IPC5272.docx

1 BOISE, IDAHO, WEDNESDAY, MAY 27, 1998, 1:15 P. M.
2
3
4 COMMISSIONER SMITH: Welcome back. I
5 believe we just finished questions from Mr. Budge, so
6 Ms. O'Leary.
7
8 GREGORY W. SAID,
9 produced as rebuttal a witness at the instance of the
10 Idaho Power Company, having been previously duly sworn,
11 resumed the stand and was further examined and testified
12 as follows:
13
14 CROSS-EXAMINATION
15
16 BY MS. O'LEARY:
17 Q On page 2 of your rebuttal testimony in the
18 paragraph beginning at line 8, you stated there that the
19 five-year period for amortization is reasonable due to
20 the changes in the electric industry. What changes
21 exactly were you thinking of?
22 A I think we've discussed this quite a bit in
23 the last couple of days. Essentially, we've looked at
24 differences in resource planning. We've looked at some
25 of the other cases where the Commission has looked at the
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1 who pays and over what time period considerations that
2 have been made in cases like the line extension
3 provisions of the Company, other provisions for who and
4 when customers pay.
5 Q Okay, and so you say that you think that
6 the five-year period is reasonable so that the customers
7 for whom the expenditures were made are the ones that are
8 paying?
9 A Yes, that's an aspect as well.
10 Q Okay, and how will those customers be
11 different under the different amortization schedules, the
12 five-year versus the 24-year that's in place?
13 A The longer the period of time the less
14 likelihood that the customers that are paying will be the
15 same as the customers for whom the payments were made.
16 Q And that's based on what?
17 A That's just based on attrition through
18 customer base changes where customers leave the system
19 and customers come to the system.
20 Q So competition?
21 A It doesn't necessarily have to relate to
22 competition. It can relate to where businesses choose to
23 site, which may include competition within their
24 industry, but not necessarily competition for
25 electricity.
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1 MS. O'LEARY: I don't have anything else.
2 COMMISSIONER SMITH: Mr. Richey.
3 MR. RICHEY: Yes, thank you, just a
4 couple.
5
6 CROSS-EXAMINATION
7
8 BY MR. RICHEY:
9 Q Mr. Said, you may have testified about
10 this, but I can't remember specifically in your direct
11 testimony if you did, but on your allocation
12 recommendation, what is the impetus behind moving to more
13 of a participant-based payment versus just spreading it
14 out evenly?
15 A I think that recommendation came from a
16 recognition that some customer classes would come to a
17 proceeding like this and say we did not have an ability
18 to participate in these programs and, therefore, feel
19 that an allocation which would assign costs to customers
20 who receive benefits might be more appropriate.
21 Q And in your rebuttal testimony, you
22 indicate that Idaho Power's recommendation is a
23 middle-of-the-road approach?
24 A I believe so, yes.
25 Q Can you explain that, what you mean by
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1 that?
2 A Well, generally, we've seen from the
3 testimony of the parties in this case that some parties
4 would suggest that there be a more radical movement than
5 what we've suggested in that all of the demand side
6 management expenditures both pre-'94 and post-'93 be
7 allocated on an ability to participate method and other
8 others have suggested that the method that had been
9 chosen for allocation in the past remain in place for
10 both the pre- and post-'94 measures. Our recommendation
11 is a hybrid. It's says go ahead and continue to allocate
12 the pre-'94 under the allocation method previously
13 approved and just move to a new allocation for the
14 post-'93 expenditures.
15 Q You had mentioned earlier that some of the,
16 I guess, impetus behind the allocation method was some
17 programs like the line extension program that tries to
18 allocate those costs to the direct beneficiary of the
19 cost; is that true?
20 A Yes. In the line extension case, there was
21 basically a movement for a larger contribution from those
22 individuals who would directly benefit from their line
23 extensions.
24 Q And where is that coming from to move, in
25 the line extension program to move, to have a larger
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1 contribution by the one that more directly benefits from
2 that?
3 A Essentially, that was a recommendation that
4 was made so that costs incurred on the behalf of an
5 individual were not passed to the larger body of
6 ratepayers inappropriately.
7 Q Or not subsidized by the larger body of
8 ratepayers?
9 A That would be another way of stating it, I
10 guess.
11 Q Yesterday Mr. Ripley asked questions of
12 Dr. Anderson as to who ultimately determines how long the
13 benefit from a DSM expenditure would last is really the
14 participant or the person that purchases the equipment or
15 whatever might fall under the DSM expenditure. Do you
16 recall that?
17 A Yes.
18 Q Do you recall if that plays any role in the
19 allocation methodology, that analysis of that rationale?
20 A I guess I'm not seeing a relation to the
21 allocation.
22 Q I was just wanting to see if it played any
23 role with respect to the fact that a participant in the
24 program can more or less dictate how long a benefit is
25 going to last, if it's somewhat more of an ownership as
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1 to whether the benefit will be spread to non-participants
2 or will just exist at any particular time, if that has
3 any role in your rationale for trying to allocate to the
4 parties that actually benefit the most to pay for it the
5 most.
6 A I believe your question speaks to the
7 direct benefits that the individual customers receive
8 from the measures that they have taken and they certainly
9 have the ability to decide whether or not over time that
10 remains an economic benefit for their establishment. I
11 don't know that it played a large part in deciding how to
12 allocate to non-participants.
13 MR. RICHEY: That's all I have.
14 COMMISSIONER SMITH: Thank you,
15 Mr. Richey.
16 Mr. Jauregui.
17 MR. JAUREGUI: Yes, I have some.
18 COMMISSIONER SMITH: Could you please turn
19 on your mike?
20 MR. JAUREGUI: Excuse me.
21
22 CROSS-EXAMINATION
23
24 BY MR. JAUREGUI:
25 Q Mr. Said, you were just discussing, I
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1 believe, regarding allocations of line extensions. In
2 that proceeding, isn't it true that there was no going
3 back, that the proposal was on a prospective basis rather
4 than a retroactive basis, in other words, on new line
5 extensions?
6 A That's true.
7 Q Thank you. With respect to the useful life
8 of a DSM, if the useful life was five years rather than
9 24 years, wouldn't that result in DSM facilities not
10 being cost effective; in other words, if the useful life
11 was five years rather than 24 years when the evaluation
12 was being made, wouldn't that affect their cost
13 effectiveness and the cost effectiveness of the DSM
14 measures?
15 A It could have an impact, yes.
16 Q What programs are available to the
17 residentials or were available to the residential
18 customers in the post-'93 DSM programs?
19 A I believe that would be the MAP program,
20 the mobile home acquisition program, the low income
21 weatherization program, the good cents program, and the
22 Idaho weatherization program.
23 Q Do you have the dollars for those last two?
24 A The good cents program deferred
25 expenditures were $555,500, and the Idaho weatherization
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1 program was 3,400.
2 Q And the MAP program was?
3 A $7,495,600.
4 Q And I believe the proposal was to allocate
5 the low income weatherization to all customers and the
6 others were essentially by class to the residential?
7 A That's correct.
8 Q And the residential to be eligible to be
9 able to participate in the good cents program and the MAP
10 program related to facilities in the home? The MAP
11 program related to purchasing a home or buying a new
12 manufactured home?
13 A Yes.
14 Q Are you aware of how many residential
15 customers there are on Idaho Power Company's system
16 currently? Would you accept about 300,000 plus, like
17 300,714 per your 10-K?
18 A Yes, I would accept that.
19 Q And would you accept how many participants
20 there were as being 4,365 under your MAP program per your
21 '98 weatherization program?
22 A Yes.
23 Q And that is approximately -- that's less
24 than one-half of one percent participated in the MAP
25 program, wouldn't that be approximately right?
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1 A If you've done your math correctly, yes.
2 Q So you're having approximately one-half of
3 one percent and the burden is placed upon 300,000 and the
4 Company's position, if I understand it, is that all of
5 those 300,000 had the ability to participate?
6 A They were within the class that had the
7 ability to participate, yes.
8 Q At the time that the programs were proposed
9 and approved and their historical basis, it was on the
10 basis of a system benefit, was it not?
11 A That was a consideration into the
12 termination of a 24-year amortization period, yes.
13 Q But weren't the DSM programs looked at as a
14 system resource at the time of the approval of the
15 programs?
16 A They were considered similar to generation
17 resources, yes.
18 Q Going to page 2 of your testimony, on
19 line 15, actually it's line 17, you indicate that the
20 electric utilities it regulates, referring to the
21 Commission, are moving towards a regional approach on
22 resource acquisition. Isn't it true that this is a
23 decision of the electric utilities, it's a business
24 decision of theirs?
25 A Yes, it is.
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1 Q And yet, you are saying that that is a
2 driving force to go to a five-year, I'm not sure, one of
3 the reasons for going to a five-year, amortization
4 schedule?
5 A It's a portion of the entire picture that
6 we're looking at here. Again, the five-year amortization
7 period that we're recommending in this case is not a big
8 move in terms of what the Company has proposed in the
9 past where we proposed a seven-year amortization period.
10 At the time of the last rate case when the amortization
11 period was being reviewed by this Commission, it was one
12 of many factors going into an overall revenue requirement
13 that they were considering and I guess it's my opinion
14 that partially why they decided on 24 years as the
15 appropriate amortization period at that time was a look
16 at the overall revenue requirement that the Company had
17 and using 24 years was a means to keep the overall rate
18 increase lower than it might have been while not
19 disallowing any of the investment that the Company had
20 made on behalf of its customers.
21 Q Isn't moving from 24 years to five years a
22 major change and a significant change and a major impact
23 on customers?
24 A It certainly has an impact.
25 Q You heard the discussion between Mr. Ripley
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1 and Mrs. Carlock discussing and I believe you made
2 reference earlier in your testimony this afternoon about
3 people leaving after a short period of time and that you
4 wanted to have the people who had the benefit pay for it,
5 do you remember that discussion?
6 A Yes.
7 Q Isn't there another side of that that if
8 people or businesses are here for five years and are then
9 no longer here, whether they die or move away or a
10 business closes down, they have paid for benefits that
11 they will never receive, the benefit on the long term and
12 that those benefits are essentially shifted to the entire
13 system? They have paid for it, they are now gone and the
14 system has benefited and the customers don't have to pay
15 for it; isn't that true?
16 A To the extent that there are remaining
17 benefits, that would be true.
18 Q Isn't the position of the Company, though,
19 that there will be continuing benefits past the five
20 years?
21 A In the instance of a company that puts in a
22 conservation measure and goes out of business five years
23 later, the benefit of that conservation measure may go
24 with the disappearance of the customer.
25 Q If you have a residential customer who is
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1 here today, pays for it and dies five years hence, that
2 house is still here and that benefit continues in the
3 system, does it not?
4 A If there's a resident.
5 Q If there is a --
6 A A resident of that house or facility with
7 the measure and the measures have not been removed.
8 Q Wouldn't you say that it's true that most
9 houses that exist today existed five years ago, there are
10 very few houses that have been removed in the Idaho Power
11 Company service territory?
12 A Removed or occupied, there are some that go
13 away, but probably not a great number. There are
14 probably a greater number of new homes being built rather
15 than homes that are being removed.
16 Q Aren't your residential customers
17 increasing?
18 A Yes.
19 Q And they have increased each year over the
20 last five, 10, 15, 20 years?
21 A They have increased and as a result, we're
22 having a number of new customers who have come on to the
23 system that are after a point in time, perhaps, that
24 conservation measures may have been available to them and
25 yet will be called upon to pay. That will be true the
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1 further you go with an amortization period the more
2 customers that you will bring on that will be responsible
3 for costs incurred a significant time before they were
4 customers.
5 Q But there are benefits to that system or at
6 least at the time that the programs were authorized,
7 isn't it true that at the time that those programs were
8 authorized they had a lifetime, for example, the MAP
9 program looked at 24 or 25 or 30 years as being the life
10 of those benefits to the system; isn't that true?
11 A That is true. A manufactured home is one
12 of the homes that may have the greatest ability to
13 relocate as well. It could be in the region. There
14 still may be a regional benefit, but the potential is
15 there that that customer could relocate.
16 Q I'm trying to keep from duplicating
17 questions that were asked before. Isn't it true that the
18 Idaho Power Company proposal will be a change of the
19 manner of recovery for DSM facilities on an after the
20 fact; in other words, that the programs have been
21 completed and the facilities installed and that they are
22 now proposing to change the method or the basis on which
23 recovery of those costs are occurring?
24 A I don't think that the method of recovery
25 for expenditures that were to be deferred had been
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1 determined in the past. What had been determined was the
2 allocation of expenditures through the 1993 period of
3 time. The Company was allowed to defer expenditures for
4 a later determination of how those expenditures would be
5 recovered and I think that's exactly what we're here to
6 do today.
7 Q Didn't some of the orders indicate that the
8 amortization period for various programs would be 30
9 years, for example, at the time that the programs were
10 approved, aren't you proposing a change?
11 MR. RIPLEY: I think counsel misstates --
12 unless he has an order in mind, I don't think any of the
13 orders at the time provided for the amortization period.
14 COMMISSIONER SMITH: Mr. Jauregui.
15 MR. JAUREGUI: I think the DEAP program
16 did. The DEAP program, it was Case No. IPC-E-89-12,
17 Order No. 22893. It is further ordered, this is in the
18 Order, that a 30-year amortization begin when the Company
19 files its next general rate case or revenue tracker.
20 MR. RIPLEY: Let's see it. Why don't you
21 show this Order to Mr. Said and then he can comment on
22 it.
23 (Mr. Jauregui approached the witness.)
24 MR. RIPLEY: The entire Order, not just the
25 paragraph you're referring to, Mr. Jauregui.
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1 Q BY MR. JAUREGUI: Have you familiarized
2 yourself with that Order?
3 A Not entirely.
4 (Pause in proceedings.)
5 Q BY MR. RIPLEY: Do you need your Order
6 back?
7 MR. JAUREGUI: It would be helpful.
8 Q BY MR. JAUREGUI: Mr. Said, have you
9 familiarized yourself with the Order?
10 A Yes.
11 Q Does that Order provide that the 30-year
12 amortization period begin when the Company files its next
13 general rate case or revenue tracker increase?
14 MR. RIPLEY: Could I interpose a question
15 in aid of an objection?
16 COMMISSIONER SMITH: Mr. Ripley.
17 MR. RIPLEY: What's the date of the Order
18 you're referring to, Counsel?
19 MR. JAUREGUI: This is December 20th,
20 1989. This was at the beginning of the program.
21 MR. RIPLEY: What Mr. Jauregui is referring
22 to is an Order which has obviously been amended by
23 subsequent orders of the Commission; namely, for one, the
24 general rate case that the Idaho Commission entered when
25 it provided for a 24-year amortization period of DEAP.
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1 MR. JAUREGUI: Madam Chairman, I recognize
2 that case, but --
3 MR. RIPLEY: I think he -- well, if I could
4 finish. I think what counsel is doing is misconstruing
5 the record as far as what the Commission ordered in the
6 past when he doesn't bring forward those orders to the
7 current time as to the period of time that the Company is
8 currently amortizing DEAP.
9 MR. JAUREGUI: Madam Chairman.
10 COMMISSIONER SMITH: Mr. Jauregui.
11 MR. JAUREGUI: The purpose of the
12 discussion or the testimony was to indicate that from a
13 historical basis at the time of the approval of the
14 program that this Commission provided for an amortization
15 period at that time.
16 COMMISSIONER SMITH: Okay.
17 MR. JAUREGUI: Mr. Said?
18 COMMISSIONER SMITH: Is there a question
19 outstanding?
20 MR. JAUREGUI: Yes, I believe there is.
21 COMMISSIONER SMITH: Does anyone know what
22 it is?
23 Q BY MR. JAUREGUI: I believe that I asked,
24 isn't it true that at the time of the approval of the
25 program, the DEAP program, I believe the case number and
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1 Order have been referred to, that the Commission ordered
2 that a 30-year amortization period begin when the Company
3 files its next general rate case or revenue tracker
4 increase; isn't that true?
5 A Yes, the 1989 Order states that at the time
6 of the next general rate case. The Commission changed
7 its mind evidently because the 30-year amortization
8 period was abandoned and replaced with a 24-year
9 amortization.
10 Q Thank you. Isn't it true that the current
11 carrying costs of the Company are less than what you
12 proposed in your revenue requirement?
13 A I think that question is better directed to
14 Mr. Gale.
15 MR. JAUREGUI: Thank you. I have no
16 further questions.
17 COMMISSIONER SMITH: Mr. Ward.
18 MR. WARD: Just a couple of quick
19 clarifications for the record, Mr. Said, and then I'll
20 ask you one substantive question.
21
22 CROSS-EXAMINATION
23
24 BY MR. WARD:
25 Q In your testimony, you state that FMC and
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1 Micron in fact could have participated in one or more of
2 the DSM programs. Do you recall that testimony?
3 A Yes.
4 Q You are aware, are you not, that of the
5 250 megawatts of demand used by FMC that all but
6 17 megawatts are for the electric arc furnaces?
7 A I would accept that.
8 Q Is there any electric arc furnace
9 efficiency improvement program that you know of?
10 A No.
11 Q Very quickly, I don't think you and I
12 misunderstand, but the discussion of the language in the
13 '98 contract regarding DSM recovery appears on page 9.
14 Do you have that testimony in front of you?
15 A Page 9 of my testimony?
16 Q Yes.
17 A Yes.
18 Q Now, I'm not sure that discussion beginning
19 with the question and answer at line 11 is really all
20 that clear. Isn't it true -- is it your understanding
21 that what the parties agreed to in the '98 contract, and
22 I want to make sure I state this exactly accurately, that
23 the parties agreed that the prices in that contract would
24 include then authorized DSM recoveries, first of all; is
25 that correct?
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1 A Yes.
2 Q But that neither party would by contract
3 prejudice their right to argue that those recoveries
4 should be either increased, decreased or in any way
5 affected by Commission decisions; isn't that true?
6 A I think what we agreed to was to disagree,
7 which I think comes to the same thing that you're
8 saying. The Company voiced its opinion that ongoing or
9 additional DSM expenditures, deferred expenditures,
10 should be allocated fully to FMC under the same or
11 similar methods as the past; whereas, FMC contended that
12 they may not be responsible for all of those
13 expenditures.
14 Q Fair enough. Now, the one substantive
15 point I want to pursue with you, if you would turn to, I
16 guess the best place, the question and answer at the
17 bottom of page 4 and running over to the top of page 5,
18 at the top of page 5, you say something that I think
19 you've paraphrased, as you noted, numerous times already
20 today and that is that, as I understand it, the prime
21 determinant that you immediately cite as justification
22 for the change in amortization period is the change in
23 the resource planning horizon from 20 years to five
24 years. Would that be a fair statement?
25 A Yes. I think again reiterating my major
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1 point is that DSM constitutes a regulatory asset rather
2 than a physical asset, but recognizing that in the past
3 DSM has been viewed as like a physical asset, a
4 generating asset, in establishing the period of time that
5 you would amortize, I also point out that there have been
6 significant changes in the way the Company plans its
7 resources.
8 Q Okay. My question is, and I won't bother
9 trying to set this up, I'll just give it to you, my
10 question is, why wouldn't the same rationale regarding
11 the change in resource planning criteria argue for a
12 five-year depreciation life, remaining depreciation life,
13 for all generating plants?
14 A As long as we remain a regulated utility, I
15 think the Commission will recognize that the generating
16 facilities have a longer life for benefit to its
17 customers.
18 Q Then let me ask the converse question: As
19 long as you remain a regulated utility, why wouldn't the
20 Commission have the same recognition with regard to DSM
21 measures?
22 A Again, because it's a regulatory asset as
23 opposed to a physical asset.
24 MR. WARD: That's all I have.
25 THE WITNESS: That's the main difference.
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1 MR. WARD: I'm sorry, did I cut you off,
2 Mr. Said?
3 THE WITNESS: I said that's my main point.
4 MR. WARD: I'm sorry. That's all I have.
5 Thank you.
6 COMMISSIONER SMITH: Mr. Gollomp.
7 MR. GOLLOMP: No questions.
8 COMMISSIONER SMITH: Mr. Fothergill.
9 MR. FOTHERGILL: I've got a little bit, one
10 for fun and another more serious.
11
12 CROSS-EXAMINATION
13
14 BY MR. FOTHERGILL:
15 Q Among the people that I associate with,
16 it's a pretty common sense thing is that the Company asks
17 for twice as much as it wants and the Commission awards
18 half as much as the Company asks, given that perception
19 of people, wouldn't it be reasonable to have an
20 amortization period of 10 to 12 years as opposed to five?
21 A I guess my answer is no. I think that our
22 proposal is fair. When you look at the expenditures, the
23 deferred expenditures, that have already been approved in
24 the past, they've already been going through a period of
25 amortization and now we're adding a five-year. We're
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1 reducing from a 24-year, but we've already amortized for
2 a number of years on expenditures that have been approved
3 in the past, so if you look at the pieces of the
4 application, there are some expenditures that will
5 eventually be recovered over a nine-and-a-half-year
6 period if our five-year amortization is approved at this
7 point in time because there's already been a period of
8 amortization for those, so we're recommending at this
9 point in time that everything be shifted to a five-year,
10 but I think it should be recognized that the recovery of
11 those expenditures is longer than five years in some
12 instances.
13 Q Thank you. I have one further question.
14 Following on Mr. Jauregui's questions where he asked you
15 if the DSM investments had been evaluated using a useful
16 life of five years as opposed to 15 to 30 years that some
17 of them, most of them, would have been found to be not
18 cost effective, that was his question to you and as I
19 recall you said perhaps.
20 A I think he changed his question to ask
21 whether or not it would change the economics. I don't
22 know what impact it would have on the cost effectiveness
23 of the programs.
24 Q Well, take it from an individual, just an
25 individual resident or business point of view and the
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1 shift from a 15 to a 30, a 15, 20, 25 useful life to a
2 five-year useful life could make the programs a burden,
3 not a benefit; isn't that true; that is, it could
4 undermine the benefits relative to the costs?
5 A If you assume a five-year useful life as
6 opposed to a longer life, then the benefits are reduced.
7 Q Then the benefits what?
8 A Are reduced.
9 Q To the point where they could be a burden
10 as opposed to a benefit; isn't that accurate?
11 A That's possible.
12 MR. FOTHERGILL: Thank you very much.
13 That's all I have.
14 COMMISSIONER SMITH: Mr. Purdy.
15 MR. PURDY: Thank you.
16
17 CROSS-EXAMINATION
18
19 BY MR. PURDY:
20 Q I think I've whittled this down to just two
21 areas. Briefly, Mr. Said, first I wanted to ask you a
22 couple of questions about the Company's commercial
23 lighting program. Now, I believe that you have testified
24 in rebuttal that the Company conducted what you term
25 persistence evaluations of what I'll call the CLP; is
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1 that right?
2 A Yes. In the fourth quarter of 1997, some
3 of our employees went to a number of sites to verify that
4 the lighting measures that had been funded were still in
5 place.
6 Q All right. Isn't it true that prior to the
7 filing of your rebuttal testimony the Commission Staff
8 submitted production requests to Idaho Power asking the
9 Company to identify any types of evaluations that it
10 performed on the CLP?
11 A I think there were a number of requests and
12 the terms of evaluations and reports and there are a
13 number of names that were used. We provided conservation
14 reports and a number of the formal written evaluations
15 that the Company had performed and I think there may have
16 been some communication problems as to the level of
17 detail. I think we tried to make the Commission aware
18 that there were a number of files that the Company had
19 that were available for inspection that would contain
20 more information as to the programs than what we provided
21 in response to data requests.
22 Q All right, then I guess I'll have to
23 approach it this way.
24 May I approach the witness?
25 COMMISSIONER SMITH: Certainly.
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1 MR. RIPLEY: I think if counsel is going to
2 make inquiry about production requests, probably he
3 should make them through me to Mr. Said. Obviously, all
4 of the answers say that they were prepared in
5 consultation with me.
6 MR. PURDY: Well --
7 MR. RIPLEY: I think it's a little unfair
8 to ask the witness as to a number of information requests
9 that were made and we have certainly nothing to hide.
10 We're simply attempting to ensure that whatever point
11 you're attempting to make be made as correctly as
12 possible.
13 COMMISSIONER SMITH: Mr. Purdy.
14 MR. PURDY: I'm simply trying to establish
15 what the Company provided the Commission Staff prior to
16 the preparation of Idaho Power's rebuttal testimony. If
17 necessary, I can ask Mr. Said what his involvement was,
18 if any, in the preparation of the Company's response, but
19 I think that it's quite routine to question a witness as
20 to responses that the client he represents provided to
21 another party in any proceeding before this Commission.
22 COMMISSIONER SMITH: Let's go ahead and see
23 how we do, Mr. Ripley.
24 MR. RIPLEY: Okay.
25 (Mr. Purdy approached the witness.)
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Wilder, Idaho 83676 Idaho Power Company
1 MR. PURDY: Do you need a minute, Counsel?
2 MR. RIPLEY: I don't know. I guess, yes.
3 COMMISSIONER SMITH: We'll be at ease for a
4 moment.
5 (Pause in proceedings.)
6 MR. PURDY: Mr. Said --
7 MR. RIPLEY: If we could have just a
8 moment.
9 I think we're ready.
10 COMMISSIONER SMITH: Thank you,
11 Mr. Ripley.
12 Okay, Mr. Purdy.
13 MR. PURDY: Thank you.
14 Q BY MR. PURDY: Mr. Said, I have handed to
15 you what I represent to be a copy of an excerpt of the
16 Company's response in this proceeding to the Commission
17 Staff's Request for Production No. 9. Do you have that
18 in front of you?
19 A Yes, I do.
20 Q All right. My next question is will you
21 please read the underlying request there and subpart (a)
22 of that request?
23 A "Provide copies of any management,
24 monitoring, or evaluation plans prepared or utilized for
25 the commercial lighting efficiency programs."
643
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q All right, and then will you read to me the
2 Company's response and subpart (c) of that response?
3 A "The management and status reports for the
4 programs are included in the Conservation Plans of Idaho
5 Power that are published annually. A copy of
6 Conservation Plans for the years 1989 through 1997 has
7 been provided. The Company will soon release its 1998
8 Conservation Plan and a copy will be provided.
9 References to the particular program years are set forth
10 below. Commercial Lighting Program, 1993 through 1997."
11 Q Thank you; so when you say, you testified
12 earlier, I believe, that you attempted to alert the
13 Commission and parties to the effect that there was
14 information available regarding what efforts the Company
15 had done or undertaken to evaluate the commercial
16 lighting program, is that what you're talking about, the
17 1998 conservation plan?
18 A No. Again, as I read this request, the
19 request is for management, monitoring and evaluation
20 plans, which the information that Mr. Anderson came and
21 reviewed later on I wouldn't consider to be a plan --
22 Q All right, then -- sorry.
23 A -- and I didn't say that we had made an
24 effort to tell the parties of the existence of these,
25 that was true only of Staff. Early on the Commission
644
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Staff had asked us for a number of materials that were
2 related to these questions that came later and we
3 provided that information and said that in addition to
4 the information provided, there were numerous files on
5 all of the programs.
6 Q Then I would ask you to please in that same
7 document that you have before you read on the record what
8 is listed there as Commission Staff Request No. 10 and
9 subpart (a) of that request.
10 A "Provide copies of any progress reports,
11 program evaluations, impact assessments, performance
12 summaries or similar documents prepared for the
13 commercial lighting efficiency programs."
14 Q Thank you. Now, will you please read the
15 first sentence of the Company's response to Request
16 No. 10?
17 A "In response to Requests 10(a), 10(b) and
18 10(c), all progress reports, program evaluations and
19 impact assessments conducted by or for Idaho Power are
20 included in the Plan or the Technical Appendices by
21 program."
22 Q Thank you, and I assume that that is
23 referring to the 1998 conservation plan; is that
24 correct? When the word "plan" appears in the Company's
25 response to Request No. 10, are you talking about the
645
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Company's 1998 conservation plan?
2 A The next line says, "The Plan was published
3 yearly, 1989 through 1997"; so I assume it's referring to
4 each of those years.
5 Q All right. Well, then my question is where
6 in any of the Company's conservation plans, any of the
7 appendices to those plans or anywhere else will I find
8 mention of the persistence evaluations that you indicate
9 Idaho Power conducted for the CLP?
10 A I think, again, it's a nature of
11 communication. I'm assuming that when Ms. Nemnich
12 responded to this question that she did not review her
13 files on the commercial lighting program as constituting
14 a report, an evaluation or an assessment. It was just
15 field data from her perspective.
16 Q And is Ms. Nemnich that you referred to
17 Ms. Darlene Nemnich who is an employee of Idaho Power
18 Company?
19 A Yes.
20 Q And is she the person who was primarily
21 responsible for the preparation of your response to
22 Request No. 10?
23 A She is listed along with Mr. Werner as
24 having coordinated the answer with Mr. Ripley.
25 Q All right. You were present at the
646
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Wilder, Idaho 83676 Idaho Power Company
1 deposition of Ms. Nemnich that was taken a couple of
2 weeks ago, weren't you?
3 A Yes.
4 Q All right. Do you recall her testimony to
5 the effect that no specific impact evaluation was
6 conducted for the CLP?
7 A Again, I think that's consistent with what
8 I perceive as Ms. Nemnich's perception of what
9 constitutes a report or an evaluation as opposed to field
10 notes.
11 Q So your answer was that yes, you agree with
12 my characterization of her deposition testimony that she
13 agreed that no impact evaluation, and I'll use those
14 precise terms, was conducted for the CLP?
15 A I believe her deposition response was
16 consistent with her data request response.
17 Q I'm sorry, that wasn't my question. Do you
18 need me to repeat my question?
19 A Yes, I guess I do.
20 Q Okay. Would you agree with my
21 characterization of Ms. Nemnich's testimony that she
22 testified, her deposition testimony that she testified,
23 that the Company had not performed an impact evaluation
24 of the CLP?
25 A I think that's true and that's consistent
647
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 with her response in the data request.
2 Q Thank you. Now, I would ask you to turn to
3 page 17 of your rebuttal testimony. Do you have that in
4 front of you?
5 A Yes, I do.
6 Q On that page you make mention of site
7 verifications that were conducted for the CLP. My
8 question is, do you know whether any of the surveyed
9 sites were selected randomly or what criteria, if any,
10 were used in the selection of those sites?
11 A My understanding is that there was a random
12 sample that was drawn and then as many of those sites
13 that were within the sample as could be visited were
14 visited, so the visiting within the sample may not have
15 been entirely random, but the sample that was initially
16 drawn was.
17 Q Do you have any idea of how many of those
18 sites have changed ownership?
19 A No, I don't.
20 Q Can you tell us how many of those sites are
21 no longer using the lighting measures that were installed
22 under the CLP?
23 A I believe that only one required a change
24 of ballasts, but otherwise, the majority, if not all of
25 the rest, had the original equipment.
648
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q Where did you get your information that you
2 utilized in preparing your testimony on the CLP,
3 Mr. Said? Did you get that from Ms. Nemnich?
4 A Yes, I did.
5 Q And Idaho Power did not call her as a,
6 present her as a, witness to this proceeding in support
7 of its application, did it?
8 A No.
9 Q In your mind, what is the difference
10 between an impact evaluation and a site -- I'm sorry, a
11 persistence evaluation?
12 A Again, I believe that from Ms. Nemnich's
13 point of view a program evaluation is a formal written
14 document. For purposes of persistence, we could go to
15 what I would call more field notes and see how many sites
16 continued to have the measure in place.
17 Q Yet you're not -- I believe I asked you
18 earlier if you could tell me how many of the sites that
19 the Company did inspect had in fact, still have the
20 conservation lighting measures in place and your answer
21 was that you didn't know.
22 A I said the majority. Of the sites that --
23 I think there were about 139 sites that were looked at
24 and, to my knowledge, only a couple had, one or two had,
25 adjustments to the facilities that had been in place.
649
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q And that's the extent of the evaluation
2 that you did, that the Company did, of the CLP?
3 A Yes. We were in the process of looking
4 into discontinuance of the program and were of the
5 opinion that if you were going to discontinue a program
6 that it wasn't reasonable to put a lot of time and effort
7 into a written report whose sole purpose would be to
8 propose modifications or discontinuance of the program.
9 Q Let me see if I can get this resolved in
10 one question. Haven't we established, and now I'm
11 talking about cost allocation, allocation of the
12 Company's DSM cost recovery, haven't we established that
13 the ability of a class to participate in Idaho Power's
14 DSM programs does not necessarily mean that every
15 customer in that class had the ability to participate?
16 A Yes, that we have.
17 Q All right, and I think we've established
18 that there might have been some barriers, actual
19 barriers, to participation; for instance, in the example
20 of the mobile home or manufactured home program, the only
21 customer that would be eligible for that program, of
22 course, is one who purchased a manufactured home; is that
23 right?
24 A Yes.
25 Q And as a practical matter, in any other DSM
650
CSB REPORTING SAID (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 program, a customer who had already installed whatever
2 conservation measures were available under the program
3 wouldn't have any reason to participate in the Company's
4 program, would it?
5 A That's true.
6 MR. PURDY: That's all I have. Thank you.
7 COMMISSIONER SMITH: Thank you, Mr. Purdy.
8 Commissioner Nelson.
9 COMMISSIONER NELSON: Thank you.
10
11 EXAMINATION
12
13 BY COMMISSIONER NELSON:
14 Q I have a couple of questions on your
15 exhibits in your direct, Mr. Said, on Exhibits 2 and 6.
16 If you'd look at Exhibit 6 for just a second, would you
17 agree with me that when you allocate the carrying charges
18 to the different schedules it's a uniform percentage?
19 A A uniform percentage applied to line 12?
20 Q Yes.
21 A Yes.
22 Q If you look at Exhibit 2, it looks to me
23 like the investments were made, if I picked out the right
24 exhibit here, the investments were made at very different
25 times and it just seems to make sense to me that the
651
CSB REPORTING SAID (Com-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 carrying charges for each program and each class of
2 customers would have to be different.
3 A You could vintage the carrying charges by
4 program.
5 Q Wouldn't it be normal to accrue those
6 carrying charges monthly or at least quarterly?
7 A The carrying charges are accrued monthly,
8 but they aren't assigned to programs at that point in
9 time or on the Company's books, so to do such an
10 allocation would require you to vintage the projects and
11 make that calculation at a later point in time.
12 Q Don't you think that it would make quite a
13 bit of difference in the amount that was allocated, say,
14 between Schedule 24 and residential considering that
15 residential programs were falling off starting in 1994
16 and the agricultural program was at least
17 semi-consistent?
18 A It would have an impact, yes.
19 COMMISSIONER NELSON: Okay, thank you.
20 COMMISSIONER SMITH: That's it?
21 COMMISSIONER NELSON: Yes.
22 COMMISSIONER SMITH: I just have a few.
23
24
25
652
CSB REPORTING SAID (Com-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Q First of all, I need to clear up some
5 confusion that I have since you answered questions of
6 Mr. Jauregui and then Mr. Fothergill. The way I was
7 seeing this was that the establishment of a useful life
8 of any project or program that you wanted to implement
9 would be done as one process, probably before you went
10 into the project to see if you thought it was worth
11 doing.
12 A Yes.
13 Q And then the amortization of the expenses
14 that were actually incurred I see as a separate process,
15 probably occurring at a separate time; am I seeing it
16 incorrectly?
17 A No, I would see it the same way.
18 Q Okay; so the fact that we decide 30 years
19 in one order, 24 in another, that doesn't change the
20 useful life of whatever product or procedure was
21 implemented?
22 A Right.
23 Q All right. Now, second of all, Mr. Ward
24 asked you a question about a five-year depreciation for
25 all of your generation and I'm wondering, would the
653
CSB REPORTING SAID (Com-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Company object to that?
2 MR. RIPLEY: If funded during the rate
3 freeze.
4 COMMISSIONER SMITH: Yeah, we'll do it
5 during the rate freeze, it will be all right.
6 THE WITNESS: In that case, we'd wait until
7 after the rate freeze.
8 Q BY COMMISSIONER SMITH: Okay, third, assume
9 that we want to perpetuate the common wisdom that was
10 referred to by Mr. Fothergill, I guess my question is to
11 you, would 10 or 12 years be better than 24?
12 A It's certainly a move in the correct
13 direction. I think, though, that our proposal for a
14 five-year amortization is a reasonable one, especially in
15 light of the fact that we've already been amortizing for
16 a period of time, and so when you look at those
17 expenditures that have been being amortized and add a
18 five-year period to that, you are closer to the 10-year
19 period for at least a portion of the investment that's
20 being recovered.
21 COMMISSIONER SMITH: Thank you.
22 Do you have redirect, Mr. Ripley?
23 MR. RIPLEY: Yes, I do and he's got some of
24 my material, if you'll beg my indulgence.
25 (Mr. Ripley approached the witness.)
654
CSB REPORTING SAID (Com-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 REDIRECT EXAMINATION
2
3 BY MR. RIPLEY:
4 Q Mr. Said, as a follow-up to a question by
5 Commissioner Smith, in the 1998 conservation plan that's
6 been filed with this Commission and referred to, does the
7 Company comment on the 24-year amortization period versus
8 the five-year amortization period?
9 A Yes, it does.
10 Q And what is the Company's comment in the
11 conservation plan in regard to the 24 years versus the
12 five years as far as cost effectiveness, et cetera?
13 A It might be best for me just to read it.
14 Q All right.
15 A "The levelized costs include an adder for
16 the present value of revenue requirement for deferred
17 costs. 24-year amortization based on an Idaho Commission
18 Order is assumed in computing the adder. The Company
19 believes that a 24-year amortization period is too long
20 and currently has cases pending in both Idaho and Oregon
21 before both the Idaho and Oregon commissions that would
22 reduce the amortization period significantly. The long
23 amortization period adds substantially to the overall
24 amount to be recovered because of additional carrying
25 charges. The Company notes that a five-year amortization
655
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 period would reduce the amounts of the revenue
2 requirement adders by 40 percent."
3 Q Now, counsel for the Irrigators asked you
4 some questions. First, he asked you as to the number of
5 customers that Idaho Power Company had, irrigation
6 customers --
7 A Yes, I remember that question.
8 Q -- and he used a number that I quite
9 frankly don't recall, but is that number of customers, of
10 irrigators, is that normally listed in terms of accounts
11 or actually physical customers or is there a difference?
12 A Generally, the number of customers that's
13 listed in a cost of service-type study would be the
14 number of accounts rather than specifically the number of
15 customers. Often there are customers, especially in the
16 irrigation class, that would have a number of accounts.
17 Q So if I understand it correctly, if I am an
18 irrigator and I had five irrigation accounts, Idaho Power
19 Company would report me as five customers?
20 A That's correct.
21 Q Now, when the Company is referring to
22 participants in conservation programs, what does it mean
23 by the term "participant" as you understand it?
24 A In that case, it truly is referring to the
25 customer rather than the account.
656
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q So a participant could have a number of
2 accounts, so participant could be, in the vernacular
3 we've been using here could be, a number of customers?
4 A That's true.
5 Q So you couldn't compare the participants to
6 the customers and come up with a meaningful percentage?
7 A It's a little bit mixing of apples and
8 oranges.
9 Q Now, when counsel asked you as to when the
10 participants first started showing up in the Company's
11 conservation plans, is there a lag between the time that
12 an individual begins to participate in the audit,
13 et cetera that's necessary for an irrigation program and
14 the actual funding of the irrigation measure,
15 conservation measure?
16 A I'm not exactly sure when the funding
17 occurs. I believe they have to pass a number of
18 criteria, so there would be a bit of a delay from the
19 time that they inquire to the time that the measure is
20 actually funded.
21 Q There is a necessary lag, particularly in
22 the irrigation program, between participation initially
23 and funding of the DSM program once it's been installed?
24 A I think that's true.
25 Q Now, you've been asked several times about
657
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 the Company's resource planning and I believe you were
2 asked is it a decision by the utility industry to go to
3 five years and you responded yes. Do you recall that?
4 A Yes, I do.
5 Q Now, when the utility makes or the industry
6 for that matter makes the decision to go to five years,
7 does it file with the various regulatory agencies, and
8 here I'm referring specifically to Idaho Power Company,
9 does it file resource plans with its regulatory agencies?
10 A Yes, it does.
11 Q Does it file such resource plans with the
12 Idaho Commission?
13 A Yes.
14 Q Does the Idaho Commission review those
15 resource plans and determine whether or not it will
16 concur in the resource plan as filed by Idaho Power?
17 A Yes.
18 Q So although Idaho Power might initiate the
19 change, its concurred in by the Idaho Commission?
20 A Yes.
21 Q And essentially, the change, as I
22 understand it, has been a switch to dependence on
23 regional resources as opposed to system resources of a
24 particular utility?
25 A Yeah, from the perspective of Idaho Power
658
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Company, again, there is no plan to build additional
2 resources. Rather, the Company intends to purchase
3 whatever needs it may have for our power in the future.
4 Q And has this been caused by, at least in
5 part, the changes that the Federal Energy Regulatory
6 Commission has imposed upon the utility industry as far
7 as generation is concerned, if you know?
8 A I guess I'm not sure exactly where you're
9 going with that question. To a large extent it's driven
10 by kind of a change in philosophy with regard to market
11 price and FERC decisions have certainly impacted that.
12 Q Better said than my question. Now, you
13 were asked a question by -- if I could approach the
14 witness.
15 COMMISSIONER SMITH: Sure.
16 (Mr. Ripley approached the witness.)
17 Q BY MR. RIPLEY: You were asked a question
18 by counsel for FMC as to whether or not there were any
19 conservation measures for arc furnaces that you know
20 about.
21 A Yes.
22 Q In the last general rate proceeding, did
23 Mr. Yokum testify on behalf of FMC Corporation, to the
24 best of your knowledge?
25 A Yes, he did.
659
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q And did Mr. Yokum's testimony refer to the
2 conservation efforts by FMC?
3 A He was asked if FMC takes internal steps to
4 reduce power costs and he responded that most definitely
5 they do.
6 Q And did he say that their energy
7 conservation focus was on the furnaces?
8 A He talks about the full plant. He mentions
9 that 94 percent of the plant power is used for the
10 furnace and that the remaining 6 percent is used for
11 operating presses, conveyors, environmental pumps and
12 other support equipment.
13 Q Now, you're certainly not an arc furnace
14 expert?
15 A No, I'm not.
16 Q So whether or not FMC can conduct any
17 energy conservation measures for arc furnaces is really
18 up to FMC?
19 MR. WARD: Madam Chair?
20 COMMISSIONER SMITH: Mr. Ward.
21 MR. WARD: I hate to object at this late
22 date, but the cross that Mr. Ripley is trying to respond
23 to only had to do with whether Idaho Power had any
24 conservation measures for arc furnaces. Other than that,
25 the context of what Mr. Yokum said last time seems
660
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 obvious to me, but I did want to make that objection for
2 the record that this examination is irrelevant.
3 MR. RIPLEY: I didn't bring it up to begin
4 with, it was counsel for FMC, but the issue is whether or
5 not FMC could participate under PIE and it's up to the
6 customer to come forward with the energy conservation
7 measures that they deem prudent or necessary. It's not
8 for Idaho Power Company to decide what measures are
9 prudent and accordingly, when he asked Mr. Said, you
10 know, if there are any conservation measures for arc
11 furnaces, obviously, it's not for Mr. Said to make that
12 determination. It's for FMC to propose those measures if
13 in fact there are such measures and that's the purpose of
14 my questions.
15 COMMISSIONER SMITH: Shall we go on?
16 MR. RIPLEY: Certainly.
17 COMMISSIONER SMITH: Are we done?
18 MR. RIPLEY: Just with one final question.
19 I think there's a pending question, but I'll simply
20 rephrase it.
21 Q BY MR. RIPLEY: Mr. Said, if there are any
22 energy conservation measures that FMC could participate
23 in for its arc furnaces, you don't know if they can
24 participate with a particular project, it's up to FMC to
25 propose the project under the now defunct PIE; would that
661
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 be true?
2 A Yes, I believe it would.
3 Q And that would also be true for Micron,
4 would it not, it's up to Micron to propose if there are
5 such measures?
6 A It's true of all the customers that they
7 need to approach the Company and see whether or not their
8 project fits into the criteria.
9 Q All right. Now, just so that the record is
10 clear, in the questions that counsel for Staff was asking
11 you in reference to the information supplied for the
12 commercial lighting program, the responses to those
13 information requests are attributed to a Mrs. Darlene
14 Nemnich, not to you?
15 A That's correct.
16 Q Have you been contacted by Staff other than
17 this cross-examination as to whether there is a further
18 explanation other than the cross that you might give to
19 the information requests?
20 A No. Again, initially we were contacted and
21 asked for some information which we provided and at that
22 time stated that there were numerous files in addition to
23 those. After that, we then got the formal data requests
24 which essentially asked for the same materials that we
25 had supplied and we made those same pieces of information
662
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 available. After that point in time there was no
2 additional informal contact or interaction between Staff
3 and myself on this issue.
4 Q Before we lose sight of the point, during
5 this period of time that Idaho Power Company was
6 conducting this evaluation, was Idaho Power Company also
7 considering and preparing the application to discontinue
8 the commercial lighting program?
9 A Yes, it was.
10 Q Did Idaho Power Company propose
11 discontinuance of the commercial lighting program on the
12 grounds that it was not cost effective?
13 A No.
14 Q What purpose would the study or evaluation
15 provide to Idaho Power Company's application to
16 discontinue the program that it filed with this
17 Commission?
18 A From the perspective of the Company, the
19 evaluation would add nothing to its application to
20 discontinue the program.
21 MR. RIPLEY: Thank you. That's all the
22 redirect I have.
23 COMMISSIONER SMITH: Thank you very much
24 for your help, Mr. Said.
25 MR. PURDY: Madam Chair?
663
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 COMMISSIONER SMITH: Mr. Purdy.
2 MR. PURDY: I'm sorry, is this the copy?
3 MR. RIPLEY: Yes, it is.
4 MR. PURDY: I would ask that the excerpt of
5 the production response I gave Mr. Said be marked as
6 Staff Exhibit No. 105.
7 COMMISSIONER SMITH: Any objection to
8 marking that as Exhibit 105? Then we will so mark it.
9 (Staff Exhibit No. 105 was marked for
10 identification.)
11 COMMISSIONER SMITH: Let's go off the
12 record for a few minutes.
13 (Off the record discussion.)
14 COMMISSIONER SMITH: Let's take a
15 ten-minute break.
16 (Recess.)
17 COMMISSIONER SMITH: Okay, let's go back on
18 the record. I think we're at your next witness,
19 Mr. Ripley.
20 MR. RIPLEY: Yes, we'd call Mr. Gale.
21 COMMISSIONER SMITH: And Mr. Gale has been
22 sworn just now while you looked the other way.
23
24
25
664
CSB REPORTING SAID (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 JOHN R. GALE,
2 produced as a rebuttal witness at the instance of the
3 Idaho Power Company, having been first duly sworn, was
4 examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. RIPLEY:
9 Q Mr. Gale, did you have cause -- well, first
10 let me ask your name for the record, please.
11 A John R. Gale.
12 Q Did you have cause to be prepared for this
13 proceeding certain prefiled testimony consisting of
14 15 pages and two exhibits marked for identification as
15 Exhibit No. 12 and Exhibit No. 13?
16 A Yes, I did.
17 Q And if I asked you the questions set forth
18 in that testimony, would your answers be the same today?
19 A I have one change.
20 Q All right.
21 A That would be on page 6, line 10, and it's
22 the number at the end of the sentence. We omitted an
23 intervenor award in our calculation, so that number needs
24 to be adjusted. I would correct it to 5,353,405.
25 Q 363?
665
CSB REPORTING GALE (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 A 353.
2 COMMISSIONER NELSON: It went down?
3 THE WITNESS: Right. There's an intervenor
4 award that needed to be deducted from the sharing.
5 MR. PURDY: Could I ask the whole amount
6 again?
7 THE WITNESS: You bet. The whole amount is
8 5,353,405 and that should be 5,606 less than the amount
9 originally filed.
10 Q BY MR. RIPLEY: Is that the Rate Fairness
11 Group's intervenor funding award from the last
12 proceeding?
13 A Correct.
14 Q Are there any changes to your exhibits?
15 A No.
16 MR. RIPLEY: Then we would request that
17 Mr. Gale's testimony be spread upon the record as if read
18 with the one exception and would ask that Exhibits 12 and
19 13 be marked as previously noted.
20 COMMISSIONER SMITH: If there is no
21 objection, it is so ordered.
22 (The following prefiled rebuttal
23 testimony of Mr. John Gale is spread upon the record.)
24
25
666
CSB REPORTING GALE (Di-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q. Please state your name, your employer, and
2 your business address.
3 A. My name is John R. Gale. I am employed by
4 Idaho Power Company (Idaho Power or the Company) as
5 General Manager of Pricing and Regulatory Services. My
6 business address is 1221 West Idaho Street, Boise, Idaho.
7 Q. Please summarize your work experience at
8 Idaho Power.
9 A. I started with the Company 15 years ago as
10 a Rate Analyst in the Rates and Contracts Department.
11 All but one year of my employment has been in the rates
12 and regulatory arena. I became Manager of Rates in 1991.
13 My current title is General Manager of Pricing and
14 Regulatory Services. I am responsible for the oversight
15 of the Company's regulatory filings, marginal and
16 embedded cost of service studies, rate design, tariff
17 administration, and retail electric service contract
18 administration.
19 Q. Have you previously provided direct
20 testimony in Case No. IPC-E-97-12?
21 A. No.
22 Q. What is the purpose of your testimony at
23 this time?
24 A. I will respond to the positions adopted by
25 the staff and the intervenors with regard to the
667
GALE, Di-Reb 1
Idaho Power Company
1 following issues: (1) the appropriate carrying charge to
2 be applied to the deferred Demand-Side Management (DSM)
3 balances; (2) the appropriate tax considerations that are
4 required in establishing customer rates; and (3) the
5 impact of adjusting the revenue requirement associated
6 with deferred DSM program expenses based upon changes to
7 the ongoing expenses recognized in current rates. I am
8 also sponsoring an exhibit which will summarize Idaho
9 Power's position in this case after consideration of the
10 recommendations of the various parties in their direct
11 testimony.
12 Q. Should failure on your part to address
13 every specific issue raised by all the parties indicate
14 your agreement with their position?
15 A. No. In the short amount of time allocated
16 to preparing rebuttal testimony there is simply not
17 enough time to address every item. Failure on my part to
18 discuss any particular issue does not imply that the
19 Company endorses or accepts such position.
20 Q. Have you reviewed the testimony of Ms.
21 Carlock and Dr. Peseau regarding the appropriate carrying
22 charge that should be applied to the DSM deferrals?
23 A. Yes. Both Ms. Carlock and Dr. Peseau
24 recommend applying a different carrying charge to the DSM
25 deferrals than has been applied in the past and was
668
GALE, Di-Reb 2
Idaho Power Company
1 authorized by this Commission in prior orders. Their
2 method creates a hypothetical cost of capital to be
3 applied selectively to an investment that was previously
4 funded by all of the Company's sources of capital. Both
5 Ms. Carlock and Dr. Peseau suggest using a carrying
6 charge comprised only of short-term debt.
7 Q. What is your response to their
8 recommendations?
9 A. I believe their recommendations would have
10 merit if, instead of a hypothetical adjustment, the use
11 of debt actually resulted in the immediate recovery of
12 the deferred amount by Idaho Power. What they suggest
13 appears to be what has become known as the
14 "securitization process" that has been explored in
15 several other states. An up to date discussion of
16 securitization prepared by Regulatory Research
17 Associates, Inc. is provided as Exhibit 12. Idaho Power
18 is willing to explore the possibility of securing this
19 amount with the Commission staff and other parties and
20 would agree to adjust the rate filing accordingly if
21 securitization were successful. Absent front-end
22 recovery securitized by an actual bond issue, the
23 hypothetical elimination of the common equity and the
24 preferred components of the overall cost of capital is
25 inappropriate. Hypothetical treatment is impractical and
669
GALE, Di-Reb 3
Idaho Power Company
1 unfair to the Company. It is impractical because in
2 reality Idaho Power does not apportion its rate base and
3 assign different capital costs to the portions. It is
4 unfair because the hypothetical application arbitrarily
5 reduces the return from what was ordered when the
6 programs were implemented. The current DSM deferred
7 balance was financed or funded by the existing capital
8 structure of the Company. It would be financed
9 exclusively by short-term debt only if the DSM balance
10 was securitized.
11 Q. What is your response to the assertion of
12 Ms. Carlock and Dr. Peseau that the shorter amortization
13 results in less risk to the Company?
14 A. Viewed in isolation there is a minimal
15 risk reduction related to the shortening of the
16 amortization period, but not nearly to the degree that
17 Ms. Carlock suggests. Her treatment reduces the tax
18 effected cost of capital of 12.8% to 7.0%, a decrease of
19 580 basis points. In comparison, the difference between
20 like bond instruments with 5 year and 25 year maturities
21 is 60 basis points.
22 Q. How has Idaho Power's overall rate of
23 return been traditionally determined by the Commission?
24 A. Idaho Power's overall rate of return has
25 been traditionally set in the context of a general rate
670
GALE, Di-Reb 4
Idaho Power Company
1 case where all the factors impacting risk can be
2 examined.
3 Q. What is your recommendation regarding the
4 appropriate carrying charge to be applied against the
5 unamortized DSM balances?
6 A. My recommendation is that the Commission
7 continue to use Idaho Power's authorized overall rate of
8 return which is what the Commission provided for in its
9 orders approving the Company's system DSM program
10 deferral authorizations.
11 Q. What is your understanding of Ms.
12 Carlock's method for computing the necessary tax
13 gross-up amount when applicable?
14 A. My understanding is that Ms. Carlock
15 recommends that the appropriate method for computing the
16 tax gross-up amount is to apply the gross-up to the
17 equity piece of the capital structure only as opposed to
18 applying the gross-up to the full amount as originally
19 filed by Idaho Power.
20 Q. What is the Company's position as to this
21 recommendation?
22 A. The Company will accept her recommendation
23 to apply the tax gross-up to the equity components of the
24 capital structure for purposes of this proceeding.
25 However, the cost of capital components should be
671
GALE, Di-Reb 5
Idaho Power Company
1 weighted by their costs in order to determine the
2 percentage that should be grossed up. When the different
3 capital costs are considered, the percentage to which the
4 gross-up should apply increases to 60 percent.
5 Q. Does Idaho Power's acceptance of Ms.
6 Carlock's method impact the earnings sharing calculation
7 for 1997?
8 A. Yes. Using her tax gross-up method and
9 weighting the cost of capital components results in an
10 earnings sharing amount of $5,353,405.
11 Q. While Ms. Carlock has agreed to a tax
12 gross-up on carrying charges that have been applied to
13 deferred DSM expenditures to date, she suggests that a
14 tax gross-up on carrying charges during the amortization
15 period is not appropriate. Do you agree with Ms.
16 Carlock's recommendation?
17 A. No. Ms. Carlock's recommendation again
18 assumes that the Company will actually issue short-term
19 debt to fund the recovery of the DSM balance. Absent
20 securitization, this will not actually occur and as a
21 result there will be a resulting tax liability associated
22 with the preferred and equity components of the cost of
23 capital on the additional revenues that the Company
24 obtains.
25 Q. What is your understanding of adjustments
672
GALE, Di-Reb 6
Idaho Power Company
1 made by Ms. Carlock related to the ongoing DSM expenses?
2 A. Ms. Carlock reduces the ongoing DSM
3 expenses recognized in the Company's revenue requirement
4 from its present level in the Idaho retail jurisdiction
5 of $1,060,090 to $212,534, a reduction of $847,556 per
6 year. Ms. Carlock bases the amount on a two-year average
7 of recorded administrative and Low Income Weatherization
8 Assistance (LIWA) amounts.
9 Q. Do you believe her adjustment is
10 appropriate?
11 A. No. I believe her adjustment overstates
12 the administrative savings and also sets a benchmark for
13 LIWA expenditures that will lock in reduced expenditures
14 in the future.
15 Q. Please separate the ongoing DSM expenses
16 authorized in the last rate case into its administrative
17 and LIWA components.
18 A. The system amount was $820,224 for
19 administrative expenses and $293,163 for LIWA. The
20 combined system amount for both components was
21 $1,113,387. The Idaho jurisdictional amounts were
22 $1,060,090 total ongoing expenses, $780,960 for
23 administrative expenses, and $279,130 LIWA program
24 expenses.
25 Q. Why does Ms. Carlock's adjustment
673
GALE, Di-Reb 7
Idaho Power Company
1 overstate the administrative savings?
2 A. Idaho Power's organizational structure
3 makes it difficult to measure the ongoing DSM
4 administrative costs because both corporate and field
5 personnel were and are involved in these activities.
6 Additionally these people work on other assignments
7 besides DSM. Prior to the general rate case the ongoing
8 administrative and LIWA costs were deferred for future
9 recovery. Under the deferred ratemaking treatment,
10 detailed tracking of administrative costs was much more
11 critical than after the rate case when the costs were
12 then expensed. The importance of detailed separation of
13 labor and other administrative expenses was no longer
14 required with the change in ratemaking. However, simply
15 because Idaho Power was not keeping track of the deferred
16 costs does not mean that the Company was not continuing
17 to incur them.
18 Q. Does Ms. Carlock have a point in
19 contending that DSM ongoing expenses should be expected
20 to be reduced from the level authorized in the last
21 general rate proceeding?
22 A. Yes. However, there continue to be
23 ongoing administrative costs associated with DSM
24 activities that her adjustment fails to recognize.
25 These costs include some of the ongoing expenses of
674
GALE, Di-Reb 8
Idaho Power Company
1 administering the LIWA program which are not included in
2 Ms. Carlock's adjustment. The ongoing expenses of
3 administering the Northwest Energy Efficiency Alliance
4 program are also not included nor are they being
5 deferred. Additionally the Company has and will continue
6 to have four Agricultural Representatives whose primary
7 responsibilities include interaction with our irrigation
8 customers on energy efficiency issues. The Agricultural
9 Choices program continues to be in existence and requires
10 the attention of Company personnel. Furthermore, the
11 Company continues to provide energy efficiency
12 information to our customers and to evaluate potential
13 energy efficiency programs on an individual basis.
14 Q. Do you have a proposal for adjusting the
15 ongoing administrative amount?
16 A. The corporate reorganization resulted in
17 only four individuals leaving the Company who spent the
18 majority of their time on system DSM program activities.
19 These individuals did work on other non-DSM activities as
20 well. A compromise method would be to decrease the
21 ongoing administrative expenses by netting the fully
22 loaded payroll expenses of these four individuals against
23 the amount authorized in the general rate case. Under
24 this method $337,362 would be deducted from the Company's
25 original filing on an annual basis corresponding to a
675
GALE, Di-Reb 9
Idaho Power Company
1 $1,686,810 reduction to the filing over the five-year
2 amortization period.
3 Q. Why will Ms. Carlock's recommendation lock
4 in reduced LIWA expenditures in the future?
5 A. The LIWA expense amount included in today's
6 rates was established by the Commission in Order
7 No. 25880 entered in Case No. IPC-E-94-5. That expense
8 amount may or may not be subscribed to by the various
9 agencies administering the program on behalf of Idaho
10 Power. The agencies then may or may not utilize the full
11 amount for which they have subscribed. By setting a
12 lower LIWA expense level than is currently established,
13 the LIWA amount will ratchet down and the ultimate amount
14 of dollars available to program participants will
15 decrease accordingly.
16 Q. Describe Idaho Power's funding commitment
17 to LIWA in 1998.
18 A. In 1998, Idaho Power has agreed with five
19 agencies in Idaho to fund up to $212,000, with an
20 additional liability of $75 per weatherized structure as
21 an administrative fee to the agencies. If the number of
22 homes weatherized in 1998 are the same as 1997, the
23 additional amount for the administrative fee would be
24 $22,500. The Company has also agreed with the same five
25 agencies to fund up to $75,000 of weatherization for
676
GALE, Di-Reb 10
Idaho Power Company
1 nonprofit organizations. The total estimated LIWA
2 liability for 1998 is $309,500.
3 Q. Have you supervised the preparation of an
4 exhibit to address the issues raised with regard to Idaho
5 Power's proposed five-year revenue requirement amount of
6 $42,348,700?
7 A. Yes. Exhibit 13 was prepared to compare
8 the revisions Idaho Power believes should be made to the
9 Company's filed five-year revenue requirement amount of
10 $42,348,700. The first column shows the various
11 components of the Company's original filing. The second
12 column represents the values that Idaho Power believes
13 are valid in light of the testimony of Commission Staff
14 and intervening parties resulting in a five-year revenue
15 requirement of $39,494,033.
16 Q. Please describe line 1 of Exhibit 13.
17 A. Line 1 of Exhibit 13 shows the change in
18 revenue requirement associated with accelerating the
19 amortization of the pre-1994 deferred DSM balance over
20 the next five years. Although various parties are
21 critical of Idaho Power's proposal to accelerate the
22 amortization period, the Company continues to believe
23 that regulatory assets should not be recovered as if they
24 were physical utility assets. The Commission should
25 recognize that this is especially true in light of
677
GALE, Di-Reb 11
Idaho Power Company
1 industry changes. This amount of $13,311,200 assumes
2 that the accelerated amortization would have begun on
3 January 1, 1998. Intervening parties have not challenged
4 this amount.
5 Q. Please describe line 2 of Exhibit 13.
6 A. Line 2 of Exhibit 13 shows six months of
7 amortization of pre-1994 deferred DSM expenditures as a
8 reduction to the line 1 balance proposed by Commission
9 Staff to shift the beginning of the accelerated
10 amortization period to July 1, 1998. The Company agrees
11 to this reduced balance adjustment of $413,820 (six
12 months at $68,970 per month).
13 Q. Please describe line 3 of Exhibit 13.
14 A. Line 3 of Exhibit 13 shows the deferred
15 DSM expenditures for the post-1993 through August 1998
16 period of time amounting to $16,239,800. Intervening
17 parties have not challenged this amount.
18 Q. Did the Commission Staff have a
19 recommended change to the post-1993 deferred DSM
20 expenditures?
21 A. Yes. The Commission Staff recommended
22 disallowance of certain Commercial Lighting Program
23 expenditures which have been addressed by Mr. Said in his
24 rebuttal testimony. The Company believes that all
25 deferred DSM expenditures were prudently incurred and
678
GALE, Di-Reb 12
Idaho Power Company
1 therefore has not made any changes to the post-1993
2 deferred DSM balances.
3 Q. Please describe line 4 of Exhibit 13.
4 A. Line 4 of Exhibit 13 shows the carrying
5 charges on the post-1993 deferred DSM expenditures not
6 including 1996 or 1997 carrying charges which have been
7 addressed though revenue sharing determinations.
8 Intervening parties have not challenged this amount of
9 $2,967,200.
10 Q. Please describe line 5 of Exhibit 13.
11 A. I have discussed the alternative proposals
12 made by Ms. Carlock and Dr. Peseau with regard to the
13 appropriate return that the Company should be entitled to
14 earn during the amortization period. The Company still
15 recommends that the rate of return of 9.199 percent be
16 utilized resulting in $4,826,800 of carrying charges
17 during the five-year amortization period.
18 Q. Please describe line 6 of Exhibit 13.
19 A. Line 6 of Exhibit 13 is an adjustment
20 suggested by Commission Staff. Consistent with the line
21 2 adjustment to remove six months of continued
22 amortization, the line 6 adjustment adds six months of
23 carrying charges to the post-1994 deferred DSM balance to
24 reflect a beginning date of July 1, 1998 for the
25 amortization period. The six month carrying charges on
679
GALE, Di-Reb 13
Idaho Power Company
1 $19,207,000 ($16,239,800 + $2,967,200) at 9.199 percent
2 amount to $900,530.
3 Q. The Commission Staff also recommended an
4 adjustment to remove six months of amortization of the
5 1994 DSM expenditures. Please comment.
6 A. The proposed Commission Staff adjustment is
7 inappropriate. Idaho Power was cognizant of the three
8 year requirement and accordingly made this filing to
9 address the treatment of deferrals of 1994 DSM
10 expenditures prior to the time that amortization was
11 required. The Commission has suspended rates relating to
12 those deferrals and it is not appropriate to now penalize
13 the Company for regulatory lag when the Company filed in
14 a timely manner.
15 Q. Please describe line 7 of Exhibit 13.
16 A. Line 7 of Exhibit 13 includes the
17 appropriate tax gross-up on carrying charges. Commission
18 Staff has suggested that the tax gross-up should only be
19 applied to the equity portion of the carrying charges.
20 The Company accepts the Commission Staff suggestion with
21 the exception that the Company believes that the
22 appropriate weighted equity percentage is 60 percent.
23 Therefore the tax gross-up number becomes $3,349,133 [60%
24 of ($2,967,200 + $4,826,800 + $900,530) * .642].
25 Q. Please describe line 8 of Exhibit 13.
680
GALE, Di-Reb 14
Idaho Power Company
1 A. As I have discussed in my rebuttal
2 testimony, I have proposed a compromise adjustment
3 reflecting a reduction of $337,362 in annual
4 Administrative and General expenses. Five years of this
5 reduction amounts to $1,686,810.
6 Q. Please describe line 9 of Exhibit 13.
7 A. Line 9 of Exhibit 13 shows the amount that
8 Idaho Power originally requested in this case,
9 $42,348,700 to be recovered over five years. The second
10 column reflects the appropriate 5-year revenue
11 requirement of $39,246,084 after adjustments have been
12 made to shift the beginning date of the amortization, to
13 compute the tax gross-up and to remove some ongoing A&G
14 expenditures.
15 Q. Does this conclude your testimony?
16 A. Yes.
17
18
19
20
21
22
23
24
25
681
GALE, Di-Reb 15
Idaho Power Company
1 (The following proceedings were had in
2 open hearing.)
3 MR. RIPLEY: We tender Mr. Gale for
4 cross-examination.
5 COMMISSIONER SMITH: We'll be different
6 this time. Do you have any questions, Mr. Fothergill?
7 MR. FOTHERGILL: No, I have none. Thank
8 you.
9 COMMISSIONER SMITH: Mr. Gollomp.
10 MR. GOLLOMP: No.
11 COMMISSIONER SMITH: Mr. Jauregui.
12 MR. JAUREGUI: Yes, I have a few.
13
14 CROSS-EXAMINATION
15
16 BY MR. JAUREGUI:
17 Q Turning to page 4 of your testimony --
18 COMMISSIONER SMITH: Could you turn on your
19 mike, please?
20 MR. JAUREGUI: Excuse me.
21 Q BY MR. JAUREGUI: -- page 4 of your
22 testimony --
23 A Yes.
24 Q -- in line 7, starting on line 6, you refer
25 to the current DSM deferred balance was financed or
682
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 funded by the existing capital structure of the Company.
2 Isn't it true that the Idaho Power Company has had
3 capital structure changes and reduced carrying costs
4 since the 1994 rate case?
5 A The Company's capital structure has had
6 changes since the rate case, since the test year in the
7 rate case.
8 Q Isn't it true that the long-term debt
9 structure and composite cost has reduced from 1994 to
10 1997?
11 A It may have been reduced. I haven't looked
12 at the recent long-term debt amount.
13 Q Are you familiar with your 10-K that you
14 filed with the FCC, are you familiar with that?
15 A I'm familiar with our 10-K.
16 Q If I were to tell you that the '94 number
17 was 8.02 for long-term debt, composite cost in 1997 was
18 7.84 as indicated in the 10-K --
19 A Did you say 7.84?
20 Q 7.84.
21 A Okay.
22 Q -- would you --
23 A I would accept the number out of the 10-K,
24 yes.
25 Q And with respect to the preferred stock,
683
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 would you accept the number in 1994 of composite cost of
2 6.55 versus 1997 of 5.66 percent?
3 A I would accept that.
4 Q So there has been a reduction in the
5 carrying costs to the Company since the last general rate
6 case?
7 A In those two items of the capital
8 structure, yes.
9 Q At the time that the case was being
10 prepared, was that prepared under your direction?
11 A The current case?
12 Q Yes.
13 A I was part of a steering committee that
14 directed the case development.
15 Q Was there any consideration given to any
16 adjustments or credits in view of the reduction in
17 carrying costs both with respect to the amount that
18 you're requesting and with respect to the carrying costs
19 involved in the amortization amount?
20 A As we developed the case, the Company
21 included the existing overall rate of return as its
22 carrying cost and did not try to adjust that.
23 Q In view of the reduced costs, in your
24 opinion, don't you believe that it is appropriate that it
25 be reduced?
684
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 A Well, overall rate of return is typically
2 reviewed and ruled upon in a general rate case where all
3 kinds of risk factors can be entertained, discussed and
4 decided. It was not our view that this was a general
5 rate case.
6 Q With respect to DSM expenses, are you not
7 requesting particular or special handling of DSM costs
8 over a particular period of time? I believe you've
9 recommended a five-year period of time.
10 A Yes, we've asked for an accelerated
11 amortization of the DSM costs.
12 Q And the amortization also involves the
13 carrying costs. Don't you believe that there should be
14 some consideration given with respect to what that amount
15 is?
16 A Well, the Company relied on the
17 Commission's orders to apply the last authorized overall
18 rate of return as the carrying costs. We do not
19 readdress that issue.
20 Q Going to page 9, I believe that you have
21 made a proposal with respect to adjusting ongoing
22 administrative amounts. Just to clarify, I believe your
23 answer indicates that there are only four -- is it only
24 four individual people who left the Company who were
25 involved in DSM from 1994 through 1997?
685
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 A Well, during the Company's reorganization,
2 there were many folks that left the Company and many that
3 came on. These four were primarily involved in DSM
4 activities and so those were the ones we identified as a
5 compromise adjustment.
6 Q Were there any other people who have left
7 the Company during its reorganization who were included
8 in the DSM expenditures previously or involved in DSM
9 programs?
10 A There very well could have been.
11 Q So there would be additional costs that you
12 associated with those individuals?
13 A Well, we had four individuals that were
14 primarily involved with the DSM programs. As I tried to
15 lay out in my testimony, both before and after we have a
16 mix of folks that do DSM and other activities. To
17 isolate those whose DSM activities were other than their
18 primary functions I'm not capable of doing.
19 Q That was done in 1990 -- for the last
20 general rate case, though, was it not?
21 A There was an identification of the ongoing
22 expense in the last general rate case, because at that
23 time we were still deferring the DSM expenses that later
24 became ongoing expenses. The accounting at that time was
25 much more accurate than it has been since then.
686
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q So is it your testimony that you don't
2 know?
3 A Don't know what, Mr. Jauregui?
4 Q What the expenditures are for DSM today
5 with respect to personnel?
6 A My testimony is that today I don't have an
7 accurate number of what the ongoing administrative costs
8 are for DSM.
9 MR. JAUREGUI: Thank you. I have no
10 further questions at this time.
11 COMMISSIONER SMITH: Thank you.
12 Mr. Richey?
13 MR. RICHEY: I have no questions for
14 Mr. Gale.
15 COMMISSIONER SMITH: Ms. O'Leary.
16
17 CROSS-EXAMINATION
18
19 BY MS. O'LEARY:
20 Q The accelerated recovery of DSM
21 expenditures would reduce the risk associated with
22 recovery of those expenditures, wouldn't it?
23 A Viewed in isolation, it would.
24 Q Is that a good thing for Idaho Power?
25 A For Idaho Power to recover its investments
687
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 in a faster time period, yes, that would be a good thing
2 for Idaho Power.
3 Q Does reducing the risk of recovery of your
4 deferred expenses reduce or increase the cost of capital?
5 A Assuming full recovery, it would have
6 reduction, in isolation reduction, on the cost of
7 capital.
8 Q And is the cost of debt factored into Idaho
9 Power's cost of capital?
10 A Cost of debt is one component of Idaho
11 Power's cost of capital.
12 Q Is the -- if the DSM amortization schedules
13 are reduced to five years from 24 years, that will
14 increase Idaho Power's revenues; correct?
15 A It will increase revenues.
16 Q Okay, and if accepted by the Commission,
17 the five-year schedule would increase Idaho Power's cash
18 flow; is that also correct?
19 A Yes. It increases revenues, expenses and
20 the primary effect is on cash flow.
21 Q And how would Idaho Power use the increased
22 cash flow? Would it use it to purchase new assets?
23 A The use of cash would be up to management.
24 There's all kinds of things that could be done with the
25 cash.
688
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 Q So purchasing of new assets might be one,
2 retiring outstanding debt might be another?
3 A Buying QF power might be another.
4 Q Increased dividends to shareholders?
5 A That would be an option, but not a likely
6 option.
7 Q Not a likely option? How about using the
8 increased cash flow to fund unregulated affiliates'
9 activities?
10 A Well, again, the primary benefit is an
11 increased cash flow. You can use it for countless
12 items. Each one is not a separate benefit. There's one
13 benefit in the increased cash flow.
14 Q If Idaho Power uses any increased cash flow
15 to acquire new assets, that would increase the book value
16 per share, wouldn't it?
17 A The primary advantage of increased cash
18 flow and whether it's an ultimate benefit to Idaho
19 Power's shareholders or not is what is done with that
20 money; is that new investment better than the existing
21 return or not, so it depends on how that money is spent
22 and the return on that investment, so it's unknown.
23 Q And if Idaho Power uses any resulting
24 increased cash flow to retire outstanding debt, that
25 would reduce interest payments, wouldn't it?
689
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 A If you retired debt, you would decrease
2 interest payments.
3 Q And a reduction in interest payments would
4 increase available income to stockholders potentially; is
5 that correct?
6 A A reduction in interest payments would
7 increase income available to stockholders. Again, you
8 have one benefit there you're using over and over again.
9 The benefit is with the cash flow.
10 Q So the increased cash flow could increase
11 dividends that would benefit shareholders and increased
12 cash flow to fund earning activities in unregulated
13 affiliates would also benefit shareholders?
14 A If the increased cash flow were invested in
15 an activity where the return was better than the existing
16 return, the shareholders benefit. If not, they don't.
17 Q Right. One would assume that you would
18 attempt to invest it wisely.
19 A One would assume.
20 Q Thank you. If Idaho Power does not use the
21 increased cash flow to fund investing activities, Idaho
22 Power's working capital balances would increase; is that
23 correct?
24 A Working capital balances would increase.
25 Q And if your working capital increases, the
690
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 financial ratios that the investors use to evaluate the
2 financial health of Idaho Power would improve, would they
3 not?
4 A Those involving current assets, those
5 ratios that involve current assets, would become
6 healthier, yes.
7 Q And the financial community would then view
8 Idaho Power more favorably with an accelerated
9 amortization of its deferred DSM costs, wouldn't it?
10 A Everything else the same, yes.
11 MS. O'LEARY: Thank you. No further
12 questions.
13 COMMISSIONER SMITH: Mr. Budge.
14 MR. BUDGE: Just a couple areas, if I may.
15
16 CROSS-EXAMINATION
17
18 BY MR. BUDGE:
19 Q Mr. Gale, beginning on page 3, I believe
20 line 9 of your testimony, and continuing on to page 4,
21 you provide, if I understand correctly, the Company's
22 response to the suggestions of Ms. Carlock and Dr. Peseau
23 of using a carrying charge comprised only of short-term
24 debt, and the area I had a question on, and maybe you can
25 help clarify my confusion, is a sentence that you
691
CSB REPORTING GALE (X-Reb)
Wilder, Idaho 83676 Idaho Power Company
1 provided on the top of page 4 beginning at the end of
2 line 3, if you have that available --
3 A Yes.
4 Q -- and you make the statement there that
5 it's unfair because the hypothetical application
6 arbitrarily reduces the return from what was ordered when
7 the programs were implemented, and as I look through the
8 various orders implementing each of these particular DSM
9 programs, I did not see that the Commission had ordered
10 any particular rate of return. Are you simply referring
11 to something else? Are you referring to the rate of
12 return in the last general rate case?
13 A No. No, what I'm referring to is as a
14 practical matter, when you apply just strictly debt to a
15 portion of our assets, you take away that return. That's
16 what I'm referring to.
17 Q Okay; so when you said what was ordered
18 when the programs were implemented, what were you
19 referring to, then?
20 A That those costs would be recovered at an
21 authorized rate of return.
22 Q You're not referring to an ordered rate of
23 return, then?
24 A Not a specific one.
25 Q A couple of other areas. Over on page 8, I
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1 believe, you begin there and respond to some changes in
2 the Company's organizational structure and other various
3 changes that you indicate affect the ability of the
4 Company to track various costs and I was puzzled here.
5 When the Irrigators prepared our Exhibit 301, we looked
6 at some of the administrative costs reported by the
7 Company in the last general rate case and those costs
8 were defined down to an exact penny.
9 A Yes.
10 Q And when I look at your testimony on the
11 top of page 8, you seem to indicate that organizational
12 structure makes it difficult to measure the ongoing DSM
13 administrative costs because both corporate and field
14 personnel were and are involved in these activities. Is
15 that an ongoing difficulty or is this a new difficulty
16 that has arisen as a result of some structural change
17 since the last general rate case?
18 A There are several dynamics at work and
19 probably the overriding one is the way that those costs
20 were funded and accounted for in the past and that
21 switched, but to try to identify an existing set of
22 people in 1994 and evaluate them again in today's context
23 is also very difficult to do because of the Company's
24 reorganization, so there's two dynamics at work, at least
25 two dynamics.
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1 Q And I guess that's where my confusion
2 lies. When we track a DSM cost, doesn't the Company have
3 to maintain certain records to place the costs as they're
4 incurred into a particular function or category and also
5 to quantify those costs?
6 A Yes, but let me take a second. The most
7 important cost breakout for the Company is defining
8 whether a cost is an expense or a capital item and that's
9 the overriding cost breakout and the one that we pay the
10 most attention to. Up until the rate case, the DSM
11 expenditures were being deferred and capitalized. A lot
12 more scrutiny as far as cost identification was done at
13 that time as opposed to once they were set up as an
14 expense item.
15 Now, my testimony is that we don't give the
16 scrutiny to differentiating different expense items
17 between different expense items as we do to capitalizing
18 items and expensing items and I would say most businesses
19 don't.
20 Q So as a result of that, is the Company
21 experiencing some difficulties quantifying administrative
22 expenses now ongoing relating to these DSM programs?
23 A To specifically target and identifying
24 ongoing admin costs, yes.
25 Q Continuing on at the bottom of that page 8,
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1 you address that issue and say that there continue to be
2 ongoing administrative costs associated with DSM that you
3 claim Mrs. Carlock had failed to recognize, but then you
4 go on to discuss those on the top of page 9 and I have
5 just a few questions there I wanted to ask you about.
6 You indicated that the low income weatherization program
7 costs were not included in the adjustment. Are those
8 costs you're able to qualify or quantify or are those
9 some that you can't quantify?
10 A I know that there are costs being incurred
11 and I cannot give you a quantification of those costs.
12 Q And that relates back to the problem that
13 you discussed earlier in your testimony?
14 A It relates to a problem of not knowing
15 until hindsight that tracking those expenses was going to
16 become an important issue in some future case.
17 Q Then in the next sentence you address the
18 administrative costs or costs of administering the
19 Northwest Energy Efficiency Alliance program. Is that
20 another cost that you're unable to quantify specifically
21 at this point in time?
22 A It is a cost we are incurring and I don't
23 have a dollar value for it.
24 Q Then you state in the next sentence, "The
25 Company has and will continue to have four Agricultural
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1 Representatives whose primary responsibilities include
2 interaction with our irrigation customers on energy
3 efficiency issues." Is that part of the ag conservation
4 program we've been discussing here or is that something
5 unrelated?
6 A Well, regardless of the future of the ag
7 choices program, these four individuals will still be
8 part of the Company's ongoing services to its irrigation
9 customers, but they are service agents for the ag program
10 as well.
11 Q So those are just basic administrative
12 costs that would be recovered as a part of your rate
13 base, not something that you're trying to add in to the
14 ongoing administration costs for the DSM programs?
15 A Well, that's my point is the Company had
16 ongoing Company expenses at the time of the last rate
17 case and we've since gone through a reorganization where
18 people are doing different jobs and I can only identify
19 four people who have left the Company who did DSM
20 specifically.
21 Q But when those four employees did the work,
22 didn't they have time cards or time records where they
23 were required to identify and categorize what they were
24 doing so it could be classified as an expense or as a
25 capital expenditure and quantified for purposes of either
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1 deducting the expense or deferring the capital cost?
2 A Yes, we have labor tracking accounting.
3 What I'm suggesting to you is once it's an expense item,
4 the tracking is not as exact as it is when it's the
5 difference between a capital item and an expense item.
6 Q So those are expenses that you're referring
7 to that would have been in the DSM category if you could
8 identify them, but since you're unable to identify them,
9 they're not there, but the Company continues to have
10 them?
11 A If I could have devised the time coding two
12 years ago, probably you'd see different numbers today.
13 The importance was not seen until today.
14 Q You also state on the same page that the
15 agricultural choices program continues to be in existence
16 and requires the attention of Company personnel and
17 that's a program that in all likelihood will end sometime
18 this year?
19 A That I do not know when it will end.
20 Q Although the Company's application to end
21 the program May 1 was deferred, no interested party has
22 opposed termination of the program, have they, although
23 some requested a delayed phase-out from what the Company
24 asked for?
25 A That's not my understanding of Staff's
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1 position.
2 Q The last item you have there on page 9, you
3 state that the Company continues to provide energy
4 efficiency information to customers to evaluate various
5 programs. That's not in any particular DSM program, is
6 it?
7 A No, that's ongoing expenses that --
8 Q So those ongoing expenses would be
9 recovered in the rate base anyway without the need to put
10 them in as a DSM deferred administrative cost?
11 A If they were in the last general rate case,
12 that would be true. If it's a mix of individuals who
13 were doing one thing at one time and are doing something
14 else, maybe not.
15 MR. BUDGE: I don't believe I have anything
16 further. Thank you, Mr. Gale.
17 COMMISSIONER SMITH: Thank you, Mr. Budge.
18 Mr. Purdy.
19 MR. PURDY: Thank you, Madam Chair.
20
21 CROSS-EXAMINATION
22
23 BY MR. PURDY:
24 Q Mr. Gale, would you turn quickly to page 3,
25 please, of your rebuttal, lines 4 through 6? Just as a
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1 point of clarification, do you know in fact whether
2 Ms. Carlock proposed a short-term debt rate or a
3 medium-term debt rate? You state there she proposed a
4 short-term rate.
5 A If I mischaracterized the term, I
6 apologize. It's certainly a debt rate.
7 Q Now, do you know how much debt Idaho Power
8 issued during 1996?
9 A Not offhand.
10 Q If I were to tell you it was, according to
11 the Company's 10-K it was, $57 million, would that sound
12 about right to you?
13 A It would sound reasonable, but I need to
14 check it.
15 Q Are you aware whether the Company has still
16 authorization to issue additional debt under its most
17 recent authorization from the Commission?
18 A I'm not aware.
19 Q Now, as I understand the gist of your
20 argument with respect to the carrying rate to apply to
21 these DSM costs is that it's somehow unfair to the
22 Company to allow it to authorize or authorize it to defer
23 these costs at an overall rate of return and now somehow
24 reduce that.
25 A Well, they're investments made by the
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1 Company, investments that were authorized a rate of
2 return, overall rate of return, not a debt rate of
3 return.
4 Q I guess the point of my question, isn't
5 it -- to the extent that the Company relied on whatever
6 authorization the Commission gave it, don't the Company's
7 customers have the same right to an expectation as to the
8 amortization period; in other words, is it fair to expect
9 that you can accelerate your amortization and not have
10 any adjustment to your carrying charge?
11 A That may -- there may be an issue to an
12 adjustment with the carrying charge. What I take issue
13 with is the degree and the categorization. If the true
14 desire is to reduce the carrying charge and not put the
15 Company at a disadvantage, I've suggested a way we can do
16 that, but to hypothetically just apply the carrying
17 charge, that's just an illusion.
18 Q Yeah, as I understood your answers to
19 questions from counsel, the Company recognizes or will
20 realize some type of benefit from the accelerated
21 amortization of its DSM, will it not?
22 A Viewed in isolation, yes.
23 Q Presumably, if it did not realize some type
24 of benefit, it would not be here today; isn't that a fair
25 statement?
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1 A Correct.
2 Q And shouldn't some recognition be made of
3 that fact, such as through an adjustment to the carrying
4 charge?
5 A The Company funds all investments based
6 upon its cap structure. It doesn't fund some differently
7 than others and we don't fund ones with shorter lives
8 different than ones with longer lives.
9 Q Now, would you agree with me that
10 Ms. Carlock and Commission Staff is not proposing to
11 change the Company's overall return for any rate base
12 items or deferrals other than DSM in this proceeding?
13 A But in effect it does. It carves out one
14 segment and doesn't adjust the rest. Where is the extra
15 equity on the residual portion of the Company's
16 investments?
17 Q Well, then using that logic, wouldn't it be
18 fair to reexamine as I think has been suggested during
19 the course of this hearing the Company's overall rate of
20 return? Isn't it the Company's position that in fact we
21 can isolate DSM and treat it singularly?
22 A We are only treating and isolating DSM
23 singularly to accelerate the amortization. That is it.
24 We haven't broadened it any further than that.
25 Q And as a result of that, the Company will
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1 face less risk, recovery of that amount?
2 A On that particular issue, yes, face less
3 risk.
4 Q Do you know what was the total amount of
5 NEEA expenditures made by Idaho Power in 1997 -- let me
6 restate that -- how much NEEA costs did Idaho Power
7 expense in 1997?
8 A I don't have that with me.
9 Q Does $3,000 sound about right or do you
10 have any idea?
11 A I have no idea.
12 Q And do you have any idea what total NEEA
13 expenditures to date have been?
14 A I don't have that with me.
15 Q Or what are expected to be expensed in
16 1998?
17 A I don't have that information with me.
18 Q All right. Is it your understanding that
19 Idaho Power has been ordered or authorized by this
20 Commission to defer its NEEA expenditures?
21 A Yes.
22 Q Is that in fact what the Company is doing?
23 A I assume so.
24 Q I'm sorry, I didn't hear you.
25 A I assume so.
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1 Q You don't know for certain?
2 A I assume so. Let me try to be more
3 responsive. If we were ordered to defer expenses and
4 we're incurring expenses, I am fairly certain we're
5 deferring those expenses.
6 Q All right, thanks.
7 MR. RIPLEY: Just for purposes of the
8 record, when you refer to deferring of expenses, the
9 Company was authorized to defer the payments to the NEEA
10 organization. It was not authorized to defer all of the
11 costs for participation in NEEA. I think that's
12 counsel's difficulty. Sorry for interrupting at this
13 late date, but I'd just as soon have the record correct.
14 Q BY MR. PURDY: Well, let's move on. Now,
15 if you'd turn to page 10 of your rebuttal testimony,
16 Mr. Gale, I believe that you review the commitment
17 amounts related to the Company's low income
18 weatherization program.
19 A Yes.
20 Q My question is, do you know what the
21 commitment amounts were for 1995, '96 or '97?
22 A I don't have that with me either.
23 Q Do you know whether the Company's actual --
24 well, strike that. A commitment amount is just that,
25 it's not necessarily what the Company actually expensed
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1 in any given year; is that a fair statement?
2 A That's a fair statement.
3 Q And isn't it true that Idaho Power's actual
4 expenditures under the low income weatherization program
5 have declined in the past three years?
6 A They have declined, but there was a reason
7 for the decline.
8 Q What was that?
9 A Well, besides the changes at Idaho Power,
10 there have been changes at the state and with DOE funding
11 and what we've seen is that with the agencies themselves
12 that there was not the activity generated because of some
13 cost cutbacks on their end and now they're gearing back
14 up, so we fully expect the amount of commitment that
15 we're talking about in 1998 to occur.
16 Q Your commitments for the past three years,
17 you stated, I think, that you don't know what the actual
18 amounts were, but do you know whether they were the same
19 every year?
20 A My reasoned, seasoned guess would be that
21 they were at budget items around the amount authorized in
22 the last rate case.
23 Q So it's not expected that Idaho Power's
24 commitment amounts will necessarily increase over the
25 next time period, next number of years?
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Wilder, Idaho 83676 Idaho Power Company
1 A Would you ask that again? I'm not sure I
2 got the gist of that one.
3 Q Do you know whether Idaho Power intends to
4 increase its commitment to the low income weatherization
5 program over the next several years?
6 A My expectation pending the outcome of this
7 case is that it will be as portrayed in my answer in my
8 testimony.
9 MR. PURDY: Could I have just one brief
10 second?
11 COMMISSIONER SMITH: Certainly.
12 (Pause in proceedings.)
13 MR. PURDY: That's all I have. Thank you
14 very much.
15 COMMISSIONER SMITH: Thank you.
16 Do we have questions from the Commission?
17 COMMISSIONER HANSEN: I believe I have one.
18 COMMISSIONER SMITH: Commissioner Hansen.
19
20 EXAMINATION
21
22 BY COMMISSIONER HANSEN:
23 Q I guess the question I'd have is as Idaho
24 Power becomes involved with NEEA, I'm just, I'm concerned
25 about what role or responsibility you see Idaho Power
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Wilder, Idaho 83676 Idaho Power Company
1 having to monitor the value of these projects and make
2 sure that they're cost effective and that we're obtaining
3 the proper results where you'll be a participant in
4 that.
5 A I don't have a direct interaction with NEEA
6 myself, Commissioner. I do have an understanding that
7 because it's a regional effort it will create a different
8 problem in trying to monitor in value its benefits than
9 specific customer programs, but the degree and the
10 approach, I'm not the right one to tell you.
11 Q I guess just one other follow-up question,
12 and being rather new to this on the Commission, do you
13 feel under the current DSM program that Idaho Power has
14 that responsibility to come forth to the Commission if
15 they feel like that one of the current DSM programs is
16 not effective or are not producing the results that were
17 indicated when that particular project was approved, do
18 you feel that responsibility of the Company or do you
19 think it's the Staff's responsibility to monitor and come
20 forth?
21 A Well, I think the Company has come forth in
22 discontinuing the programs and certainly, Staff has some
23 role in monitoring, but it's primarily the responsibility
24 of the Company.
25 Q I guess one other, this leads to another
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Wilder, Idaho 83676 Idaho Power Company
1 question. In Mr. Anderson's testimony, I believe he
2 stated that he felt like that, I believe it's on page 12,
3 line 3, where he states, "Idaho Power was not reasonable
4 and prudent in its continuation of the Commercial
5 Lighting Program beyond 1995...." I'm just kind of
6 curious, do you agree with that statement?
7 A It's hard for me to agree with it because
8 it's not as simple as just getting out of a program.
9 There's political ramifications, there's a process to go
10 through, there's customers to interact with, so it's not
11 as quick as an on/off switch. There's a point when the
12 Company needs to come forward and propose
13 discontinuances. Whether you can always time that at the
14 exact right time or not, well, probably not.
15 COMMISSIONER HANSEN: Thank you. That's
16 all I have.
17
18 EXAMINATION
19
20 BY COMMISSIONER SMITH:
21 Q Well, Mr. Gale, I have a question and I
22 don't know if I can ask it correctly and it has to do
23 with a motion made earlier by Mr. Ward. Were you here
24 when Mr. Ward made his motion?
25 A I was here, but I'm a visual person and I
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1 would want to see it written out because I'm not sure I
2 caught exactly what his intention was with his motion.
3 Q Well, that's my trouble, too. My shorthand
4 says he want us to order a '98 expensing, whatever that
5 meant. Did you have a reaction even though you didn't
6 see it written out? Was it a good idea?
7 A I don't know. I don't know exactly what he
8 means.
9 COMMISSIONER SMITH: Okay, thanks.
10 Redirect, Mr. Ripley?
11 MR. RIPLEY: Yes.
12
13 REDIRECT EXAMINATION
14
15 BY MR. RIPLEY:
16 Q First, in reference to the LIWA, low income
17 weatherization, programs, you were asked by counsel for
18 the Staff if there was a difference between the
19 commitment amount that Idaho Power Company would track
20 for and the amount that would actually be funded of that
21 commitment during the year.
22 A That's right.
23 Q Do I understand that it is Idaho Power
24 Company's anticipation that the funding of the commitment
25 will increase back up to 300,000 or thereabouts?
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1 A Yes.
2 Q And why is that, Mr. Gale? What do you
3 base that on?
4 A Well, we know that the agencies are up and
5 running again at full speed. We know that there were
6 some timing differences between the fiscal years that
7 caused a lag during that period. We know that there was
8 an increased level in the funding of nonprofit
9 weatherization programs, such as senior citizens centers,
10 that is a part of the process, and in talking with our
11 people administering the program, which I think has been
12 elevated within the Company, that what was laid out in
13 1998 will indeed occur as far as actual funding and not
14 just commitment.
15 Q Are you stating that the Company is going
16 to make additional efforts to ensure that the funding of
17 the commitment will occur?
18 A I think everything both on the state side,
19 the agency side and the Company's side is set in place to
20 ensure that.
21 Q Now, you also have been asked a number of
22 questions by counsel for the Industrial Customers,
23 Irrigators that if the Company increases its cash flow,
24 it could somehow affect earnings. Do you recall that
25 line of questions?
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Wilder, Idaho 83676 Idaho Power Company
1 A Yes.
2 Q Does the Company currently have a mechanism
3 in place to share any of those benefits, those increased
4 earnings, with its customers?
5 A First of all, the cash flow has to
6 translate into an increase in earnings, which I was
7 hopefully careful in saying that may or may not occur,
8 but if it does, yes, the Company does have a mechanism to
9 share earnings 50-50 above a certain benchmark level.
10 Q Is that what has been referred to as the
11 revenue sharing Order?
12 A Yes.
13 Q Now, in the revenue sharing Order, you were
14 a participant in the negotiations leading up to that
15 revenue sharing Order?
16 A Yes, I was.
17 Q Was one of the prime reasons from the
18 Company's standpoint for revenue sharing due to the
19 restructuring of the Company?
20 A Yes, it was.
21 Q Now, when I say "restructuring," could you
22 define for the record what I mean as opposed to dereg,
23 what was the Company doing restructuring?
24 A Well, that is not an industry
25 restructuring, that is a corporation restructuring and an
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1 internal restructuring, not even at that point having
2 anything to do with the holding company, where business
3 unit by business unit all the processes were being
4 evaluated and changed and in some instances employees
5 left the Company and others they came.
6 Q Now, under that restructuring of the
7 business units, were there new business units that did
8 demand side management activities that the old business
9 units did not do that individuals changed jobs,
10 et cetera?
11 A Well, responsibilities changed. The
12 tracking of the business units I'm not sure I could
13 answer, but the responsibilities changed, people doing
14 the activities changed.
15 Q And I appreciate that you're not a cost
16 accountant, but as I understand it, the Company attempts
17 to keep track of its costs in the various functions, but
18 do I understand from your testimony that keeping track of
19 expenses is not as important as keeping track of the
20 items that are capitalized versus the items that are
21 expensed?
22 A That's what I've testified to.
23 Q Now, when we harken back to the last
24 general rate case, there's been a lot of testimony as to
25 roughly $1 million of administrative expenses. Did the
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1 Company portray the $1 million as being the amount of
2 administrative costs that had been deferred in the
3 previous accumulation of demand side management balances?
4 A It was our estimation of an annual ongoing
5 expense for administration.
6 Q And that estimation was based upon what we
7 had previously deferred by that year?
8 A From deferred recordkeeping, yes.
9 Q So even if the Company, if it expensed an
10 item, it recovered it through the expenses as opposed to
11 recovering it through the demand side management
12 deferral?
13 A That was the new ratemaking arrangement.
14 Q All right. Now, under the new system, if
15 the Company indeed has enjoyed some additional reduction
16 in expenses, does that flow through to the revenue
17 sharing Order?
18 A Any reduction in expenses would flow
19 through.
20 Q Was that the purpose in your mind of the
21 revenue sharing Order was to ensure that during this
22 restructuring process that the Company would be protected
23 as well as its customers as a result of restructuring?
24 A That was part of the settlement, part of
25 the thought behind the settlement.
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Wilder, Idaho 83676 Idaho Power Company
1 Q Now, one final question. In reference to
2 the reduction of debt, et cetera, does that inure to the
3 benefit of Idaho Power Company's customers in your
4 opinion in the long run?
5 A In the long run, yes.
6 Q How is that?
7 A Well, a reduction in debt -- well, let me
8 back up a second. I thought I was tracking you one way
9 and I may not be. To the extent the changes in the cost
10 of capital actually occur in the Company's cost of
11 capital, I mean changes that we make actually reduce our
12 capital costs, that will be reflected in rates in the
13 future.
14 MR. RIPLEY: That's all the questions I
15 have. Thank you.
16 COMMISSIONER SMITH: Thank you.
17 Thank you, Mr. Gale.
18 (The witness left the stand.)
19 COMMISSIONER SMITH: I think that finally
20 brings us to the end of our witnesses. Without
21 objection, we will now admit all exhibits previously
22 identified.
23 (All exhibits previously marked for
24 identification were admitted into evidence.)
25 COMMISSIONER SMITH: And the only matter
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1 hanging is Mr. Ward's motion, which we managed to let him
2 get away without further discussion, so I'm wondering,
3 Mr. Ripley, if you would like to address that now or do
4 we want him to reduce it to writing or how should we
5 proceed?
6 MR. RIPLEY: Well, I'm like Mr. Gale, I
7 don't know for certain what counsel had in mind. He
8 isn't here; therefore, I don't want to take advantage of
9 him. I would dearly love to, but I won't, but the point
10 is if he wants to pursue the motion, then I think he
11 should make it and accompany it with a brief and that we
12 can respond to that brief and the other parties as well.
13 I simply do not know the ramifications of the motion, I'm
14 sorry.
15 COMMISSIONER SMITH: Mr. Purdy.
16 MR. PURDY: We're just now talking about it
17 and I guess my thoughts are that we haven't had time,
18 Staff hasn't had time, to really think through this and
19 decide for itself whether it believes it to be a good
20 idea or not, so I would urge the Commission to defer any
21 decision and allow the parties an opportunity to brief
22 should Mr. Ward choose to pursue it.
23 COMMISSIONER SMITH: Are there any other
24 issues or matters that the parties desire the opportunity
25 to brief? I hear silence, so I take that as a no;
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Wilder, Idaho 83676
1 therefore, what I propose is that we leave the record
2 open for a period of, let's say, seven days during which
3 time Mr. Ward if he wishes to pursue the motion should
4 file it in writing with a memorandum supporting it and if
5 he does so, then parties would have two weeks to
6 respond. Is that too much? I know we -- weren't we
7 tying to get this done in a timely manner?
8 MR. RIPLEY: There's a cutoff date by
9 June 30th, but again --
10 COMMISSIONER SMITH: But that's three weeks
11 from today which I think still is mid-June.
12 MR. PURDY: I think that gives us ample
13 opportunity.
14 COMMISSIONER SMITH: Mr. Jauregui, did you
15 have a comment on that?
16 MR. JAUREGUI: No, Madam Chairman, I
17 was just going to raise the same issue as to a timing
18 thing.
19 COMMISSIONER SMITH: Mr. Ripley.
20 MR. RIPLEY: There is one other issue and
21 that is if the Commission will recall, there was the
22 outstanding discovery request dispute between the
23 Industrial Customers and Idaho Power.
24 COMMISSIONER SMITH: Yes.
25 MR. RIPLEY: I believe that we have that
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1 matter resolved. I had worked out something with
2 Mr. Richardson. He had to leave and I would state that
3 we will file that stipulation that only affects the
4 Industrial Customers and Idaho Power within the next week
5 as soon as I can track down counsel.
6 COMMISSIONER SMITH: I guess I was
7 naively assuming that since the record was about to close
8 that all discovery disputes would be moot or at least
9 end.
10 MR. RIPLEY: Well, this isn't discovery.
11 It's now a stipulation to take the place of the
12 requirements.
13 COMMISSIONER SMITH: I see. Well, just so
14 everybody is clear, then, Mr. Purdy, would you assume the
15 responsibility of notifying Mr. Ward that he has seven
16 days to pursue his motion by putting it in writing and
17 filing it with the Commission?
18 MR. PURDY: Yes, I will.
19 COMMISSIONER SMITH: And then if he does
20 so, the parties have 14 days after that date, which would
21 be three weeks from today, within which to file their
22 responses to his motion, upon which the Commission will
23 consider the record to be closed and will issue its
24 decision as soon as possible.
25 I want to thank you all for your patience
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1 and your help in examining these issues and we're
2 adjourned.
3 (The Hearing adjourned at 3:50 p.m.)
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1 AUTHENTICATION
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4 This is to certify that the foregoing
5 proceedings held in the matter of the application of
6 Idaho Power Company for authority to increase its rates
7 and charges to recover demand side
8 management/conservation expenditures, commencing at
9 9:30 a.m. on Tuesday, May 26, and continuing through
10 Wednesday, May 27, 1998, at the Commission Hearing Room,
11 472 West Washington, Boise, Idaho, is a true and correct
12 transcript of said proceedings and the original thereof
13 for the file of the Commission.
14 Accuracy of all prefiled testimony as
15 originally submitted to the Reporter and incorporated
16 herein at the direction of the Commission is the sole
17 responsibility of the submitting parties.
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CONSTANCE S. BUCY
22 Certified Shorthand Reporter #187
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