20101230Sur-reply Comments.pdf

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Peter J. Richardson (ISB # 3195)
Gregory M. Adams (ISB # 7454)
Richardson & O'Leary, PLLC
515 N. 2ih Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(frichardsonandolear.com
greg(frichardsonandolear.com
iow DEC 30 PH 1,:, 2
Attorneys for the Industrial Customers of Idaho Power
BEFORE THE IDAHO
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S REQUEST FOR )
ACCEPTANCE OF ITS 2011 RETIREMENT )BENEFITS PACKAGE )
)
)
CASE NO. IPC-E-10-25
SUR-REPLY COMMENTS OF THE
INDUSTRIAL CUSTOMERS OF
IDAHO POWER
COMES NOW, the Industrial Customers of Idaho Power ("ICIP"), and pursuant to
ICIP's Motion for Leave to File Sur-Reply Comments, hereby files these Sur-Reply Comments
in the above-captioned matter, and respectfully requests that the Commission consider the same.
For the reasons stated in ICIP's initial Comments and for the reasons set fort below, ICIP
respectfully requests that the Commission reject Idaho Power Company's ("Idaho Power's" or
the "Company's") request for acceptance of its 2011 Retirement Benefits Package. With these
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SUR-REPL Y COMMENTS OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER
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Sur-Reply Comments, ICIP only addresses two new arguents and one new report included for
the first time in Idaho Power's Reply Comments. i
A. Idaho Power's speculation that a defined contribution plan designed to reward
longevity may violate federal regulations is entirely unconvincing.
The Commission Sta and ICIP both recommended that Idaho Power adopt a defined
contribution plan that would reward longevity, and suggested that perhaps the Company could
provide older employees and employees in critical operations roles with a larger employer-
matching contribution than ran and file employees. See Commission Staff Comments, at p. 10;
ICIP Comments, at p. 8. In response, Idaho Power did not dispute that such a plan would shift
investment risk from ratepayers to employees, yet stil reward longevity. Rather, the Company
speculated that "the alternatives recommended by the Staff and ICIP are likely discriminatory
and therefore unlawfL." Idaho Power Reply Comments, p. 11 (emphasis added). Idaho Power
weakly asserted, "A plan tilted in favor of employees based on criteria such as 'position
classification' or 'critical operations' would most certainly violate the terms set forth in Title 26
C.F.R. L.401(a)-4." Id (emphasis added).
Idaho Power's speculative and inconclusive legal assertions demonstrate that it did not
completely consider the viable defined contrbution alternatives. Furer, given that the vast
majority of employers have moved to a defined contribution plan, including most public utility
companes with similar motivations to promote longevity as Idaho Power's, it is hard to believe
ICIP's Sur-Reply Comments merely address the arguments and authorities raised by
Idaho Power's Reply Comments that were not directly addressed in ICIP's initial Comments.
ICIP stads by all comments made earlier, and in no way concedes any point previously made.
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that other employers have not devised legal 401(k) plans that reward longevity. See ICIP
Comments, at pp. 4-7. Without commenting on the highy complex regulatory scheme alluded to
for the first time in Idaho Power's Reply Comments, ICIP submits that it is highly probable
Idaho Power could engage an ERISA or ta attorney skiled enough to help it solve the
hypothetical problem it appears to have not even yet fully considered.
B. Idaho Power's new report by Towers Watson indicates that prospective employees
do not consider the employer's retirement plan to be the major factor in
choosing among employers, and the report therefore undermines Idaho Power's
position that it must retain a traditional defined benefit plan for new employees to
attract the best talent.
Idaho Power expects that it wil lose significant numbers of skiled workers over the next
decade, and therefore believes it needs to "attact and retain skiled workers that will be able to
fill these critical roles in the coming years." Idaho Power Reply Comments, at p. 17. Idaho
Power relies on Towers Watson's "Retirement Attitudes: Attaction and Retention," which it did
not provide in discovery but attched to its Reply Comments as Attchment No. 3.2
By selectively quoting from this report, Idaho Power failed to note that the report
concluded that "younger employees' decisions to join an organization are more influenced by
pay and vacation time." Id at Attachment No.3, p. 4. Indeed, for prospective employees aged
40-49 years old, the report listed six factors more important than retirement benefits, including in
2 ICIP Production Request NO.1 requested "all documents, studies, or other information
provided by Towers Watson to Idaho Power," and ICIP requested that Idaho Power provide it
with information that came available after fiing of the request. That the Company withheld this
study that appears as Attchment NO.3 of its Reply Comments, in violation of its obligation to
provide ful and ongoing responses to discovery, should cause the Commission to question what
other relevant materials have been withheld.
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order of importce: (1) base pay, (2) vacationlTO, (3) flexible schedule, (4) health care
benefits, (5) work location, and (6) career advancement. Id at Attchment No.3, p. 4, Figure 6.
Even for prospective employees 50 or more years old, the report concluded that base pay, health
care benefits, and vacation time, are more importt factors than a retirement plan. Id at
Attachment No.3, p. 5, Figue 7. Thus, Idaho Power's previously withheld report actuly
refutes its arguent that it must retain a traditional defined benefit plan for new employees to
attract skiled workers.
C. The Commission can condition acceptance of Idaho Power's defined benefit pension
plan for new employees on the Company's shareholder's agreement to assume the
investment risk for the plan fund without violating the Fifth Amendment of the
United States Constitution.
The Commission stated, "Idaho Power must. . . consider changes to its retirement plan
and address shareholder:. :.:. liabilities in assignment of pension plan investment risk." Order
No. 31091, at p. 3 (emphasis added). ICIP and Staff asserted that the Company's Application
did not demonstrate it had done so. In response, Idaho Power has not described any alternatives
it considered that would shift pension fud investment risk to shareholders. Instead, the
Company posits for the first time in its Reply Comments that "an order requiring Company
shareholders to become financially liable for benefit expenses without a corresponding return on
investment may result in confiscatory rates that violate the U.S. Constitution's Fifth Amendment
Takngs Clause." Idaho Power's Comments, at p. 3. Idaho Power's speculation misses the point
of the Commission's order and misconstres the law.
The U.S. Constitution and the Idaho Constitution provide that private propert shall not
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be taen for public use without just compensation. See United States Constitution Amendment
v; Idaho Constitution Aricle I, § 14. With regard to ratemaking, "(t)he Constitution protects
utilities from being limited to a charge for their propert serving the public which is so 'unjust'
as to be confscatory." Hayden Pines Water Co. v. Idaho Public Utilities Commission, 122
Idaho 356, 358, 834 P.2d 873, 875 (1992) (internal quotation omitted).
Idaho Power is a regulated monopoly with the burden to prove the prudency of the
expenses which it recovers from its ratepayers. In Order No. 31091, the Commission expressed
concerned that Idaho Power planed to charge its ratepayers to keep Idaho Power's underfuded
pension fud solvent at a time when the vast majority of employers have moved away from
traditional defined benefit pension plans. If the Commission were to issue an order that (1)
found continued use Idaho Power's traditional defined benefit plan proposed in this case would
be uneasonable, and (2) prospectively required that Idaho Power shareholders accept the
liabilty for underfuded pension fud obligations Idaho Power may incur for new employees, no
taing would occur. Idaho Power has the option today to cease offering a traditional defined
benefit pension plan to new employees, and to adopt a defined contribution plan similar to those
of most employers. Should the Company choose not to do so, it is entirely appropriate and legal
for the Commission to require that Idaho Power shareholders accept the liabilty for future
contributions to keep that pension fud solvent for new employees.
Nobody is "requiring" Idaho Power to continue to be one of the very few remaining
companes offering new employees a traditional defined benefit pension plan. So requiring
shareholders to accept the obvious liability involved with continuing to offer such a plan to new
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employees would not be "so unjust as to be confiscatory." See Hayden Pines Water Co., 122
Idaho at 358,834 P.2d at 875.
CONCLUSION
Because Idaho Power failed to adequately comply with Commssion Order No. 31091,
ICIP respectfully requests that the Commission reject Idao Power's 2011 Retirement Benefits
Package, and require the Company to devise a plan that shifts responsibility and risk to its
employees and/or shareholders.
Jl
DATED this ~D day of December, 2010.
RICHASON AND O'LEARY, PLLC
By:~
ter J. Richardson
Gregory M. Adams
Attorneys for the Industrial
Customers of Idaho Power
IPC-E-10-25
SUR-REPL Y COMMENTS OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 30ay of December, 2010, I caused a true and
correct copy of the foregoing SUR-REPLY COMMENTS OF THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER to be served by the method indicated below, and addressed
to the following:
Jean Jewell
Idaho Public Utilties Commission
472 West Washington Street (83702)
Post Office Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( ) Overnight Mail
( ) Facsimile
( ) Electronic Mail
Lisa Nordstrom
Donovan Walker
Idaho Power Company
PO Box 70
Boise, Idaho 83707
(x) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( ) Overnght Mail
( ) Facsimile
(x) Electronic Mail
Gregory W. Said
Tim Tatum
Idaho Power Company
POBox 70
Boise, ID 83707
(x) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( ) Overnight Mail
( ) Facsimile
(x) Electronic Mail
Signed:~\CW4 ~
Nina M. Curis
IPC-E-10-25
SUR-REPLY COMMENTS OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER
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