20111007Butler Direct.pdf

Peter J. Richardson (lSB # 3195)
Gregory M. Adams (ISB # 7454)
Richardson & O'Lear, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(frichardsonandolear.com
greg(frichardsonandolear.com
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201l OCT -7 PH 2: 38
Attorneys for the Industral Customers of Idaho Power
BEFORE THE IDAHO
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S REQUEST TO INCREASE ITS )
RATES AND CHAGES FOR ELECTIC )SERVICE IN IDAHO )
)
)
CASE NO. IPC-E-II-08
INDUSTRIAL CUSTOMERS OF IDAHO POWER
DIRECT TESTIMONY OF DEL BUTLER
October 7, 2011
1 Q.
2 A.
Please state your name, occupation, and business address.
My name is Del Butler, Senior Director, Business Development, J.R. Simplot
3 Company, 1130 West Highway 30, Pocatello, Idao.
4 Q.
5 A.
6 University.
7 Q.
8 A.
Please describe you educational background.
I have a Bachelors Degree in Business Adminstration, from Idaho State
What is your work experience at the J.R. Simplot Company?
I have worked for the lR. Simplot Company for 39 years. I was the Plant
9 Manager at the Don Plant in Pocatello for nine (9) years, from 1998 to 2007.
10 Q.
11
What is the purpose of your testimony?
A.The purose of my testimony is to provide customer insight into the Idao
12 Power facilties charge for equipment located on our propert and express my concern over what
13 I consider to be an unai business practice.
14 Q.Please explain in general terms the location and products produced at J.R.
15 Simplot Company's Don Plant, which takes service from Idaho Power as a special contract
16 customer.
17 A.The Don Plant, located in Pocatello, Idaho produces a ful line of agrcultural
18 phosphate fertlizer.
19
20
Q.How many people does the Don Plant employ?
A.The plant employs 350 to 360 regular employees, with seasonal employment
21 peaking around 450 to 500 workers in late spring.
Del Butler, DI 1
Industral Customers of Idaho Power
1 Q.How much electricity does the Don Plant receive from Idaho Power
2 annually?
3 A.We routinely consume approximately twenty-one (21) megawatts.
4 Q.Does the Don Plant pay Idaho Power a facilties charge for electrical
5 distribution equipment installed and maintained beyond the point of delivery by Idaho
6 Power?
7 A.Yes.
8 Q.What types of equipment are included in the Idaho Power facilties charge?
9 A.The charge includes typical higher-voltage equipment such as transformers,
1 0 switches, power poles, and wirig.
11 Q.Could you explain your understanding of the facilties charge when you were
12 the Plant Manager at the Don Plant?
13 A.As I understood it at the time, whenever we needed equipment such as
14 transformers, poles, or switches, we would contact Idaho Power and they would provide this
15 equipment with no up-front charge. The cost of the equipment plus instalation would then be
16 added to the bil as a facilties charge. In effect, the newly instaled piece of equipment would
17 become leased equipment. Idaho Power was responsible for servicing and maintaning the
18 equipment. If the equipment failed and required replacement once again, the asset would be
19 retired, the remaining book value would be zeroed out and a new facilty chage would be
20 established based upon the cost and instalation of the new equipment installed in place of the old
21 equipment.
Del Butler, DI 2
Industral Customers of Idaho Power
1 Q.
2 A.
Could you explain your current understanding of the facilties charge?
As I understad it now, once a piece of equipment gets added to the facilties
3 charge, we pay a 20.4% anual fee every year, forever. It never gets paid off and we do not have
4 the option to pay it off. Additionally, if we ever wanted to purchase our own equipment, Idao
5 Power has provided no reasonable opportty for us to do ths. Essentially, we have no choice
6 and no options and we are stuck paying 20.4% anually on an ongoing basis.
7 Q.
8 installation?
9 A.
10 Q.
11 this equipment?
12 A.
13 Q.
14 A.
Do you know how much the original equipment cost Idaho Power including
I do, now. The total amount for the Don Plant is $2,619,846.62.
How much does the Don Plant currently pay in facilties charges annually for
We pay $534,448.71 anually.
What is the average age of the facilties charge equipment at the Don Plant?
The average age of the Idaho Power equipment at the Don Plant is 24.5 years.
15 We've got sixty-thee (63) pieces of equipment that were instaled in 1964, fort-seven(47)
16 years ago. I understad that Idaho Power has informed us in this case that the anual rate at the
17 Don Plant has been 20.4% since 1976, and was 15% anually from 1964 to 1976. For the
18 equipment dating back to 1964, we have paid $534,330 to date for equipment that cost $75,791
19 installed. We have paid for these sixty-thee (63) items more than seven (7) times already.
20 Q.What is the total dollar amount that the Don Plant has paid to Idaho Power
21 for facilties charge equipment currently installed?
DeI Butler, DI 3
Industral Customers of Idaho Power
1 A.J.R. Simplot Company has been paying a facilties charge at the Don Plant since
2 1964, for the past fort-seven (47) years, on equipment that was instaled as early as 1964. We
3 have estimated, based on the historic rates Idaho Power has provided to us in this case, for $2.6
4 millon in curently instaled equipment, we have now paid $10,027,224. Ths does not include
5 the time-value of money, and if we included that, the actu cost would be much higher.
6 Q.How did you become aware of the facilties charge?
7 A.I have always been aware of the facilties charge at the Don Plant, but the ful
8 extent of ths unair business practice was brought to my attention this fiscal year by our
9 Corporate Energy Manager, Don Stuevant.
10 Q.Has Idaho Power ever requested your written consent, as a plant manager at
11 J.R. Simplot Company to install any facilties beyond the point of delivery at your plants?
12 A.No. I have never given formal consent that I understood the facilties charge
13 equipment would be charged an anual 20.4% fee, never be paid off, and have no option to be
14 paid offever.
15 Q.Are you aware of such consent given by any other J.R. Simplot Company
16 offcials?
17 A.No.
18 Q.What insurance requirements does J.R. Simplot Company require of
19 electrical contractors that conduct work on its propert?
20 A.The J.R. Simplot Company requies all contractors, electrcal or otherwse, to
21 provide a $5 milion insurance liabilty policy.
Del Butler, DI 4
Industral Customers of Idaho Power
1 Q.Does Idaho Power's ownership and management of electrical equipment on
2 plants owned by J.R. Simplot Company concern you from a liabilty perspective?
3 A.Absolutely. The safe and reliable operation of the facilty could easily be
4 impacted by the interrption of power and the liabilties that go along with tht loss.
5 Q.Do you think it is fair for Idaho Power to continue charging the facilties
6 charge rate for Idaho Power's initial investment made an average of24 years ago?
7 A.No.
8 Q.Idaho Power has offered a reduction in the annual facilties charge from
9 20.4% of the initial investment to 17.00%. Please explain your thoughts on that.
10 A.For the Don Plant, we have paid for ths equipment many ties aleady. Simply
11 providing a small reduction in the rate is not fair.
12 Q.When you were responsible for the Don Plant operations, what was your
13 understanding of the options provided by Idaho Power's facilties charge for the customer
14 to stop paying the charge?
15 A.I believed that there were no options and that we were required to pay the
16 facilties charge.
17 Q.What is your current understanding of Simplot's options regarding the facilities
18 charges?
19 A.We curently do not have any option other than to require Idaho Power to remove
20 their facilties and replace their system with our own. However, as I understad it, we must pay
21 Idaho Power for the remaining book value, plus the cost to remove the facilties, minus a credit
Del Butler, DI 5
Industral Customers of Idao Power
1 for the salvage value of the equipment, if any. This would be a substatial cost and would not
2 be a financially responsible alternative.
3 Q.Do you consider it fai for Idaho Power to refuse to sell the equipment to you
4 at a fairly negotiated value?
5 A.No.
6 Q.If you had the choice, how would you propose Idaho Power address the
7 problems you see with its facilties charge?
8 A.We have paid for our curent facilties-charge equipment more than thee times
9 already at the Don Plant. I believe that Idaho Power has aleady recovered its initial costs and
10 any authorized rate of retu several times over. At ths point, it would only be fair to simply
11 tu ownership of these facilties over to J.R. Simplot Company.
12 In addition, I believe it is imperative that the Commission seriously reform the facilties
13 charge strctue and stop ths unfair business practice. I fuly support the recommendations
14 contained in the direct testimony of Dr. Don Reading, which would make the monthy charge
15 fair for those customers who wish to pay it and would provide reasonable mechasms by which
16 customers may take over ownership of equipment on their own propert.
17 Q.Does this conclude your testimony?
18 A.Yes.
Del Butler, DI 6
Industral Customers of Idaho Power
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 7th day of October, 2011, a tre and correct copy of the
withn and foregoing TESTIMONY OF DON READING, DON STURDEVANT AND DELL
BUTLER ON BEHALF OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER IN CASE
NO. IPC-E-II-08 was served in the maner shown to:
Ms. Jean Jewell
Commssion Secreta
Idao Public Utilities Commssion
POBox83720
Boise, il 83720-0074
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Lisa D Nordstrom
Jason B Wiliams
Idaho Power Company
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Idaho Power Company
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Eric L. Olsen
Racine, Olson, Nye, Budge &
Bailey, Charered
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
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Donald L Howell, II
Karl Klein
Idaho Public Utilties Commission
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US Deparent of Energy
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&&
. Adams