20090225Lobb Direct re Stipulation.pdf

RECE
BEFORE THE
2009 fEB 25 PH i: 59
1'.., FO ",;dfCIDAHO PUBLIC UTILITIES COMMISSlglluTfE~ (ldt~l~,c\¡SSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP DBA ROCKY MOUNTAN ) CASE NO. PAC-E-08-7
POWER FOR APPROVAL OF CHANGES )
TO ITS ELECTRIC SERVICE SCHEDULES. )
)
)
)
)
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DIRECT TESTIMONY OF RANDY LOBB
IN SUPPORT OF STIPULATION
IDAHO PUBLIC UTILITIES COMMISSION
FEBRUARY 25, 2009
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2 record.
Q.Please state your name and business address for the
A.My name is Randy Lobb and my business address is
5
4 472 West Washington Street, Boise, Idaho.
6
Q.By who are you employed?
A.I am employed by the Idaho Public Utilities
8
7 Commission as Utilities Division Administrator.
Q.What is your educational and professional
10
9 background?
A.I received a Bachelor of Science Degree in
11 Agricultural Engineering from the University of Idaho in 1980
12 and worked for the Idaho Department of Water Resources from
13 June of 1980 to November of 1987. I received my Idaho
14 license as a registered professional Civil Engineer in 1985
15 and began work at the Idaho Public Utilities Commission in
16 December of 1987. I have conducted analysis of utility rate
17 applications, rate design, tariff analysis and customer
18 petitions. I have testified in numerous proceedings before
19 the Commission including cases dealing with rate structure,
20 cost of service, power supply, line extensions, regulatory
21 policy and facility acquisitions. My duties at the
22 Commission currently include case management and oversight of
24
23 all technical Staff assigned to Commission filings.
25
Q.What is the purpose of your testimony in this case?
A.The purpose of my testimony is to describe the
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 1
STAFF
1 process leading to the filed Stipulation (the Proposed
2 Settlement) and to explain the rationale for Staff's support.
3 In this case the Company is PacifiCorp as the corporate
4 entity doing business in Idaho as Rocky Mountain Power. The
5 Proposed Settlement is signed by Rocky Mountain Power, the
6 Idaho Irrigation Pumpers Association, Community Action
7 Partnership Association of Idaho and Commission Staff. The
8 Stipulation does not impact or propose any changes to the
9 rates of Monsanto or Agrium, whose rates are controlled by a
10 separate Stipulation approved in 2007, Case No. PAC-E-07-5,
11 Order No. 30482.
12 Q.Please summarize your testimony.
13 A.Based on its review of Rocky Mountain Power's rate
14 case filing, a comprehensive audit ofPacifiCorp test year
15 results of operations and consideration of outstanding rate
16 case issues, Staff believes that the comprehensive Proposed
17 Settlement is in the public interest and should be approved
18 by the Commission. The Company originally proposed a revenue
19 increase of $5.9 million for an overall revenue requirement
20 increase to Idaho's retail customers excluding Monsanto and
21 Agrium of 4.0%. The Proposed Settlement provides an annual
22 revenue requirement increase of $4.38 million or 3.1% spread
23 to the various specified Idaho customer classes based on the
24 Company's proposed cost of service.
25 There are four primary issues that Staff believes
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 2
STAFF
1 makes negotiated settlement a reasonable option in this case.
2 1) Most test year expenses and investments have already been
3 reviewed and adjusted by five other state jurisdictions
4 served by PacifiCorp. 2) Expense and investment adjustments
5 made on a PacifiCorp system level trickle down to affected
6 Idaho retail customers in this case at only 2.1% of the
7 original adjustment. 3) Multi-State Process (MSP)
8 jurisdictional allocation commitments already limit the level
9 of revenue requirement increase that can be passed on to
10 Idaho retail customers. 4) The Stipulated Settlement
11 approved by the Commission in Case No. PAC-E-07-5 contains
12 the following terms:
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. With respect to the rate plans for 2008
through 2010 for Agri um and Monsanto,
the Company agrees that in any rate
filing during the terms of such rate
plans it will not seek to recover any
revenue shortfalls related to Agrium
and Monsanto from other Idaho customers
when compared to cost of service studies
in those filings. (Stipulation, ~ 10).
. The cost of service methodology proposedby the Company in thi s proceeding wi i i
remain in effect as the accepted methodology
through the maximum duration of the rate
plans for Agrium and Monsanto which expire
December 31, 2010. (Stipulation, ~ 11).
As a result of its audit and in preparation of
direct testimony, a variety of adj ustments to the Company's
proposed revenue requirement were identified by Staff. Areas
subj ect to adjustment included authorized return on equity,
CASE NO. PAC-E-08-7
02/25/09
LOBB, R. (Di) 3
STAFF
1 plant additions, wind integration costs, renewable energy
2 credit revenue, line loss effects, working capital and taxes
3 associated with AFUDC. Staff also investigated costs
4 associated with the acquisition of the Chehalis generating
5 plant ,demand side management tariff rider expenditures and
6 possible residential rate design options.
7 Staff evaluated each adjustment individually and
8 all of the issues in total to arrive at an overall settlement
9 that provides 26% less revenue than that originally requested
10 by the Company. If identified errors and undisputed
11 adjustments in the Company's favor are included, the
12 Settlement represents a reduction of more than 32%.
13 Moreover, the resulting revenue requirement reduction
14 reflects nearly all of the adjustments that Staff would have
15 presented through testimony for Commission decision.
16 In addition to the adjustments identified above,
17 many other issues were evaluated by Staff in its review of
18 the Company's filing. All issues were included in settlement
19 discussion in order to arrive at a negotiated agreement that
20 Staff believes is in the overall best interest of Rocky
21 Mountain Power customers.
22 As part of the Stipulation, Staff specifically
23 agreed on appropriate levels of net power supply costs, that
24 acquisition and operating costs of Chehalis generating plant
25 were prudently incurred and should be included in rates, that
CASE NO. PAC-E-08-7
02/25/09
LOBB, R. (Di) 4
STAFF
1 DSM expenditures made from the DSM tariff rider were
2 prudently incurred and that $50,000 in tariff rider funds
3 should be used to support energy conservation education in
4 conjunction with the ,existing low income weatherization
5 program. Staff also agreed that a rate spread and rate
6 design for each retail class based upon the Company's
7 original proposals as adjusted for the lower revenue
8 requirement were reasonable. A provision in the Stipulation
9 recommended by Staff commits Rocky Mountain to address an
10 inverted tiered rate design proposal for the residential
11 class in its next general rate case.
12 The Stipulation
13 Q.What factors did the Commission Staff consider
14 before pursuing negotiated settlement?
15 A.Staff identified several issues early on in its
16 investigation that are unique to Rocky Mountain Power's
17 general rate case filing. The first issue deals with the
18 proformed 2007 historic test year proposed by the Company.
19 The historic and proformed expense and investments included
20 in the Company's filing have already been thoroughly reviewed
21 in various regulatory proceedings in the five other state
22 jurisdictions in which PacifiCorp operates. As a result of
23 this review, most of the expenses and investments that might
24 have been subj ect to adj ustment by Staff in this case have
25 already been removed by the Company.
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 5
STAFF
1 Once Staff does identify an adjustment on a
2 PacifiCorp system cost basis, it must be reduced to an Idaho
3 jurisdictional amount and then to an Idaho retail cost of
4 service amount. In other words, an adjustment of $1 million
5 on a system basis is reduced to just $21,000 or only 2.1% of
6 the original adjustment when fully allocated to Idaho retail
7 customers subj ect to a rate increase in this case.
8 Another unique consideration when assessing the
9 Company's filing in this case is the effect of the MSP cap on
10 costs allocated to Idaho. When the Revised Protocol
11 allocation methodology was approved by the Commission, it
12 included a commitment until March 31, 2009, that costs
13 allocated to Idaho under the new methodology would not exceed
14 101.67% of the cost allocation that would have occurred under
15 the existing Rolled-In allocation methodology (Order No.
16 29708). The effect of this cap in the Company-filed case is
17 to limit costs allocated to Idaho by $3.1 million. For other
18 cost adjustments identified by Staff to have any effect, they
19 must exceed this level of costs already removed.
20 The final unique consideration in assessing the
21 merits of pursuing settlement in this case was the cost of
22 service provision in the Stipulation approved by the
23 Commission in Case No. PAC-E-07-5. That provision prohibited
24 a change in rate case cost of service methodology during the
25 approved three-year rate contract period between Rocky
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 6
STAFF
1 Mountain and Monsanto/Agrium. Maintaining cost of service
2 methodology is necessary during the rate contract period to
3 assure costs are not inappropriately shifted between customer
4 classes as part of a general rate case. Consequently, this
5 provision takes modification to cost of service methodology
6 off the table in this case.
7 Q.What are the key components of the Proposed uBlack
8 Box" Settlement described in the Stipulation?
9 A.The key components include: 1) an annual Idaho
10 revenue requirement increase of $4.38 million or 3.1%;
11 2) total Company base power supply costs of $982 million;
12 3) including Chehalis acquisition and operation costs in
13 rates as prudently incurred; 4) accepting demand side
14 management (DSM) program costs requested in this case as
15 prudently incurred; and 5) allocating $50,000 of DSM tariff
16 rider funds for education associated with low income
17 weatherization.
18 The Stipulation also covers a variety of other
19 issues including the Oregon Energy Trust and its funding of
20 wind proj ects, a residential tiered rate design proposal to
21 be provided by Rocky Mountain in its next rate case and a
22 revenue/rate spread to Idaho retail customers based on the
23 cost of service principles proposed by the Company in its
24 original filing. The Stipulation is attached as Staff
25 Exhibit No. 101.
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 7
STAFF
1
2
Q.What is meant by a uBlack Box" Settlement?
A.The parties agreed that the Settlement represents a
3 ublack box" in that the position of the parties on individual
4 issues and resulting revenue adj ustments are not specifically
5 identified. Rather, the give and take during negotiations on
6 all issues resulted in a single overall revenue requirement
7 that was satisfactory to all parties. For example, while cost
8 of equity was a subj ect of discussion, it was agreed that it
9 would not be specifically identified in the Stipulation.
10 Likewise, issues such as the treatment of revenues from
11 renewable energy credits, the cost of wind integration and
12 the calculation of cash working capital were all considered
13 as part of the overall settlement package. However, there
14 was no specific position or revenue adjustment for these
15 issues included in the Stipulation.
16 General Settlement in this way provides for
17 compromise to arrive at a mutually acceptable revenue
18 requirement. It does not set a precedent that commits any
19 party to a specific position on an issue that might be more
20 fully addressed in the future.
22
21 Revenue Requirement
Q.How did Staff identify revenue requirement issues
23 and what were the primary considerations in reaching
24 agreement on the stipulated revenue requirement?
25 A.Staff identified issues in this case by reviewing
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 8
STAFF
1 the Company's rate case filing, conducting a comprehensive
2 audit of Company test year results of operations and
3 reexamining issues, recommendations and Commission Orders
4 associated with the Company's last general rate case, Case
5 No. PAC-E- 07-5. Staff identified 10 potential adjustments
6 with annual revenue requirement impacts ranging from $50,000
7 to over $2 million. Other issues such as the Energy Cost
8 Adjustment Mechanism (ECAM) and associated net power supply
9 cost, the Chehalis generating plant, DSM expenditures,
10 renewable energy credits, cost allocation for the irrigation
11 load control program and rate design were discussed at the
12 settlement workshop and had value in the negotiation process.
13 Staff evaluated each of the issues identified above
14 to determine the associated revenue requirement adjustment,
15 if any, and to develop the justification for the position
16 Staff would likely present in testimony. Staff established
17 an overall revenue requirement target that it believed could
18 be achieved with reasonable certainty and then negotiated
19 additional less certain adjustments in conjunction with the
20 likely Staff position on various disputed issues to arrive at
21 an overall revenue requirement compromise.
22 Staff believes that the stipulated increase in
23 revenue requirement of 3.1%, or approximately $1.5 million
24 less than that originally proposed by the Company, represents
25 a reasonable settlement in this case. This is particularly
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 9
STAFF
1 true when tax errors and undisputed adj ustments totaling some
2 $600,000 were identified during the negotiations that would
3 have increased the Company's original revenue requirement
4 request. Staff also believes that the $4.38 million proposed
5 revenue increase recognizes the unique characteristics of the
6 Company's filing while balancing the needs of both the
7 Company and its customers. Staff notes that the Proposed
8 Settlement incorporates almost all of the adjustments that
9 Staff would have recommended in testimony.
10 Q.The Stipulation states that the parties agreed to a
11 revenue requirement increase of $4.8 million yet the actual
12 increase is only $4.38 million. How was the lower increase
13 derived?
14 A.The lower revenue requirement increase for Idaho
15 retail customers of $4.38 million was derived by establishing
16 an Idaho jurisdictional revenue requirement and then
17 reallocating the total to Idaho retail customers (excluding
18 Monsanto and Agrium). The methodology approved by the
19 parties begins with the $4.8 million revenue requirement
20 increase and then divides by the 36.0553%, which represents
21 the Idaho jurisdictional cost responsibility of retail
22 customers. The resulting $13.31 million Idaho jurisdictional
23 revenue requirement is then reallocated to all Idaho customer
24 classes using the Staff's cost of service model incorporating
25 proposed revenue requirement adjustments. The result of the
CASE NO. PAC-E-08-7
02/25/09 LOBB, R. (Di) 10
STAFF
1 methodology is an increase to the impacted Idaho retail
2 customer classes of $4.38 million. The difference between
3 $4.8 million and $4.38 million is the additional Idaho
4 jurisdictional costs that are allocated to Monsanto and
5 Agrium.
6 Return on Equi ty
7 Q.Why was return on equity not specified in the
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8 Proposed Settlement?
A.Return on equity (ROE) was not specified in the
10 Stipulation as a compromise to recognize the significant
11 difference in party positions. The Company had proposed a
12 ROE of 10.75% and Staff believed the current ROE of 10.25%
13 was all that was warranted. Staff ultimately determined that
14 it was not necessary for the Stipulation to specify return on
15 equity if the overall revenue requirement was deemed
16 reasonable. To the extent return on equity is required for
17 other purposes such as avoided cost and AFUDC calculations,
18 Staff supports continued use of the last authorized return on
19 equity (10.25%). Order No. 30482.
21
20 Net Power Supply Cost
Q.Why were net power supply costs specifically
22 established in the Stipulation?
23 A.Staff reviewed the calculation of net power supply
24 costs as provided in the Company's filing and determined that
25 annual costs of $982 million were reasonable. Staff would
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 11
STAFF
1 not have necessarily proposed any adjustment to the amount if
2 the case had proceeded to hearing. However, the parties
3 agreed that the Commission must establish normalized net
4 power supply costs in this case in order to properly evaluate
5 the merits of the Company's proposed ECAM. Staff has not
6 agreed at this time to the Company's ECAM proposal nor has it
7 agreed that an ECAM mechanism is warranted for Rocky Mountain
8 Power in Idaho.
9 Chehalis
10 Q.Why did Staff agree in the Stipulation to allow
11 cost recovery for the Chehalis generating plant?
12 A.As part of its rate case review, Staff investigated
13 the Company's proposal to include the acquisition and
14 operating cost of the Chehalis generating plant in base
15 rates. The plant is a 500 MW natural gas-fired combined
16 cycle generation facility acquired by PacifiCorp on September
17 15, 2008.
18 During its investigation, Staff verified that
19 PacifiCorp' s 2007 Integrated Resource Plan (IRP) identified a
20 future deficit between the Company's projected peak capacity
21 needs and its resources available to serve peak demand. In
22 April 2007, the Company issued a Request for Proposal (RFP)
23 seeking up to 1,700 MW of cost-effective base load resources
24 to address the needs identified in the IRP. The Chehalis
25 plant was not bid into that RFP; instead, it became available
CASE NO. PAC-E- 08-7
02/25/09
LOBB, R. (Di) 12
STAFF
1 for a limited time in the market, outside of the RFP bidding
2 process. The time limitations on the transactions were such
3 that the completion of an RFP under the procurement
4 guidelines and laws in Oregon and Utah would have resulted in
5 the loss of the opportunity to purchase the Plant. As a
6 consequence , waivers of the RFP regulatory requirements were
7 obtained from each of those states. Reports prepared by
8 three independent evaluators - Merrimack Energy Group,
9 Bodington & Company, and Boston Pacific Company - were
10 submitted in support of the Company's waiver requests in
11 Oregon and Utah. Each of those reports supported the
12 Company i s acquisition of the Plant, and concluded that even
13 though the Chehalis Plant was not bid into the 2012 RFP, it
14 likely would have been selected over other bids that were
15 submitted. Staff thoroughly reviewed these reports as part
16 of its analysis in this case.
17 The Company has used data and models from its 2007
18 IRP, 2008 business plan and information regarding the Plant
19 obtained from the then current owner in analyzing whether to
20 acquire the Plant. The capitalized purchase price of the
21 Chehalis Plant was $305 million, or $610 per kW, not
22 including the capitalization of the legal and consulting
23 costs and site licensing costs. The results of the Company's
24 analysis show that acquisition of the Plant on the terms and
25 condi tions in the Purchase and Sale Agreement reduces present
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 13
STAFF
1 value revenue requirement of the Company's portfolio by about
2 $142 million to $197 million versus a comparable al ternati ve
3 resource from the 2012 RFP with an estimated cost of $1,000
4 per kW to $1,150 per kW. Staff concurs with the Company's
5 analysis and believes that the Company's customers are better
6 off through acquisition of the Plant now than acquisition of
7 a similar resource in 2012 based on market pricing and
8 responses to the 2012 RFP.
9 Based on its own analysis and a review of the
10 Company's analysis, Staff concludes that acquisition of the
11 Chehalis Plant is in the public interest and provides a
12 favorably-priced, flexible resource that will assist the
13 Company in meeting the resource needs of its customers at the
14 lowest reasonable cost.
15 Demand Side Management
16 Q.Why did Staff agree as part of the Stipulation to
17 accept PacifiCorp's 2006-2007 DSM expenditures as prudent?
18 A.Staff's review of Rocky Mountain's 2006-2007 demand
19 side management (DSM) expenditures found that the Company
20 evaluates the cost-effectiveness of its programs using the
21 total resource cost test (TRC), the utility cost test (UCT),
22 and the participant cost test (PCT). The Company maintains
23 and Staff has verified that its programs meet Commission
24 approved cost-effective criteria. Staff has also verified
25 that the methodology used by the Company to evaluate benefits
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 14
STAFF
1 and costs properly captures program energy savings.
2 Additionally, Staff is satisfied that the Company
3 periodically reviews and updates its DSM business case
4 through its Integrated Resource Plan (IRP) and other
5 processes.
6 Finally, the Company periodically reviews its DSM
7 program assumptions and cost-effectiveness and makes changes
8 as necessary. Formal, third-party, post - implementation
9 impact and process evaluations have been performed for some
10 of the programs that have been running longer in other
11 PacifiCorp jurisdictions and these evaluations have also
12 resul ted in changes to Idaho programs. Al though the Company
13 has not yet obtained competitive-bid, third-party evaluations
14 in Idaho, it is in the process of doing so, per its program
15 evaluation schedule, now that some of its programs have had
16 three-years of experience in Idaho.
17 Rocky Mountain has actively marketed its DSM
18 programs and education to its Idaho customers and many of its
19 customers have participated in them. Consequently, Staff
20 likely would have supported a prudency finding for Rocky
21 Mountain's two-year (2006-2007) DSM expenses in testimony at
22 hearing and concludes that it was reasonable to support such
23 a finding as part of the Stipulation.
24 Cost of Service
25 Q.What have the parties agreed to with respect to
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 15
STAFF
1 cost of service?
2 A.As a result of the Commission approved Stipulation
3 in the Company's last general rate case, Case No. PAC-E-07-5,
4 the cost of service methodology used to allocate costs to the
5 various customer classes could not change in this rate case.
6 Consistency in cost of service methodology between rate cases
7 was required due to the rate contract with Monsanto and
8 Agrium. While this case establishes the Idaho jurisdictional
9 revenue requirement, the Company can only recover cost
10 increases associated with retail customers (excluding
11 Monsanto and Agrium). Changing cost of service methodology
12 in this case could inappropriately increase costs allocated
13 to retail customers or shift costs allocated to
14 Monsanto/Agrium making those additional costs unrecoverable
15 by the Company in this rate case. Consequently, the cost of
16 service methodology used by the Company in its last general
17 rate case and proposed in this case was adopted by the
18 parties to establish class revenue responsibility.
19 Rate Spread and Rate Design
20 Q.Do the parties to the Stipulation agree with the
21 Class revenue spread and the rate relationships proposed by
22 the Company in its direct case?
23 A.Yes, as adjusted for the lower overall revenue
24 requirement. The cost of service study proposed by the
25 Company and adopted as part of the Stipulation provides the
CASE NO. PAC-E-08-7
02/25/09 LOBB, R. (Di) 16
STAFF
1 basis for the proposed revenue spread. The actual revenue
2 spread specified in the Stipulation for the various customer
3 classes range from no increase for the lighting
4 classifications to 5.94% for commercial schedules 6 and 9.
5 The residential schedule receives an increase of 3.53% and
6 irrigators receive 1.73%. Staff believes that the proposed
7 revenue spread reasonably applies the results of the cost of
8 service study previously approved by the Commission and
9 accepted by the parties in this case.
10 Absent a compelling rationale for major changes in
11 rate structure, the parties in this case agreed to apply the
12 general rate principals proposed by the Company in its
13 original filing. Residential customers will see an across
14 the board increase in rate components while maintaining the
15 differential between summer/winter and peak/off peak energy
16 rates.
17 The rate components for commercial, industrial and
18 irrigation schedules will also increase across the board
19 based on the overall revenue increase proposed for the class.
20 For example, the first block irrigation season energy rate
21 will increase by 1.73% from 7.0083 cents per kWh to 7.1295
22 cents per kWh. Proposed rates for each of the customer
23 classes are attached as Staff Exhibit No. 102.
24 Q.Why is there a provision in the Stipulation for
25 Rocky Mountain to address residential tiered rate design in
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 17
STAFF
1 its next general rate case filing?
2 A.While Staff has not proposed any rate structure
3 changes for the residential class in this case, it is
4 interested in whether a tiered rate design would be
5 beneficial to the Company and its customers. Tiered rates
6 have been proposed by Staff and approved by the Commission
7 for Idaho Power residential customers and may be appropriate
8 for Rocky Mountain customers as well. There are however,
9 some significant differences between the two companies that
10 make further evaluation of a tiered rate design necessary.
11 For instance, Rocky Mountain already has a residential, time
12 of use rate and Idaho represents only 6% of PacifiCorp's
13 customer base. A tiered rate design will not have the impact
14 on a system basis for Rocky Mountain that it will have for
15 Idaho Power given that Idaho customers represent about 95% of
16 Idaho Power's customer base.
17 Consequently, the parties agreed that it is
18 reasonable for Rocky Mountain to further investigate and to
19 include an inverted tiered rate design proposal for
20 residential customers in its next filed general rate case.
22
21 Miscellaneous Provisions
Q.Are there any other provisions in the Stipulation
23 that you wish to address?
24 A.Yes, there is one. The Stipulation includes a
25 paragraph regarding the Energy Trust of Oregon funding of the
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 18
STAFF
1 Goodnoe Hills wind generation plant. This issue deals with
2 how renewable energy credits generated from the project
3 should be allocated among the jurisdictions given that the
4 Oregon Energy Trust contributed directly to proj ect
5 development. The parties did not agree on any specific
6 allocation methodology and therefore agreed to defer this
7 issue to Rocky Mountain's next general rate case.
8
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Q.Does this conclude your testimony in this case?
A.Yes it does.
CASE NO. PAC-E-08-702/25/09 LOBB, R. (Di) 19
STAFF
~~l~OUNTAIN
Februar 4, 2009
VI OVERNIGHT DELIVERY
Jean D. Jewell
Commssion Secreta
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Attention: Jean D. Jewell
Commssion Secreta
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UT\~R~rsO \~otl; Mì 3 SIC) l\
201 South Main, Suite 2300
Salt Lake City, Utah 84111
RE: Case No. PAC-E-08-07 In the Matter of the Application of Rocky Mountain Power for
Approval of Changes to its Electric Service Schedules and a Price Increase of $5.9
Milion, or 4.0%.
Enclosed please find the original and seven (7) copies of the Stipulation entered into by and
between Rocky Mountain Power and the following paries of record in the above captioned
matter: Staf for the Idaho Public Utilties Commission, Idaho Irrgation Pumpers Association,
Inc. and the Communty Action Parership Association of Idaho. This stipulation does not
impact or propose any changes to Monsanto or Agrium's rates. Monsanto parcipated in the
settlement discussions and while they do not adopt the Stipulation they have no objection to the
Commssion approving the same. Paries to the Stipulation will file testimony in support of the
settlement on Februar 25, 2009.
Please let me know if you have any fuer questions.
Very Truy,
c~lJ)\~\
Danel E. Solander .
Senior Counel
Rocky Mountan Power
Enclosures
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
02/25/09 Page 1 of 12
John R. Hamond, Jr, ISB No. 5470
FISHER PUSCH & ALDERM, LLP
US Ban Plaza, 5th Floor
101 South Capitol Boulevard
PO Box 1308
Boise, Idaho 83701
[phone]
jrh¡ffpa-law.com
REC¡:1i ,..~ ~ 1(.'" :r)~ '. .'~
2009 FEB _r"
J AH 9: 35
UTJLtf~:~O
Danel E. Solander
Admitted Pro Hac Vice
Rocky Mounta Power
201 South Main, Suite 2300
Salt Lake City, Uta 84111
[phone]
daniel.solander¡fpacificorp.com
Attorneys for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION ROCKY MOUNTAIN ) CASE NO. P AC-E-08-07
POWER FOR APPROVAL OF )
CHANGES TO ITS ELECTRIC ) STIPULATION
SERVICE SCHEDULES AND A pRiCE )
INCREASE OF $5.9,MILLION OR 4.0 )PERCENT )
)
This stipulation ("Stipulation") is entered into by and among Rocky Mountai Power, a
division of PacifiCorp ("Rocky Mountain Power" or the "Company") and the following parties
of record in Case No. PAC-E-08-07: Staf for the Idaho Public Utilities Commssion ("Stafr');
the Communty Action Parership Association of Idaho ("CAP AI'1); and the Idaho Irgation
Pumpers Association, Inc. ("LIP A") (collectively, the "Paries"). i Monsanto and Agrum Inc.
rates are not directly impacted by the foregoing settlement reached by the other effected paries.
i Agrium, Inc., also a par
of record in Case No. PAC-E-08-07, did not paricipate in settlement
discussions and is not a signator to the Stipulation. Staff Exhibit No. 101
Case No. PAC-E-08-7
STIPULATION - Page 1 R. Lobb, Staff2/25/09 Page 2 of 12
Monsanto does not adopt the stipulation but has no objection to the Commission approving the
same.
I. INTRODUCTION
1. The terms and conditions of this Stipulation are set forth herein. The Paries agree that
this Stipulation represents a fair, just and reasonable compromise of the issues raised in ths
proceeding and that this Stipulation is in the public interest. The Paries, therefore, recommend
that the Idaho Public Utilties Commssion ("Commission") approve the Stipulation and all of its
terms and conditions. See IDAPA 31.01.01.271, 272, and 274.
II. BACKGROUND
2. On September 19, 2008, Rocky Mountai Power filed an Application, seeking
authority to increase the Company's base rates for electric service by $5.9 milion anualy, an
average increase of approximately 4.0%. The increase in rates vared by individua customer and
actu usage. Rocky Mountain Power sought to increase rates effective October 19,2008. The
Application did not include changes to the rates charged by Rocky Mountain Power to Monsanto
and Agrum,as the rates for those two customers are subject to the Stipulation filed and
approved by the Commission in Docket No. PAC-07-05 and no changes to those rates were
proposed in the curent Docket.
3. With a view toward resolving the issues raised in Rocky Mountain Power's
Application in this proceeding, representatives of the Paries met on Janua 15, 2009, pursuant
to IDAPA 31.01.01.271 and 272, to engage in settlement discussions.
Based upon the settlement discussions between the Paries, as a compromise of the
positions in ths proceeding, and for other consideration as set fort below, the Pares agree to
the following terms:
STIPULATION - Page 2
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 3 of 12
III. TERMS OF THE STIPULATION
4. The Paries agree that ths shall be a "black box" settlement with no pary accepting a
specific methodology for the revenue requirement determination. Accordingly, each individual
component of the Stipulation has not been agreed to by all Parties, but all Paries support the
overall increase to Rocky Mountain Power's Revenue Requirement, and agree that the overall
increase represents a fair, just and reasonable compromise of the issues raised in this proceeding
and that ths Stipulation is in the public interest.
5. The Paries agree to support an overall revenue requirement increase in ths case of
$4.8 milion, excluding the contract customers. Paries to the stipulation agreed that the $4.8
milion would be divided by 36.0553%, (the ratio of non-contract to contract customers cost of
service from page 2 of Rocky Mountain Power's Exhibit 20) to get to an Idaho total revenue
requirement increase of $13,312,883. This increase to Idaho's revenue requirement was input
into Staffs cost of service model to run the class allocation producing $4,382,632 or
approximately 3.1 % revenue requirement increase to the non-contract customers. The increase
~shall be effective April 18, 2009 for all affected customers.
6. The Paries agree to establish the total company base net power cost at $982 milion, as
filed in this Application, which .will be necessar for calculation puroses in Rocky Mountan
Power's curently pending Application for Approval of an Energy Cost Adjustment Mechansm
in Docket No. PAC-E-08-08.
7. The Paries agree that Rocky Mountain Power's acquisition of the Chehalis generating
plant in Chehalis, Washington was a prudent decision and in the public interest, and costs related
to the plant acquisition and operation included in ths case are reasonable and are included in rate
base.
8. The Paries agree that the demand-side management programs proposed by Rocky
Mounta Power in Docket No. PAC-E-08-0lare prudent. Furher, the Paries agree that a tota
of $50,000 of demand-side management program fuds will be made available to Southastern
Idaho Community Action Agency and Eastern Idaho Community Action Parership to be used
Staff Exhibit No. 101
Case No. PAC-E-08-7
STIPULATION - Page 3 R. Lobb, Staff
2/25/09 Page 4 of 12
to support conservation education as a component of Rocky Mountain Power's low income
weatherization program, Schedule 21. Paries agree that it is the responsibility of the
Communty Action Parnership Association of Idaho to propose said education program to
Rocky Mountan Power by May 1, 2009 and that the proposal will contain fuding proportioning
the $50,000 between the two agencies, objectives and any savings estimates to assist in program
evaluations and reporting requirements. The Paries agree that the low income weatherization
program (Schedule 21) and the conservation education component of the program is in the public
interest and is determined to be cost-effective even though the explicit quatification of benefits
may not be possible, and fuermore, the Paries agree to support the justification and recovery
of these costs though the demand-side management surcharge fuding.
9. The Paries agree that the issue raised in Company testimony related to the Energy
Trust of Oregon Funding of the Goodnoe Hils wind generation plant will be deferred to' Rocky
Mounta Power's next filed general rate case.
10. Rocky Mounta Power agrees that it will include an inverted tier rate design
propòsal or option for residential customers in its next fied general rate case for the
Commission's consideration.
11. . The Paries agree to the rate spread set fort in the following table. The rate
spread was calculated based on the ratio of Rocky Mountain Power's proposed revenue
requirement increase of $5,871,441 to the settled revenue requirement increase of $4,382,632.
This amount was ratably applied to Rocky Mountan Power's original proposed price change by
customer class. Details of the rate spread are included in Attachment 1 to this Stipulation.
Customer Class
Residential-Schedule 1
Residential- Schedule 36
General Service
Schedule 23/23A
Schedule 6/6AJ8/35
Schedule 9
Schedule 19
Proposed
4.73%
4.73%
Settled
3.53%
3.53%
STIPULATION - Page 4
0% 0%
7.96% 5.94%
7.96% 5.94%
2.31% 1.73%
Staff Exhibit No. 101
Case No. P AC-E-08-7
R. Lobb, Staff
2/25/09 Page 5 of 12
Irrigation
Schedule 10
Public Street Lighting
Schedules 7/7 A, 11, 12
2.31%1.73%
0%0%
12. The paries agree that the design of rates by rate schedule (rate design) shall be
consistent with the Company's fied proposals as adjusted for the revenue requirement in this
settlement.
iv. GENERA PROVISIONS
13. The Paries agree that ths Stipulation represents a compromise of the positions of
the Paries on all issues in this proceeding. Other than the above referenced positions and any
testimony fied in support of the approval of this Stipulation, and except to the extent necessar
for a Par to explain before the Commission its own statements and positions with respect to the
Stipulation, all negotiations relating to this Stipulation shall not be admissible as evidence in ths
or any other proceeding regarding ths subject matter.
14. The Paries submit ths Stipulation to the Commssion and recommend approval
in its entirety pursuant to IDAPA 31.01.01.274. The Paries shall support ths Stipulation before
the Commssion, and no Pary shall appeal any portion of ths Stipulation or Order approving the
same. If this Stipulation is challenged by any person not a par to the Stipulation, the Paries to
this Stipulation reserve the right to cross-examine witnesses and put on such case as they deem
appropriate to respond fully to the issues presented, including the right to raise issues that are
incorporated in the settlement embodied in this Stipulation. Notwthtanding ths reservation of
rights, the Paries to this Stipulation agree that they will continue to support the Commssion's
adoption of the terms of ths Stipulation.
15. In the event the Commission rejects any par or all of ths Stipulation, or imposes
any additional material conditions on approval of ths. Stipulation, each Par reserves the right,
upon wrtten notice to the Commission and the other Paries to this proceeding, withn 15 days of
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 6 of 12STIPULATION - Page 5
the date of such action by the Commission, to withdraw from this Stipulation. In such case, no
Pary shall be bound or prejudiced by the terms of this Stipulation, and each Par shall be
entitled to seek reconsideration of the Commission's order, file testimony as it chooses, cross- .
examine witnesses, and do all other things necessar to put on such case as it deems appropriate.
16. The Paries agree that this Stipulation is in the public interest and that all of its
terms and conditions are fair, just and reasonable.
17. No Pary shall be bound, benefited orprejudiced by any position asserted in the
negotiation of ths Stipulation, except to the extent expressly stated herein, nor shall ths
Stipulation be construed as a waiver of the rights of any Pary uness such rights are expressly
waived herein. Execution of this Stipulation shall not be deemed to constitute an
ackn,owledgment by any Par of the validity or invalidity of any paricular method, theory or
principle of regulation or cost recovery. No Par shall be deemed to have agreed that any
method, theory or principle of regulation or cost recovery employed in ariving at this Stipulation
is appropriate for resolving any issues in any other proceeding in the future. No fIndings of fact
or conclusions of law other than those stated herein shall be deemed to be implicit in ths
. Stipulation.
18. The obligations of the Paries under this Stipulation are subject to the
Commi~sion's approval of this Stipulation in accordance with its terms and conditions and, if
judicial review is sought, upon such approval being upheld on appeal by a cour of competent
jursdiction.
(INTENTIONALL Y LEFT BLANK)
STIPULATION - Page 6
: Staff Exhibit No. 101
i Case No. PAC-E-08-7
: R. Lobb, Staff
: 2/25/09 Page 7 of 12
Respectfully submitted this .í~ay of February, 2009.
Rocky Mountain Power Idaho Irrigation Pumpers Association,
Inc.B~~BY
.Idaho Public Utilties Commission Staff Community Action Partnership
Association of Idaho
By By
STIPULA nON - Page 7
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 8 of 12
Respectfully submitted this ~~day of February, 2009.
Rocky Mountain Power Idaho Irrigation Pumpers Association,
Inc.B~~BY
Idaho Public Utilties Commission Staff Community Action Partnership
Association of Idaho
B~., .. ~d.æh/jl:;;
1'30/(1'7
By
STIPULATION - Page 7
Staff Exhibit No. 101
Case No. P AC-E-08-7
R. Lobb, Staff
2/25/09 Page 9 of 12
Respectfully submitted thi4-thday of February, 2009.
Rocky Mountain PowerB~
Idaho Public Utilties Commission Staff
By
STIPULATION - Page 7
Community Action Partnership
Association of Idaho
By
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 10 of 12
Retfully submitted this ~tRday of Febiiary. 2009.
ROl:ky MOIIDtain PowerB~BY
Idaho Publie Utilities Commision Staff
By
STIPULATION -Page 1
Idaho Irrigation Piimpers Asciation.
me.
Community Action Partl1ersbi
Assodaoou ofldaho-/'L'. ~ig,(B ,'/,,' ~y : ',-
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 11 of 12
A'IACHMENT i
ROCKY MOUNtAIN POWER
ESMATli" iMPACT OF PROPOSED REVENUES ON NORMALIZED Piu..,~T REVENUES
FROM ELECTC SALES TO ULTIMATE CONSUMERS
DISTBUTD BY RATE SCHEDULES IN IDAHO
11 MONTHS ENDING DECEMBER ZOO?
Pm Prpo c...ia_..(SO)_enut (SO)BaR.._
A..Ui Pm Prpo No. or Ba Ba Pm Pr
No De Sd Sd Cus MWH Revnu.1 Reveauel ($01 .,WI!Wl (t)lWh
(I)(2)(3)(4)(5)(6)(7)(8)(9 (10)(II)
(6)-5)(7)1(5)(S)4)(6)1(4)Rni sa
RClidial Seic I I 39.21S 399.023 535.00 S36.237 SI.235 3,53..8.77 9,08
Rc_al O¡iona TOO 36 36 16.39 317,371 $22.475 $2.268 $793 lS3..7.08 7,33AGA.~S5 SS $0 0,00"
4 T.. Ro 55.s85 716.401 S51.48 S59,51O $2,08 ~8,02 8.3'
5 Cgmcral ".Ipd
6 0e Se . La ""6 6 1.028 29916 SI7.411 SI8,445 SI.OO 5,94"5.82 6,17
7 Gel Svc, . 1.. Powe (R&6A 6A 247 36.068 $2.34 $2.479 SI39 5,94"6.49 6.87
8 S.lial-scdle 6 1.15 334,984 S19.751 $20,924 SI,I74 5,94"5,90 6,25
9 0e Seic . Mo Vo..8 6 2 2.SISI SI60 $9 5.94"5,32 5,6)
10 0e Se. Hip Voi..9 9 12 130.89 S5.672 $6.00 S331 5,94"4,33 4,59
II Irraiio 10 10 5.33 697,66 $47,382 $48.201 SRI9 1.73%6.79 6.91
12 Comm. " Ind Spa -8 19 19 148 8.36 U53 S562 SIO 1.73"6.71 6,83
13 0e Seic 23 23 6,183 122,77 $9,710 $9,710 $0 0,00 7,91 7.91
14 Gel Sorvic (R&f 23A 23A 1,383 18.166 SI.s15 SI.515 $0 0.00 8.34 8.34
IS Sulal.ScIiIe 23 7.s67 140,944 SII.225 SII.225 SO 0,00%7.96 7,96
16 0...1 Se Opna TO 35 35 2.s87 SI22 S130 $7 5.94%4.73 5,01
17 Spial Co-M 1,319,64 SS3.S45 S53.s45 $0 0.00 4,06 4,06
18 Speal C_.Nv WeS 109.11 $4.239 $4.239 $0 0,00 3.88 3,88
19 AGA.R...$477 $477 $0 0,00
20 T.. e-"I-.14,3 2,746,9 S143.1I7 S145.472 $2.355 ~5.21 5.30
21 T.. e-"I-.14,339 1.427,276 S89.m $91.926 $2,355 2,63"6.28 6,44
(E Me.._)
22 Pl St I IpiDf
23 S. An Upiiaa 7 7 239 284 SI04 SI04 $0 OJJO..36,72 36,72
24 Senty An Uøhii (R&f 7A 7A 195 138 S54 SS4 $0 0,00 39,41 39.4
25 S.. U¡ii . Compe II 11 32 121 SS S52 $0 0.00 43.10 43.10
26 s"" Uølin . C.""..12 12 29 1.974 5370 S370 $0 0.00 18.75 18,75
27 AOA.R..$0 $0 $0 0.00
28 .... i' SI Lina 760 21517 S581 S581 $0 ~23,08 23,08
29 T.. s. io IJ C.-70,6 3.65.818 $21.180 si.s62 $4.3 2.8..5,80 5,93--S2,698
30 T.. s. io IJ c..70.6 'kOJ71J79 S143.35 SI47.778 $4.383 3.06%7,04 7.5
(Ei Me...." Na-Wai)-
Staff Exhibit No. 101
Case No. PAC-E-08-7
R. Lobb, Staff
2/25/09 Page 12 of 12
Proposed Rates for PacifiCorp Settlement1
Present Rates Setlement Rates Setlement Stipulation
Deman
d
Demand Energy Charge Energy Biling
Customer Charge Rate Custmer (per Rate Determinant %
Rate Schedule Charge (perkW)(e/kWh)Charge kW)(e/kWh)Increase
Residential 3.53%
Sch.12
May-October see below N/A 10.0505 see below N/A 10,4053
November-April see below N/A 7,7380 see below N/A 8.0112
May-October (Single Phase)$10.2 $10.63
November-April (Single Phase)$10.27 $10.63
May-October (Three Phase)$30.81 $31.90
November-April (Three Phase)$30.81 $31.90
May-October (Single Phase, Non Year-Rour $14.35 $14.86
November-April (Single Phase, NOn Year-Ri $14.35 $14.86
May-October (Three Phase, Non Year-Rour $43.05 $44.57
November-April (Three Phase, Non Year-Rc $43.05 $44.57
Sch,36
May-October, On-Peak $13.17 N/A 10,9602 $13.63 N/A 11.3471
May-October, Off-Peak $13.17 N/A 3.7401 $13.63 N/A 3.8721
November-April, On-Peak $13.17 N/A 9.3625 $13.63 N/A 9.6930
November-April, Off-Peak $13,17 N/A 3.4230 $13.63 N/A 3.5438
General Service 5.94%
Sch,6/6A
May-October, Secondary $29,17 $10.68 2.9564 $30,90 $11.31 3.1320
May-October, Primary $87,51 $10.68 2.9564 $92,71 $11.31 3.1320
November-April, Secondary $29,17 $8.79 2.9564 $30.90 $9.31 3.1320
November-April, Primary $87,51 $8.79 2.9564 $92,71 $9,31 3.1320
Sch.9
May-October $282,89 $7.40 3.0561 $299.69 $7.84 3,2376
November-April $282,89 $5.60 3.0561 $299.69 $5,93 3,2376
Sch.19 1.73%
May-October $19,82 N/A 7.7373 $20.16 N/A 7.8712
November-April $19.82 N/A 5.7332 $20.16 N/A 5,8324
Sch,35 5,94%
Secondary $51.44 $12.67 3.7745 $54.50 $1342 3.9987
Primary $126,72 $12.67 3.7745 $134.25 $13,42 3,9987
Irrigation 1.73%
Sch.10
15 hp or less $11.54 $4,48 see below $11.74 $ 4.56 see below
16 hp or more $33.54 $4,48 see below $34.12 $ 4.56 see below
Post-Season $17.6 N/A 5,9281 $18.07 N/A 6.0307
First 25,000 kWh 7,0083 7.1295
Next 225,000 kWh 5,1843 5.2740
All Additional kWh 3,8419 3.9084
1 No rate changes for Schedules 23/23A,and Public Street Lighting (7/7 A, 11, 12)
2 Customer Charge denotes Monthly Minimum Charge
Staff Exhibit No. 102
Case No. P AC-E-08-7
R. Lobb, Staff
2/25/09
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 25TH DAY OF FEBRUARY 2009,
SERVED THE FOREGOING DIRECT TESTIMONY OF RANDY LOBB IN SUPPORT
OF STIPULATION, IN CASE NO. PAC-E-08-07, BY MAILING A COPY THEREOF,
POSTAGE PREP AID, TO THE FOLLOWING:
TED WESTON
MGR, ID REGULATORY AFFAIRS
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: ted.weston(ipacificorp.com
DATA REQUEST RESPONSE CENTER
PACIFICORP
825 NE MUL TNOMAH STE 2000
PORTLAND OR 97232
E-MAIL: datarequest(gpacificorp.com
KATIE IVERSON
BRUBAKER & ASSOCIATES
17244 W CORDOVA COURT
SURPRISE AZ 85387
E-MAIL: kiverson(áconsultbai.com
ERIC L OLSEN
RACINE OLSON NYE BUDGE & BAILEY
201 E CENTER
PO BOX 1391
POCATELLO ID 83204
E-MAIL: elo(iracinelaw.net
BRAD MPURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
E-MAIL: bmpurdy(ihotmaiLcom
DANIEL SOLANDER
SENIOR COUNSEL
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: danieLsolander(ipacificorp.com
RANDALL C BUDGE
RACINE OLSON NYE BUDGE & BAILEY
201 E CENTER
PO BOX 1391
POCATELLO ID 83204
E-MAIL: rcb(iracinelaw.net
JAMES R SMITH
MONSANTO COMPANY
E-MAIL: jim.r.smith(imonsanto.com
ELECTRONIC COPIES ONLY
ANTHONY Y ANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44140
E-MAIL: tony(gyaneLnet
CONLEY E WARD
MICHAEL C CREAMER
GIVENS PURSLEY LLP
601 W BANNOCK ST
PO BOX 2720
BOISE ID 83701-2720
E-MAIL: cew(ggivenspursley.com
CERTIFICATE OF SERVICE
DENNIS E PESEAU PhD
UTILITY RESOURCES INC
1500 LIBERTY ST SE
SUITE 250
SALEM OR 97302
E-MAIL: dpeseau(fexcite.com
jß,J1.KQSËiARY
CERTIFICATE OF SERVICE