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Home My WebLink About20050204Stewart Direct Revised.pdf825 N.E. Multnomah Portland, Oregon 97232 (503) 813-5000 tn.:J~t I V F~! L.E~D znO5 FEB - 4 Ar1iO: 11 PACIFICORP PACIFIC POWER UTAH POWER . .. - i., ;' ' :.. )1.-. j ' UTiLft IES COr'llsstON February 4, 2005 Jean D. Jewell Commission Secretary Idaho Public Utilities Commission 472 W. Washington Boise, ID 83702 Re:PacifiCorp Docket No. PAC-05- Dear Ms. Jewell: Please find enclosed for filing an original and nine (9) copies of Revised pages to John W. Stewart' direct testimony. Each changed page is labeled "REVISED FEBRUARY 4, 2005". Marked pages showing the changes in legislative style are also included. On the enclosed cd, is the corrected model for J. Ted Weston s Exhibit No.9. To the attention of the Court Reporter is a paper copy of all documents along with a diskette containing the revised testimony and exhibit. The enclosed pages are the following: Direct Testimony of John W. Stewart, Pages 11 through 14. Communications regarding discovery matters, including data requests issued to PacifiCorp, should be addressed to: By E-mail (preferred):datareq uest~pac ifi corp. com By Fax:(503) 813-6060 By regular mail:Data Request Response Center PacifiCorp 825 NE Multnomah St., Suite 800 Portland, OR 97232 Very truly yours cc:Service List Enclosures PROOF OF SERVICE I hereby certify that on this 4th day of February, 2005 I caused to be served, via Overnight mail, a true and correct copy of the Revised pages to John W. Stewart's direct testimony. Also enclosed on cd, is the corrected model for J. Ted Weston s Exhibit No. IDABO IRRIGATION PUMPERS ASSOCIATION, mc; Eric L. Olsen Racine, Olson, Nye, Budge Bailey, Chartered 201 E. Center O. Box 1391 Pocatello, ill 83204-1391 MONSANTO Randall Budge Racine, Olson, Nye, Budge Bailey, Chartered 201 E. Center O. Box 1391 Pocatello, ill 83204-1391 erations Coordinator CASE NO. PAC-O5- CORRECTED PAGES (11-14) TO JOHN W. STEWART'S DIRECT TESTIMONY (Marked) REVISED FEBRUARY 4, 2005 and Oregon. Through the scrutiny of these rate cases we have refined and improved the data to meet the objective of keeping our rate increase request as conservative as possible, while seeking to recover the revenue necessary to allow the Company an opportunity to earn a reasonable return on investment. Further, as discussed earlier in my testimony, we work hard to help customers mitigate their energy costs and to limit the need for rate case increases by controlling our own operating costs. The Company has been able to limit the net overall price increase in this case through the efforts discussed and through a deliberate effort to seek a price increase that is as conservative as possible. As noted earlier, since base rates were last set by the Commission in 1986, PacifiCorp rates have decreased. PacifiCorp s request for a net overall price increase of 9.2 percent based on rates that are lower than they were in 1986 is clearly reasonable and will continue to represent an excellent value to Idaho customers. If approved as filed, how will PacifiCorp s Idaho prices compare with other utilities? As stated in the Commission s Fiscal Year 2004 Annual Report , " Idaho electricity rates are among the lowest in the nation." Based on information from the Edison Electric Institute Typical Bills and Average Rates Report - (Sununer 20041LPacifiCorp s current retail average rates rank 171 st lowest out of 172 utilities. If the full rate increase were granted PacifiCorp rates would rank as the 165th lowest among 172 utilities. Further. on Gfl-a regional basis, as shown in the Stewart, Di - PacifiCorp REVISED FEBRUARY 4, 2005 chart below, PacifiCorp rates in Idaho are very low when compared to other Idaho utilities, and other regional utilities. Total Average Retail Rates (cents per kilowatt-hour) Pac if iCorp (Idaho rates) 87 Idaho State Average Mountain Region Average * Source: Edison Electric Institute, Typical Bills and Average Rates Report, Summer2004. : Mountain Region includes Arizona, Colorado, Idaho, Montana, Nevada, New Mexico Utah, Wyoming. When comparing PacifiCorp s electric rates to that of other utilities PacifiCorp s request for a net overall price increase of $11.4 million, or 9. percent, is reasonable. Granting this request would allow the Company an opportunity to earn a reasonable return on investment and to continue meeting the growing electrical service needs of customers in Idaho by providing safe and reliable energy. Introduction of Witnesses Please list the Company witnesses and provide a brief description of their testimony. The Company witnesses filing direct testimony are: Samuel C. Hadaway, FINANCO, Inc., will testify concerning the Company return on equity. Based on a DCF (Discounted Cash Flow) methodology confirmed by a risk premium analysis, as well as a review of the current market, the electric utility industry, and company-specific factors, Mr. Hadaway proposes a point value for PacifiCorp s cost of equity of 11.125 percent. Stewart, Di - 12 PacifiCorp REVISED FEBRUARY 4, 2005 Bruce N. Williams, Treasurer, will testify concerning the Company s cost of debt and preferred stock. Mr. Williams will show the Company s embedded cost of long-term debt to be 6.34 percent and the embedded cost of preferred stock to be 64 percent. He will also explain the calculation of the average capital structure for the utility for the test year. J. Ted Weston, Regulation Manager, will present the Company s overall revenue requirement based on normalized results of operations for a FY 2004 test year with known and measurable adjustments. Mr. Weston will present the normalizing adjustments to actual test period results related to revenue, operation and maintenance expense, net power costs , depreciation and amortization, taxes and rate base. Mark T. Widmer, Director, Net Power Costs, will describe the operation of the GRID model, including the new VISTA model for hydro normalization, and the calculation of net power costs. Stan K. Watters, Senior Vice President, Commercial & Trading, will provide information regarding the West Valley lease, the Gadsby Project and the Currant Creek generation project. Daniel J. Rosborough, Director of Employee Benefits, will testify to the Company s increased pension and employee benefit costs. Mr. Rosborough will also address the actions the Company is taking to control these rising costs. David L. Taylor, Principal Regulatory Consultant, explains the cost allocation procedures that apply following the adoption of the new MSP Protocol in Idaho. Stewart, Di - 13 PacifiCorp REVISED FEBRUARY 4, 2005 Mr. Taylor also presents testimony on class cost of service and functional revenue requirement. William R. Griffith, Director of Pricing and Regulatory Operations, will present testimony on three primary areas: 1) description of the Company s pricing objectives, 2) the Company s proposed rate spread, and 3) the Company proposed changes in price design for the affected rate schedules. Does this conclude your direct testimony? Yes. Stewart, Di - 14 PacifiCorp CASE NO. PAC-O5- CORRECTED PAGES (11-14) TO JOHN W. STEWART'S DIRECT TESTIMONY (Unmarked) REVISED FEBRUARY 4, 2005 and Oregon. Through the scrutiny of these rate cases we have refined and improved the data to meet the objective of keeping our rate increase request as conservative as possible, while seeking to recover the revenue necessary to allow the Company an opportunity to earn a reasonable return on investment. Further, as discussed earlier in my testimony, we work hard to help customers mitigate their energy costs and to limit the need for rate case increases by controlling our own operating costs. The Company has been able to limit the net overall price increase in this case through the efforts discussed and through a deliberate effort to seek a price increase that is as conservative as possible. As noted earlier, since base rates were last set by the Commission in 1986 PacifiCorp rates have decreased. PacifiCorp s request for a net overall price increase of 9.2 percent based on rates that are lower than they were in 1986 is clearly reasonable and will continue to represent an excellent value to Idaho customers. If approved as filed, how will PacifiCorp s Idaho prices compare with other utilities? As stated in the Commission s Fiscal Year 2004 Annual Report , " Idaho electricity rates are among the lowest in the nation." Based on information from the Edison Electric Institute, Typical Bills and Average Rates Report (Summer 2004), PacifiCorp s current retail average rates rank 171 st lowest out of 172 utilities. If the full rate increase were granted PacifiCorp rates would rank as the 165th lowest among 172 utilities. Further, on a regional basis, as shown in the Stewart, Di - Pacifi Corp REVISED FEBRUARY 4, 2005 chart below, PacifiCorp rates in Idaho are very low when compared to other Idaho utilities, and other regional utilities. Total Average Retail Rates (cents per kilowatt-hour) PacifiCorp (Idaho rates) 87 Idaho State Average Mountain Region Average * Source: Edison Electric Institute, Typical Bills and Average Rates Report, Summer2004. : Mountain Region includes Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming. When comparing PacifiCorp s electric rates to that of other utilities PacifiCorp s request for a net overall price increase of $11.4 million, or 9. percent, is reasonable. Granting this request would allow the Company an opportunity to earn a reasonable return on investment and to continue meeting the growing electrical service needs of customers in Idaho by providing safe and reliable energy. Introduction of Witnesses Please list the Company witnesses and provide a brief description of their testimony. The Company witnesses filing direct testimony are: Samuel C. Hadaway, FINANCO, Inc., will testify concerning the Company return on equity. Based on a DCF (Discounted Cash Flow) methodology confirmed by a risk premium analysis, as well as a review of the current market the electric utility industry, and company-specific factors, Mr. Hadaway proposes a point value for PacifiCorp s cost of equity of 11.125 percent. Stewart, Di - 12 PacifiCorp REVISED FEBRUARY 4, 2005 Bruce N. Williams, Treasurer, will testify concerning the Company s cost of debt and preferred stock. Mr. Williams will show the Company s embedded cost of long-term debt to be 6.34 percent and the embedded cost of preferred stock to be 64 percent. He will also explain the calculation of the average capital structure for the utility for the test year. J. Ted Weston, Regulation Manager, will present the Company s overall revenue requirement based on normalized results of operations for a FY 2004 test year with known and measurable adjustments. Mr. Weston will present the normalizing adjustments to actual test period results related to revenue, operation and maintenance expense, net power costs, depreciation and amortization, taxes and rate base. Mark T. Widmer, Director, Net Power Costs, will describe the operation of the GRID model, including the new VIST A model for hydro normalization, and the calculation of net power costs. Stan K. Watters, Senior Vice President, Commercial & Trading, will provide information regarding the West Valley lease, the Gadsby Project and the Currant Creek generation project. Daniel J. Rosborough, Director of Employee Benefits, will testify to the Company s increased pension and employee benefit costs. Mr. Rosborough will also address the actions the Company is taking to control these rising costs. David L. Taylor, Principal Regulatory Consultant, explains the cost allocation procedures that apply following the adoption of the new MSP Protocol in Idaho. Stewart, Di - 13 PacifiCorp REVISED FEBRUARY 4, 2005 Mr. Taylor also presents testimony on class cost of service and functional revenue requirement. William R. Griffith, Director of Pricing and Regulatory Operations, will present testimony on three primary areas: 1) description of the Company s pricing objectives, 2) the Company s proposed rate spread, and 3) the Company proposed changes in price design for the affected rate schedules. Does this conclude your direct testimony? Yes. Stewart, Di - 14 PacifiCorp