20090730Weston Direct.pdf

,
~~~OUNTAIN RECEiVED
2009 JUL 30 AM 10= 19
201 South Main, Suite 2300
Salt Lake City, Utah 84111
July 30, 2009 iDAHO PUBU';;
UTILITIES COMMISSION
VI ELECTRONIC FILING
AN OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secreta
Idaho Public Utilities Commssion
472 W. Washington
Boise,ID 83702
Attention: Jean D. Jewell
Commission Secreta
RE: Case No. PAC-E-08-08 In the Matter of the Application of Rocky Mountain Power for
Approval of an Energ Cost Adjustment Mechanism.
Enclosed please find the original and nine (9) copies of the testimony and exhibits of J. Ted
Weston in support of the Stipulation entered into by and between Rocky Mountain Power and
the followig pares of record in the above captioned matter: Sta for the Idaho Public Utilities
Commssion, Idaho Irgation Pumpers Association, Inc. and Monsanto.
Please let me know if you have any fuer questions.
qll:L(~
Vice President, Regulation
Rocky Mounta Power
Enclosures
Cc: Service List PAC-E-08-08
REeECERTIFICATE OF SERVICE
I hereby certify that on this 30th day of July, 2009, I caused to be served, via E-mail 1009 JUl30AMIO= ,
and/or overnght delivery, a tre and correct copy of Rocky Mountain Power's TestimonK)AHO P' '8i it:
of J. Ted Weston supportng the Stipulation in PAC-E-08-08 to the following: UTILITIES CO~Ai~¡ŠSlC
Radal C. Budge (E-mail & Hard Copy)
Raine, Olson, Nye, Budge & Bailey,
Charered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: rcb(ßracinelaw.net
Katie Iverson (E-mail & Hard Copy)
Brubaker & Associates
17244 W. Cordova Cour
Surrise, AZ 85387
E-mail: kiverson(ßconsultbai.com
Anthony Yanel (E-mail only)
29814 Lake Road
Bay Vilage, OH 44140
E-mail: tony(ßyanel.net
Rady Lobb (E-mail & Hard Copy)
Scott Woodbur (E-mail & Hard Copy)
Idaho Public Utilties Commssion
472 W. Washigton
Boise,ID 83702
E-mail: Rady.lobb(ßpuc.idaho.gov
E-mail: Scott.woodbur(ßpuc.idaho.gov
Eric L. Olsen (E-mail only)
Racine, Olson, Nye, Budge & Bailey,
Charered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: elo(ßracinelaw.net
James R. Smith (E-mail only)
Monsanto Company
POBox 16
Soda Springs, ID 83276
E-mail: jim.r.smith(ßmonsanto.com
Jean Jewell
Commssion Secreta
Idaho Public Utilties Commission
472 W. Washigton
Boise,ID 83702
E-mail: Jean.jewell(ßpuc.idaho.gov
Ted Weston
Danel Solander
PacifiCorp/ dba Rocky Mounta Power
201 S. Mai Street, Suite 2300
Salt Lake City, UT 84111
Ted. weston(ßpacificorp.com
Danel.solander(ßpacificorp.com
CndifL--
Care Meyer
Coordinator, Admstrative ~ices
RECEI D
2089 JUL 30 AM 10: ,
IDAHO PUBliC
UTILITli:.c: CO'~HH:(""C· ........ rm~ll':'';1
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ROCKY )
MOUNTAIN POWER FOR )
APPROVAL OF AN ENERGY COST )
ADJUSTMENT MECHANISM )
)
CASE NO. PAC-E-08-08
Direct Testimony of J. Ted Weston
ROCKY MOUNTAIN POWER
CASE NO. PAC-E-08-08
July 2009
1 Q.
2
3 A.
Please state your name, business address and present position with Rocky
Mountain Power (the "Company"), a division of PacifCorp.
My name is J. Ted Weston and my business address is 201 South Main, Suite
4 2300, Salt Lake City, Utah, 84111. I am currently employed as the Manager of
5 Idaho Regulatory Affairs.
6 Qualifications
7 Q.
8 A.
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18 Q.
19 A.
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Briefly describe your educational and professional background.
I received a Bachelor of Science Degree in Accounting from Utah State
University in 1983. I joined the Company in June of 1983 and I have held various
accounting and regulatory positions prior to my curent position. In addition to
formal education, I have attended several educational, professional and electrc
industr related seminars during my career with the Company.
What are your responsibilties as Manager of Regulatory Affairs?
My primar responsibilities include the coordination and management of Idaho
regulatory fiings, communications with the commission and staff, and oversight
of reporting requirements for the Company with the Idaho Public Utilties
Commission.
Have you testified in previous regulatory proceedings?
Yes. I have testified before the Washington Transportation and Utilities
Commission, the Wyoming Public Service Commission and the Idaho Public
Utilities Commission.
Weston, Stip - 1
Rocky Mountain Power
I Purpose of Testimony
2 Q.What is the purpose of your testimony in this proceeding?
3 A.The purpose of my testimony is to present and support the Stipulation for the
4 Company's Energy Cost Adjustment Mechanism (ECAM) entered into by and
5 among the Company; Staff for the Idaho Public Utilities Commission ("Staff');
6 the Idaho Irrigation Pumpers Association, Inc. ("LIP A"); and Monsanto, which I
7 collectively refer to as the Parties. I wil explain how the ECAM wil work and
8 describe the terms and conditions of this Stipulation. I wil also demonstrate that
9 this Stipulation represents a fair, just and reasonable compromise of the issues in
10 this proceeding and that this Stipulation is in the public interest. My testimony
11 supports the Company's recommendation that the Idaho Public Utilities
12 Commission ("Commission") approve the Stipulation and all of its terms and
13 conditions.
14 Background
15 Q.Would you summarize the proceedings to date of the Company's Energy
16 Cost Adjustment Mechanism, Case No. PAC-E-08-08?
17 A.On October 23, 2008, Rocky Mountain Power filed an application ("Application")
18 seeking approval of an ECAM. On November 5, 2008 the Commission published
19 a notice of the Application and set an intervention deadline. Monsanto and the
20 LIP A intervened in the case. On February 26,2009 the Company met with staff
21 and the other intervening parties to explain its pending application and answer any
22 questions. During the subsequent month the Company responded to several
23 formal and informal discovery requests. On April 7, 2009 staff formally advised
Weston, Stip - 2
Rocky Mountain Power
1 the Commission and the other intervening parties, pursuant to IDAP A
2 31.01.01.271 and .272, of its intent to engage in settlement discussions. With a
3 view toward resolving the issues raised in the Application, the Paries met on May
4 11,2009 and conference calls were held June 1,2,4 and June 5, 2009. Based
5 upon the settlement discussions among the Parties, we have reached a
6 compromise agreement that resolves all outstanding issues and which the Parties
7 believe is in the public interest as set fort in the Stipulation.
8 Energy Cost Adjustment Mechanism
9 Q.
10 A.
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18 Q.
19 A.
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Please describe the Energy Cost Adjustment Mechanism.
The ECAM is designed to allow the Company to collect or credit the differences
between the actual net power costs (NPC) incured to serve customers in Idaho
and the amount collected from Idaho customers through rates set in general rate
cases. On a monthly basis, the Company wil compare the actual system net
power costs (Actual NPC) to the net power costs embedded in rates from the most
recent general rate case, (Base NPC), and defer the differences in a balancing
account. An ECAM Surcharge rate wil be updated annually to collect from or
credit to customers the accumulated balance over the subsequent year.
What FERC accounts and types of costs would be included in the ECAM?
Base NPC and Actual NPC wil include amounts tyically booked to the
following FERC accounts:
Account 447 - Sales for resale, excluding on-system wholesale sales and
other revenues that are not modeled in GRID
Account 501 - Fuel, steam generation; excluding fuel handling, start up
Weston, Stip - 3
Rocky Mountain Power
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fuel/gas!, diesel fuel, residual disposal and other costs that
are not modeled in GRID
Account 503 - Steam from other sources
Account 547 - Fuel, other generation
Account 555 - Puchased power, excluding BPA residential exchange credit
pass-through if applicable
Account 565 - Transmission of electricity by others
How will the ECAM deferral be calculated?
An example of the ECAM deferral calculation is included in Exhibit No.4,
attached hereto. The calculation of the deferral wil be on a monthly basis by
comparing the system monthly Base NPC rate on a dollars per megawatt-hour
basis (shown on line 1 of Exhibit No.4) to the system Actual NPC rate also in
dollars per megawatt-hour (shown on line 4 of Exhibit No.4). The resulting
monthly NPC rate differential (on line 5) would be multiplied by actual Idaho
retail load at input (on lines 6 and 7) to calculate the NPC differential for deferral
(on line 8).
Why is the Idaho tariff and tariff contract load broken out separately?
The Idaho tariff and tarff contract load are separated to isolate the tariff
customers share from the contract tariff customers. Line 6 of Exhibit No.4 is the
Idaho tariff load and line 7 is for the tariff contract customers. Line 7 wil be zero
until January 1, 2011 because tariff contract loads are not subject to any ECAM
surcharges/sur-credits until Januar 1,2011.
1 Start up fuel is accounted for separately from the primary fuel for steam power generation plants. Sta up
costs are not accounted for separately for natural gas plants, and therefore all fuel for natual gas plants is
included in the determination of both Base NPC and Actual NPC.
Weston, Stip - 4
Rocky Mountain Power
1 Q.
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Why isn't the Company proposing to defer the net power costs associated
with the two tariff contract customers prior to January 1, 2011?
In Case No. PAC-E-07-05, the Commission approved as part of the overall
stipulation an energy service agreement with specific planned rate increases for
these customers through December 31, 2010. The Company agreed not to
increase these customers' rates outside this service agreement before Januar 1,
2011 and is not proposing any modifications to that rate plan in this ECAM
application. Initially these two tariff contract customer's load wil be excluded
from Idaho's load when calculating the NPC deferraL. The tariff contract
customers' loads wil be included in the ECAM cost deferral calculation
beginning January 1,2011 (the rate plan expires December 31, 2010), and would
be subject to the ECAM rate from that date forward. If the ECAM is approved,
any balance at December 31,2010 would be isolated from the balance calculated
beginning January 1, 2011 to assure these contract tariff customers have no
impact of the ECAM deferral prior to the end of the service agreement.
How would the Base NPC rate be calculated?
Base NPC would be determined and approved in a general rate case proceeding
based on total company net power costs. Initially, Base NPC of $982 milion as
stipulated to and approved in Order No. 30783 from Case No. PAC-E-08-07 wil
be used for the ECAM, until re-set in the next general rate case. The monthly net
power costs from the most recent general rate case wil be divided by the monthly
normalized load used to determine those net power costs to express the costs on a
dollar per megawatt-hour basis.
Weston, Stip - 5
Rocky Mountain Power
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How is the Actual NPC rate calculated?
Actual NPC wil be calculated using all components of net power costs as
traditionally defined in the Company's general rate cases. The actual monthly
system NPC wil be divided by the system load for that month to calculate the
Actual NPC dollars per megawatt-hour rate (shown on lines 2 through 4 of
Exhibit No.4) and that rate is then compared to the Base NPC rate to determine
the NPC differential (shown on line 5 of Exhibit No.4).
Do Actual NPC include adjustments prior to the comparison with Base
NPC?
Yes. The tyes of adjustments that wil be made to Actual NPC would be (1) the
removal of prior period accounting entres and (2) the addition of applicable
Commission-adopted adjustments reflected in the most recent general rate case to
make the Actual NPC consistent with the Base NPC. Actual NPC wil not be
adjusted for hydro conditions and forced outages because they give rise to the
fluctuations in net power costs that the ECAM is designed to captue. Actual
NPC wil be subject to review by the Commission, staff, and other paries
annually when the Company fies its applications for recovery of the deferred
NPC.
What deferral period wil be used in the ECAM?
The ECAM deferral period wil be December 1 through November 30, with an
application to adjust the ECAM Rate to refud or collect the ECAM deferral
balance from the prior year filed with the Commission by the Company on
February 1. Parties and Commission staff would then review the application, and
Weston, Stip - 6
Rocky Mountain Power
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assuming the application is approved, the ECAM rate would then be updated
annually and would be effective April 1.
What wil the deferral period be for the first year of the ECAM?
The Parties agreed that the ECAM would be effective July 1,2009, provided that
the Commission issues an order approving the Stipulation. Therefore the initial
deferral period will be July 1 through November 30, 2009.
In addition to the comparison of Actual to Base net power costs what other
components are included in the ECAM?
There are two additional components included in the ECAM, a Load Growth
Adjustment Rate (LGAR) and a credit for any S02 allowance sales.
Please describe your understanding of the purpose of the Load Growth
Adjustment Rate (LGAR), its calculation, and how it impacts the ECAM.
The LGAR is a symmetrical adjustment to offset any over or under collection of
the Company's production related revenue requirement due to variances in Idaho
load. The LGAR has typically been calculated by dividing the total Company
production revenue requirement from the most recent general rate case by system
load from that case to produce the dollars per megawatt-hour rate. A component
of the Company's production related revenue requirement is NPC. Rocky
Mountain Power's ECAM differs from Idaho Power and Avista's PCA
mechanisms in that the Company's ECAM is calculated using dollars per
megawatt-hour differential between Base NPC and Actual NPC. This calculation
subtracts the base dollars per megawatt-hour rate established in a general rate case
from the actual dollars per megawatt-hour NPC expense incured to serve
Weston, Stip - 7
Rocky Mountain Power
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customers. Therefore, the ECAM excludes the base net power costs collected in
rates from any load growth or decline leaving only the incremental increase or
decrease in NPC. Including NPC expense in the calculation of the LGAR for
Rocky Mountain Power would adjust these costs twice, once through the NPC
differential and again though the LGAR. Therefore based on the Company's
ECAM design it is necessary to exclude NPC from the production related revenue
requirement when calculating the LGAR. The Parties agree that asymmetrcal
LGAR of $17.48 per megawatt-hour wil be applied to the incremental load from
the base load established in Case No. PAC-E-08-07, and that the LGAR and base
load wil be updated each time base NPC are updated in a general rate case.
The load growth adjustment is calculated by subtracting Idaho's Base Load which
is the load from the most recent general rate case (shown on line 9 of Exhibit No.
4), from Actual Idaho load (shown on lines 6 and 7 of Exhibit No.4). The
difference (on line 10) is multiplied by the LGAR of $17 .48 (on line 11) and the
product is the load growth adjustment (on line 12).
How are S02 sales treated in the ECAM?
The Parties agree that S02 sales made after June 30, 2009 wil be included as an
offset to the ECAM deferraL. The Parties further agree that sales made prior to
such date wil continue to be amortized over fifteen years consistent with curent
practice as reflected in Case No. PAC-E-06-04 (Larson Direct Testimony, Exh. 1,
pp. 3.6 and 3.6.1).
Line 13 of Exhibit No.4 of the ECAM template would contain total Company
S02 sales (line 14 is Idaho's SE percentage from the last general rate case). A
Weston, Stip - 8
Rocky Mountain Power
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multiplication ofline 13 by line 14 produces Idaho's allocation of the S02 sales.
Line 16, Idaho Tariff customer percentage, is calculated by dividing line 6, Idaho
tariff load by total Idaho load. Line 17, Idaho S02 offset, is calculated by
multiplying line 15 by line 16.
Line 18 is the sum of the NPC differential for deferral on line 8 plus the load
growth adjustment revenues on line 12 and the S02 sales from line 17.
Does the ECAM have a sharing band?
Yes. The Parties agree that the ECAM wil include a symmetrical sharing band
wherein when there is a difference between Actual NPC and Base NPC,
customers pay, if there is an increase in NPC, or receive, if there is a decrease in
NPC, 90 percent of the difference, and the Company is responsible for the
remaining 10 percent. Line 19 of Exhibit No.4 is the 90 percent customer's
sharing ratio of the symmetrical sharing band and line 20 is customer's share of
line 18 NPC deferraL. The Company's absorption of 10 percent of the differential
is one of the customer benefits from this mechanism.
Does the ECAM Stipulation contain an agreement to account for the impact
of new renewable resources not yet in rates?
Yes. The Parties recognize that the Company has made significant investment in
renewable generation projects that are not yet being recovered in Idaho rates and
that these projects provide significant benefits to customers through the ECAM.
Therefore, from the effective date of the ECAM to the effective date of rates in
the next rate case, the Parties agree that the ECAM wil include a renewable
generation investment offset adjustment. The adjustment recognizes that actual
Weston, Stip ~ 9
Rocky Mountain Power
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NPC have been reduced by power generated from these renewable generation
projects, but that the costs of these projects are not yet being recovered in Idaho
rates. The adjustment wil be based on $55.00 per megawatt-hour, as calculated
in Exhibit No.5, attached hereto, multiplied by the actual megawatt-hour output
generated by the renewable resources that were not included in rate base in Rocky
Mountain Power's Case No. PAC-E-08-07. This calculation occurs on lines 21
through 23 with the Idaho allocation calculated on lines 24 through 27.
In recognition for and as a result of the implementation of the ECAM with an
adjustment for renewable generation projects not yet in rate base as specified
above, the Company agrees not to fie a general rate case prior to May 1, 2010.
This rate stability and assurance of no rate increase prior to April 1, 2010, the
effective date of the ECAM rate, is another key customer benefit.
Please explain the balancing account and the calculation of the ECAM rate.
The balancing account and ECAM surcharge rate serve as a tre-up mechanism to
recover or credit the differences between Base NPC and Actual NPC. On a
monthly basis, the Company wil calculate Idaho's NPC differential, load growth
adjustment, S02 sales, and the renewable resource adder. These amounts wil be
deferred in the balancing account. The monthly under or over recovery wil
accumulate in the balancing account and accrue a caring charge equal to the
Commission's most recently approved customer deposit rate. On an annual basis
the cumulative deferred balance in the balancing account wil be converted to a
Schedule 94 ECAM rate expressed on a cents per kilowatt-hour basis for
projected Idaho sales for the next twelve months of the ECAM recovery period.
Weston, Stip - 10
Rocky Mountain Power
1 Q.
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Has the Company provided a copy of Schedule 94?
No. As noted in item 11 of the Stipulation the Company is working with the other
Parties to the Stipulation to design rates that reflect line losses and distinguish
between transmission, primar and secondar voltage delivery service. On
Februar 1,2010 the Company wil fie an application with the Commission that
wil include the ECAM deferred account balances at November 30, 2009 with
proposed rates by customer class for Commission approval.
When wil the Company reconcile the ECAM deferral and rate recovery and
update the ECAM rates?
The Company proposes to fie anual ECAM reconciliations and updated rates on
February 1 with anew ECAM rate effective April 1. The first application
addressing a deferred amount in the balancing account would be made Februar
1,2010 with rates effective April 1, 2010.
Does the ECAM Stipulation specify any additional issues?
Yes. There are two additional issues specified in the Stipulation. First, the
Company agrees to hold a risk management hedging seminar to educate Parties
about the Company's risk management practices and hedging strategies. Second,
the Parties agreed that the Company's fied Case No. PAC-E-08-07 included an
annual level of amortization of three regulatory liabilities for the West Valley
lease, administrative and general expense merger commitment, and the gain on
the sale of the Goose Creek transmission line which reduced the revenue
requirement used in establishing the curent base rates. The curent rates wil
continue until new rates are set at the end of 20 1 0 or later and, as a result,
Weston, Stip - 11
Rocky Mountain Power
1 customers continue to receive the benefit of the amortization in rates until that
2 time. As of December 31, 2010, an unamortized balance of $156,434 for the
3 Goose Creek sale wil remain on the Company's books and records. The
4 Stipulation specifies that upon Commission approval thereof, the Company wil
5 credit the ECAM deferral for the Goose Creek sale in the amount of $156,434.
6 Accordingly, the Parties agree that the Company can write-off the remaining
7 balances of these regulatory liabilities.
8 Conclusion
9 Q.Is it the Company's position that the Stipulation represents a fair, just and
10 reasonable compromise of the issues and is in the public interest?
11 A.Yes. The Stipulation as filed contains a symmetrical sharing band, aLGAR, S02
12 sales credit, renewable resource adder, and a commitment from the Company not
13 to file a general rate case before May 1, 2010. The ECAM wil send better price
14 signals to customers of the cost of power by adjusting their rates on a more
15 curent basis while continuing to provide an incentive to the Company to actively
16 control NPC. The ECAM wil provide an opportity for interested parties to
17 review and provide input on one of the Company's main cost drvers.
18 Q.Does this conclude your direct testimony?
19 A.Yes.
Weston, Stip - 12
Rocky Mountain Power
,...'.';,....
L:U
2009 JUL 30 AM '0: 20 Case No. PAC-E-08-08
Exhibit No.4
Witness: J. Ted Weston
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAIN POWER
Exhibit Accompanying Direct Testimony of J. Ted Weston
July 2009
E "".,RcC . ~.."". i- .
2009 JUL 30 AM lOt 20
IDAHO r
UTlUT1ES C
Case No. PAC-E-08-08
Exhibit No.5
Witness: J. Ted Weston
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ROCKY MOUNTAIN POWER
Exhibit Accompanying Direct Testimony of J. Ted Weston
July 2009
Rocky Montain Power
Exhibit No.5 Pag 1 ()f 1
Case No. PAC-E-08-08
Witness: J. Ted Weston
1) Market Price Forecast for Mid-Columbia and Palo Verde.
Source: Company's Offcial Forward Price Curve dated 3/31/2009
Month Mid-C PV Mid-C/PV
Averae:e
Jul2009 $31.28 $37.03 $34.15
Aug 2009 $36.54 $37.00 $36.77
Sep 2009 $33.08 $30.88 $31.98
Oct 2009 $32.41 $28.42 $30.41
Nov 2009 $36.04 $28.56 $32.30
Dec 2009 $45.16 $32.08 $38.62
Jan 2010 $49.89 $38.69 $44.29
Feb 2010 $43.03 $36.70 $39.86
Mar 2010 $35.54 $34.10 $34.82
Apr 2010 $34.32 $38.15 $36.24
May 2010 $24.93 $35.81 $30.37
Jun 2010 $23.46 $40.81 $32.13
Jul2010 $44.10 $53.66 $48.88
Aug 2010 $50.17 $54.51 $52.34
Sep 2010 $49.16 $47.02 $48.09
Oct 2010 $48.30 $40.67 $44.48
Nov 2010 $49.05 $39.74 $44.40
Dec 2010 $51.37 $41.67 $46.52
Average $39.88 $38.64 $39.26
2) Idaho Schedule 37 prices for Wind Resources.
Contract N on- Levelized Wind Integration Wind Resource
Year Rates Charge Rate
(1)(2)(1)-(2)
2009 $76.73 $5.10 $71.63
2010 $75.83 $5.10 $70.73
Average*$71.03
*Weighted average for the period 7/1/09 - 12/31/10
3) The resultant average cost per megawatt of wind generation is calculated as an
average of 1 &2 above.
($39.26/ MWh + $71.03/ MWh)Average = =
2 I $55 1