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Home My WebLink About19910819Hattaway Direct.pdfo o +/ 3;o6 T, F ar f I I i F l\ IILVLI I L.U '_'r rn: '* L ll l--i 'ii r}iiO Lg Fil 3 2L iii,'.i"iU iti-.:i "--'i rTlrF ,lirt! j!a'-''.!l* ;, -l I IEJ i-, q.iir'li;.i.-; - r'.:tr BEFORE TTIE IDAHO PI]BLIC IMLITIES COMMISSION IN fiIE MATIER OF fiIE APPIICATION Or. IDAIIO POWER COMPAhIY FOR APPROVAL OF AI{ INTERCONNEGIION TARIEF tr1OB NON-IIrIIJIY GE{ERATION - SCEEDI]I,E 72 ) ) ) ) ) ) CA,SE NO. IFC-E-90-20 DIREGT IESTIMONY OF DAYID HAITAWAY IDAHO PTIBIJC IIrILITIBS COMIIISSION AUcUSlr 19, 1991 x o o 1 2 3 4 5 6 7 I 9 IO II LZ I3 t4 I5 I6 L7 I8 19 20 2L z2 23 24 z5 O. Please state your name and business address for the record. A. My name is David Hattaway. My business address is 472 West Washington Street, Boise, ldaho. O. By whom are you employed and in what capacity? A. I am employed by the ldaho Public Utilities Commission as an auditor in the Accounting Section of the Utilities Division. O. What is your educational and experience background? A. I received a Bachelor of Science degree with a major in accounting from Brigham Young University in 1972. ln 1980, learned a Master of Business Administration from Pepperdine University. I have over 15 years of experience in accounting and management with companies ranging in size from very small to one of the largest Fortune 500 companies. Over those years, I have worked as a staff accountant, senior financial analyst, credit manager, accounting supervisor and controller. O. What is your responsibility in this case now before tlre Commission? A. My responsibility is to perform the staff analysis of financial data submitted by ldaho Power Company (lPCo) showing the development of lPCo's rate for Operation and Maintenance (O&M) costs. O. What is the purpose of your testimony? A. The purpose of my testimony is to comment on lPCo's calculation and methodology to determine the O&M factor used for recovering costs associated with distribution and transmission. O. What are the O&M factors you are addressing? tPc-E-90-20 8-19-91 HATTAWAY, Di 1 Staff o oo I 2 3 4 5 6 7 8 9 l0 II L2 I3 l4 I5 I6 L7 l8 19 20 ZL zz z3 24 25 A. I am addressing the rates lor the non-utility generation, Schedule No. 72, interconnection tariff mentioned in lPCo's application. Specifically, the rates are 0.7"/" for distribution and the 0.4% for transmission. O. What are your conclusions? A. The calculations are reasonable and based on correct data. The methodology used is logical and appropriate. O. What is the source of the data used for the calculation? A. The data is from the books and records of lPCo as of December 31, 1989. The books and records are kept in accordance with Federal Energy Regulatory Commission (FERC) Uniform System of Accounts (usoA). O. What is the methodology used to determine the above mentioned rates? A. The methodology is to divide distribution and transmission related O&M expenses by lP0o's investment in associated assets. The USOA does not separate Qualified Facilities' (QF) interconnect costs or O&M expenses from general utility expenses of this type. Therefore some judgments were made by lPCo based on experience (what plant in service is typically used to interconnect a QF), the relation of USOA Accounts to QF construction and operation, and cost accounting conventions (like relating overhead costs to appropriate cost objectives). ln my opinion those judgments were and still are reasonable. O. Why use the methodology described above? A. I considered four common cost allocation methods. 1) lnvestment,2) Direct Labor,3) Units of Production, and 4) Line Length. tPc-E-90-20 8-19-91 HATTAWAY, Di 2 Staff o o 1 2 3 4 5 6 7 I 9 l0 II L2 13 l4 I5 I6 L7 I8 l9 20 ZL zz z3 z4 25 The method used by lPCo where investment is the basis for allocation, offered the best of all options. lt is logical and verifiable. lt is simple to derive and to understand. !t results in the most realistic and fair allocation. O. Please explain the other three options and your reasoning for rejecting them. A. Direct labor is a common basis for allocation of cost pools. An allocation factor could be developed by dividing direct labor costs on QF facilities by total direct labor for lPCo. Labor costs for QFs are not shown in a separate USOA account and lPCo does not capture the specific payroll data to determine QF labor hours or amounts. A direct labor allocation factor can not be calculated with the available data. Another common basis for allocation of cost pools is units of production. Units of production in this case would be kilowatt hours generated. The factor is determined by dividing kilowatt hours generated by QFs by total lPCo system generation. The problem with this method is that it does not recognize that electricity flowing through the interconnect equipment does not directly affect O&M costs. The interconnect equipment may require O&M expense even if the QF does not generate any power. A third method might be to allocate O&M by dividing the length of line used for a QF's interconnect by the number of miles of line in the lPCo system. This method would not reflect realities of terrain, accessibility and dollars of investment. O. Do any other utilities you know of use a method similar to lPCo's? tPc-E-90-20 8-19-91 HATTAWAY, Di 3 Staff oo o o 1 Z 3 4 5 6 7 I 9 IO II L2 13 14 15 16 L7 t-8 19 zo 2L zz 23 24 25 A. Yes. Several other utilities operating in ldaho use a similar method for calculating O&M rates for use in QF contracts with results similar to those of ldaho Power. O&M Rates Based on lnvestmeril Company ----------O&M Rates--(/" per Month) Distribution Transmission ldaho Power Co. Utah Power & Light Pacific Power & Light .7 .73 .67 .4 .42 .35 Washington Water Power (WWP) does not have an O&M rate for QFs in effect at this time. WWP permits QFs, on a case by case basis, to build and maintain their own lines and interconnect subject to WWP specifications. O. Does this conclude your testimony? A. Yes, it does. tPc-E-90-20 8-19-91 HATTAWAY, Di 4 Staff oo a a A?n^,nu CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this 19th day of August, 1991, served the foregoing DIRECT TESTIMONY OF DAVID HATTAWAY, in Case No. IPC-E-90-20, by mailing a copy thereof via Federal Express or hand delivery, to the following: BARTON L. KLINE, ESQ. LEGAL DEPARTMENT IDAHO POWER COMPANY P. O. BOX 70 BOISE, tD 83707-0070 LARRY D. RIPLEY, ESQ. LEGAL DEPARTMENT IDAHO POWER COMPANY P. O. BOX 70 BO|SE, tD 83707-0070 GARY A. DAHLKE R. BLAIR STRONG PAINE, HAMBLEN, COFFIN, BROOKE & MILLER 12OO WASHINGTON TRUST FINANCIAL CENTER SPOKANE, WA 99204 TOM DUKICH RATES & TARIFF ADMINISTRATION WASHINGTON WATER POWER COMPANY P. O. BOX 3727 SPOKANE, WA 99220 A. W. BROWN A. W. BROWN COMPANY, INC. 3416 VIA LIDO, SUITE F NEWPORT BEACH, CA 92663 JOHN M. ERIKSSON UTAH POWER & LIGHT COMPANY 1407 NORTH WEST TEMPLE SALT LAKE CITY, UT 84140-OOO1 W. F. MERRILL MERRILL & MERRILL P. O. BOX 991 POCATELLO, tD 83201 -0091 JAMES FELL, ESQ. STOEL, RIVES, BOLEY, JONES AND GRAY SUITE 23OO 9OO SW FIFTH AVENUE PORTLAND, OR 97204 GREGORY N. DUVALL UTAH POWER & LIGHT COMPANY 424 PUBLIC SERVICE BUILDING 920 SW SIXTH AVENUE PORTLAND, OR 97204 ROY L. EIGUREN, ESQ. PETER J. RICHARDSON, ESQ. DAVIS WRIGHT TREMAINE 7O2W IDAHO STREET, SUITE 7OO BOISE, tD 83702-8908 C. TOM ARKOOSH RODEN & ARKOOSH P. O. BOX 2110 BOISE, tD 83701-2110 l CERT/173 SEdRETtrRV O