20210806Tatum Direct.pdf

BEFORE THE IDA}IO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDATIO POT'IER
COMPANY'S PETITION FOR APPROVAL
OF A CUSTOMER SURCHARGE AND
MODIFIED LINE ROUTE
CONFIGURATION FOR CONSTRUCTION
OF A NEW 138 lff/ TRANSM]SSION
LINE IN T}IE WOOD RIVER VALLEY
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
TIMOTHY E. TATUM
CASE NO. IFC-E-2I1-25
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present position with
ttCompany") .
A. My name
address is 1,221. West
am employed by Idaho
Regulatory Affairs.
O. Please
A. I earned a Bachelor of
degree in Economics and a Master of
from Boise State Universlty. I have
utility ratemaking courses, including
The Changing Electrical Industry, " a
New Mexico State University's Center
"Introductj-on to Rate Design and Cost
and Techniques" presented by Electric
Pl-ease state your name, business address, and
Idaho Power Company ("Idaho Power" or
1s Timothy E. Tatum. My business
Idaho Street, Boise, Idaho 83702.
Power as the Vice President of
describe your educational
I
Business
background.
Administration
10 Business Administration
also attended electric
"Practical Skills for
course offered through
for Public Utilities,
of Service Concepts
Utilities
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1,7 Consultants, Inc. , and Edison Electric Inst j-tute' s
18 "El-ectric Rates Advanced Course." In 20!2, I attended the
L9 Utility Executive Course (*UEC") at the University of
20 ldaho, and subsequently became a member of the UEC faculty
2L in 2015.
22 O. Please descrj-be your work experi-ence with
23 Idaho Power.
24 A. I began my employment with Idaho Power in 1996
25 in the Company's Customer Service Center where I handled
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customer phone
transactlons.
cal-ls and
In 1.999, r
Center
other
began
where
customer-rel-ated
worklng in the Customer
I was responsible for
the areas of billing and
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Account Management
customer account maintenance i-n
meteri-ng.
In June of 2003, I began working as an Economic
Analyst on the Energy Efficiency Team. As an Economic
Analyst, I was responslble for ensuring that the demand-
side management ("DSM") expenses were accounted for
properly, preparing and reporting DSM program costs and
activities to management and various external stakeholders,
conducting cost-benefit analyses of DSM programs, and
providing DSM analysis support for the Company's Integrated
Resource PIan.
In August of 2004, T accepted a position as a
Regulatory Analyst in the Regulatory Affalrs Department.
As a Regulatory Ana1yst, I provided support for the
Company's various regulatory acti-vities, including tariff
admlnj-stration, regulatory ratemaking and compliance
filings, and the development of various pricing strategies
and policies.
fn August of 2006, f was promoted to Senior
Regulatory Analyst. As a Senior Regulatory Analyst, my
responsibllities expanded to include the development of
complex financi-al- studies to determine revenue recovery and
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pricing strategies, including the preparation of the
Company's cost-of-service studies.
In September of 2008, f was promoted to Manager of
Cost of Service and, in April of 2077, I was promoted to
Senior Manager of Cost of Service and oversaw the Company's
cost-of-service activities, such as power supply modelj-ng,
jurisdictional separation studies, class cost-of-service
studies, and marginal cost studies.
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In March 20L6, I
Regulatory Affairs. As
was promoted to Vice President of
Vice President of
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11 Affairs, I am responsible for the overall
Regulatory
coordination and
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direction of the Regulatory Affairs Department, including
development of jurisdictional- revenue requirements and
class cost-of-servj-ce studies, preparation of rate design
analyses, and administration of tariffs and customer
contracts.
O. What is fdaho Power requesting 1n this case?
A. Idaho Power is requesting approval from the
Idaho Public Utilitj-es Commission (*IPUC" or "Commission")
to implement a surcharge mechanism applicable to Idaho
Power's customers in Blalne County, Idaho, for the purpose
of funding incremental transmissj-on and distribution line
undergrounding costs.
Specifically, the Company is requesting the
Commission approve: 1) the proposed Iine route and
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construction configuration for
line in the hlood River VaIIey,
a new 138 kV transmission
incl-uding burial of the
modified line route ("OwI
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exi-sting
Rock Road
distribution along the
Route"); 2) the methodology for determining the
Rock Road Route asincremental cost of constructing the OwI
compared to a baseline build configuration; 3) the new
Schedul-e 96, Blaine County Surcharge to Fund the
Undergrounding of Certain Facilities ("Schedule 96"),
detailing proposed surcharge amounts to fund the
incremental cost of the OwI Rock Road Route, along wj-th the
underlying methodology applied to calculate such charges;
and 4) regulatory accounting authorj-zation from the
Commission to facilitate the implementation of the proposed
surcharge mechanism.
O. How is the Company's case organized?
A. My testimony is composed of four parts:
1) determinatj-on of the incremental costs that will be
collected through the surcharge; 2) inltial- determination
of the surcharge rates; 3) factors that could affect the
surcharge during the collection perj-od,' and 4) the need for
a surcharge-related accounting order. Mr. Ryan Adelman's
testimony descri-bes the loca1 permittlng activities with
B1aine County and presents a detailed description of the
proposed line route and build configuration of the OwI Rock
Road Route.
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O. Have you prepared any exhibits?
A. Yes, Exhlbit 5 shows the calculation of the
proposed surcharge amounts.
r. INCREMENIAI COSTS
O. Why is the Company seeking to collect certain
incremental costs through the proposed surcharge?
A. As described in Mr. Adelman's Testimony, the
BIaine County Board of Commissioners ("County Board")
requested that Idaho Power modify the design of the 138 kV
transmission lj-ne ("Transmission Line") for which the
Commission issued a CPCN tn 2017. The Transmission Line
approved by the IPUC is, therefore, referred to herein and
in the Company's Petition as the *CPCN Route."
In response to the County Board's request, Idaho
Power agreed to place certain portions of the Transmission
Line and existing distribution facilities underground,
provlded that the associated incremental costs were funded
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18 by those requesting such modifications. Undergroundj-ng
19 those portions of transmission and distribution will result
20 in j-ncremental costs that the County Board has ultimately
21 agreed should be funded via a surcharge on Blaj-ne County
22 customers' electricity bi11s.
23 The new line configuration, based on the County
24 Board's requests, is referred to herein and in the
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Company's Petition as the Owl Rock Road Route ("Ow1 Rock
Road Route").
u How does the Company propose to calculate
j-ncremental costs to be coll-ected through the surcharge
mechanism?
A. The Company's
incremental- cost of the Owl
preliminary estimate of the
Rock Road Route is $9.8 mil-lion
($5.7 million for the distribution 1i-ne burials and $4.1
mj-llion for the transmissj-on l-ine burial), as indicated in
Mr. Adelman's testimony. This is the incremental- cost
11 estimate used to cal-culate the
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bill surcharge
Schedufe 96. The
13 requesting the Commj-ssion approve the charges
Schedule 96 to become effective on the flrst
calendar month following the in-service date
Transmission Line.
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amounts
Company is
detail-ed in
day of the
of the
11 After the project
18 make a final calculation
is constructed, Idaho Power wil-l-
of the i-ncremental- cost of the Ow1
79 Rock Road Route based on the difference between (1) the
20 actual cost of the OwI Rock Road Route and (2) the final
2L estimated cost of the CPCN Route.
22 Idaho Power will calculate the final- estimated cost
23 of the CPCN Route with its engineering consultant, Power
of the leading underground24Engineers of Hailey - one
transmission engineering firms in the United States - when
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the Transmj-ssion Line construction is ready to begin on the
Ow1 Rock Road Route.
This timing will allow Idaho Power to utilize the
most current cost information available for both overhead
and underground transmissj-on constructj-on, as set forth in
the pre-construction pricing for the Ow1 Rock Road Route.
Because the CPCN Route will never actually be constructed,
its cost will always be an
estimate for the CPCN Route (based on the pre-construction
will provj-de the mostpricing for
current and
the Ow1 Rock Road Route)
comparable cost estimate.
A. Does Idaho Power intend to present to the
Commj-ssion its final quantification of the incremental cost
of constructing the OwI Rock Road Route?
A. Yes. Upon compJ-etion of the OwI Rock Road
Route project, the Company wil-I fil-e its final incremental
project cost determination with the Commission for review
and approval-. If the incremental cost determination
warrants modification of the charges contaj-ned within
Schedul-e 96 approved in this case, the Company will also
simultaneously request approval of a revised Schedule 96.
By approving the charges proposed in ScheduLe 96, the
Commission will set forth a process whereby the surcharge
amounts can be applied nearly coi-ncident wlth the project's
in-service date. This would avoid the 1ag that could exist.
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estimate. The final cost
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1 if rates had to be reviewed and approved after project
effective.but before becoming
Does the Company expect any subsequent revj-ew
96?
Yes. The Company believes it would be
2 completion
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4 of Schedule
5A.
6 appropri-ate for
7 be reviewed, dt
8 Such review will
the charges contained within Schedule 96 to
a minimum, with each general rate case.
ensure the surcharge amounts properly
9 reflect Blaine County customer growth, the then-authorized
10 rates of return, and other factors that may impact the
11 level and duration of collecti-on.
1-2 O. V{hat is Idaho Power's current cost estimate
13 for the CPCN Route?
14 A. Idaho Power's original 2016 cost estlmate for
15 the CPCN Route was $30 mi1lion. Subsequently, the Company
1,6 worked with Power Engl-neers in 201,9 to prepare an updated
L7 cost estimate of $35,102 ,288. Adelman Direct Testimony,
18 Exhibit No. 4.
19 This increased cost estimate was based upon updated
20 labor and materials costs from 201,9 and certain
2L modiflcations to the CPCN Route that were developed by
& Zoning
Commission
for the
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Idaho Power and the Blaine County Planning
Commission (*P&Z Commission") when the P&.2
issued its Conditional Use Permit (*CUP")
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1 Transmission Line project in January 201-9r ds di-scussed in
2 detail in Mr. Adelman's testimony.
3 Modifications to the CPCN Route included slightly
4 modifying ("micro-siting") the overhead transmission l-ine
5 pole locations to better accommodate adjacent features
6 (such as bike trail-s, trees, traffj-c Ianes, and residential
7 subdivisions) and making certain electrical system upgrades
8 that could be more efficiently and economically installed
9 as part of the overall Transmission Line project (such as
10 install-1ng a new ri-ng bus at the Wood River Substation to
11 enhance local switching capacity).
12 Idaho Power plans to prepare one more cost estimate
13 for the CPCN Route - the final cost estimate referenced
t4 above - based on the pre-construction pricing for the Owl
15 Rock Road Route.
16 O. Why does the Company propose a method of
77 determining incremental- costs based on a comparison of
18 total project costs as opposed to a more detailed cost
19 reconciliation?
20 A. Idaho Power will be managing the Transmission
21, Line project on a total project basi-s, as it does with
22 other large projects. A more detail-ed segment-by-segment
23 cost assessment is not feasible because the Transmission
24 Line wil-l not be constructed in segments. As such, the
25 Company considers the total project j-ncremental cost
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approach
estimated
the best
(the difference between the updated CPCN
costs and the Owl Rock Road Route actual
Route
costs )
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method of identifying costs to be borne by
County customers.
O. V[hy can't the Company isolate the actua]-
individual- costs of the OwI Rock Road Route (1.e., the
extra transmissi-on line and distribution 11ne burials) to
calculate the incremental cost of that route?
A. First, for a large and integrated effort like
the Transmission Line project, it is not feasibl-e to
isolate or "carve out" the costs for a specj-fic segment or
segiments of the project. Many of the project costs (e.9.,
engineering design work, contractor mobj-lization, equipment
and vehicles, overheads) apply to the entire project and
are not easiJ-y divisible by project segment. Modifying
Idaho Power's project accounti-ng systems to isolate and
track the costs of specific project segments would be
difficult and expensive.
Second, estimating segment costs stil1 requires an
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20 estimate of what the alternative construction cost would
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22 construction, in the present case) for that segment.
23 Additlonally, the cost estimate for burying a section of
24 the Transmi-ssion Line would tend to be higher on a
25 standalone basis than as part of the larger project because
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there w111 be economies of scale from including the
proposed 1.4-mi1e Owl Rock Road Route transmission line
burial with the other project transmj-ssion line burial-s.
O. Please explain how the Company proposes to
apportion costs responsibility between Blai-ne County and
al-1 of Idaho Power's other retail customers.
A. Idaho Power's general retail customers would
be responsible for the final estimated cost of the CPCN
Route, which is the route Idaho Power would have built as
general rate base project. The Bl-aine County surcharge
would pay for the incremental cost of the Ow1 Rock Road
Route (i.e., the actual cost of the Owl Rock Road Route
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that the final14For illustratj-ve purposes, assume
15 CPCN Route cost estimate remains at $35 mi1I1on. Under the
Company's proposal, if actual costs of the Owl- Rock Road
rouLe were $45 mi1Iion, then Blalne County would be
responsible for $10 mil]ion ($45 million minus $35
million). But, for example, if the total OwI Rock Road
Route were to come in at $41 milIion, then Blaine County
would be responsj-bIe for $12 mill-ion ($47 million minus $35
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22 mi1Iion. )
On23 the other hand, if actual costs come in at $40
24 mill-ion for the Owl Rock Road Route, Blaine County woul-d
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1 only be responsible for $5 million ($40 mlIIion minus $35
2 million).
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developed in
A.
the project could
cost estimate will
cost estimate for
current cost
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vary over time. The final CPCN Route
be based on a detailed pre-construction
the Ow1 Rock Road Route based on then-
Are the incremental- cost estimates that were
201,9 expected to change materially?
It is possi-bIe. Prices for the components of
information. This approach wil-l Iikely narrow
the total project costs to be addressed in a
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contingency percentage. Updating the final CPCN Route cost
estimate cl-oser to the time of construction will serve to
more equitably assign total project cost changes between
Blaine County residents and the rest of the body of Idaho
Power customers.
II. ST'RCEARGE
11 Overview
18 O. What is the purpose of the proposed surcharge
19 to Idaho Power's Blaine County customers?
20 A. The purpose of the surcharge is to provide a
2L mechanism to collect the incremental costs associated wlth
22 Blaine County's request to underground portj-ons of the Wood
23 River-Ketchum transmission line. As described in Mr.
24 Adelman's testimony, the Company agreed to explore such a
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mechanism at the request of the County Board after no other
funding options proved vj-able.
O. Does the Company generally support surcharges
of this nature?
A. No. ldaho Power is generally opposed to on-
bill financing mechanisms to fund third-party electric
infrastructure requests beyond that which can be provided
for through state-authorized franchise fees. However, at
the request of the County Board, Idaho Power agreed to
consider a surcharge funding mechanism not to exceed 3
percent of associated base revenue. among the other funding
optlons being evaluated by the County Board.
Ultlmately, the County Board determined that a bill
surcharge applicable to ldaho Power's Blaine County
customers was the only available option. Considering the
specific narrow ci-rcumstances - the siting of a
Transmission Line through a scenic corridor, the lack of
alternati-ve funding mechanisms, and the critical need for
the l-ine to maintain reliable service - Idaho Power
beli-eves the use of a surcharge mechanism is reasonable.
O. How did the Company determine the amount of
surcharge coll-ection?
A. The Company determined the potential
surcharge collection by reviewing Blaine County customer
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1 billing data for 20L9 (subsequently updated to 2020 data)
2 and quantifying 3 percent of annual- billed revenue.
3 Q. What bill components were used to determine
4 2079 revenue from Blaine County customers?
5 A. The base revenue amount includes the service
6 charge, energy charges, demand charges, the power cost
7 adjustment, and fixed cost adjustment. Franchise fees, the
8 energy efficiency ri-der, and the Bonnevill-e Power
9 Adminlstration credit were excluded.
10 0. What were the results of this analysis?
11 A. The total of the included charges bi1led in
12 2079 to Blaine County customers was $35,855,205. Based on
13 this total, a 3 percent surcharge would collect $1,075,656
t4 annually. The Company updated these amounts when 2020 data
15 became available, with total 2020 charges increasing to
t6 $35,709,086 and the 3 percent surcharge increasj-ng to
17 $1,101,273 annua11y.
18 O. How long would the surcharge need to be in
!9 place to repay the estimated j-ncremental costs?
20 A.Idaho Power consi-ders 20 years a reasonable
2T duration to
o.
collection,
year perlod?
collect estimated incremental costs.
22 Using annual billed revenue as the basis of
how much would Idaho Power collect over a 20-23
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1 A. The net present value of the 2O-year surcharge
2 based on 2079 billing data was approximately $9.8 mill-ion
3 when discounted to today's dollars using the Company's pre-
4 tax authorized rate of return of 9.59 percent. This amount
5 closely matches the current estimated incremental cost of
6 undergrounding. Using 2020 billing data as a base, the net
7 present value of the 20-year surcharge increases to $10.4
8 milIion.
9 Q. Did the Company assume any changes to revenue
10 and annual surcharge collectj-ons over the 2O-year time-
11 period?
1"2 A. Yes, in determining the net present value over
13 20 years, the Company assumed that both revenues and the 3
t4 percent surcharge collection would grow by 1 percent
15 annually over the 20-year period.
16 O. V0i11 the Company use this 2020-based data when
t7 determlning the actual surcharge amounts upon
18 implementation of the surcharge?
t9 A. Not necessarily. The Company believes these
20 amounts serve as a reasonable estimate for initial
2L implementation of the surcharge; howeverr ds noted earlier,
22 several factors could resu1t in the Company proposing
23 revi-sions to these amounts.
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1 Development of monthly charges to customers
How did the Company determine the proposed2
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surcharges contained within Schedule 96?
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A. The Company proposes a flat monthly surcharge
for two categories of customers: 1) Residential and Small
General Servj-ce, and 2) Non-Residential (including Large
General Service, Industrial, and Irrigation) . Customers
within these categories would pay the same amount each
month (i.e., a flat amount).
O. How did the Company determine a fixed/fl-at
monthly amount was the appropriate surcharge model-?
A. The Company began by assessing severaf
potential options (e.9., charges that would be fixed,
variable, oL assessed based on individual customer
characteristics). Because the costs of undergroundlng are
not associated with energy use or demand, the Company
settl-ed on a flat charge as the most appropriate and
18 reasonable type of charge. Further,
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assess a charge
not possess such
customer income
based on information
as customer property
1evel.Additionally,
predictabl-e,
Idaho Power cannot
that the Company does
size/value or
and importantly, flat
and easy tocharges are transparent,
understand by customers.
O. Why are there different surcharge rates for
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1 A. When developing its proposal-, the Company also
2 considered the impact of the surcharge to indlvidual
3 customer classes. A single surcharge rate applied to all
4 customers could have a dramatic impact on some customers'
5 bi11s, but an insignificant impact on other customers.
6 Idaho Power's objective with the two different surcharge
7 categories was to minimize inequitable impact across
I different customer classes.
9 Q. How did the Company address this?
10 A. Idaho Power took all customers i-n Blaine
11 County and organized them into "like" categories based on
12 customer characteristics. These categories were: 1)
13 Residential and Small- General Service; 2) Non-Residential;
14 and 3) Other.
15 The Residential and Smal-l General Servj-ce category
1,6 was formed from Schedules L, 3, 5, 6, 7, and 8, ds these
l7 customers have simil-ar billing and revenue characteristics
18 that support having the same surcharge amount.
L9 The Non-Residential category represents the majority
20 of al-I other customers and includes Large General Service,
21, Agricultural Irrigation Service, and Large Power Service
22 (Schedul-es 9, 24, and 19, respectively), all of which have
23 similar characteristics and bil-Iing determi-nants.
24 Fina11y, the Other category was formed to include
25 dusk-to dawn lighting (schedule 15), unmetered customers
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(Schedule 40), and street
customers (Schedules
O. Does Idaho
to customers in all three
A. No. The Company
to BIaine County customers
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llghting and trafflc contro1
and 42).
Power propose applying the surcharge
categories ?
proposes applying the surcharge
in the Residential-/Smal1 General
Service and Non-Residential and proposes
on the Otherexcluding application of the
category.
O. Why does the Company support excluding the Other
category from surcharge applicability?
A. The Other category includes customers on distinct
rate schedu1es that function in an all-together different
categories
surcharge
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14 manner than rate schedules associated with more traditional
15 energy service tariffs.
l6 Specif i-ca11y,
on Schedule 15 (Dusk
the Other category includes customers
to Dawn Customer Lighting), Schedule
18 40 (Unmetered General Service), Schedule 4t (Street
19 Lighting Service), and Schedule 42 (Traffic Control Signal
20 Lighting Service).
2l Notably, customers with lighting-related rate
22 schedules are also on other rate schedules for electric
23 service from Idaho Power, and the Company does not want
24 customers to experience a double appli-cation of the
25 surcharge. Additionally, charges associated wit.h lighting
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schedul-es are assessed on a per-fixture basis, meaning that
applying a similar approach to the appllcation of the
surcharge wou1d be complicated and burdensome.
Customers on Schedule 40 (unmetered general service)
are, by and large, third parties (that is, not dj-rect
electric service customers). Given that these customers are
unmetered, they woul-d not be affected by the Transmission
Line or the Owl Rock Road Route and, therefore, should not
be subject to the surcharge.
Considering the above, Idaho Power determi-ned that
the optlmal solution would be to include the billed revenue
associated with the Other category in the total collection
amount from Blaine County, but excl-ude those schedul-es from
application of the surcharge.
O. Please describe how the Company derived the Lwo
proposed surcharge amounts.
A. First, monthly surcharge amounts were estlmated
for each of the three aforementioned categories as the
annual billed revenue from that category (cal-culated as
described above) and divided by the annual number of
customer bill-s in that category. Then, Idaho Power removed
the Other category from surcharge applicability and applied
a "cap and spread" techni-que to: 1) ensure that bi11ed
revenue from the Other category would be accounted for in
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1 the remaining two surcharge categories, and 2) moderate the
2 impact of the surcharge on any individual rate class.
3 O. Please explain the use and applicatlon of the
4 "cap and spread" technique.
5 A. When analyzing the results of the surcharge on
6 the three different customer categories, the Company was
7 concerned that a smal-I number of customers in certain rate
8 schedules within each of the two categories could
9 potentially be allocated a surcharge that was significantly
10 above the intended 3 percent.
11 The cap-and-spread technique j-s used to alleviate
12 the impact on customers by adjusting the surcharge amounts
13 to mj-nimize inequitable bill impacts.
14 Additionally, the Company determined that removing
15 the Other category would require the "spread" of billed
16 revenue from that category to the remaining two categories
t1 to ensure sufficient collection of incremental project
18 costs.
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a
A
billing
etc. ) ,
How does the cap and spread work?
The cap-and-spread approach looks at the
information for each rate code (01, 01,95,
with"spreads" the billed revenue associated
23 Other category (Schedules 15, 40, 4L, and
24 the surcharge i-mpact on the remainj-ng rate
42), then
schedules
195,
the
t'caps "
at8
TATUM, DI
Idaho Power
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Company
1 percent. This cap ensured that no primary rate class could
2 experience a surcharge impact of more than 8 percent.
3 Finally, in order to collect the necessary annual
4 surcharge to cover the incremental costs of the Owl Rock
5 Road Route, dny amounts not collected because of the cap
6 would then "spread" (that is, be added) to the rate codes
7 that were under the 8 percent cap. Using 2020 billing data,
8 no primary rate class hit the "cap" but the Company intends
9 to monitor for such a possibility if the surcharge rates
10 are recalcul-ated in the future.
11 O. What are the resulting monthly surcharge
L2 amounts?
13 A. The rates for each rate schedule are contained
74 within the proposed Schedule 96 (Attachment 1). Based on
15 2020 billing information, Residentj-al and Small General
16 Service customers could expect a monthly flat charge of
l7 approximately $3.42 and Non-residential customers coul-d
18 expect a monthly flat charge of approximately $14.36.
L9 While the overall- surcharge was designed as 3
20 percent of total bitled revenue from Bl-aine County
2L customers, the percentage
customer to customer and
impact on bill-s will vary from
22 from month to month and could be
23 greater than or l-ess than 3 percent.
24 O. Are these the amounts that will be implemented
25 when the surcharge begins?
TATUM,
Idaho
DI
Power
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Company
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A Yes. Idaho Power the Commissionrequests
in thisapprove
current
data and
the proposed surcharges case based on the
estimated incremental- project cost and customer
other assumptions. Upon completion of the
Transmission Line, Idaho Power will review the actual total
6 project construction cost for the OwI Rock Road Route as
7 compared to the esti-mated cost of the CPCN Route (the
8 incremental cost) to ensure the approved surcharge rates
9 are sufficient to recover the incremental project cost over
10 the desired 2)-year financing term. If the incremental
11 cost review suggests the approved rates should be modified
L2 to provide for the intended cost recovery and financing
13 term, Idaho Power will update the surcharge amounts and
t4 file with the Commission for review and approval. Under
15 either scenario, Idaho Power proposes beginning collection
t6 from Blaine County residents using the proposed amounts
77 based on esti-mated cost, until- such time the Commission
18 approves revised surcharge amounts.
1,9 O. When will the surcharge go into effect?
20 A. The surcharge will be applied to customers'
2L biI1s starting on the first bill date of the month
22 foll-owing energization of the facilities (i.e., when they
23 become "used and useful").
24 O. WilI the monthly surcharge amounts be fixed
25 for the entire 2O-year surcharge period?
TATUM, DI
Idaho Power
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Company
1 A. As previously discussed, these surcharge
2 amounts are inj-tial estimates and ultimately are dependent
3 on a variety of factors. As previously described, the
4 final determj-nation of the incremental costs could j-mpact
5 the future surcharge rates. Also, changes in Blaine County
6 revenue and customer counts, changes in the Company's pre-
7 tax authorized rate of return, and changes in j-ncome tax
8 rates could al-so impact the requJ-red surcharge amounts.
9 Q. Vihat other factors could j-nf luence the
10 surcharge amounts over time?
11 A. Once the surcharge is implemented, deviati-ons
t2 from the lnltial estimates and the changes described above
13 may necessitate adjustments to the 2)-year term of the
74 surcharge or potentially the surcharge rate applied.
15 However, Idaho Power proposes that the surcharge amounts
76 remain effective until the actual incremental cost is fu11y
l7 recovered. This may be sooner or Later that the 20-year
18 estimated collection period based on changes in those
1,9 variables.
20 O. Will changes in base rates trigger changes in
21 the surcharge amounts?
22 A. The Company is not requesting such a
23 triggering mechanism at this time, but adjustments of this
24 type could be considered during the term of the surcharge
25 if deemed appropriate.
TATUM, DI
Idaho Power
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Company
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return or effective
o I/flill changes in
tax rate
the Company's allowed rate of
trigger a change in the
surcharge amounts?
A.As discussed below, these or similar changes
could affect the length of the surcharge or possibly result
Company is not
factors at
in the need to adjust the surcharge, but the
requesting
this time.
o.
an automatic adjustment for these
What would happen to the surcharge if Blaine
County's costs
million?
vary from the current estimate of $9.8
A Based on customer bills from 2020, a 3 percent
to fund approximately $10.1 mj-11-ionsurcharge will
of incremental costs over 20 years (this amount is derived
from the prevj-ously noted $10.4 million net of annual
adminlstration costs). Should final assessed incremental
costs exceed the $10.1 million amount, the surcharge
percentage may have to be revised j-n order to collect the
ful1 incremental cost during the 20-year collection term.
O. Did the Company provide notice of the proposed
bill surcharges to impacted customers?
A. Yes. Included as Attachment 3 to the Petition
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be able
23 is a copy of
Idaho Power
the postcard that will be distributed to all
24 customers residing in Blaine County who would
25 be impacted by the surcharge. The customer notice provides
TATUM, DI
Idaho Power
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Company
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a brief explanation describing the purpose of the proposed
surcharge and references the opportunity for public comment
on the Company's Petition.
III . ST'RCHARGE TRACKING
o How will- the balance due from Blalne County be
tracked?
A Once the surcharge is applied upon the
the Company willTransmissj-on Llne being placed in service,
implement
remaining
surcharge
a tracking mechanism that cal-culates the
amount due from Blaine County. Each month of10
collection wil-l- reduce the balance of the
L2 incremental- cost owed. Financing costs will increase the
13 balance.
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A
How are financing
The financing rate
costs determined?
the Company's current.ly
up for its current
authorized rate of
l-s
16 authorized rate of return, grossed
t7 effective tax rate. Currently, the
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return in Idaho is 7.86 percent, grossed up to 9.59 percent
for j-ncome taxes. The financing cost calculation will use
the current rates in effect through the financj-ng period.
O. What monj-toring and reporting does the Company
propose to track progress in paying down Blaine County's
total costs?
A. The Company proposes to annually provide an
update to Blaine County along with a projection based on
TATUM,
Idaho
DI
Power
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Company
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current information, such as the current allowed return in
the Idaho jurisdiction and current income tax rates.
O. How would this information be used?
A. The Company contemplates that if the
projections indicate that the incremental costs will be
collected before the
would be made to the
an acceptable result
that the current
2O-year period, no changes
Early collection would be
if the projections show
end of the
surcharge.
However,
10 i-ncremental-
would adjust
accordingly.
o.
A.
When will the
The surcharge
surcharge end?
will continue until the
costs
the
surcharge is not adequate to collect the
over the 2l-year period, the Company
surcharges and/or payback period11
1,2
13
1.4
15 incremental costs are paid j-n fuII. Any over-collected
16 balance would be returned to Blaine County customers.
l7 O. WiIl B1aine County be able to pay down the
18 balance of the surcharge if funds become avail-able?
1,9 A. Yes. Blaine County will have the option to
20 prepay all or part of the outstanding surcharge principal
21, amount at any time. In the case of partial principal
22 repayments, t.he monthly surcharge assessments wilL remain
23 the same, but the allocation between principal and interest
24 of the subsequent surcharge payments wil-l be adjusted to
25 reflect Blaine County's principal prepayment, with a
TATUM,
Idaho
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Power
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Company
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corresponding reduction in the number of surcharge payments
schedule.remaining under the surcharge repalrment
IV. ACCOUNTING ORDER
o.
regulatory
facilitate
mechani-sm?
A.Yes. The Company requests an order that would
authorize Idaho Power to depreciate the incremental capital
costs over the 2O-year surcharge period so that the
incremental costs are fully depreciated over the same time
period the surcharge is collecting those costs, thus
matchlng the timing of the surcharge revenue recognition
and depreciatj-on expense recognition.
Traditionally, generally accepted accounting
principles require costs to be depreciated over the Ij-ves
of the rel-ated transmissj-on assets, whi-ch, in the Company's
current approved depreciation rates, average over 50 years.
Without the proposed accountj-ng order, there would be a
timing mismatch between surcharge revenues and the related
depreciation expenses.
Further, the Company requests that it be allowed to
depreciate costs using a modified depreciatj-on expense
calculatj-on in order to result in the Company earnlng its
Is the Company requestlng any specific
accounting authorization from the Commission to
the implementation of the proposed surcharge
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TATUM,
Idaho
DI
Power
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Company
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l- authorized rate of return on the incremental costs
2 throughout the surcharge period.
3 Q. Please explain this.
4 A. A utility earns a return on its net rate base
5 (primarily plant-in-service less accumulated depreciation).
6 Over time, net rate base decl-ines, result.ing in a reduced
7 revenue requirement for that asset. Because the surcharge
I revenue is expected to be recovered as approximately a flat
9 annual amount (or slightly increasing over ti-me) , the
10 Company would recover less than its revenue requirement for
11 the incremental costs early in the surcharge period and
1,2 more that its revenue requirement later in the surcharge
13 perlod. Adjusting the timing of depreciation will allow
t4 cost recovery to match the income statement surcharge
15 revenue recognition.
76 O. How w111 the incremental- costs and surcharge
11 revenue be accounted for?
18 A. Accounting for the incremental capital costs
19 will follow the FERC Uniform System of Accounts, with the
20 costs recorded j-n FERC Account L01, Utility Plant in
2L Service and the appropriate FERC plant accounts.
22 Depreciation wil-l be recorded j-n FERC Account 403
23 Depreciation Expenses and FERC Account l-08 - Accumulated
24 Depreciation based on Commisslon-approved depreci-ation
25 rates. Surcharge revenue wiLl be recorded in FERC Account
TATUM, DI
Idaho Power
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Company
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400 General Business Revenue.
How wil-l-the Company ensure that the
not included in revenue requirement
the general customer population?
has cal-cul-ated the rate base and
incremental- costs are
amounts applicable to
A. The Company
revenue requi-rement impacts of the j-ncremental costs using
the depreciation method identified in the Petition to ensure
that the surcharge revenue fuI1y covers the revenue
requirement so that Idaho Power's broader retail customer
U
10 base is not negatively impacted.
11 An exception to this treatment relates
12 $35,000 administration charge included in the
13 rates. The associated administrative expenses
t4 recorded within utility
separately identifiable,
those incremental costs,
operating expense accounts but not
15
17
to an annuaf
surcharge
will be
1,6
18
L9
20
wou]d not be
during a rate
O&M amount in
application.
removed from
proceeding,
the revenue
so in order to properly offset
the $35, 000 administratj-on charge
current revenues. Alternate1y,
$35,000 could be removed from the
requirement in the Company's
2t v. coNclusroN
22 O. Please summarize Idaho Power's request in this
23 case?
24 A. Idaho Power i-s requestj-ng approval from the
25 Commlssion to implement a surcharge mechanism applicab1e to
TATUM,
Idaho
DI
Power
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Company
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1 Idaho Power's customers in Blaine County, Idaho, for the
purpose of funding
distribution Line undergrounding costs. Specifically, the
Company is requesting the Commission approve: 1) the
proposed Ow1 Rock Road Route construction configuration and
assocj-ated line undergrounding; 2) the methodology for
determining the incremental cost of constructing the Owl
Rock Road Route as compared to the estimated cost of
constructing the CPCN Route; 3) a new Schedule 96 detailing
proposed surcharge amounts along with the underlying
methodol-ogy used to calculate such charges; and 4)
regulatory accounting authorization from the Commission to
facilitate the implementation of the proposed surcharge
mechanism.
O. Do you believe approval of the Company's
proposal in this case will serve the public j-nterest and
result in rates that are falr, just, and reasonable?
A. Yes, I do. The line route and buil-d
configuration, along with the proposed surcharge mechanism,
presented in this case represents the culmination of more
than a decade of planning and coflaboration with the
residents of Bl-aine County and will ensure a fair
assignment of costs for all fdaho Power customers.
O. Are there any other relevant items Idaho Power
wishes to address?
incremental transmission and
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TATUM, DI
Idaho Power
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Company
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1 A. Yes. The County Board, as part of the Final
2 CUP, outlined Conditions of Approval. Idaho Power will work
3 with Blaine County to monitor progress and ensure the
4 resol-ution of each condition. For example, Idaho Power will
5 consult with Blaine County regarding surcharge-related
6 financial- support for indigent Blaine County residents.
7 Q. Does this conclude your testj-mony?
8 A. Yes, it does.
9
10
TATUM, Dr 31
Idaho Power Company
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ATTESEATION OF IESIIMOTVY
STATE OF IDAHO
QA
County of Ada
I, Timothy E. Tatum, having been duly sworn to
testify truthfully, and based upon my personal knowledge,
state the following:
I am employed by fdaho Power Company as a Vice
President of Regulatory Affairs and am competent to be a
witness in this proceedi-ng.
I declare under penalty of perjury of the l-aws of
the state of Idaho that the foregoing pre-filed testimony
and exhibits are true and correct to the best of my
information and belief.
DATED this 5th day of August 2027.
T mothy Tatum
SUBSCRIBED AND SWORN to before me this 5th day of
August 202L.
NO ary Publ
Residing at:e,Idaho
My commission expires:09/70/2025
TATUM, DI 32
Idaho Power Company
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orf
Bois
CHRISTY LYN DAYETIPOIT
Nor.ry Pt$lt - Stltcd ldlho
Comnhdon Nurnbcr 52970
lly Cormldon Erplrcl tcp lO, 2O2a
BEFORE THE
IDAHO PUBLIG UTILITIES COMMISSION
CASE NO, IPC.E.21.25
IDAHO POWER COMPANY
TATUM, DI
TESTIMONY
EXHIBIT 5
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Exhibit No. 5
Case No. IPC-E-21-25
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