20071026Walje rebuttal.pdf

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201 South Main, Suite 2300
Salt lake City, Utah 84111
October 25 2007 1 ,..
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VL4 ELECTRONIC MAIL AND
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-
Rocky Mountain Power s Rebuttal Testimony & Exhibits
Dear Ms. Jewell:
Please find enclosed for filing an original and nine copies of Rocky Mountain Power s rebuttal
testimony and exhibits in the above-referenced matter. Also enclosed with each copy of the
rebuttal testimony and exhibits is a CD containing work papers. To the attention of the Court
Reporter is a paper copy of all documents along with a CD containing all testimony and exhibits
in original, text-searchable format.
The following exhibits are only available in pdfformat: Hadaway Exhibit No. 43 and McDougal
Exhibit No. 48.
All formal correspondence and regarding this filing should be addressed to:
Brian Dickman
Justin Lee Brown
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Email: brian.dickman~pacificorp.com
i ustin. brown~pacificorp. com
Katherine A. McDowell
McDowell & Rackner
520 Southwest Sixth Ave., Suite 830
Portland, OR 97204
Email: katherine~mcd-Iaw.com
Communications regarding discovery matters, including data requests issued to Rocky Mountain
Power, should be addressed to one or more ofthe following:
By E-mail (preferred):datareq uest~pac ifi corp. com
By Fax:[phone]
By regular mail: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
r, IfJP
Jeffrey K. Larsen
Vice President, Regulation
cc:Service List
Enclosures
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
, '
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
APPROV AIJ OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
CASE NO. PAC-O7-
REBUTTAL TESTIMONY &
EXHIBITS OF ROCKY MOUNTAIN
PO'VER
ROCKY MOUNTAIN POWER
CASE NO. PAC-07-
Rebuttal Testimony and Exhibits
October 2007
CERTIFICATE OF SERVICE
I hereby certify that on this 25th day of October, 2007, I caused to be served, via
e-mail and overnight delivery a true and correct copy of Rocky Mountain Power
Rebuttal Testimony and Exhibits in PAC-07-, to the following:
Scott Woodbury
Neil Price
Deputy Attorneys General
Idaho Public Utilities Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
Email: scott.woodbury~puc.idaho.gov
neil. price~puc.idaho. gov
Maurice Brubaker
Katie Iverson
Brubaker & Associates
1215 Fern Ridge Parkway, Suite 208
St. Louis, MO 63141
Email: mbrubaker~consultbai.com
ki verson~consu1tbai. com
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
201 E. Center
PO Box 1391
Pocatello, ID 83204-1391
Email: elo~racinelaw.net
Conley E. Ward
Michael C. Creamer
Givens Pursley LLP
601 W. Bannock Street
PO Box 2720
Boise, ID 83701-2720
Email: cew~givenspursley.com
Brad M. Purdy
Attorney at Law
2019 N. 17th Street
Boise, ID 83702
Email: bmpurdy~hotmai1.com
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey
201 E. Center
PO Box 1391
Pocatello, ID 83204-1391
Email: rcb~racinelaw.net
James R. Smith
Monsanto Company
PO Box 816
Soda Springs, ID 83276
Email: iim.smith~monsanto.com
Anthony Yankel
29814 Lake Road
Bay Village, OH 44140
Email: yankel~attbi.com
Dennis E. Peseau, Ph.
Utility Resources, Inc.
1500 Liberty Street SE, Suite 250
Salem, Or 97302
Email: dpeseau~excite.com
Kevin B. Homer
Attorney at Law
1565 South Boulevard
Idaho Falls, ID 83404
Email: kbh~khomerlaw.com
Timothy Shurtz
411 S. Main
Firth, Id 83236
Email: tim~idahosupreme.com
!J)J6
Debbie DePetris
Supervisor, Regulatory Administration
RECE
ZaG7 OCT 26 At? fO:, 45
IQ!~'IO PUBLIC
UTILI I ItS COMMISSIOt"
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR APPROVAL
OF CHANGES TO ITS ELECTIDC SERVICE SCHEDULES
CASE NO. PAC.07-
Rebuttal Testimony
of A. Richard Walje
ROCKY MOUNTAIN POWER
CASE NO. PAC-07-
October 2007
Please state your name, business address and present position with the
Company (also referred to as Rocky Mountain Power).
My name is A. Richard Walje. My business address is 201 South Main, Suite
2400, Salt Lake City, Utah 84111. I am President of Rocky Mountain Power.
Are you the same A. Richard Walje that previously submitted testimony in
this proceeding?
Yes. I submitted direct testimony on behalf of Rocky Mountain Power providing
an overview of the Company s 2007 Idaho general rate case application
describing the need for rate relief, and supporting regulatory policy matters
related to the Company s request.
Purpose of Testimony
What is the purpose of your rebuttal testimony?
I will present updates to the Company s filing and respond to certain policy-
related issues raised in the direct testimony of the Idaho Irrigation Pumpers
Association (IIPA) and Monsanto. Specifically, I will discuss the loss of the
Bonneville Power Administration (BP A) residential exchange credit (BP A credit)
that has historically been passed on to our residential and small farm customers in
Idaho. I will also provide the Company s view of the settlement agreement
reached with Monsanto during 2006. Finally, I will discuss the Company
communications with customers about the underlying cost pressures that have
caused the Company to make this rate filing.
Has the Company revised its requested price increase?
Yes. The Company has reduced its overall requested revenue increase from $18.4
Walje, Di-Reb -
Rocky Mountain Power
million to $15.4 million, or 8.6 percent. The reduction reflects: 1) corrections
identified by the Company and intervening parties since the original filing; and 2)
the Company s acceptance of certain adjustments proposed by Staff and other
intervening parties in an effort to reasonably and conservatively reflect the cost to
serve our Idaho customers. Consequently, the Company is now proposing revised
increases of 6.3 percent for residential and irrigation customers, 17.1 percent for
street and area lighting, 14.1 percent for Agrium s special contract, and 18.
percent for Monsanto s special contract.
BP A Credit
Please respond to Mr. Mark Mickelsen s statement true that the loss of the
BP A credit has "caused an increase in irrigators' rates in the neighborhood
of 50% to 80%,,
While it is true that the loss of the BP A credit has impacted the amount irrigation
customers will pay for service based on their net bills, and in some cases
significantly, the base rates paid for service from Rocky Mountain Power have
not changed. At the time the reduction in the credit was implemented for Rocky
Mountain Power customers, the Company calculated that irrigators' net bills
would rise 51 percent on average. The impact is strictly due to an unfavorable
court ruling that effectively prevents BP A, at least temporarily, from sharing the
benefits of the federal hydro-power system with customers of the region
investor-owned utilities, including Rocky Mountain Power s customers in Idaho.
1 Mickelsen, Dir, Page 1 Line 14.
Walje, Di-Reb - 2
Rocky Mountain Power
Mr. Mickelsen2 and Mr. Anthony Yankel3 both state that the Company must
drastically increase the price paid to the irrigators under the irrigation load
control demand side management program in order to mitigate the loss of
the BP A credit. Do you agree?
No. The credit given to irrigation customers who participate in the Company
irrigation load control demand side management program must be determined
independently based on the value the program provides the Company and its other
customers; it cannot in any way be modified to offset changes to the Residential
Exchange benefits passed on to our qualifying customers by the federal
government. Company witness Mr. Gregory N. Duvall will testify regarding the
appropriate level of credit to be given for the irrigation load control program and
its correct treatment for ratemaking purposes.
What is the Company doing to help restore the BP A credit?
We have been diligently working with BP A, other parties and through the judicial
process to restore federal benefits to our customers. We believe that it is clear in
the law that our customers have the right to share in the benefits of the federal
hydro power system. We continue to work directly with BP A, other investor-
owned utilities, and publicly owned utilities to restore the Residential Exchange
benefits as soon as possible to our customers. I have communicated with this
Commission and Idaho s political leaders, and corresponded with Mr. Mickelsen
in his capacity as president of lIP A as we work toward a solution. However
Rocky Mountain Power s base rates must be determined based on the cost to
2 Mickelsen, Dir, Page 3 Line 7.3 Yankel, Dir, Page 16 Line 1.
Walje, Di-Reb - 3
Rocky Mountain Power
serve our customers, independent of the Residential Exchange benefits that are
passed on to our qualifying customers.
Monsanto Settlement Agreement
Please describe the recent agreement reached between the Company and
Monsanto.
On May 18 , 2006, the Company executed an agreement with Monsanto to renew
its electric service agreement effective January 1 2007 (the 2007 Agreement). As
part of the 2007 Agreement, both the tariff rate for electric service and the price
paid by the Company to Monsanto for ancillary products increased, resulting in an
11 percent increase in Monsanto s net rate. Among other things, Monsanto
agreed that its rates would be subject to Commission-approved tariff changes on
or after January 1 , 2008. This provision is important because it aligns the timing
of Monsanto rate changes with that of other customers and allows for all rates to
be set based on a consistent cost of service study. The Commission approved the
2007 Agreement in Order No. 30197.
Do you agree that the 2007 Agreement was fair, just, and reasonable?
Yes, at the time and under the circumstances.
Do you agree that the 2007 Agreement set a rate for Monsanto that is "at or
near true cost of service" as stated by Monsanto witness Mr. James R.
Smith 4
No. Historically, Monsanto s rate had fallen behind relative to the Company
true cost to serve its load. Over the last several years, the Company and
Monsanto have worked together through negotiated settlements, including the
4 Testimony of James R. Smith, Page 16 Line 6.
Walje, Di-Reb - 4
Rocky Mountain Power
2007 Agreement, to increase Monsanto s rate and bring it closer to the true cost of
service. Monsanto s present rate, however, is still not at full cost of service.
Despite Monsanto s implications to the contrary,S the fact that the negotiated
increase in 2007 did not bring Monsanto s rate to the full cost of service was
known to all parties involved. The cost of service study the Company relied on to
make its decision was filed as an exhibit in Case No. PAC-06-09. Furthermore
in Order No. 30197 the Commission stated:
The 16.5% ($6 843 817) increase in rates to Monsanto is a justified
increase that moves Monsanto more than half way toward the approximate
$13 million required by the Company s study to attain full cost of service.
Commercial and residential customers under the Company s cost of
service study are presently at or near full cost of service. No change in
rates for these customers is proposed in the Company s PAC-06-
docket. The perceived shortfall in Monsanto s return is acceptable given
the Company present willingness to absorb the difference.(Emphasis
added.
As expressed by the Commission in its Order, all parties were aware that the
agreement did not result in Monsanto moving to full cost of service. Moreover
the Company recognized the adverse effects on Monsanto of moving to full cost
of service all at once and the negotiation resulted in the Company agreeing to
absorb the difference between Monsanto s rate and the full cost of service so as to
effectuate a mutually acceptable settlement among the parties at the time.
Has the Company made any additional efforts to ensure its proposed
increase in rates was not a surprise to its customers?
Yes. As Staff notes in its testimony, the Company complied with Commission
rules regarding the notice requirements. In addition, the Company has made a
concerted effort to communicate its expectations for the utility business in the
5 Testimony of Daniel R. Schettler, Page 15 Line 15.
Walje, Di-Reb - 5
Rocky Mountain Power
future. I have personally spent time in Idaho communicating with local leaders
and customers in our service territory to explain the challenges facing the
Company in the near future. This year I have toured the Monsanto and Agrium
plants near Soda Springs, Idaho and met with management from each company. I
have sponsored the "Plugging into Rocky Mountain Power" tour in 2006 and
2007 during which I visited multiple cities within our service territory to meet
with customers and civic leaders. In addition, I have regularly met with the
Commission and Staff in Boise to provide updates on the state of our business and
our expectations for the future. In each of these meetings with various
stakeholders I have consistently explained the need for increased investment and
the upward pressure currently being placed on the Company s rates.
Does this conclude your testimony?
Yes.
Walje, Di-Reb - 6
Rocky Mountain Power