20070608Application.pdf

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Salt lake City, Utah 84111
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VIA OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Re:Application of Rocky Mountain Power
for Approval of Changes to Its Electric Service Schedules
Case No. PAC-07-
Dear Ms. Jewell:
Please find enclosed for filing an original and nine copies of Rocky Mountain Power
Application in the above-referenced matter, along with nine copies ofPacifiCorp s direct
testimony and exhibits. Also enclosed is a diskette containing the Application, summary of
testimony, direct testimony, exhibits, and work papers. To the attention ofthe Court Reporter is
a paper copy of all documents along with a diskette containing all testimony and exhibits.
The following exhibits, Hadaway Exhibit No., Williams Exhibit Nos. 8-, Fehrman Exhibit
Nos. 17-, Wilson, 22-, 26-27 are only available in pdfformat.
All formal correspondence and regarding this Application should be addressed to:
Brian Dickman
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: brian.dickman~pacificorp.com
Dean Brockbank
Justin Brown
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: dean.brockbank~pacificorp.com
i ustin. brown(fYpacificorp. com
Communications regarding discovery matters, including data requests issued to Rocky Mountain
Power, should be addressed to one or more of the following:
By E-mail (preferred):
By Fax:
By regular mail:
datareq uest~pacifi corp. com
[phone]
Data Request Response Center
PacifiCorp
825 NE Multnomah St., Suite 2000
Portland, OR 97232
Thank you for your assistance with this filing.
Very truly yours
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Jeff Larsen
Vice President, Regulation
cc:Service List
Enclosures
CERTIFICATE OF SERVICE
I hereby certify that on this 7th day of June, 2007, I caused to be served, via overnight
delivery, a true and correct copy of Rocky Mountain Power s general rate case
application, direct testimony, and exhibits in P AC-07-, to the following:
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
201 E. Center
O. Box 1391
Pocatello, ID 83204-1391
Mail: elo~racinelaw.net
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
201 E. Center
O. Box 1391
Pocatello, ID 83204-1391
Mail: rcb~racinelaw.net
Tim Buller
Agrium, Inc.
3010 Conda Road
Soda Springs, ID 83276
Mail: tbuller~agrium.com
Debbie DePetris
Regulatory Analyst
ROCKY MOUNTAIN POWER
SUMMARY OF TESTIMONY
P AC-O7-
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Rocky Mountain Power, a division ofPacifiCorp, provides this summary of its testiMbbYU.
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filed in support of its general rate case application. Copies of the Company s filing are
available online at www.pacificorp.com;click on "News and Info" and then select
Regulatory Information" and "Idaho." Copies of the filing may also be reviewed during
regular business hours at the offices of the Idaho Public Utilities Commission in Boise
and in these Rocky Mountain Power offices:
25 East Main, Rexburg
509 South 200 East, Preston
852 East 1400 North, Shelley
24852 U.S. Highway 89, Montpelier
A. RICHARD W ALJE
President, Rocky Mountain Power
Company witness Walje provides an overview of the Company s 2007 general rate case
filing and testifies in support of the proposed revenue increase. The Company finds itself
in a position similar to that of many utilities across the nation-increasing loads
environmental requirements and improved reliability expectations from customers are
driving the need for new utility plant investments which have associated fuel costs
financing costs and operation and maintenance expenses.
Company witness Walje testifies that the Company requires a revenue increase of $18.
million, or 10.3 percent overall, in order to recover the costs of providing safe and
reliable electric service and to provide a reasonable opportunity for the Company to earn
a fair return on its investments. Commission approval of this increase will enable the
Company to maintain the financial strength necessary to attract the requisite capital to
meet the electrical service needs of its Idaho customers. Mr. Walje also explains the
impacts of MidAmerican Energy Holdings Company s (MEHC) recent acquisition of the
Company and MEHC's efforts to control costs.
SAMUEL C. HADA WAY
FINANCO, Inc.
Dr. Hadaway testifies in support ofthe Company s return on equity (ROE). Based on his
review of alternative versions of the constant growth and multistage growth discounted
cash flow model, Dr. Hadaway proposes 10.75 percent for the Company s cost of equity.
His analysis is confirmed by a risk premium analysis and a review of comparable
companies. Dr. Hadaway also describes the unique operational risks that Rocky
Mountain Power faces and why the Commission should authorize a ROE that will
account for Rocky Mountain Power s higher risks and operating challenges.
BRUCE N. WILLIAMS
Vice President and Treasurer
Company witness Williams testifies in support of the Company s capital structure, cost of
debt, and cost of preferred stock for the test year used in the Company s filing. Mr.
Williams determines the cost of long-term debt to be 6.26 percent and the embedded cost
of preferred stock to be 5.41 percent. Mr. Williams calculates the average capital
structure for the Company s test year to be 49.1 percent long-term debt
, .
5 percent
preferred stock, and 50.4 percent common stock equity. When combined with Dr.
Hadaway s 10.75 percent ROE, Rocky Mountain Power proposes an overall weighted
cost of capital of 8.52 percent.
STEVEN R. MCDOUGAL
Director, Revenue Requirements
Company witness McDougal testifies in support of the Company s overall revenue
requirement based on the normalized results of operations for the calendar year 2006 test
year with known and measurable adjustments and will describe the normalizing
adjustments related to revenue, operation and maintenance expense, net power costs
depreciation and amortization, taxes and rate base. Based upon these results of operations
Rocky Mountain Power is earning an overall ROE of 5.3 percent in its Idaho
jurisdiction-far below any other ROE recently authorized for other Idaho investor-
owned utilities and less than what is required to provide a fair and equitable return for the
Company s shareholders.
Rocky Mountain Power requests a price increase of $18.5 million based on the Revised
Protocol inter-jurisdictional cost allocation methodology. This request is $3.6 million
less than the increase otherwise supported by the Company s revenue requirement
analysis, but was limited due to the Revised Protocol rate mitigation cap. Company
witness McDougal will also testify on the revenue requirement impact of deferred
accounting entries previously approved by the Commission.
MARK T. WID MER
Director, Net Power Costs
Company witness Widmer testifies in support of the Company s net power costs as
calculated using the Generation and Regulation Initiatives Decision Tools (GRID) model
the Company s production cost model. Company witness Widmer will also describe the
GRID model and explain how input data is normalized. Finally, Company witness
Widmer explains hydro modeling associated with the VISTA hydro model.
WILLIAM J. FEHRMAN
President, PacijiCorp Energy
Company witness Fehrman testifies in support of the Company s major new generation
resource acquisitions, including a new natural gas fired generating facility, three new
wind facilities, and a geothermal resource. Mr. Fehrman demonstrates that these
resources were prudently acquired and provide benefits to the Company s integrated
system and Rocky Mountain Power s customers in Idaho. Company witness Fehrman
also explains the increased generation related overhaul and maintenance expenses
included in the test period.
DOUG N. BENNION
Managing Director, Network Reliability
Company witness Bennion testifies in support of the capital investments that the
Company is making in transmission and distribution facilities to serve customer loads and
deliver reliable power where it is needed in Idaho. Mr. Bennions also explains the
Company s transmission and distribution capital investment plan and what Rocky
Mountain Power is doing to minimize the impact of rising costs during a robust
construction period.
ERICH D. WILSON
Director, Human Resources
Company witness Wilson testifies in support of the Company s compensation, pension
and benefits programs and related costs. In addition, Company witness Wilson will
support the severance costs incurred by the Company in reshaping its corporate
workforce.
MARK E. TUCKER
Regulatory Analyst
Company witness Tucker will testify in support of the Company s class cost of service
study that functionalizes, classifies, and allocates costs to each customer class based on
the test year in the Company s filing. Mr. Tucker also explains any differences between
this cost of service study and studies previously filed with the Commission, including that
all Idaho customers are now subject to tariff rate changes as approved by the
Commission.
WILLIAM R. GRIFFITH
Director, Pricing, Cost of Service, and Regulatory Operations
Company witness Griffith testifies in support of the Company s rate spread and rate
design proposals. The Company s rate spread is based on the class cost of service study
and includes a proposal that, in a time of rising costs, no individual customer class would
receive a rate reduction. Consequently, Rocky Mountain Power proposes the following
allocation of the net price increase for major customer classes:
Residential: 6.
Irrigation: 6.
Industrial Contract Schedule 400: 24.1 %
Industrial Contract Schedule 401: 14.
General Service: No increase
Company witness Griffith will also present an analysis of the on- and off-peak
differential structure in the residential time-of-use schedule.
CAROLE A. ROCKNEY
Director, Customer and Regulatory Liaison
Company witness Rockney testifies in support of proposed housekeeping and needed
operational changes to the Company s electric service regulations. Rocky Mountain
Power proposes changes to Regulation No.1 0, proposing payment of collection agency
costs be the responsibility of the customer causing such a charge to be incurred. The
Company is also proposing increasing Schedule 300 fees associated with the connection
and reconnection of service and changing the hours during which connection and
reconnection of service is offered after normal office hours. In addition, the Company is
proposing changes to Regulation 12 including housekeeping, clarification, and changing
the methodology of refunding customer advances for line extension.
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UTIL.IT; ,
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
APPROVAL OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
CASE NO. P AC-O7-
APPLICATION OF
ROCKY MOUNTAIN POWER
ROCKY MOUNTAIN POWER
CASE NO. P AC-07-
Direct Testimony and Exhibits
June 2007
Dean Brockbank
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: dean.brockbank~pacificorp.com
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Justin Lee Brown
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: iustin.brown~pacificorp.com
Attorneys for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
APPROVAL OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
CASE NO. PAC-07-
APPLICATION OF
ROCKY MOUNTAIN POWER
Rocky Mountain Power, a division ofPacifiCorp ("Rocky Mountain Power" or the
Company ) hereby applies to the Commission for approval of proposed changes to the
Company s electric service schedules submitted herewith. In support of this Application
Rocky Mountain Power states as follows:
Rocky Mountain Power is authorized to do and is doing business in the state
ofIdaho. The Company provides retail electric service to approximately 67 000 customers in
the state of Idaho and is subject to the jurisdiction of the Commission.
APPLICATION OF
ROCKY MOUNTAIN POWER
Page 1
Communications regarding this Application should be addressed to:
Brian Dickman
201 South Main, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: brian.dickman~pacificorp.com
and to:
Dean Brockbank
Justin Lee Brown
201 South Main, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: dean. brockbank~pacificorp.com
iustin. brown~pacificorp .com
In addition, the Company respectfully requests that all data requests regarding this
matter be addressed to one or more of the following:
Bye-mail (preferred)
By regular mail
datareq uest~pacifi corp. com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR 97232
By facsimile [phone]
Rocky Mountain Power s proposed revised tariff schedules, which are filed
with this Application, would result in a net increase of $18.5 million, or 10., in prices for
the Company s Idaho retail customers. The revised tariff schedules reflect a proposed
effective date of January 1 2008.
This proposed increase is based upon normalized results of operations for the
test period ending December 31 , 2006, with known and measurable changes. These
normalized test period results show that the Company is currently earning a normalized
return on equity ("ROE") of 5.3 percent in its Idaho jurisdiction. This current ROE is far
APPLICATION OF
ROCKY MOUNTAIN POWER
Page 2
below the Company s currently authorized return, the returns recently authorized for other
Idaho investor-owned utilities, and the 10.75 percent ROE supported by the Company
testimony filed with this Application. Without the requested increase in revenues, it will be
increasingly difficult for the Company to access capital markets to obtain the funds necessary
to maintain its utility infrastructure and continue to provide adequate, efficient, just and
reasonable service to its Idaho customers.
Rocky Mountain Power s direct case consists of the testimony and exhibits of
eleven witnesses. Below is a brief summary oftheir testimony.
(a)A. Richard Walje, president, Rocky Mountain Power, will present an
overview of the Company s case and provide the context for the testimony of
the other witnesses.
(b)Samuel C. Hadaway, FINANCO , Inc., will testify in support of the
Company s ROE. He will also describe the unique operational risks that
Rocky Mountain Power faces and why the Commission should authorize a
ROE that will account for Rocky Mountain Power s higher risks and
operating challenges. Dr. Hadaway s analysis suggests a cost of equity for the
Company of 10.75 percent.
(c)Bruce N. Williams, vice president and treasurer, testify in support ofthe
Company s cost of debt, preferred stock and capital structure.
(d)Steven R. McDougal, director, revenue requirements, will testify in support of
the Company s results of operations for the test period ending December 31
2006, and will discuss the normalizing adjustments made to the results.
Company Witness McDougal will also testify on deferred accounting costs
and support the Company s proposed inter-jurisdictional cost allocation.
APPLICA nON OF
ROCKY MOUNTAIN POWER
Page 3
(e)
(f)
(g)
Mark T. Widmer, director, net power costs, will testify in support of the
Company s net power costs. Company Witness Widmer will also describe the
Company s production cost model and explain how input data is normalized.
William J. Fehrman, president, PacifiCorp Energy, will testify in support of
the Company s major new generation resource acquisitions, and will provide
investment information on and prudence justification for these items
including the increased generation related overhaul and maintenance expenses
for the test period.
Douglas N. Bennion, managing director, network reliability and investment
delivery, will testify in support of the capital investments that the Company is
making in transmission and distribution facilities to serve customer loads and
(h)
deliver reliable power where it is needed in Idaho.
Erich D. Wilson, director, human resources, will testify in support of the
Company s new compensation, pension, and benefits program and related
costs. In addition, Company Witness Wilson will support the severance costs
incurred by the Company in reshaping its corporate workforce.
(i)Mark E. Tucker, regulatory analyst, will testify in support ofthe Company
class cost of service study, which was used in developing the proposed
allocation of the revenue increase in this filing to the various customer classes.
William R. Griffith, director, pricing and cost of service, will testify in support
of the Company s rate spread and rate design proposals. Company Witness
Griffith will also present an analysis of the residential time-of-use schedule
structure.
(k)Carole A. Rockney, director, customer and regulatory liaison, will testify in
support of proposed housekeeping and needed operational changes to the
Company s electric service regulations.
APPLICATION OF
ROCKY MOUNTAIN POWER
Page 4
Rocky Mountain Power is notifying its customers of this Application by
means of a press release sent to local media organizations, messages on customer bills over
the course of a billing cycle, and, in some cases, personal contact with customers or their
representatives. In addition, copies of this Application will be made available for review at
the Company s local offices in its Idaho service territory.
The Company respectfully submits that the Commission s approval of Rocky
Mountain Power s Application, including the approval and implementation of the proposed
electric service schedules as filed, is in the public interest. In accordance with Commission
Rule 121 (d), Rocky Mountain Power represents that it stands ready for immediate
consideration of this Application.
WHEREFORE, Rocky Mountain Power respectfully requests that the Commission
issue a final order approving the Company s proposed electric service schedules effective
January 1 2008.
DATED this 8th day of June, 2007.
Respectfully submitted
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Dean Brockbank-----" /,14)Justin Brown
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Attorneys for Rocky Mountain power
APPLICATION OF
ROCKY MOUNTAIN POWER
Page 5