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HomeMy WebLinkAbout20070928Harms direct.pdfBEFORE THE HEGEl D 7nrii ('C'y " 0 rH' '"' l..'J\:i ~U f:.O tr1'::: I IDAHO PUBLIC UTILITIES COMMIS~IQI~AHO PUEUG U j jUt If::) CmJ,:\nSSl0N IN THE MATTER OF THE APPLICATION OF PACIFICORP DBA ROCKY MOUNTAIN POWER FOR APPROVAL OF CHANGES TO ITS ELECTRIC SERVICE SCHEDULES CASE NO. PAC-07- DIRECT TESTIMONY OF PATRICIA HARMS IDAHO PUBLIC UTILITIES COMMISSION SEPTEMBER 28, 2007 please state your name and address for the record. My name is Patricia Harms.My business address is 472 West Washington Street, Boise, Idaho. By whom are you employed and in what capacity? I am employed by the Idaho Public utilities commission (Commission) as a Senior Auditor. Give a brief description of your educational background and experience. I graduated from Boise State Uni versi ty, Boise, Idaho in 1981 with a B.A. degree in Business Administration, emphasis in Accounting.I am a Certified Public Accountant licensed by the State of Idaho.Prior to joining the Commission Staff in 2000, I was employed by the State of Alaska as an In Charge Auditor and performed both financial and performance audits of governmental agencies.I have attended many seminars and classes involving auditing and accounting.While at the Commission I have audited a number of utilities including water, electric, gas and telephone utili ties and provided comments and testimony in a number of cases that dealt with general rates, hook-up fees, accounting issues, and other regulatory issues.I have also completed the National Association of Regulatory Utility Commissioners (NARUC) annual regulatory studies program at Michigan CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) State Uni versi ty.I also attend meetings of NARUC' Staff Subcommittee on Accounting and Finance. What is the purpose of your testimony? The purpose of my testimony is to present the summary exhibits that reflect all the adjustments of Staff witnesses for Rocky Mountain Power (Company) in this general rate case.I quantify the Idaho revenue requirement and revenue increase proposed for Idaho retail customers in this case. My testimony also describes the proposed calculation of test year rate base and annualizing/pro forma plant adjustments and explains the rationale supporting Staff's position.My testimony further describes the adjustments proposed by Staff as a result of this position. Addi tionally, my testimony describes Staff' proposed adj ustment related to the Company s treatment of costs related to abandoned proj ects.Finally, my testimony describes Staff's adjustment regarding tax credits related to the Blundell Bottoming Cycle project. What exhibits are you sponsoring? I am sponsoring Staff Exhibit Nos. 108-113. Staff Exhibit No. 108 calculates Staff's proposed revenue requirement under the rate mitigation cap stipulated and approved by the Commission in Case No. PAC-E~ 02 - 3.Staff CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) Exhibit No. 109 reflects Rocky Mountain Power Normalized Results of Operations under the Revised Protocol cost methodology as Adjusted by Staff.Staff Exhibi t No. 110 calculates the Revised Protocol revenue requirement price increase for Rocky Mountain Power. Staff Exhibit No. 111 reflects Rocky Mountain Power Normalized Results of Operations under the Rolled-In cost methodology as Adjusted by Staff.Staff Exhibit No. 112 lists the adjustments proposed by Staff and the related change to the Idaho revenue requirement under the Revised Protocol cost methodology.Staff Exhibit No. 113 lists the system-wide amounts for capital proj ects Staff annualized or pro formed into Staff's proposed rate base. What is the purpose of Staff Exhibit No. 108? This exhibit shows the Idaho revenue requirement proposed by Staff and reflects the rate mitigation cap as stipulated and approved by the Commission in Case No. PAC-02- What revenue requirement does Staff propose in this case? The revenue requirement proposed is $190,229,447 as shown on Staff Exhibit No. 108, line This results in an overall net increase of $11.2 million or 6.28%.The Company proposed in its Application a net increase of $18.5 million or 10.32% in prices for the CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) Company s Idaho retail customers. How is revenue requirement calculated in this case? The $193,808 268 (Staff Exhibit No. 108, line 6) revenue requirement calculated under the Revised Protocol methodology is reduced to the rate mitigation cap of $190,229,447 (Staff Exhibit No. 108, line 3) as stipulated and approved by the Commission in Case No. PAC-02-This stipulation states: For all Idaho general rate proceedingsini tiated after the effective date of this Stipulation and Revised Protocol, and until March 31 , 2009, the Company s Idaho revenue requirement to be used for purposes of setting rates for Idaho customers will be the lesserof: (i) the Company s Idaho revenue requirement calculated under the Rolled-In Allocation method multiplied by 101.67 percent, or (ii) the Company s Idaho revenue requirement resulting from use of the Revised Protocol. The test period for this case is based on the historical twelve-month period ending December 31 , 2006 that has been adjusted for known and measurable adjustments through December 31 , 2007 for operating revenues and expenses.Rate base levels are based on a thirteen-month average using the balances from January 2006 through January 2007 with annualizing and pro forma adjustments for known and measurable plant additions placed in service through December 31, 2007.Staff' adjusted rate base is $487,197,283. CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) How is the revenue requirement price increase on Staff Exhibit No. 110 calculated? Staff calculated the revenue requirement price increase using a Rate Base of $487,197 283 and an 8.267% overall rate of return described in Staff witness Carlock's testimony.Staff's recommended Idaho revenue requirement price change of $14 815,425 is shown on Staff Exhibit No. 110.This revenue requirement price increase is also shown on Staff Exhibit No. 109. Rate of Return How does Staff's proposed overall return compare to that requested by the Company? The 8.267% overall rate of return Staff witness Carlock proposes is based upon a return on equity of 10.25% .This return on equity is 0.5% lower than that proposed by Rocky Mountain Power in its Application. Based upon the case filed by the Company, this overall rate of return would result in an Idaho revenue requirement reduction of approximately $2 million. Ra te Base How have you provided for recovery of the Company s investments in rate base? Staff proposes to establish the revenue requirement for the Company using rate base levels based on a thirteen-month average using the balances from CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) January 2006 through January 2007 with annualizing and pro forma adj ustments for known and measurable plant additions through December 31, 2007. How does Staff propose recovery of the Company s investment in plant made during the 2006 test year? Staff proposes several ways for the Company to recover plant investments it made in 2006.First, Staff proposes a thirteen-month average rate base for all plant in service investment incurred during 2006.Each plant in service project, regardless of size, is included in Staff's thirteen-month average rate base.In addition, projects in service during 2006 costing over $100 million system-wide or that are generation facil i ties reflected in power supply and/or transmission costs related to projects over $2 million system-wide were annualized. How did Staff determine the dollar threshold for annualizing projects during 2006? The Company s Unadjusted Electric Plant in Service for 2006 on a beginning and ending average is $14,745,911 135 (Exhibit No. 11 , page 2., line 36) system-wide.Compared to that investment level, Staff considered the Company s $2 million system-wide threshold for annualizing major projects in 2006 as too low ($2,000,000 per project divided by $14 745,911 135 total CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) electric plant in service is .00014 or 0.014%) .The $100 million threshold represents a single proj ect as 0.7% of the Company s average Plant in Service during 2006 ($100,000,000 divided by $14,745,911,135).Based upon a review of the Company s plant additions on Exhibit No. , pages 8.82 through 8.85 there is a definite difference in the number and magnitude of proj ects. There are a few large proj ects and many smaller proj ects. Those six (three in 2006 and three in 2007) large projects range from $118 million to $331 million. Further, the Company has identified that Board of Directors ' approval of individual capital expenditure proj ects has been replaced with the requirement of PacifiCorp CEO approval for proj ects greater than $25 million. If Staff used the Company s $25 million threshold for capital expenditure proj ects requiring PacifiCorp CEO approval, what additional proj ects would be annualized in 2006? None.There are no proj ects in service during 2006 costing more than $25 million but less than $100 million system-wide according to Company Exhibit No. 11 page s 8. 8 . 2 and 8. 8 . 3 .So, effectively, Staff's $100 million threshold for including plant within rate base and the Company s $25 million threshold for capital CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) expendi tures requiring CEO approval has the same impact. What 2006 projects were annualized in rate base as a result of meeting the $100 million system-wide threshold? Three proj ects met this threshold.The proj ects are Currant Creek Phase II ($177 million system- wide), the Leaning Juniper 1 Wind Plant ($175 million system-wide), and the Huntington Unit II Scrubber ($118 million system-wide) Did Staff consider whether a generation proj ect greater than $2 million system-wide is included in the power supply model and cost calculation for the Company as one of its criteria for annualizing proj ects in 2006? Yes.Staff also used generation proj ects included in the power supply model as one of its criteria for annualizing projects in 2006.However, according to the Company, no proj ects greater than $2 million but less than $100 million system-wide produced power supply cost savings. How did Staff propose recovery for transmission projects in 2006? In addition to inclusion within Staff' proposed thirteen-month average, Staff annualized the 2006 transmission proj ects listed in Company Exhibit No. 11, page 8.These proj ects totaled $75 million CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) system-wide. How does Staff's proposal for 2006 plant additions compare to the Company s case? As identified by Staff Exhibit No. 113, Staff annualized 18 projects with a system-wide total of $546,599,918.This is approximately 85% of the proj ects listed on Exhibit No. 11, pages 8.2 and 8.3 when distribution proj ects that would be allocated situs to other states are removed from the list.This annualizing adj ustment incorporates those proj ects into rate base as if they had been in place for the entire year. Additionally, the associated depreciation and tax effects of this adjustment were calculated and included in Staff's proposed revenue requirement. This methodology was developed under the supervision of Staff witness Carlock , Deputy Administrator of the Utilities Division, to ensure annualizing or adding major plant additions such as this as if it were in service for the entire test year is consistent with the policy used for major plant additions in Idaho Power and Avista rate cases (Case Nos. IPC-03-13 and AVU-04-1) . How does Staff propose recovery of the Company s investment in plant made in 2007 (post test year) ? CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) Staff has made pro forma adj ustments for projects placed in service through December 31, 2007 costing over $100 million system-wide.Staff also adj usted for proj ects that are reflected in the power supply model and costs and/or transmission proj ects over $2 million system-wide.These proj ects were also pro formed into rate base. What 2007 proj ects were pro formed into rate base as a result of meeting the $100 million system-wide threshold? Three proj ects met this threshold.The projects are Lake Side Capital Build ($331 million system-wide), the Marengo Wind Project ($259 million system-wide), and the Goodnoe Hills Wind proj ect ($197 million system-wide) .These generation resource investments were weighted by the in service date to align the rate base investment with its inclusion in the calculation of net power supply costs. Did Staff pro form into rate base any 2007 proj ects greater that $2 million but less than $100 million system-wide that were included in the power supply model and cost calculation? Yes.The Blundell Bottoming Cycle project ($28 million system-wide) was also weighted by the in service date to align the rate base investment with its inclusion CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) of the plant, costs and availability in the calculation of net power supply costs. Were there any other adj ustments associated with the Blundell Bottoming Cycle project? Yes.The Company did not include the Federal Renewable Energy Tax Credit and the Utah State Renewable Energy Credit associated with this plant.The Federal Renewable Energy credit would equal $312 412 system-wide and $20,562 would be allocated to Idaho.The Utah State Renewable Energy credit would be $54,672 system-wide of which $1,822 would be allocated to Idaho.This adj ustment reduces Idaho revenue requirement by approximately $40,000. How did Staff propose recovery for transmission projects in 2007? Staff weighted the Company s investment in 2007 transmission proj ects by the updated in service dates provided for the projects listed in Company Exhibit No. 11, page 8.One third (five of the fifteen) of projects listed in Company Exhibit No. 11 , page 8. will not be placed in service during 2007 as originally planned by the Company.One proj ect has been delayed a year.As a result , Staff has excluded these projects from its proposed rate base in this case. Are there any proj ects included in Staff's rate CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) base that are planned to go into service after the hearing in this case? Yes.The in service dates for the Blundell Bottoming Cycle proj ect, Goodnoe Hills Wind proj ect, and two transmission proj ects are December 2007.Although Goodnoe Hills is a $197 million proj ect system-wide, due to net power cost savings its Idaho revenue requirement is approximately $60,000. What would be Staff's recommendation if these projects did not go in service before December 31, 2007? Staff would recommend removing these proj ects from rate base if they are not placed in service before December 31, 2007.This would be consistent with other post test year adj ustments and assure the proj ects are used and useful when rates become effective. How does Staff's proposal for 2007 plant additions compare to the Company s case? As identified by Staff Exhibit No. 113, Staff included in its case 14 proj ects with a system-wide total of $946,738,633.This is over 80% of the projects listed on Exhibi t No. 11, pages 8. 8 .4 and 8. 8 . 5 .(Notably this percentage is approximately 90% when the proj ects now with in service dates in 2008 and distribution projects that would not be allocated to Idaho are removed from the denominator) .These pro forma Staff adjustments CASE NO. PAC-E- 07 - 5 09/28/07 HARMS, P. STAFF (Di) incorporate those proj ects weighted by the number of months the plant would be in service during 2007. Additionally, the associated depreciation and tax effects of this adjustment were calculated and included in Staff's proposed revenue requirement. What is the change in Staff's proposed Idaho revenue requirement based upon the proposed treatment of 2006 and 2007 rate base/plant additions and associated costs compared to the Company s filing? Staff's proposal results in a reduction in Idaho revenue requirement of approximately $1 million. This still provides a reduction in regulatory lag by including proj ects to be completed after Staff's prefile but before the effective date of customer rates. You have described Staff's proposal regarding rate base.What historic test year does Rocky Mountain Power use in this case and what adjustments does it propose? The Company s case is based on historical data for the twelve-months ended December 31, 2006.The Company then made various normalizing, annualizing and known and measurable adj ustments to test year revenues, expenses and rate base.Rate base presented by the Company was initially an average of beginning and ending account balances.The Company proposed annualizing over CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) 60 projects listed on Exhibit No. 11, pages 8.2 and 3 as if they were in place for the entire year. 'Because of the Company s beginning and ending average rate base, these proj ects were already in the Company filing as if they had been in place for six months of the year even if an individual proj ect' s in service date was December 2006. The Company listed almost 60 post-test year projects on Exhibit No. 11, pages 8.4 and 8.5 to include in rate base for the number of months they would be in service during 2007. How does Rocky Mountain Power s post-test year adj ustments compare to those proposed by other companies when the revenue requirement was not part of a stipulated agreement? Idaho Power in Case No. IPC-03-13 filed a 2003 test year with 6 months of actual expenses, revenues and investments and 6 months estimated.Various normalizing, annualizing and known and measurable adj ustments were made to test year revenues and expenses. In addition, a thirteen-month average rate base was used to recognize that some plant was in service for only part Finally, less than ten maj or plantof the test year. addi tions were added beyond the end of the test year. These maj or proj ects were included in the rate base CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) calculation as if they were in service for the entire test year. In Case No. AVU-04-1, Avista used a historic test year from January 1, 2002 to December 31, 2002.The Company then included various normalizing, annualizing anq known and measurable adjustments to test year revenues and expenses.It used an average of the monthly averages to establish rate base levels.Avista included only five major plant additions beyond the test year; two generation proj ects and three transmission proj ects. These five major projects were included in the rate base calculation as if they were in service for the entire test year. What rate base treatment did the Commission allow in these cases? The Commission required rate base be set using a thirteen-month average or the average of the thirteen- monthly averages for the test year.The Commission also allowed these companies to include limited maj or plant additions completed after the test year as if they had been in service for the entire year provided an adj ustment was made to reflect revenue producing or expense reducing benefits from these proj ects in the revenue requirement. Did the Commission approve the test year with CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) post-test year plant additions as proposed by the companies in these two cases? However , in both cases the CommissionYes. expressed specific concern regarding annualizing plant additions added late in the year or after the Company test year as if it were in place for a full year. Order No. 29505, in Case No. IPC-03-13, the Commission stated: We generally believe that including investment in the calculation of average-year rate base as if it were in service the entire year when it was not_. creates a mismatch between test year revenue and expenses. How does Staff's proposed rate base treatment address this issue? Using a thirteen-month average rate base reduces the expense/revenue mismatch identified by the Commission that occurs when the costs of plant adjustments are added as if they were in place for a whole year without adding any benefits. Over 85% of the plant additions annualized by Staff in the 2006 test year were generation resources. These proj ects are included in the Company s power supply model and reflected in the net power supply costs, producing benefits to customers.The Company has al so included additional maintenance, depreciation and property taxes for these proj ects and where applicable, CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) renewable energy tax credits.The remaining proj ects annualized are transmission related. The availability of these transmission proj ects is also reflected in the power supply model to improve reliability and to make cost effective purchases or sales that reduce customer costs.Although it may not result in cost savings that have been directly quantified , Staff is familiar with the calculations to assure customer benefits are received from these proj ects Therefore, they are included in Staff's proposed rate base. Neither the Company nor Staff proposes to incl ude post test year plant additions in rate base as if they were in place for the whole year.Instead, Staff proposes to include those proj ects as previously described based upon their in service dates.Again, over 85% of these 2007 projects were generation resources that are reflected in the Company s power supply cost model and reflect net power cost savings.The remaining proj ects are transmission. Please identify other Staff adjustments to rate base that are summarized in your exhibits. Staff witness Leckie proposes two adj ustments to rate base.He has removed the cost of a coal lease from rate base reducing the Idaho revenue requirement by approximately $26,000.He has also removed the cost of a CAS E NO. PAC - E - 0 7 - 5 09/28/07 HARMS, P. STAFF (Di) Jim Bridger dragline from rate base reducing the Idaho revenue requirement by approximately $15,000. Expenses Has Staff made any adjustments to expenses? Yes.Staff has adjusted depreciation expense due to Staff's proposed plant adjustments, reduced expenses for abandoned proj ects, adjusted power supply costs, removed some costs associated with incentive and severance pay, reduced net lease expenses, removed certain administrative and general expenses, and reduced other expenses. How was depreciation expense calculated for Staff's proposed plant adjustments? First depreciation expense changed due to the thirteen-month average Staff proposed compared to the beginning/ending average filed in the Company s case. Second, Staff annualized depreciation expense for maj or plant additions added during the test year.Third, depreciation expense for pro forma plant additions added to rate base is based on the number of months the plant lS included in the test period rate base. How are abandoned proj ects included in the Company s case? The Company expensed approximately $1.6 million system-wide of costs associated with abandoned proj ects . CASE NO. PAC-07- 09/28/07 HARMS, P. STAFF (Di) According to the Company, many of these costs are associated with proj ects contemplated by customers but not completed.These costs do not represent assets that are used and useful.Staff proposes removal of these costs as they do not provide service to customers and should not be included in customer rates.On an Idaho allocated basis, this reduces revenue requirement by approximately $80 000. Please identify other Staff adj ustments to expenses that are summarized in your exhibits. Staff witness Lanspery proposes three power supply cost adj ustments .The first relates to an error by the Company in extracting data associated with gas purchases.This reduces Idaho revenue requirement by approximately $2.5 million.Second, he proposes adjusting power supply costs associated with the Monsanto credit.This lncreases Idaho revenue requirement by approximately $110,000.Third, Staff witness Lanspery proposes an adj ustment associated with the Idaho Irrigators Load Control Program.This reduces Idaho revenue requirement by approximately $940,000.Staff witness Lanspery s testimony discusses these adjustments in detail. Staff witness Leckie proposes several adjustments.1) He proposes reducing incentive pay, CASE NO. PAC-07- 09/28/07 HARMS , P. STAFF (Di) reducing Idaho revenue requirement by approximately $160,000.2) He also proposes reducing net lease expense.This adj ustment reduces Idaho revenue requirement by approximately $7,000.3) He proposes to remove from the Company s case the costs associated with changing the Company s fiscal year to a calendar year end.This adjustment reduces Idaho revenue requirement by approximately $25,000.4) He adj usts for severance costs, reducing Idaho revenue requirement by approximately $160,000.Staff witness Leckie provides further detail regarding these adjustments in his testimony. Staff witness Nobbs proposes to remove expenses that are nonrecurring or should not be paid by Idaho utility customers.His adjustments reduce Idaho revenue requirement by approximately $93,000.His testimony discusses these adjustments in detail. Revenues Has Staff made any adjustments to revenues? Staff witness Carlock has imputed revenueYes. associated with the Company s Green Tags.These adj ustments reduce Idaho revenue requirement by approximately $270,000. Her testimony discusses these adj ustments in detail. CASE NO. PAC-07-09/28/07 HARMS, P. STAFF (Di) Taxes case? How did Staff's adj ustments change taxes in the Staff's adj ustments to revenues and expenses change federal and state income taxes as taxable income changes.In addition , federal and state income taxes are changed because interest expense must be "trued up " for changes in rate base such as the adjustments tq plant proposed by Staff. Does this conclude your direct testimony in this proceeding? CASE NO. PAC-07- 09/28/07 Yes , it does. HARMS, P. STAFF (Di) Page 1. ROCKY MOUNTAIN POWER STATE OF IDAHO Normalized Results of Operations 12 Months Ended December 2006 with Known and Measurables (1) December 2006 Rolled-In Revenue Requirement (2) Rate Mitigation Cap (3) Capped Revised Protocol Revenue Requirement (4) Normalized December 2006 General Business Revenues (5) Capped Revised Protocol Price Change (A)(B) Case Proposed Oriainal Filina by Staff 194 215 986 187 104 796 101.67%101.67% 197,459 393 190 229,447 178 992 843 178 992 843 466 550 236 604 Line No. Revised Protocol (6) Filed Revised Protocol Revenue Requirement (7) Normalized December 2006 General Business Revenues (8) Revised Protocol Price Change (9) Capped Revised Protocol Price Change (10) Reduction to Revised Protocol Revenue Requirement 201 020 661 178 992 843 027 818 466 550 561 268) 193 808 268 178 992 843 815,425 236 604 578,821 ) ICapped Revenue Requirement Increase as a Percentage of Line 7 10.32%28% Exhibit No.1 08 Case No. PAC-07- P. Harms, Staff 9/28/07 Rocky Mountain Power IDAHO Normalized Results of Operations - REVISED PROTOCOL 12 Months Ended DECEMBER 2006 Operating Revenues: 2 General Business Revenues 3 Interdepartmental 4 Special Sales 5 Other Operating Revenues 6' Total Operating Revenues Operating Expenses: 9 Steam Production 10 Nuclear Production 11 Hydro Production 12 Other Power Supply 13 Transmission 14 Distribution 15 Customer Accounting 16 Customer Service & Inlo 17 Sales 18 Administrative & General 20 Total O&M Expenses 22 Depreciation 23 Amortization 24 Taxes Other Than Income 25 Income Taxes - Federal 26 Income Taxes - State 27 Income Taxes - Del Net 28 Investment Tax Credit Adj. 29 Mise Revenue & Expense 31 Total Operating Expenses: 33 Operating Rev For Return: 35 Rate Base: 36 Electric Plant In Service 37 Plant Held lor Future Use 38 Mise Delerred Debits 39 Elec Plant Acq Adj 40 Nuclear Fuel 41 Prepayments 42 Fuel Stock 43 Material & Supplies 44 Working Capital 45 Weatherization Loans 46 Mise Rate Base 48 Total Electric Plant: 50 Rate Base Deductions: 51 Accum Prov For Depree 52 Accum Prov For Amort 53 Accum Del Income Tax 54 Unamortized ITC 55 Customer Adv For Canst 56 Customer Service Deposits 57 Mise Rate Base Deductions 59 Total Rate Base Deductions 61 Total Rate Base: 63 Return on Rate Base 65 Return on Equity 67 TAX CALCULATION: 68 Operating Revenue 69 Other Deductions 70 Interest (AFUDC) 71 Interest 72 Schedule "M" Additions 73 Schedule "M" Deductions 74 Income Belore Tax 76 State Income Taxes 77 Taxable Income 79 Federal Income Taxes + Other (1) Total Adjusted Results (2) Price Change 178992 843 122881 936 601 123 308,475 902 815,425 51.759 768 324 572 149 261 969 009 675 088,461 586 151 661 078 21.784 114 389 239806 062 215 016 268 986 932 527 754 556 771 172 557 970 (757 790) (168,477) 942 703 671 631 277 380021 636 118 4027518731.095880 9179306 917 578 857 (3,408) 3,493 591 019 178 922 256 281 196 7,453 023 276 120 5.790.713 577 049 (3) Results with Price Change 193808 268 607 935 932 527 697 259 1,442 804 283 016 140 953 388 575 953 388 575 (358 147 663) (20 236 770) (76 841 792) 125 265) (465 858) 373 943) (466 191 291) 487 197283 (466 191 291) 487197283 383%267% 512% 36,421 788 793 641 974 788 357 745 141 075 663 669 793 641 771 172 15892497 671 631 14122010 10.250% 215 429 974 788 357 745 141 075 31,457 310 804 30014507 4754556 4942703 9697259 ReI. Page 2. Page 1. Exhibit No.1 09 Case No. PAC-07- P. Harms, Staff 9/28/07 Rocky Mountain Power IDAHO Normalized Results of Operations - REVISED PROTOCOL 12 Months Ended DECEMBER 2006 Net Rate Base 487,197 283 Ref. Page 1. Return on Rate Base Requested 267%Ref. Page 2. Revenues Required to Earn Requested Return 275 187 Less Current Operating Revenues (31 095 880) Increase to Current Revenues 179,306 Net to Gross Bump-up 161.40% Price Change Required for Requested Return 815,425 Requested Price Change 815 425 Uncollectible Percent 147%Ref. Page 1. Increased Uncollectible Expense 784 Requested Price Change 815,425 Franchise Tax 000%Ref. Page 1. Revenue Tax 000%Ref. Page 1. Resource Supplier Tax 000%Ref. Page 1. Gross Receipts 000%Ref. Page 1. Increase Taxes Other Than Income Requested Price Change 815 425 Uncollectible Expense (21 784) Taxes Other Than Income Income Before Taxes 793 641 State Effective Tax Rate 54%Ref. Page 2. State Income Taxes 671 631 Taxable Income 122 010 Federal Income Tax Rate 35.00%Ref. Page 2. Federal Income Taxes 942 703 Operating Income 100.000% Net Operating Income 61.958%Ref. Page 1. Net to Gross Bump-161.40% Page 1. Exhibit No. 110 Case No. PAC-07- P. Harms, Staff 9/28/07 Page 1 of 2 Rocky Mountain Power IDAHO Normalized Results of Operations - REVISED PROTOCOL 12 Months Ended DECEMBER 2006 Operating Revenue 100.000% 147%(1) 000% 000% 000% 000% 99.853% 533% 95.320% 33.362% 61.958% Operating Deductions Uncollectible Accounts Taxes Other - Franchise Tax Taxes Other - Revenue Tax Taxes Other - Resource Supplier Tax Taxes Other - Gross Receipts Sub-Total State Income Tax ~ 4.54% Sub-Total Federal Income Tax ~ 35.00% Net Operating Income (1) Computation equals: Idaho situs uncollectible accounts (FERC904) divided by Idaho general business revenues (page 2., column "Idaho , line 714) divided by (page 2., column "adj total", line 1) Page 1. Exhibit No. 110 Case No. PAC-07- P. Harms, Staff 9/28/07 Page 2 of 2 Rocky Mountain Power IDAHO Normalized Results of Operations - ROLLED- 12 Months Ended DECEMBER 2006 Operating Revenues: 2 General Business Revenues 3 Interdepartmental 4 Special Sales 5 Other Operating Revenues Total Operating Revenues Operating Expenses: 9 Steam Production 10 Nuclear Production 11 Hydro Production 12 Other Power Supply 13 Transmission 14 Distribution 15 Customer Accounting 16 Customer Service & Inlo 17 Sales 18 Administrative & General 20 Total O&M Expenses 22 Depreciation 23 Amortization 24 Taxes Other Than Income 25 Income Taxes - Federal 26 Income Taxes - State 27 Income Taxes - Del Net 28 Investment Tax Credit Adj. 29 Mise Revenue & Expense 31 Total Operating Expenses: 33 Operating Rev For Return: 35 Rate Base: 36 Electric Plant In Service 37 Plant Held lor Future Use 38 Mise Delerred Debits 39 Elec Plant Acq Adj 40 Nuclear Fuel 41 Prepayments 42 Fuel Stock 43 Material & Supplies 44 Working Capital 45 Weatherization Loans 46 Mise Rate Base 48 Total Electric Plant: 50 Rate Base Deductions: 51 Accum Prov For Depree 52 Accum Prov For Amort 53 Accum Del Income Tax 54 Unamortized ITC 55 Customer Adv For Canst 56 Customer Service Deposits 57 Mise Rate Base Deductions 59 Total Rate Base Deductions 61 Total Rate Base: 63 Return on Rate Base 65 Return on Equity 67 TAX CALCULATION: 66 Operating Revenue 69 Other Deductions 70 Interest (AFUDC) 71 Interest 72 Schedule "M" Additions 73 Schedule "M" Deductions 74 Income Belore Tax 76 State Income Taxes 77 Taxable Income 79 Federal Income Taxes + Other (1) Total Adjusted Results (2) Price Change 178 992 843 111 953 122 881 936 601 135 308.475 914 078 916 324 572 142 191 189 009 675 088.461 586 151 661 078 927 123.414 233 063.455 215 735 267 350 936 717 994 229 127 217 552 155 (757 790) (168.468) 273 230 599 2,706 300 367 741 085 968 35245314 5025985 918 320 604 (3.408) 555 375 019 178 924 321 311 959 7.473 953 219 413 790 713 577 049 (3) Results with Price Change 187 104 796 598 078 936,717 700 529 1.494 958 276 316 568 40 271 300 954 189 157 954 189 157 (358986 583) (20 245 273) (76 837 855) 125 265) (465 858) 378 058) (467 038 893) 487150264 (467 038 893) 487150264 235%267% 203% 161 125 100 026 973 343 377 016 146 019 23.418 779 100 026 127 217 22291 563 367 741 7732285 10.250% 261 151 973 343 377 016 146 019 518 806 1.494 958 30023847 6994229 2706300 9700529 ReI. Page 2. Page 1. Exhibit No. 111 Case No. PAC-07- P. Harms, Staff 9/28/07 ~~ n t T J PJ : x OO ~ UJ P " ' -- - CD ... . . . . cr " -. . . ) (/ : , " 0 ? S- ~ " " " " ' n" " " " , &1 N -.. . ) RO C K Y M O U N T A I N P O W E R ST A T E O F I D A H O Re v e n u e R e q u i r e m e n t I m p a c t o f S t a f f ' s P r o p o s e d A d j u s t m e n t s 12 M o n t h s E n d e d D e c e m b e r 2 0 0 6 w i t h K n o w n a n d M e a s u r a b l e s Li n e No , De s c r i p t i o n o f S t a f f P r o p o s a l 1 A l l o w r e t u r n o n e q u i t y o f 1 0 . 2 5 % c o m p a r e d t o 1 0 . 75 % r e q u e s t e d b y C o m p a n y . 2 A l l o w r e c o v e r y o f C o m p a n y s i n v e s t m e n t i n p l a n t o n a 1 3 - m o n t h a v e r a g e an n u a l i z i n g c e r t a i n p r o j e c t s i n 2 0 0 6 a n d a d d i n g c e r t a i n p r o j e c t s i n 2 0 0 7 . 3 R e m o v e c o a l l e a s e c o s t n o t k n o w n a n d m e a s u r a b l e a t p r e f l e d a t e . 4 R e m o v e n o t u s e d a n d u s e f u l m i n i n g e q u i p m e n t f r o m r a t e b a s e . 5 I n c l u d e r e n e w a b l e e n e r g y t a x c r e d i t s a s s o c i a t e d w i t h s t e a m p r o d u c t i o n p r o j e c t . 6 R e m o v e c o s t o f a b a n d o n e d p r o j e c t s f r o m o p e r a t i n g e x p e n s e s . 7 R e m o v e p o w e r s u p p l y c o s t e r r o r i n d a t a e x t r a c t a s s o c i a t e d g a s p u r c h a s e s . 8 A d j u s t p o w e r s u p p l y c o s t a s s o c i a t e d w i t h t h e M o n s a n t o c r e d i t . 9 A l l o c a t e I d a h o i r r i g a t i o n l o a d c o n t r o l p r o g r a m s y s t e m - w i d e . 10 R e d u c e i n c e n t i v e p a y c o s t s . 11 R e d u c e n e t l e a s e e x p e n s e d u e t o e c o n o m i c i n c e n t i v e s . 12 R e m o v e c o s t s a s s o c i a t e d w i t h c h a n g i n g f i s c a l y e a r t o c a l e n d a r y e a r . 13 R e d u c e s e v e r a n c e p a y c o s t s . 14 R e m o v e e x p e n s e s t h a t a r e n o r e c u r r i n g o r n o t I d a h o u t i l i t y r e l a t e d . 15 I m p u t e r e v e n u e a s s o c i a t e d w i t h t h e C o m p a n y s G r e e n T a g s . Im p a c t t o C o m p a n y Re v e n u e R e q u i r e m e n t St a f f W i t n e s s In c r e a s e ( D e c r e a s e ) Ca r l o c k ($ 2 00 0 00 0 ) Ha r m s ($ 1 00 0 00 0 ) Le c k i e ($ 2 6 00 0 ) Le c k i e ($ 1 5 00 0 ) Ha r m s ($ 4 0 00 0 ) Ha r m s ($ 8 0 00 0 ) La n s p e r y ($ 2 50 0 00 0 ) La n s p e r y $1 1 0 00 0 La n s p e r y ($ 9 4 0 00 0 ) Le c k i e ($ 1 6 0 00 0 ) Le c k i e ($ 7 00 0 ) Le c k i e ($ 2 5 00 0 ) Le c k i e ($ 1 6 0 00 0 ) No b b s ($ 9 3 00 0 ) Ca r l o c k (2 7 0 00 0 ) Id a h o G e n e r a l R a t e C a s e IP U C M o d i f i e d C a p i t a l A d d i t i o n s Ad j u s t m e n t b y Fu n c t i o n Pr o j e c t Fa c t o r T r e a t m e n t In S e r v i c e D a t e Mo n t h s Am o u n t Ad j u s t m e n t Ty p e o f P r o j e c t 20 0 6 A n n u a l i z e d P l a n t A d d s Ot h e r P r o d u c t i o n Cu r r a n t C r e e k P o w e r P r o j e c t An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma r - 20 0 6 17 6 64 3 83 8 17 5 97 5 Ot h e r P r o d u c t i o n Le a n i n g J u n i p e r 1 W i n d P l a n t An n u a l i z e t h r o u g h J a n 2 0 0 7 Se p - 20 0 6 17 5 . 4 3 4 25 9 10 7 95 9 54 4 Su b t o t a l O t h e r P r o d u c t i o n 13 5 13 5 51 9 Tr a n s m i s s i o n Cu r r a n t C r e e k P o w e r P r o j e c t An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma r - 20 0 6 55 8 15 7 23 9 71 6 Tr a n s m i s s i o n Su m m i t - Vi n e y a r d ( L a k e S i d e ) I n t e r c o n n e c t An n u a l i z e t h r o u g h J a n 2 0 0 7 Oc t - 20 0 6 68 0 80 9 9. 4 7 1 32 9 Tr a n s m i s s i o n Su m m i t - Vi n e y a r d T r a n s m i s s i o n P r o j e c t An n u a l i z e t h r o u g h J a n 2 0 0 7 Se p - 20 0 6 72 8 88 8 06 3 93 1 Tr a n s m i s s i o n 80 9 P D I T E M S S C A D A P h a s e 2 ( E P I C ) An n u a l i z e t h r o u g h J a n 2 0 0 7 No v - 20 0 6 17 8 02 7 13 6 94 4 Tr a n s m i s s i o n Be a l l L n S u b C o n s t r u c t N e w 1 1 5 - 12 k V S u b An n u a l i z e t h r o u g h J a n 2 0 0 7 Se p - 20 0 6 23 0 37 4 14 1 76 8 Tr a n s m i s s i o n Go r d o n A v e ( L a y t o n ) : N e w 1 3 8 - 12 . 5k S u b An n u a l i z e t h r o u g h J a n 2 0 0 7 De c - 20 0 6 66 3 74 1 56 1 62 7 Tr a n s m i s s i o n Bi t t e r C r e e k P r o v i d e 2 3 0 k V S v c A n a d a r k o An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma r - 20 0 6 37 6 57 9 36 5 62 8 Tr a n s m i s s i o n 90 t h S o u t h - Oq u i r r h R e c o n d u c t o r 1 3 8 k V L n An n u a l i z e t h r o u g h J a n 2 0 0 7 No v - 20 0 6 79 0 81 4 14 6 78 0 Tr a n s m i s s i o n Cl a i m J u m p e r P r o v i d e 2 3 0 S v c A n a d a r k o An n u a l i z e t h r o u g h J a n 2 0 0 7 Se p - 20 0 6 3. 4 4 5 75 2 12 0 . 4 6 3 Tr a n s m i s s i o n Qu a r r y - Di m p l e D e l l L o o p - Ph a s e 2 An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma r - 20 0 6 00 0 12 0 61 5 . 4 0 3 Tr a n s m i s s i o n Cr o w R e s e r v a t i o n R e n e w R i g h t - o f - Wa y An n u a l i z e t h r o u g h J a n 2 0 0 7 No v - 20 0 6 66 0 59 4 58 5 07 3 Tr a n s m i s s i o n Sy r a c u s e A d d 3 4 5 - 13 8 k V T r a n s f m r ( 3 9 4 M V A ) An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma y - 20 0 6 5. 4 9 8 25 8 69 1 77 2 Tr a n s m i s s i o n 51 9 P D I T R Q A S R a n g e r Q A S S y s S C A D A P T 0 1 5 An n u a l i z e t h r o u g h J a n 2 0 0 7 Au g - 20 0 6 91 5 14 5 18 5 07 8 Tr a n s m i s s i o n 90 t h S o & T e r m i n a l S u b s : L o o p - i n C W L n s An n u a l i z e t h r o u g h J a n 2 0 0 7 Ju n - 20 0 6 10 0 72 1 73 1 04 7 Tr a n s m i s s i o n SW U t a h L o a d G r o w t h P r o j e c t An n u a l i z e t h r o u g h J a n 2 0 0 7 Ma y - 20 0 6 85 6 68 3 03 2 82 5 Su b t o t a l T r a n s m i s s i o n 08 9 38 4 St e a m P r o d u c t i o n G E N R E S O U R C E DE V . C A I P R O J E C T An n u a l i z e t h r o u g h J a n 2 0 0 7 De c - 20 0 6 11 7 83 7 16 0 70 8 36 6 70 8 36 6 54 6 59 9 91 8 26 9 93 3 26 9 26 9 93 3 26 9 I 20 0 7 P r o F o r m a P l a n t A d d s Ot h e r P r o d u c t i o n La k e S i d e C a p i t a l B u i l d Nu m b e r o f M o n t h s i n T e s t P e r i o d Ju n - 20 0 7 33 0 84 1 58 3 19 2 99 0 92 4 Ot h e r P r o d u c t i o n Ma r e n g o W i n d P r o j e c t Nu m b e r o f M o n t h s i n T e s t P e r i o d Au g - 20 0 7 25 8 54 1 35 1 10 7 72 5 56 3 Ot h e r P r o d u c t i o n Go o d n o e H i l l s ( F o r m e l y E a s t & W e s t ) W i n d P r o j e c t Nu m b e r o f M o n t h s i n T e s t P e r i o d No v - 20 0 7 19 6 57 2 . 4 0 6 76 2 06 8 Su b t o t a l O t h e r P r o d u c t i o n 33 3 47 8 55 4 St e a m P r o d u c t i o n B l u n d e l l Bo t t o m i n g C y c l e Nu m b e r o f M o n t h s i n T e s t P e r i o d No v - 20 0 7 70 0 64 3 61 6 77 4 61 6 77 4 Tr a n s m i s s i o n Su m m i t V i n e y a r d L a k e S i d e T r a n s m i s s i o n Nu m b e r o f M o n t h s i n T e s t P e r i o d Se p - 20 0 7 54 9 83 1 84 9 94 4 Tr a n s m i s s i o n Ca m p W i l l i a m s - Mo n a 3 4 5 k V # 4 L i n e P r o j e c t Nu m b e r o f M o n t h s i n T e s t P e r i o d Ju n - 20 0 7 25 3 54 7 14 7 90 2 Tr a n s m i s s i o n Su m m i t V i n e y a r d ( L a k e S i d e ) T r n s I n t e r c o n n e c t Nu m b e r o f M o n t h s i n T e s t P e r i o d Ma y - 20 0 7 86 1 57 5 57 4 38 3 Tr a n s m i s s i o n Ma r e n g o W i n d P r o j e c t Nu m b e r o f M o n t h s i n T e s t P e r i o d Ap r - 20 0 7 86 6 51 4 89 9 88 6 Tr a n s m i s s i o n Em e r y M o o r e 6 9 k V A d d Nu m b e r o f M o n t h s i n T e s t P e r i o d Ju l - 20 0 7 2. 4 1 8 91 2 20 9 45 6 Tr a n s m i s s i o n Oa k l e y - Ka m a s l i n e Nu m b e r o f M o n t h s i n T e s t P e r i o d De c - 20 0 7 46 9 19 1 28 9 09 9 Tr a n s m i s s i o n Sh u t e C r e e k T o M o n a S y s t e m U p g r a d e S t u d y Nu m b e r o f M o n t h s i n T e s t P e r i o d De c - 20 0 7 94 5 88 2 32 8 82 4 Tr a n s m i s s i o n Cr a v e n C r k P r o v i d e 2 3 0 k V S v c t o E n t e r p r i s e P r o d - Pi o n e e r Nu m b e r o f M o n t h s i n T e s t P e r i o d Ju l - 20 0 7 10 8 98 6 55 4 49 3 Tr a n s m i s s i o n Ca c h e V a l l e y A d d . B r i d g e r l a n d S w S t P h 1 Nu m b e r o f M o n t h s i n T e s t P e r i o d Ju l - 20 0 7 50 5 66 4 7, 7 5 2 83 2 Tr a n s m i s s i o n Ch a p p e l C r e e k - p r o v i d e 2 3 0 k V s e r v i c e t o J o n a h F i e l d Nu m b e r o f M o n t h s i n T e s t P e r i o d De c - 20 0 7 10 2 54 8 34 1 87 9 Su b t o t a l T r a n s m i s s i o n 94 8 69 8 tr J 94 6 73 8 63 3 39 3 04 4 02 5 39 3 04 4 02 5 I \D 'i : I -- - . -- - -. . ) P' ~ :: q ~ P' cr ' " tj Z .. . . . ~ 0 ... . . . . CI . ! CZ J ' i : I ~ S- ~ ... . . . f- h n ... . . . 0- + ; t : d -. . ) To t a l P l a n t A d d A d j u s t m e n t 66 2 , 97 7 , 29 5 66 2 97 7 , 29 5 CERTIFICATE OF SERVICE HEREBY CERTIFY THAT I HAVE THIS 28TH DAY OF SEPTEMBER 2007 SERVED THE FOREGOING DIRECT TESTIMONY OF PATRICIA HARMS, IN CASE NO. PAC-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID TO THE FOLLOWING: JUSTIN BROWN ROCKY MOUNTAIN POWER 201 S MAIN ST STE 2300 SALT LAKE CITY UT 84111 MAIL: iusti brown(Q),pacificorp com DATA REQUEST RESPONSE CENTER ACIFICORP 825 NE MULTNOMAH STE 2000 PORTLAND OR 97232 MAIL: datarequest(Q),pacificorp com (ELECTRONIC COPIES ONLY) JAMES R SMITH MONSANTO COMPANY PO BOX 816 SODA SPRINGS ID 83276 MAIL: iim.smith(Q),monsanto.com ERIC L OLSEN RACINE OLSON NYE BUDGE & BAILEY PO BOX 1391 POCATELLO ID 83201-1391 MAIL: elo(Q),racinelaw.net CONLEY E WARD MICHAEL C CREAMER GIVENS PURSLEY LLP PO BOX 2720 BOISE ID 83701-2720 MAIL: cew(Q),givensPUfsleY com BRIAN DICKMAN MANAGER, ID REGULATORY AFFAIRS ROCKY MOUNTAIN POWER 201 S MAIN ST STE 2300 SALT LAKE CITY UT 84111 MAIL: brian.dickman(Q),pacificorp com RANDALL C BUDGE RACINE OLSON NYE BUDGE & BAILEY PO BOX 1391 POCATELLO ID 83201-1391 MAIL: rcb(Q),racine1aw.net MAURICE BRUBAKER KATIE IVERSON BRUBAKER & ASSOCIATES 1215 FERN RIDGE PARKWAY SUITE 208 ST LOUIS MO 63141 MAIL: mbrubaker~consultbai. ki versoncGlconsultbai. com ANTHONY Y ANKEL 29814 LAKE ROAD BAY VILLAGE OH 44140 MAIL: tony(Q),yankel.net DENNIS E PESEAU, Ph. UTILITY RESOURCES INC 1500 LIBERTY ST SE STE 250 SALEM OR 97302 MAIL: dpeseilllCillexcite.com CERTIFICATE OF SERVICE BRAD M PURDY ATTORNEY AT LAW 2019 N 17TH STREET BOISE ID 83702 MAIL: bmpurdy~hotmail.com KEVIN B HOMER ATTORNEY AT LAW 1565 SOUTH BOULEVARD IDAHO FALLS ID 83404 MAIL: kbh~khomer1aw.com TIMOTHY SHURTZ 411 S. MAIN FIRTH ID 83236 MAIL: tim~idahosupreme. com SECRET A ~~- CERTIFICATE OF SERVICE