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HomeMy WebLinkAbout20111007Higgins Direct.pdfBOEHM, KURTZ & LOWRY ATTORNS AT lAW36 EAT SE STRT SUIT 1510 CICIATI, OHIO 45202 TELEPHONE (513) 421.2255 TELECOPIER (513) 421-764 ,P\~ r= r r: f.,.~.:, ,:.:. '.'" r_ "'., l"'" _.... ~c._- ini l OCT -7 PH l2: 57 VIA OVERNIGHT MAIL October 6,2011 Jean D. Jewell, Secretary Idaho Public Utilities Commission P.O. Box 83720 472 W. Washington Street Boise, Idaho 83720-0074 In re: Case No. IPC-E-ll-08 Dear Ms. Jewell: Enclosed please find the original and (7) copies of the DIRCT TESTIMONY AN EXHllITS OF KEVIN C. HIGGINS on behalf of THE KROGER CO. d//a FRED MEYER AN SMITH'S FOOD AN DRUG to be fied in the above referenced matter. I also enclose a CD containing same in .Word and Excel format. Please place this document of file.Rlicr~" KtJ.'¿ehm, Esq. BOEHM, KURTZ & LOWRY MLKkew Ene\. G:\ WORK\MLK\KROGER\IDAHO\IPC-E-ii-08\Commission letter.docx y CERTIFICATE OF SERVICE I hereby certify that tre copy of the foregoing was served by electronic mail (when available) and regular U.s. mail, unless otherwise noted, this 6th day of October, 2011 to the following:~~Kurt J. Boehm, Esq. IDAHO POWER COMPANY Lisa D. Nordstrom Donovan E. Walker Jason B. Wiliams Idaho Power Company 1221 W. Idaho St. (83702) Boise, ID 83707-0070 E-mail: Inordstromt?idahopower.com dwalkert?idaopower.com jwillamscqidahopower.com Bay Village, OH 44140 E-mail: tonvßyanke1.net Gregory W. Said Vice President, Regulatory Affairs Idaho Power Company 1221 W. Idaho St. (83702) PO Box 70 Boise, ID 83707-0070 E-mail: gsaidcqidahopower.com INDUSTRIAL CUSTOMERS OF IDAHO POWER: Peter J. Richardson Gregory M. Adams Richardson & O'Leary, PLLC 515 N. 77th Street PO Box 7218 Boise, ID 83702 E-mail: peterßùrichardsonandolearv.com gregßùrichardsonandoleary.com Don Reading 6070 Hill Road Boise, ID 83703 E-mail: dradingcqmindspring.com COMMISSION STAFF: Donald L. Howell, II Karl Klein Deputy Attorneys General Idaho Public Utilities Commission 472 W, Washington (83702) PO Box 83720 Boise, ID 83720-0074 E-mail: don.howeiicqpuc.idaho.gov kar1.kleinwuc.idaho.gov THE UNITED STATES DEPARTMENT OF ENERGY: Arhur Perr Bruder Attomey- Advisor United States Department of Energy 1000 Independence Ave., SW Washington, DC 20585 Email: Arur.bruderßùhg.doe.gov IDAHO IRRGATION PUMPERS ASSOCIATION, INC: Eric L. Olsen Racine, Olson, Nye, Budge & Bailey, Chartered 201 E. Center PO Box 1391 Pocatello, ID 83204-1391 E-mail: eloßù.racine1aw.net Anthony Yanicel 29814 Lake Road Dwight Etheridge Exeter Associates, Inc. 5565 Sterrett Place Suite 310 Columbia, MD 21044 Email: detheridgeCfexeterassociates.com Steven A. Porter Assistant General Counsel Electricity and Fossil Energy United State Department of Energy E-mail: steven.porterßùhg.doe.gov G:\WORK\MLK\KROGER\IDAHO\lPC-E-II-08\Commission letter.docx COMMITY ACTION PARTNRSHIP ASSOCIATION OF IDAHO: Brad M. Purdy, Attorney at Law 2019 N. 17th St. Boise, ID 83702 E-mail: bmpurdvßhotmai1.com MICRON TECHNOLOGY, INC: Richard E. Malmgren Sr. Asst. General Counsel Micron Technology, Inc. 800 South Federal Way Boise, ID 83716 E-mail: remalmgrenCfmicron.com MaryV. York Thorvald A. Nelson Mark A. Davidson Holland & Hart, LLP 6800 S. Fiddlers Green Circle Suite 500 Greenwood Vilage, CO 80111 Email: rnyorkßùhollandhrt.com tnelsonßùhollandhart.com madavidsonßùhollandhart.com IDAHO CONSERVATION LEAGUE: Benjamin J. Otto Idaho Conservation League 710 N. Sixth Street PO Box 844 Boise, ID 83701 Email: bottocqidahoconservation.org SNAKE RIVER ALLIANCE: Ken Miller Snake River Alliance PO Box 1731 Boise, ID 83701 Email: kmilerCfsnakeriveralliance.org G:\WORK\MLK\KROGER\IDAHO\lrC-E-II-08\Commission 1etter.docx BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF IDAHO POWER COMPANY FOR ) AUTHORITY TO INCREASE ITS RATES ) AND CHARGES FOR ELECTRIC SERVICE )mID~O ) Ri=ri=i\Jr:~~ 'l.,,, .-.J '"~ Ii c¡t ;,'.. :,...' 2011 OCT -7 PH 12: 51 Case No. IPC-E-ll-08 Direct Testimony of Kevin C. Higgins on behalf of The Kroger Co. October 7, 2011 DIRECT TESTIMONY OF KEVm C. HIGGINS1 2 3 Introduction Please state your name and business address.4 Q. 5 A. 6 7 Q. 8 A. 9 10 11 Q. 12 A. 13 14 15 16 17 Q. 18 A. 19 20 21 22 23 24 Kevin C. Higgins, 215 South State Street, Suite 200, Salt Lake City, Utah, 84111. By whom are you employed and in what capacity? I am a Principal in the firm of Energy Strategies, LLC. Energy Strategies is a private consulting firm specializing in economic and policy analysis applicable to energy production, transportation, and consumption. On whose behalf are you testifying in this proceeding? My testimony is being sponsored by The Kroger Co. ("Kroger"). Kroger is one of the largest retail grocers in the United States, and has over 25 accounts served by Idaho Power, which together consume over 30 milion kWh per year. A large portion of Kroger's load takes service under Schedule 9. Kroger's Schedule 9 load takes service at both secondar and primar voltage. Please describe your professional experience and qualifications. My academic background is in economics, and I have completed all coursework and field examinations toward a Ph.D. in Economics at the University of Utah. In addition, I have served on the adjunct faculties of both the University of Utah and Westminster College, where I taught undergraduate and graduate courses in economics. I joined Energy Strategies in 1995, where I assist private and public sector clients in the areas of energy-related economic and policy analysis, including evaluation of electrc and gas utilty rate matters. HIGGINS /1 1 2 3 4 5 6 7 Q. 8 A. 9 10 11 Q. 12 13 A. 14 15 16 17 18 19 20 Prior to joining Energy Strategies, I held policy positions in state and local governent. From 1983 to 1990, I was economist, then assistant director, for the Utah Energy Offce, where I helped develop and implement state energy policy. From 1991 to 1994, I was chief of staff to the chairman of the Salt Lake County Commission, where I was responsible for development and implementation of a broad spectrum of public policy at the local governent leveL. Have you testifed previously before this Commission? Yes. I testified in Idaho Power's 2008 general rate case, Case No. IPC-E- 08-102007; its 2007 general rate case, Case No. IPC-E-07-8; and in its 2003 general rate case, Case No. IPC-E-03-13. Have you testified previously before any other state utilty regulatory commissions? Yes. I have testified in approximately 140 proceedings on the subjects of utility rates and regulatory policy before state utilty regulators in Alaska, Arizona, Arkansas, Colorado, Georgia, Ilinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nevada, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming. I have also fied affidavits in proceedings at the Federal Energy Regulatory Commission. HIGGINS/2 1 Overview and Conclusions What is the purpose of your testimony in this proceeding? My testimony addresses the limited issue of the appropriate level of the Energy Efficiency Rider, Schedule 91. By way of background, is Kroger a part to the Stipulation that has been filed in this case? Yes. Kroger fully supports the Stipulation package. The matter of the appropriate level of the Energy Efficiency Rider has been reserved in Section II(a) of the Stipulation as a contested issue. What is your recommendation to the Commission? I recommend that the Commission approve the Stipulation as fied. In addition, I recommend that the Energy Efficiency Rider be reduced from 4.75% to 3.40% to recognize that $11.2 milion in demand response program costs are being shifted from energy efficiency funding into base rates pursuant to the Stipulation. Even after my proposed reduction in the Energy Effciency Rider, the fuding for non-demand-response programs wil increase by $1.2 milion relative to pro forma levels due to the underlying 4.1 % rate increase proposed in the Stipulation. 2 Q. 3 A. 4 5 Q. 6 7 A. 8 9 10 Q. 11 A. 12 13 14 15 16 17 18 19 20 Energy Efficiency Rider Adjustment 21 Q. 22 A. 23 24 Q. What is the current level of Idaho Power's Energy Efficiency Rider? The current level of Idaho Power's Energy Effciency Rider, Schedule 91, is 4.75%. What is level of funding is recovered from this rider? HIGGINS / 3 1 A. 2 3 Q. 4 5 A. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 As shown in line 18, column (c) of Kroger Exhibit No. 501, approximately $39.7 milion would be recovered through this rider in 2012 at current rates.! Please explain the basis of your proposed adjustment to the Energy Efficiency Rider. Demand response program costs are currently recovered through the Energy Efficiency Rider. In its rate case filing, Idaho Power proposed to shift recovery of these costs, which amount to $11.2 milion, into base rates. Idaho Power did not offer a corresponding reduction in the Energy Efficiency Rider to recognize this change. The Stipulation accepts the shifting of cost recovery from the Energy Efficiency Rider into base rates, but reserves the question of the appropriate level of the Energy Efficiency Rider. In my opinion, it would be reasonable to reduce the Energy Efficiency Rider charge to account for fact that $11.2 milion in current program costs wil be recovered in base rates going forward. As shown in Kroger Exhibit No. 501 (line 18, column f), non-demand- response program cost recovery through the Energy Efficiency Rider at current rates amounts to $28.5 milion (for 2012). This amount can be recovered - at current rates - with a 3.4% rider charge. Ifthis level of rider charge is applied to the revenue requirement recommended in the Stipulation, revenues to fud non- demand-response program wil increase by nearly $1.2 milion to $29.6 millon? i This calculation is eonsistent with Idao Power Energy Effcieney Rider revenues presented in Idaho Power Exhibits No. 47 (Sparks) and No. 43 (Youngblood) and includes expected Energy Effcieney Rider reeovery from Hoku First Block sales effective Januar 1,2012.2 Additionally, going forward, $5.2 million in Custom Efficiency costs wil be booked as a regulatory asset, providing additional headroom for non-demand-response programs relative to historical fuding levels. HIGGINS /4 1 2 3 4 5 6 7 8 Q. 9 10 11 A. 12 13 14 In light of these facts, I recommend that the Commission reduce the Energy Efficiency Rider to 3.4%. This approach allows for net growth in funding for non-demand-response programs while being mindful of the overall rate impacts being borne by Idaho Power customers. In contrast, shifting $11.2 milion into base rates while raising those base rates by 4.1 % - and failing to adjust the Energy Efficiency Rider charge downward - would pose an unreasonable cost burden on customers. If the Energy Efficiency Rider is reduced to 3.4%, how would this surcharge compare to those of other utities in the region that levy a percentage surcharge? In Table KCH-l, below, I have compiled a list ofthe utilities in the West, of which I am aware, that levy a percentage surcharge for energy efficiency program cost recovery. Table KCH-l 15 Percentage Energy Efficiency Riders in Western States 16 Utility 17 El Paso Electrc (New Mexico) 18 Public Service Co. of New Mexico 19 Rocky Mountain Power (Idaho) 20 Rocky Mountain Power (Utah) 21 Rocky Mountain Power (Wyoming) 22 23 24 DSMRider 1.8052% 2.262% 3.40% 3.70% (Industrial) / 3.91 % (Residential) 0.43% (Industral) / 1.87% (Residential) As shown in the table, a 3.4% surcharge is equal to the surcharge approved for Rocky Mountain Power in Idaho, but is stil in the upper par of the HIGGINS / 5 2 3 4 Q. 5 A. 6 7 8 9 10 11 12 13 14 15 16 17 Q. 18 A. range. Adopting my recommendation would result in a surcharge for Idaho Power customers that is not out of line with what is charged elsewhere in the region for energy efficiency cost recovery. Please summarize your recommendation to the Commission. Kroger fully supports the Stipulation as filed. In my opinion, it produces just and reasonable rates and I recommend its adoption by the Commission. The appropriate level of the Energy Effciency Rider remains a contested issue in this case. I recommend that the Energy Efficiency Rider be reduced from 4.75% to 3.40% to recognize that $11.2 milion in demand response program costs are being shifted from energy efficiency funding into base rates pursuant to the Stipulation. Even after my proposed reduction in the Energy Efficiency Rider, the funding for non-demand-response programs wil increase by $1.2 milion due to the underlying 4.1 % rate increase proposed in the Stipulation. The resulting 3.4% rider is equal to the surcharge approved for Rocky Mountain Power in Idaho, and is consistent with the level of percentage surcharges levied elsewhere in the region for energy efficiency cost recovery. Does this conclude your direct testimony? Yes, it does. HIGGINS/6 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO INCREASE ITS RATES AND CHARGES FOR ELECTRIC SERVICE IN IDAHO ) ) ) ) ) Case No. IPC-E-ll-08 AFFIDAVIT OF KEVIN C. HIGGINS STATE OF UTAH ) )COUNTY OF SALT LAKE ) Kevin C. Higgins, being first duly sworn, deposes and states that: i. He is a Principal with Energy Strategies, L.L.C., in Salt Lake City, Utah; 2. He is the witness who sponsors the accompanying testimony entitled "Direct Testimony of Kevin C. Higgins;" 3. Said testimony and exhibits were prepared by him and under his direction and supervision; 4. If inquiries were made as to the facts and exhibits in said testimony he would .respond as therein set forth; and 5. The aforesaid testimony and exhibits are true and correct to the best of his knowledge, information and belief. !. Kevin Subscribed and sworn to or affirmed before me this 61h day of October, 2011, by Kevin C. Higgins. My Commission Expires: ~ Pr e s e n t v s K r o g e r R e c o m m e n d e d E n e r g y E f f i c i e n c y R i d e r R e v e n u e at S t i p u l a t i o n R e v e n u e I n c r e a s e (a ) (b ) (c ) (d ) (e ) (t ) (g ) (h ) (i ) G) (k ) Ra t e Cu r r n t Cu r r n t Cu r r n t Cu r n t Se t t l e m e n t Re c o m m e n d e d Se t t l e m e n t Re c o m m e n d e d Ch a n g e i n Li n e Sc h e d u l e Ba s e EE EE - D R EE - N o n D R Ba s e EE EE - D R EE - N o n D R EE - N o n D R No . T a r f f D e s c n p t i o n No . Re v e n u e ! Re v e n u e s Po r t i o n Po r t o n Re v e n u e ! Re v e n u e s Po r t o n Po r t i o n Re v e n u e s (! 4 . 7 5 % (= 1 . 5 % ) (= 3 . 4 0 % ) (! 3 . 4 0 % (= 3 . 4 0 % ) Un i f o n n T a n f f S c h e d u l e s 1 Re s i d e n t i a l S e r v i c e 1, 3 , 4 , 5 $3 8 0 , 4 4 9 , 7 0 2 $1 8 , 0 7 1 , 3 6 1 $5 , 1 2 0 , 6 8 8 $1 2 , 9 5 0 , 6 7 3 $3 9 6 , 3 8 3 , 7 7 2 $1 3 , 4 9 3 , 0 7 6 $1 3 , 4 9 3 , 0 7 6 $5 4 2 , 4 0 2 2 Sm a l l G e n e r a l S e r v i c e 7 $1 4 , 3 6 0 , 8 0 6 $6 8 2 , 1 3 8 $1 9 3 , 2 9 0 $4 8 8 , 8 4 8 $1 4 , 9 6 2 , 2 7 1 $5 0 9 , 3 2 2 $5 0 9 , 3 2 2 $2 0 , 4 7 4 3 La r g e G e n e r a l S e r v i c e 9P , 9 T $1 8 , 4 9 2 , 9 4 9 $8 7 8 , 4 1 5 $2 4 8 , 9 0 7 $6 2 9 , 5 0 8 $1 9 , 2 6 7 , 4 8 5 $6 5 5 , 8 7 4 $6 5 5 , 8 7 4 $2 6 , 3 6 6 4 La r g e G e n e r a l S e r v i c e 9S $1 7 0 , 5 9 6 , 7 9 8 $8 , 1 0 3 , 3 4 8 $2 , 2 9 6 , 1 5 9 $5 , 8 0 7 , 1 8 9 $1 7 7 , 7 4 1 , 7 3 2 $6 , 0 5 0 , 4 0 6 In c l u d e d $6 , 0 5 0 , 4 0 6 $2 4 3 , 2 1 6 5 Du s k / D a w n L i g h t i n g 15 $1 , 1 2 8 , 7 4 4 $5 3 , 6 1 5 $1 5 , 1 9 2 $3 8 , 4 2 3 $1 , 1 7 6 , 0 1 4 $4 0 , 0 3 2 in $4 0 , 0 3 2 $1 , 6 0 9 6 La r g e P o w e r S e r v i c e 19 S , 1 9 P , 1 9 T $8 2 , 8 7 2 , 1 0 8 $3 , 9 3 6 , 4 2 6 $1 , 1 1 5 , 4 2 3 $2 , 8 2 1 , 0 0 3 $8 6 , 3 4 2 , 9 7 2 $2 , 9 3 9 , 1 5 2 Ba s e R e v e n u e $2 , 9 3 9 , 1 5 2 $1 1 8 , 1 4 9 7 Ir r g a t i o n S e r v i c e 24 $1 0 3 , 0 6 6 , 5 2 9 $4 , 8 9 5 , 6 6 0 $1 , 3 8 7 , 2 3 1 $3 , 5 0 8 , 4 2 9 $1 0 7 , 3 8 3 , 2 5 6 $3 , 6 5 5 , 3 7 3 $3 , 6 5 5 , 3 7 3 $1 4 6 , 9 4 3 8 Un m e t e r e d S e r v i c e 40 $1 , 0 6 2 , 1 1 5 $5 0 , 4 5 0 $1 4 , 2 9 6 $3 6 , 1 5 4 $1 , 1 0 6 , 5 9 8 $3 7 , 6 6 9 $3 7 , 6 6 9 $1 , 5 1 5 9 Mu n c i p a l S t r e e t L i g h t i g 41 $2 , 7 8 6 , 7 5 2 $1 3 2 , 3 7 1 $3 7 , 5 0 8 $9 4 , 8 6 3 $2 , 9 0 3 , 4 3 9 $9 8 , 8 3 4 $9 8 , 8 3 4 $3 , 9 7 2 10 T r a f f c C o n t r o l L i g h t i n g 42 $1 6 0 , 1 9 1 $7 , 6 0 9 $2 , 1 5 6 $5 , 4 5 3 $1 6 6 , 9 0 1 $5 , 6 8 1 $5 , 6 8 1 $2 2 8 11 To t a l I d a h o R a t e s $7 7 4 , 9 7 6 , 6 9 4 $3 6 , 8 1 1 , 3 9 3 $1 0 , 4 3 0 , 8 5 0 $2 6 , 3 8 0 , 5 4 3 $8 0 7 , 4 3 4 , 4 4 0 $2 7 , 4 8 5 , 4 1 9 $2 7 , 4 8 5 , 4 1 9 $1 , 1 0 4 , 8 7 5 Sp e c i a l C o n t r c t s 12 Mi c r o n 26 $1 6 , 1 8 6 , 3 3 3 $7 6 8 , 8 5 1 $2 1 7 , 8 6 1 $5 5 0 , 9 9 0 $1 6 , 8 6 4 , 3 8 4 $5 7 4 , 0 7 1 $5 7 4 , 0 7 1 $2 3 , 0 8 1 13 Si m p l o t 29 $5 , 8 9 2 , 2 9 9 $2 7 9 , 8 8 4 $7 9 , 3 0 8 $2 0 0 , 5 7 6 $6 , 1 3 9 , 0 1 5 $2 0 8 , 9 7 5 In c l u d e d $2 0 8 , 9 7 5 $8 , 3 9 9 14 D O E l I N L 30 $7 , 6 6 1 , 3 8 4 $3 6 3 , 9 1 6 $1 0 3 , 1 1 9 $2 6 0 , 7 9 7 $7 , 9 8 2 , 1 8 9 $2 7 1 , 7 1 7 in $2 7 1 , 7 1 7 $1 0 , 9 2 0 15 Ho k u - 1 s t B l o c k C h a r g e s 32 $2 4 , 2 0 4 , 3 4 3 $1 , 1 4 9 , 7 0 6 $3 2 5 , 7 8 0 $8 2 3 , 9 2 6 $2 4 , 2 0 4 , 3 4 3 $8 2 3 , 9 2 6 Ba s e R e v e n u e $8 2 3 , 9 2 6 $0 16 H o k u - 2 n d B l o c k C h a g e s 32 $7 , 0 8 4 , 0 0 7 $3 3 6 , 4 9 0 $9 5 , 3 4 8 $2 4 1 , 1 4 2 $7 , 3 8 0 , 6 8 1 $2 5 1 , 2 4 2 $2 5 1 , 2 4 2 $1 0 , 0 9 9 17 T o t a l S p e c i a l s $6 1 , 0 2 8 , 3 6 6 $2 , 8 9 8 , 8 4 7 $8 2 1 , 4 1 5 $2 , 0 7 7 , 4 3 2 $6 2 , 5 7 0 , 6 1 2 $2 , 1 2 9 , 9 3 1 $2 , 1 2 9 , 9 3 1 $5 2 , 4 9 9 18 T o t a l I d a h o R e t a i l S a l e s $8 3 6 , 0 0 5 , 0 6 0 $3 9 , 7 1 0 , 2 4 0 $ 1 1 , 2 5 2 , 2 6 5 $2 8 , 4 5 7 , 9 7 5 $8 7 0 , 0 0 5 , 0 5 2 $2 9 , 6 1 5 , 3 4 9 $2 9 , 6 1 5 , 3 4 9 $1 , 1 5 7 , 3 7 4 19 Sti p u l a t i o n R e c o m m e n d e d C h a n g e i n B a s e R e v e n u e $3 3 , 9 9 9 , 9 9 2 20 S t i p u l a t i o n R e c o m m e n d e d C h a n g e i n B a s e R e v e n u e P e r c e n t 4. 1 % Br e a k d o w n o f E n e r g E f f c i e n c y R e v e n n e Pc t o f C u r e n t Pr o p o s e d Pc t o f P r o p o s e d Cu r n t A m o u n t B a s e R e v e n u e s Am o u n t Ba s e R e v e n u e s 21 De m a n d R e s p o n s e ( D R ) P o r t i o n 2 $1 1 , 2 5 2 , 2 6 5 1. 5 % De m a n d R e s p o n s e ( D R ) P o r t i o n In Ba s e R e v . NA 22 No n - D e m a n d ( N o n D R ) R e s p o n s e P o r t i o n $2 8 , 4 5 7 , 9 7 5 3. 4 0 % No n - D e m a n d ( N o n D R ) R e s p o n s e P o r t i o n $2 9 , 6 1 5 , 3 4 9 3. 4 0 % 23 To t a l E E R e v e n u e s $3 9 , 7 1 0 , 2 4 0 4.7 5 % To t a l E E R e v e n u e s $2 9 , 6 1 5 , 3 4 9 3. 4 0 % Da t a S o u r c e s : 1. S e t t e m e n t S t i p u l a t i o n E x h i b i t N O . 2 . 2. 1 P C w i t n e s s M a t t e w T . L a r k i E x h b i t N o . 3 1 , p , 6 6 o f 1 4 5 . Kr o g e r E x h i b i t N o . S O l Ca s e N o . I P C - E - l l - 0 8 Wi t n e s s : K e v i n C . H i g g i n s Pa g e i o f t