8 11 , 2 4 4 , 6 3 8 19 7 , 0 0 9 , 2 1 7 4 La r g e P o w e r S e r v i c e 19 11 4 2, 0 4 0 , 6 8 1 , 7 9 6 42 , 7 9 0 , 9 7 2 42 , 6 2 9 , 3 7 0 92 2 , 6 3 0 86 , 3 4 2 , 9 7 2 5 Ir r i g a t i o n S e r v i c e 24 16 , 6 0 7 1, 6 7 9 , 7 7 6 , 7 3 4 88 , 1 3 3 , 6 1 0 37 , 4 9 0 , 6 0 8 (1 8 , 2 4 0 , 9 6 2 ) 10 7 , 3 8 3 , 2 5 6 G H I J K L CO S F i x e d C o s t C O S F i x e d C o s t F i x e d C o s t T o t a l F i x e d C o s t C a l c u l a t i o n o f C a l c u l a t i o n o f Li n e S c h e d u l e R e v e n u e f r o m R e v e n u e f r o m S h a r e o f R e v e n u e R e v e n u e f r o m F C C F C E No . U n i f o r m T a r i f f S c h e d u l e s N o . F i x e d C h a r g e s E n e r g y C h a r g e s S h o r t - F a l l / S u b s i d y E n e r g y C h a r g e s ( $ / C u s t . N r . ) ( $ / k W h ) C- G E x 5 8 . 9 H + I J . . A J . . B 1, 3 , 4 & 5 7 9 19 24 1 ( C o n t . ) R e s i d e n t i a l S e r v i c e 2 ( C o n t . ) S m a l l G e n e r a l S e r v i c e 3 ( C o n t . ) L a r g e G e n e r a l S e r v i c e 4 ( C o n t . ) L a r g e P o w e r S e r v i c e 5 ( C o n t . ) I r r i g a t i o n S e r v i c e i: s : ( ) m Il . I l ) ( (0 - " ( / : : CD ò " C D õ ' (¡ c z ; : o : i 0 Z _( 0 . 0 (¡ 0 ' - . õ i : N o ( ) a. i . m - i i: - " () i " -"co 23 , 9 2 0 , 4 9 7 24 9 , 7 6 7 , 5 5 9 8, 7 9 3 , 0 6 1 25 8 , 5 6 0 , 6 2 0 1, 7 0 3 , 2 4 3 10 , 5 4 2 , 2 7 7 (3 1 9 , 6 2 8 ) 10 , 2 2 2 , 6 5 0 44 , 3 9 8 , 7 1 9 67 , 2 3 7 , 9 9 2 6, 6 2 3 , 1 6 9 73 , 8 6 1 , 1 6 1 $ 2, 4 1 6 . 7 6 $ 0. 0 2 1 1 5 1 25 , 9 8 0 , 1 7 5 16 , 8 1 0 , 7 9 7 54 3 , 4 3 6 17 , 3 5 4 , 2 3 2 $ 15 2 , 2 3 0 . 1 1 $ 0. 0 0 8 5 0 4 26 , 0 6 9 , 4 4 7 62 , 0 6 4 , 1 6 3 (1 0 , 7 4 4 , 0 5 1 ) 51 , 3 2 0 , 1 1 1 $ 3, 0 9 0 . 2 7 $ 0. 0 3 0 5 5 2 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 19th day of October 2011 I served a true and correct copy of the within and foregoing DIRECT TESTIMONY OF MICHAEL J. YOUNGBLOOD IN SUPPORT OF THE APPLICATION FOR AUTHORITY TO CONVERT SCHEDULE 54 (FIXED COST ADJUSTMENT) TO A PERMANENT SCHEDULE upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Donald L. Howell, II Karl T. Klein Deputy Attorneys General Idaho Public Utilities Commission 472 West Washington (83702) P.O. Box 83720 Boise, Idaho 83720-0074 -2 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email Don.Howelicæpuc.idaho.gov Karl. Kleincæpuc. idaho.gov Industrial Customers of Idaho Power Peter J. Richardson Gregory M. Adams RICHARDSON & O'LEARY, PLLC 515 North 27th Street (83702) P.O. Box 7218 Boise, Idaho 83707 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email petercærichardsonandoleary.com greg(grichardsonandoleary.com Dr. Don Reading Ben Johnson Associates, Inc. 6070 Hill Road Boise, Idaho 83703 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email dr(gbenjohnsonassociates.com Idaho Irrigation Pumpers Association, Inc. Eric L. Olsen RACINE, OLSON, NYE, BUDGE & BAILEY, CHARTERED 201 East Center P.O. Box 1391 Pocatello, Idaho 83204-1391 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email elo(gracinelaw.net Anthony Yankel 29814 Lake Road Bay Vilage, Ohio 44140 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email tony(gyankel.net CERTIFICATE OF SERVICE-1 The Kroger Co. Kurt J. Boehm BOEHM, KURTZ & LOWRY 36 East Seventh Street, Suite 1510 Cincinnati, Ohio 45202 Kevin Higgins Energy Strategies, LLC 215 South State Street, Suite 200 Salt Lake City, Utah 84111 Micron Technology, Inc. MaryV. York HOLLAND & HART, LLP 101 South Capital Boulevard, Suite 1400 Boise, Idaho 83702 Richard E. Malmgren Senior Assistant General Counsel Micron Technology, Inc. 800 South Federal Way Boise, Idaho 83716 The United States Department of Energy Arthur Perry Bruder, Attorney-Advisor United States Department of Energy 1000 Independence Avenue SW Washington, DC 20585 Dwight D. Etheridge Exeter Associates, Inc. 10480 Little Patuxent Parkway, Suite 300 Columbia, Maryland 21044 CERTIFICATE OF SERVICE - 2 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email kboehmCâBKLlawfirm.com jrhCâbattfisher.com Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email khigginsCâenergystrat.com Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email myorkCâhollandhart.com tnelsonCâholland hart. com madavidsonCâholland hart. com fsch midtCâholland hart. com InbuchananCâholland hart. com Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email remalmgrenCâmicron.com Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email Arthur.bruder(ëhq.doe.gov Steven. porter(ëhq. doe. gov Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email detheridge(ëexeterassociates.com Community Action Partnership Association of Idaho Brad M. Purdy Attorney at Law 2019 North 1th Street Boise, Idaho 83702 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email bmpurdyaìhotmail.com Idaho Conservation League Benjamin J. Otto Idaho Conservation League 710 North Sixth Street (83702) P.O. Box 844 Boise, Idaho 83701 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email bottoaìidahoconservation.org Snake River Allance Ken Miller Snake River Alliance P.O. Box 1731 Boise, Idaho 83701 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email kmiller((snakeriveralliance.org NW Energy Coalition Nancy Hirsh, Policy Director NW Energy Coalition 811 First Avenue, Suite 305 Seattle, Washington 98104 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email nancy((nwenergy.org Hoku Materials, Inc. Dean J. Miler McDEVITT & MILLER LLP 420 East Bannock (83702) P.O. Box 2564 Boise, Idaho 83701 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email joe((mcdevitt-miller.com heather((mcdevitt-miller.com Scott Paul, CEO Hoku Materials, Inc. One HokuWay Pocatello, Idaho 83204 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email spaul((hokucorp.com ~Æs=~ V-Willams c ::"- CERTIFICATE OF SERVICE - 3