20231027Direct Timothy Tatum.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES ) CASE NO. IPC-E-23-11
AND CHARGES FOR ELECTRIC SERVICE )
IN THE STATE OF IDAHO AND FOR )
ASSOCIATED REGULATORY ACCOUNT )
TREATMENT. )
)

IDAHO POWER COMPANY

TESTIMONY IN SUPPORT OF SETTLEMENT STIPULATION

OF

TIMOTHY E. TATUM

RECEIVED
Friday, October 27, 2023 2:24:13 PM
IDAHO PUBLIC
UTILITIES COMMISSION
TATUM, DI 1
Idaho Power Company
Q. Please state your name and business address. 1
A. My name is Timothy E. Tatum and my business 2
address is 1221 West Idaho Street, Boise, Idaho. 3
Q. By whom are you employed and in what capacity? 4
A. I am employed by Idaho Power Company (“Idaho 5
Power” or “Company”) as Vice President of Regulatory Affairs. 6
Q. Are you the same Timothy E. Tatum that 7
previously submitted testimony in this proceeding? 8
A. Yes, I submitted direct testimony on behalf of 9
Idaho Power providing an overview of the Company’s overall 10
rate request in this proceeding. 11
Q. What is the purpose of your testimony? 12
A. My testimony describes the Stipulation that was 13
signed by Idaho Power, the Staff of the Idaho Public Utilities 14
Commission (“Staff”), and all intervenors in this docket: 15
Clean Energy Opportunities for Idaho (“CEO”), Industrial 16
Customers of Idaho Power (“ICIP”), City of Boise, Idaho 17
Irrigation Pumpers Association, Inc. (“IIPA”), Micron 18
Technology, Inc. (“Micron”), Federal Executive Agencies 19
(“FEA”), Idaho Conservation League (“ICL”), NW Energy 20
Coalition (“NWEC”), IdaHydro, and Walmart, Inc. These 21
entities are referred to individually as a “Party” or 22
TATUM, DI 2
Idaho Power Company
collectively referred to as the “Parties.” The Stipulation 1
filed in this docket on October 27, 2023, settles all issues 2
that arose in this case (“Proposed Settlement”). My testimony 3
also expresses Idaho Power’s support for the Stipulation and 4
urges the Commission to adopt the Proposed Settlement without 5
material change or condition. 6
Q. Do you believe that the Proposed Settlement is 7
in the public interest? 8
A. Yes. The Parties have agreed to settle the 9
issues identified in the Stipulation, thus indicating their 10
satisfaction with the outcome. From the Company’s 11
perspective, the Proposed Settlement provides the Company with 12
the ability to update its rates to better reflect current 13
costs and the ability to economically finance new investments 14
in infrastructure for its system. The Company also believes 15
that the rates that result from the Stipulation are just and 16
reasonable for its customers. 17
Q. How did the Parties arrive at the Stipulation? 18
A. On September 18, 2023, a settlement conference 19
was held at the Commission’s offices. All parties to the case 20
were represented and discussed the issues presented in the 21
Company’s case. The Parties continued their discussions on 22
TATUM, DI 3
Idaho Power Company
October 4 and 5, 2023 and ultimately those discussions led to 1
agreements which resulted in the Stipulation. 2
Q. Have all Parties in this case joined in the 3
Stipulation? 4
A. Yes. 5
Background 6
Q. Please describe Idaho Power's original revenue 7
requirement increase request. 8
A. On June 1, 2023, Idaho Power filed an 9
Application in this case seeking authority to increase the 10
Company’s Idaho jurisdictional retail revenue an average of 11
8.61 percent. If the Company’s initial proposal had been 12
approved, the Company’s revenues would have increased by 13
approximately $111 million annually. Idaho Power proposed 14
spreading the rate increase to varying degrees among all 15
customer classes and special contract customers. The Company 16
requested that new rates become effective on January 1, 2024, 17
which is the end of the statutory period set forth in Idaho 18
Code § 61-622(4) and Commission Rule of Procedure (“RP” or 19
“Procedural Rule”) 123. Pursuant to Procedural Rule 125, 20
Idaho Power notified customers of the requested rate increase 21
via press release, customer notices mailed to individual 22
TATUM, DI 4
Idaho Power Company
customers, and personal contact with some customers. 1
Q. Did Staff and other Parties conduct a thorough 2
examination of the Company's filing? 3
A. Yes. The Parties conducted extensive discovery 4
on Idaho Power's filing. Over the course of this proceeding, 5
the Company provided responses to approximately 400 data 6
requests, the vast majority of which were from Staff. In 7
addition, Staff auditors and engineers have made numerous 8
visits to Idaho Power's Corporate Headquarters to review the 9
underlying accounting data and capital project documentation 10
that was the basis for the Company's filed revenue 11
requirement. Additionally, Staff conducted on-site visits of 12
certain hydro and gas plants, as well as transmission, 13
distribution, battery, security, and communication projects. 14
Proposed Settlement Overview 15
Q. What is the Idaho jurisdictional revenue 16
increase to which the Parties agree? 17
A. The Parties agree to an Idaho jurisdictional 18
revenue increase of $54.7 million, which represents a 19
settlement of all issues in this case. 20
Q. What is the overall percentage increase to 21
rates resulting from the Stipulation? 22
TATUM, DI 5
Idaho Power Company
A. The stipulated test period revenue increase of 1
$54.7 million is an approximate 4.25 percent average increase 2
to Idaho retail revenue. 3
Q. When will the rates to recover the stipulated 4
revenue increase and new tariff riders go into effect? 5
A. The Parties have requested that the Commission 6
issue an Order approving the agreed-upon rates as reflected in 7
the Stipulation to become effective on January 1, 2024. 8
Q. Please describe the Stipulation's terms related 9
to cost of capital. 10
A. The Parties agreed to a 9.6 percent return on 11
equity (“ROE”) and a 7.247 percent overall rate of return 12
(“ROR”) based on a non-specified cost of debt and capital 13
structure. This cost of capital adjustment served to reduce 14
the Company’s rate request by $23,461,105. 15
Q. What are the Stipulation's terms related to 16
rate base? 17
A. The Parties agreed to an authorized Idaho 18
jurisdictional rate base of $3,816,351,478. This rate base 19
value reflects the removal of certain plant held for future 20
use items and annualizing adjustments associated with certain 21
large capital projects, which reduced the test year revenue 22
TATUM, DI 6
Idaho Power Company
requirement by $8,294,557. In addition, the Parties agreed to 1
reduce the filed request by $2,273,749 to remove the revenue 2
requirement related to battery augmentation. To offset the 3
revenue impact of removing the battery-related revenue 4
requirement, Idaho Power will be provided the opportunity to 5
accelerate the amortization of additional accumulated deferred 6
investment tax credits (“ADITC”). The combined impact of the 7
stipulated rate base adjustments reduced the Company’s rate 8
request by $10,568,306. 9
Q. Did Staff have any reservations regarding a 10
prudence determination of any capital projects presented in 11
the Company’s filed case? 12
A. Yes. At the time of the Stipulation, Staff had 13
yet to complete its review of capital projects included in the 14
test year rate base. Except as otherwise noted in the 15
Stipulation, all capital projects included in the Company’s 16
test year are presumed to be prudently incurred as Staff 17
continues its plant investment review. Staff agreed to update 18
the Company on its progress toward completing its review by 19
November 15, 2023, and commits to fully complete its plant 20
investment review by December 1, 2023. To the extent Staff 21
identifies potential prudence concerns, it will identify 22
TATUM, DI 7
Idaho Power Company
specific plant investments to be the subject of further 1
prudence review in the Company’s next general rate case. 2
Also, Idaho Power and Staff commit to discuss capital project 3
review options and documentation generally, and specifically 4
for the Company’s partnered plants, to establish a framework 5
for future prudence reviews. 6
Q. What are the details related to the agreement 7
reached by Parties regarding the Company’s authority to 8
accelerate amortization of ADITC? 9
A. Since 2009, the Company has been subject to an 10
ADITC / Revenue Sharing Mechanism, that includes provisions 11
for the accelerated amortization of ADITC to help achieve a 12
minimum specified percent Idaho-jurisdiction return on year-13
end equity (“Idaho ROE”), currently set at 9.4 percent. The 14
mechanism also provides for the potential sharing between 15
Idaho Power and Idaho customers of Idaho jurisdictional 16
earnings in excess of a 10.0 percent Idaho ROE. Under the 17
current mechanism, the ADITC and sharing thresholds are to be 18
reset at a general rate case to align the sharing threshold 19
with the newly authorized ROE and the threshold for use of 20
accelerated amortization of ADITC if the Company’s Idaho 21
jurisdictional ROE falls below 95 percent of the authorized 22
TATUM, DI 8
Idaho Power Company
ROE. 1
Under the Stipulation, the ADITC Revenue Sharing 2
Mechanism is modified to include an additional amount of 3
Investment Tax Credits (“ITC”) equal to the incremental ITC 4
generated from the Company’s investment in the 2023 battery 5
storage projects, including augmentation costs. Further, the 6
Parties agreed that the maximum allowed annual accelerated 7
amortization of ADITC, currently set at a $25 million cap, is 8
removed. Effective January 1, 2024, potential revenue sharing 9
between Idaho Power and Idaho customers of Idaho-10
jurisdictional earnings will occur if earnings are in excess 11
of a 9.6 percent Idaho ROE. Under the Stipulation, all 12
revenue sharing will be implemented through the Power Cost 13
Adjustment (“PCA”) rather than a portion offsetting customer-14
funded pension obligations, which is what occurs under the 15
current mechanism structure. The new minimum-specified Idaho 16
ROE is set at 95 percent of the stipulated 9.6 percent, or 17
9.12 percent. 18
Q. What are the Stipulation's terms related to 19
expenses? 20
A. The Parties agreed to six categories of expense 21
adjustments that when combined totaled a $21,736,202 reduction 22
TATUM, DI 9
Idaho Power Company
to the Company’s rate request. The categories of expense 1
adjustments are as follows: 1) Employee Housing, 2) Long-Term 2
Pay at Risk, 3) General Labor, 4) Uncollectible Expenses, 5) 3
Miscellaneous Administrative and General Expenses, and 6) Non-4
Specific Adjustment. The rationale for each of these 5
adjustments is detailed in the Stipulation. 6
Q. What are the Stipulation's terms regarding 7
deferrals and other rate mechanisms? 8
A. The Parties agreed to five separate revenue 9
requirement adjustments that either adjust the timing of cost 10
recovery or move recovery to other rate mechanisms. The total 11
net impact of these adjustments is a reduction to the 12
Company’s rate request of $819,583. The revenue requirement 13
adjustments in this category are as follows: 1) Energy 14
Efficiency Rider Funded Activities, 2) Western Resource 15
Adequacy Program, 3) Intervenor Funding Amortization, 4) 16
Wildfire Expense Removal, Deferral and Amortization, and 5) 17
Net Power Supply Expense. The rationale for each of these 18
adjustments is detailed in the Stipulation. 19
Q. What are the Stipulation’s terms regarding the 20
appropriate class cost of service to be used to inform class-21
specific cost allocation and rate design? 22
TATUM, DI 10
Idaho Power Company
A. The Parties do not agree on any particular 1
cost-of-service methodology. The Company’s filed cost-of-2
service methodology, updated to reflect the settled revenue 3
requirement, has been utilized on a limited basis to determine 4
Fixed Cost Adjustment (“FCA”) rates, the Sales Based 5
Adjustment Rate (“SBAR”) used in the PCA, Schedule 20 High-6
Density Load Interruption Compensation, special contract rates 7
(except for Schedule 30, as discussed further in paragraph 10 8
of the Stipulation), and optional service offerings including 9
Schedules 31, 45, 46, and 62. 10
Q. Please describe the Stipulation's terms related 11
to revenue spread. 12
A. The Parties agree that the above-described 13
$54.7 million net revenue increase should be recovered 14
according to a rate spread method under which revenue from 15
rates for each customer class will be generally increased by a 16
factor at least 0.5 times, but not more than 1.3 times, the 17
overall 4.25 percent increase, with no increase for any 18
customer class above 120 percent of the cost-of-service index. 19
Q. Please describe the Stipulation's terms related 20
to rate design. 21
A. The Parties agree to the rate design and tariff 22
TATUM, DI 11
Idaho Power Company
provisions included in Attachment No. 2 to the Motion for 1
Approval of Stipulation (“Motion”) filed contemporaneously 2
herewith. The Parties note the following terms as included in 3
Attachment No. 2 and Stipulation Exhibit No. 2, which detail 4
the rate calculations for the various schedules, that differ 5
from the Company’s Application. 6
First, in determining the individual rates for 7
residential Schedules 1, Residential Service Standard Plan, 8
and 6, Residential Service On-Site Generation, the Parties 9
agree to use the customer billing determinants as proposed by 10
the Company in this case but maintain the current percentage 11
differential between each block. 12
Second, the Parties agree the residential Service 13
Charge will increase from $5 per month to $10 per month on 14
January 1, 2024, and to $15 per month on January 1, 2025. 15
Third, the small general Service Charge will increase 16
from $5 to $25 per month on January 1, 2024. 17
Fourth, a summer mid-peak period from 3 p.m. to 7 p.m. 18
is added to residential time-of-use (“TOU”) offerings 19
contained in Schedules 5, Residential Service Time-of-Use 20
Plan, and 6, Residential Service On-Site Generation, to 21
generally align with Schedules 9, Large General Service, and 22
TATUM, DI 12
Idaho Power Company
19, Large Power Service as defined in the respective tariff 1
schedules included in Attachment No. 2 to the Motion. 2
Fifth, the revenue requirement allocated to Schedule 3
30, U.S. Department of Energy Special Contract, will be 4
effectuated by setting the demand charge at $9.75/kW and the 5
energy charge at $0.040951/kWh. 6
Sixth, the Schedule 8 tariff sheet will be updated to 7
reflect the inclusion of September as part of the summer 8
season as reflected in Attachment No. 2 to the Motion. 9
Q. Are there any other non-revenue items to which 10
the Parties agreed in the Stipulation? 11
A. Yes. There are four other non-revenue 12
stipulated agreements made by the Parties. First, Parties 13
agreed that Idaho Power’s share of all capital expenditures at 14
the jointly owned Jim Bridger Power Plant (“Bridger”) and the 15
North Valmy Power Plant (“Valmy”) through year-end 2022 were 16
prudently incurred. Idaho Power’s rate increase resulting from 17
this case reflects the full level of collection related to 18
previously authorized coal-related cost recovery for the 19
Bridger plant. 20
Second, Parties agreed that the Idaho jurisdictional 21
amount of $46,361,643 in third-party point-to-point wheeling 22
TATUM, DI 13
Idaho Power Company
revenues will serve as the baseline for discussions in a 1
subsequent separate proceeding regarding the potential annual 2
tracking of these revenues. 3
Third, the Parties agreed that wildfire expenses 4
included into base rates will be $26,080,688. Incremental 5
vegetation management costs above the 2022 actuals amount of 6
$24,848,875 will continue to be deferred through the earlier 7
of the Company’s next general rate case or 2025. Expenses for 8
the Covered Wire Evaluation pilot and the Vegetation 9
Management Satellite and Aerial Patrols pilot are to be 10
deferred through 2025. Incremental insurance above the 2022 11
actuals amount of $14,489,412 will continue to be deferred 12
through the earlier of Idaho Power’s next general rate case or 13
2025. 14
Fourth, Parties agreed that Idaho Power should be 15
authorized to defer and amortize annual differences between 16
certain periodic maintenance costs at the Company’s natural 17
gas-fired power plants. This deferral will not include a 18
carrying charge. 19
Acceptance of the Proposed Adjustments 20
Q. Why was the Company willing to accept in 21
settlement a lower general rate increase than it initially 22
TATUM, DI 14
Idaho Power Company
filed? 1
A. In her direct testimony, Ms. Lisa Grow 2
explained that in the preparation of its initial request the 3
Company looked for areas where it could forego requesting an 4
increase at this time in recognition of the impact the rate 5
increase would have on customers at a time when they are 6
facing other inflationary pressures. Idaho Power participated 7
in the settlement negotiations with those same concerns in 8
mind and believes that the Proposed Settlement strikes the 9
right balance between the Company’s need for timely cost 10
recovery and its recognition of the state of the current 11
economic pressures its customers are facing. The $54.7 million 12
net revenue increase will provide additional cash flow to help 13
support current credit ratings, and the additional ADITC 14
provisions and other deferral authorizations (i.e., vegetation 15
management, insurance, and gas plant maintenance) will provide 16
some positive support to the Company’s earnings until the next 17
general rate case. 18
Although the Proposed Settlement is a reasonable 19
resolution of a broad range of contested rate issues, the 20
agreement will require the Company to continue to look for 21
ways to manage ongoing inflationary pressures on its expenses 22
TATUM, DI 15
Idaho Power Company
and be thoughtful in its capital markets transactions as well 1
as with its credit ratings. 2
Q. Were there other reasons why the Company was 3
willing to accept a lower revenue requirement? 4
A. Yes. In consideration of the settlement terms 5
the Company recognized that the adjustments related to income-6
qualified weatherization, WRAP expenses, intervenor funding 7
amortization, wildfire mitigation costs and net power supply 8
expenses will have no material impact to the Company’s 9
earnings, as these adjustments serve to either adjust the 10
timing of cost recovery or move recovery to other rate 11
mechanisms. 12
Q. Please explain the Company’s acceptance of an 13
overall rate of return that was less than originally 14
requested. 15
A. For purposes of the Proposed Settlement, Idaho 16
Power is willing to accept an overall rate of return that is 17
lower than originally requested because Idaho Power believes 18
that the agreed-upon rate of return will allow the Company to 19
finance its electric utility operations in the near-term. 20
Q. Do you have any observations regarding the 21
revenue spread provided for in the Stipulation? 22
TATUM, DI 16
Idaho Power Company
A. Yes. Idaho Power believes that it is important 1
to have rates that reflect the costs to serve its individual 2
classes of customers. With that said, the Company also 3
recognizes that there are many differing views regarding class 4
cost-of-service methodologies. In order to facilitate 5
settlement and avoid potentially contentious issues, the 6
Company has agreed to a rate spread method that it believes 7
represents meaningful movement toward cost-of-service while 8
also mitigating the rate increase assigned to any one customer 9
class. 10
Q. Do you have any concluding remarks regarding 11
the Proposed Settlement? 12
A. Yes. During this proceeding the Company 13
experienced a willingness by the Commission Staff and the 14
other Parties to address the issues in this case in a 15
straight-forward manner and to approach the possibility of 16
settlement in a productive way. The Company is very 17
appreciative of these efforts by Staff and the other Parties. 18
Q. Does this conclude your testimony? 19
A. Yes, it does. 20
// 21
// 22
TATUM, DI 17
Idaho Power Company
DECLARATION OF TIMOTHY E. TATUM 1
I, Timothy E. Tatum, declare under penalty of perjury 2
under the laws of the state of Idaho: 3
1. My name is Timothy E. Tatum. I am employed by 4
Idaho Power Company as the Vice President of Regulatory 5
Affairs. 6
2. On behalf of Idaho Power, I present this pre-7
filed direct testimony. 8
3. To the best of my knowledge, my pre-filed 9
direct testimony is true and accurate. 10
I hereby declare that the above statement is true to 11
the best of my knowledge and belief, and that I understand it 12
is made for use as evidence before the Idaho Public Utilities 13
Commission and is subject to penalty for perjury. 14
SIGNED this 27th day of October 2023, at Boise, Idaho. 15
16
Signed: ___________________ 17
Timothy E. Tatum 18
19