20050118Griffith Direct.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF PACIFICORP DBA
UT AD POWER & LIGHT COMPANY
FOR APPROVAL OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
CASE NO. P AC-O5-
) Direct Testimony of William R. Griffith
ACIFICORP
CASE NO. PAC-O5-
January2005
Please state your name, business address and present position with PacifiCorp
dba Utah Power & Light Company (the Company).
My name is William R. Griffith. My business address is 825 NE Multnomah Street
Suite 800, Portland, Oregon 97232. My present position is Director, Pricing &
Regulatory Operations, in the Regulation Department.
Qualifications
Briefly describe your educational and professional background.
I have a B.A. degree with High Honors and distinction in Political Science and
Economics from San Diego State University and an M.A. in Political Science from
that same institution; I was subsequently employed on the faculty. I attended the
University of Oregon and completed all course work towards a Ph.D. in Political
Science. I joined the Company in the Rates & Regulation Department in December
1983. In June 1989, I became Manager, Pricing in the Regulation Department. In
February 2001, I assumed my present responsibilities.
Have you appeared as a witness in previous regulatory proceedings?
Yes. I have testified for the Company in regulatory proceedings in Utah, Oregon
Wyoming, Washington, and California.
Purpose of Testimony
What are your responsibilities in this proceeding?
I am responsible for the Company s proposed rate spread and for the proposed price
design changes.
Please describe PacifiCorp s pricing objectives in this case.
The Company s pricing objectives are to implement the 9.2 percent overall net price
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increase while reflecting cost of service and minimizing customer bill impacts.
order to accomplish these objectives, the Company is proposing a rate increase cap so
that no rate schedule class receives more than 1.5 times the overall net increase.
These rates are proposed to become effective September 2005.
What is the purpose of the rate increase cap proposed by the Company?
The proposed rate increase cap is intended to provide appropriate price signals to all
customers while mitigating impacts on those receiving the largest increases. The cap
also helps assure that gradualism and fairness are achieved for all classes.
Please explain the significance of a net price increase as referenced in your
testimony.
The net price increase, as used in this case, is the actual rate impact on customers after
including the effect of the elimination of the Power Costffax Surcharge (Schedule
93). Because Schedule 93 is scheduled to tenninate prior to the implementation of
proposed prices in this case, it is appropriate to take into account the termination of
Schedule 93 when assessing customer bill impacts and applying the proposed price
increase cap. In this way, actual rate impacts on customers can be analyzed and bill
impacts mitigated.
Please describe the Company s specific proposal for the allocation of the revenue
requirement.
After excluding any customer on a fixed price contract that was approved under the
IPUC Contract Standard - and who is therefore not eligible for a price change in this
case - the overall proposed average net price increase is 9.2 percent. The Company
proposes the following allocation of the net price increase for the major customer
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classes:
Customer Class
Residential
General Service
Schedule 23/23A
Schedule 6/6A135
Schedule 8
Schedule 9
Schedule 19
Irrigation
Schedule 10
Nu-West-Special Contract
Public Street Lighting
Proposed Net Price Change
60/0
50/0
70/0
60/0
60/0
10.4%
13.
13.
Please explain the proposed rate spread.
The proposed rate spread has been guided by cost of service results, and the proposed
rate increase cap has been implemented to mitigate net price increases. As a result
customer classes currently falling close to cost of service unity are proposed to receive
closest to the average overall increase. Based on cost of service results , General
Service customers are proposed to receive the smallest increase of all classes and in
no case is any class proposed to receive less than one half the overall net increase, or
6 percent. The proposed rate spread recovers the overall revenue requirement
change, while mitigating net bill impacts and assuring that all customer classes
receive appropriate price signals reflecting the upward direction of the Company
costs.
Please explain the proposed price increase for the Nu-West Special Contract.
The cost of service study recommends that Nu-West should receive a price increase
nearly twice the overall average. Based on these results and after implementing the
rate increase cap, the Company proposes to increase net rates for Nu-West by 13.
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percent, or 1.5 times the overall net average increase. Because the expiring Power
Cost/Tax Surcharge (Schedule 93) was not applicable to Nu-West, Nu-West's base
and net price increases are the same - 13.8 percent. As a result, Nu-West will see a
proposed price increase that is 1.3 percentage points higher than the overall proposed
Idaho base price increase.
Please describe Exhibit No. 25.
Exhibit No. 25 shows the estimated effect of the proposed price change by rate
schedule for the normalized historic test period. The table displays the present
schedule number, the proposed schedule number, the average number of customers
during the test year, and the megawatt-hours of energy use in Columns (2) through
(5). Revenues by tariff schedule are divided into six columns - three for present
revenues and three for proposed revenues. Column (6) shows annualized revenues
under present base rates; Column (7) shows present revenues from Power Cost/Tax
Surcharge (Schedule 93), and Column (8) shows net present revenues. Column (9)
shows annualized revenues under proposed base rates; Column (10) shows proposed
revenues from Schedule 93; and Column (11) shows the net estimated revenues which
would be received if the proposed prices were in effect during the entire normalized
historic test period. Columns (12) and (13) show the dollar and percentage changes in
base rates. Columns (14) and (15) show the dollar and percentage changes comparing
net rates in effect today including Schedule 93 with net rates proposed to be in effect
at the conclusion of this docket and with the expiration of Schedule 93.
Please describe Exhibit Nos. 26 and 27.
Exhibit No. 26 contains the Company s proposed revised tariffs in this case. Exhibit
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No. 27 contains the revised tariff sheets in legislative format.
Does the Company propose to continue the current Schedule 94, the Rate
Mitigation Adjustment (RMA)?
No. While revenues presently being collected under the RMA are included in the
Company s normalized present revenues reported in this case, the Company proposes
to terminate the RMA upon implementation of proposed rates.
Please explain.
Pursuant to IPUC Order No. 29034 regarding Case No. P AC-02-, the RMA
became effective on June 8, 2002 as a surcharge or surcredit applied to each tariff
schedule on a cents per kilowatt-hour basis and reflected as a separate line item
charge on customers' bills. In that case , the RMA was designed to achieve two major
goals: i) to moderate the impact of the rate change on rate classes, and ii) to move the
irrigation class closer to cost of service. The Commission also determined that the
Year 3 RMA rates now in effect could be subject to termination upon the earlier of (I)
the expiration of current electric service Schedule 34 BP A Credit or (2) the adoption
by the Commission of a cost of service study for PacifiCorp and the subsequent
implementation for all customers of the approved cost of service study. Based on this
latter condition, and given the filing of a complete cost of service study in this case
the Company proposes to simplify rates and to tenninate the RMA (Schedule 94)
upon approval by the Commission of the cost of service study in this case.
Including the effects of the Company s proposal, how have the Company
proposed rates in Idaho changed over time?
The Company s base rates have remained stable in Idaho for more than thirteen years.
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Moreover, base rates have not increased in Idaho since 1986, a period of nearly
nineteen years. Since 1986, the Consumer Price Index has increased by over 70
percent. If the Company s proposed increase in this case is approved as filed, changes
to base rates will have declined on a real basis by over 35 percent since 1986.
Electricity has clearly been a good value for our customers over the years and will
remain a good value if the Company s increase is approved as filed.
Residential Rate Design
Please describe the Company s proposed residential rate design changes.
For residential customers, the Company proposes to implement the price increase on a
uniform percentage basis, while keeping the current ratios between summer/winter
energy charges and on-peak/off-peak energy charges for optional time of day
Schedule 36. For Standard Residential Schedule 1 , the Company proposes to increase
the minimum charge from $9.57 to $11.00 per month. This change reflects the
underlying changes in the residential energy charges for Schedule 1. For Optional
Schedule 36, the customer service charge is proposed to increase from $12.56 to an
even $13.00 per month.
How will the proposed residential rate design impact customers?
Exhibit No. 28 contains Monthly Billing Comparisons for the Company s proposed
tariff revisions. For residential and irrigation customers, the Monthly Billing
Comparisons include the effects of all tariff riders, including the BP A credit, in order
to more appropriately reflect the actual change on customers' bills. For Schedule 1
the Monthly Billing Comparisons show that the Company s rate design proposal
results in uniform percentage impacts across usage levels. For Residential Optional
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Time of Day Schedule 36, even though base off- and on-peak rates were increased on
a uniform percentage basis, the Monthly Billing Comparisons show that the net
percentage impacts are greater for high usage customers. This is due to the effect on
bills after including the impact of the BP A credit, which does not vary by time of day.
General Service & Irrigation Prices
Please describe the Company s proposed price design changes for Schedules 6
, 8 and 9.
The Company proposes to implement the price change uniformly to both energy and
demand charges, while keeping the current seasonal ratios between summer and
winter demand charges. In order to simplify rate administration, the Company
proposes small changes to the customer service charges rounding up to whole dollars
for these schedules.
Please describe the Company s proposed price design changes for Schedule 23
and 23A.
The Company proposes to implement the price change uniformly to energy charges
while keeping the current seasonal ratio between summer and winter energy charges.
The Company also proposes to increase customer service charges rounding up to a
whole dollar amount.
Please describe the Company s proposed price design changes for Schedule 17.
Schedule 17, Standby Service, currently has no customers. To implement the
proposed price change, the Company proposes to increase all charges in Schedule
by 6.7 percent, equal to the proposed base price increase for the equivalent full
requirements service tariff, Schedule 9.
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Please describe the Company s proposed price design changes for Schedule 10.
Pursuant to IPUC Order No. 29034 regarding Case No. PAC-02-1, the Company
consolidated the previously separate A, Band C firm and interruptible irrigation rate
options into a single firm rate effective June 8, 2002. As a result, the Company
implemented the current customer service and demand charges which were calculated
as the average of those three previous rates, proportioned for the amount of the usage
under each of the three previous options. The Company also revised the previous on-
season energy charge to the current three-block energy charge to more closely track
cost of service.
In this case, the Company proposes to retain the current rate structure of
Schedule 10. The Company also proposes to implement the price change for
Schedule lOon a uniform percentage basis to both demand and energy charges in
order to maintain the current relationships between the energy blocks and the current
ratio of on-season to off-season average revenues. Consistent with proposals for the
other schedules, the Company proposes small changes to the customer service
charges, rounding up to whole dollars for these schedules. The customer service
charge proposals for Schedule 10 are: Small On-Season from $10.17 to $11.00; Large
On-Season, from $30.33 to $33.00; and Post-Season, from $16.17 to $17.00.
Commercial and Industrial Space Heating
What is the Company s proposal for Commercial and Industrial Space Heating,
Schedule 19?
In this case, the Company proposes to close Schedule 19 to new service. In a future
case, the Company plans to propose to move these customers to the appropriate
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general service rate schedule--either Schedule 23 or
Why is the Company proposing this change?
Schedule 19 is an end-use specific rate serving heating loads-the Company s only
end-use rate of its type in Idaho. The Company believes that closing Schedule 19 to
new service at this time is an appropriate first step toward ultimately moving these
customers to the applicable general service rate schedules. It allows public notice of
the Company s intentions well in advance of implementation of any rate schedule
change. In the future, these customers, rather than being served on an end-use based
rate, will pay prices equivalent to other similarly situated customers with the same
load and usage characteristics. The Company believes this is more equitable for all
customers.
Has the Company used this approach in other states where a rate schedule was
first closed to new service, and then later customers were moved to other
appropriate rate schedules?
Yes. The Company has used this two-step approach in eliminating end-use specific
rates in other states. In Utah, Wyoming, and Washington, end-use specific heating
rates were eliminated by the Company using this method.
Lighting
How does the Company propose to implement the price change for lighting
customers?
The Company proposes to implement proposed price change for lighting customers
by generally applying a percentage increase to the current rate to achieve the proposed
overall revenue change.
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Monthly Billing Comparisons
Please explain Exhibit No. 28.
As referenced earlier, Exhibit No. 28 details the customer impacts of the Company
proposed pricing changes. For each rate schedule, it shows the dollar and percentage
change in monthly bills for various load and usage levels.
Billing Determinants
Please explain Exhibit No. 29.
Exhibit No. 29 details the billing determinants used in preparing the pricing proposals
in this case. It shows billing quantities and prices at present rates and proposed rates.
Does this conclude your testimony?
Yes, it does.
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