20100528Application.pdf

~g_~OUNTAIN
May 28,2010
VL OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secreta
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
RE.CE.\\f
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201 South Main, Suite 2300
Salt Lake City, Utah 84111
Re: Case No. PAC-E-1O-07
In the Matter of the Application of Rocky Mountain Power for Approval of Changes
to its Electrc Service Schedules and a Price Increase of $27.7 Milion, or
Approximately 13.7 Percent
Dear Ms. Jewell:
Pleas find enclosed for fiing an original and nine copies of Rocky Mountan Power's
Application in the above-referenced matter, along with nine copies ofPacifiCorp's direct
testimony and exhbits. Also enclosed is a CD containig the Application, sumar of
testimony, testimony and exhbits, customer notice and press release; and a confdential CD
containing confdential testimony and exhbits. To the attention of the Cour Reporter is.a
paper copy of all documents along with a CD containing all testimony and exhbits in their
original formats.
All formal correspondence and regarding ths Application should be addrssed to:
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
Telephone: [phone]
Fax: [phone]
Email: ted.westoncgacificorp.com
Daniel E. Solander
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
Fax: [phone]
Email: danieL.solander(fpacificorp.com
Communcations regarding discovery matters, including data requests issued to Rocky
Mountan Power, should be addressed to the following:
By E-mail (preferred):
By reguar mail:
datarequestêpacificorp.com
Data Request Response Center
PacifiCorp
825 NE Multnomah St., Suite 2000
Portland, OR 97232
Idaho Public Utilties Commssion
May 28, 2010
Page 2
Informal inquies may be directed to Ted Weston, Idaho Reguatory Manager at (801) 220-
2963.
Very try yours,~k4-~
Jeffey K. Larsen
Vice President, Regulation
cc: Service List
Enclosures
tuJ,
Mark C. Moench
Danel E. Solander
Yvonne R. Hogle
Rocky Mountan Power
201 South Main Street, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
mark.moenchêpacificorp.com
daneL.solanderêpacificorp.com
yyonne.hogle(fpacificorp.com
Attorneys for Rocky Mountain Power
RECEi
iO\OKAY28 AtH\~5\
\DAHOi~
UT\UT\E.S C\.i,
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
APPROVAL OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
AND A PRICE INCREASE OF $27.7
MILLION, OR APPROXITELY
13.7 PERCENT
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)
)
)
)
)
)
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CASE NO. PAC-E-I0-07
APPLICATION OF
ROCKY MOUNTAIN POWER
Rocky Mountain Power, a division of PacifiCorp ("Rocky Mountain Power" or the
"Company") hereby applies to the Idaho Public Utilties Commission ("Commission") for
approval of proposed changes to the Company's electrc service schedules submitted
herewith. In support of this Application, Rocky Mounta Power states as follows:
1. Rocky Mountain Power is authorized to do and is doing business in the state
of Idaho. The Company provides retail electrc service to approximately 72,700 customers in
the state of Idaho and is subject to the jursdiction of the Commission.
2. Communcations regarding ths Application should be addressed to:
Ted Weston
201 South Main, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
Fax: [phone]
Email: ted.westoncgacificorp.com
APPLICATION OF ROCKY MOUNTAIN POWER Page 1
and to:
Danel E. Solander
201 South Main, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
Fax: [phone]
Email: daneL.solanderêpacificorp.com
In addition, the Company respectfuly requests that all data requests regarding ths
matter be addressed to one or more of the following:
Bye-mail (preferred)
By reguar mail
datareguestcgacificorp.com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR 97232
3. Rocky Mountain Power's proposed revised taff schedules, which are fied
with this Application, would result in a net increase of $27.7 milion, or 13.7 percent, in
prices for the Company's Idaho retal customers. The revised taff schedules reflect a
proposed effective date of June 28, 2010.
4. This proposed increase is based upon normalized results of operations for the
test period ending December 31,2009, with known and measurable changes. The Company
is curently earng a retu on equity ("ROE") of 5.7 percent, which is signficantly below
the Company's curently authorized retur, the retus recently authorized for other Idao
investor-owned utilties, and the 10.6 percent ROE supported by the Company's testimony
filed with ths Application. Without the requested increase in revenues, it will be
increasingly diffcult for the Company to maintain its utility infastrctue and continue to
provide adequate, effcient, just and reasonable service to its Idaho customers. The Company
is in the midst of a multi-year program of investing in renewable energy, trsmission
facilties, and environmenta controls to serve its customers in Idaho and across its six state
APPLICATION OF ROCKY MOUNTAIN POWER Page 2
system. At a tota company level, the test period includes over $4 bilion of new plant
investment and $87 millon in increased pow~r costs. This Application includes in rates the
investments, costs, and benefits of the Company's activities durg the test period, and
reflects other changes in costs durng that period.
5. Rocky Mountan Power's direct case consists of the testimony and exhibits of
fifteen witnesses. Below is a brief sumar of their testimony.
(a) A. Richard Walje, president, Rocky Mountan Power, will present an
overview of the Company's justification for its case, describe the major
capita investment the Company is making to serve its customers, the cost
control efforts to minimie rate impact on customers, and provide the context
for the testimony of the other witnesses.
(b) Steven R. McDougal, director, revenue requirement, will discuss the revenue
increase and the sources of the data used in determinig the normalizing
adjustments related to revenue, operations and maitenance expense, net
power costs, depreciation and amortization, taes, and rate base in developing
the Idaho revenue requirement. Mr. McDougal will also support the
Company's proposed inteijursdictional allocation of common costs, and the
allocation treatment of Monsanto's curlment, and the Company's irgation
load control program. Mr. McDougal will also address the Company's
proposal to track renewable energy credit ("REC") sales in the Energy Cost
Adjustment Mechanism ("ECAM") on a dollar-for-dollar basis.
(c) Bruce N. Wiliams, .vice president and treasurer, will testify in support of the
Company's cost of debt, preferred stock and capital strctue.
APPLICATION OF ROCKY MOUNTAIN POWER Page 3
(d) Samuel C. Hadaway, FINANCO, Inc., will testify in support of the
Company's ROE. He wil also describe the signficant changes in the capita
markets that afect Rocky Mountain Power. Dr. Hadaway's analysis suggests
a cost of equity for the Company of 10.6 percent.
(e) Stefan A. Bird, senior vice president, commercial and trading, will testify
regarding the prudence of the Company's decision to enter into the Top ofthe
World Wind Energy, LLC and Three Buttes power purchase agreements, and
to acquire the Dunlap I wind plant. Mr. Bird also explains the volatility of the
REC market, generation, and futue revenues supporting trackig them in
ECAM.
(f) Mark R. Tallman, vice president of renewable resource development discusses
the Company's prudent investment in wind generation resources, including
the Seven Mile Hil, Glenrock, Rolling Hils, Seven Mile Hil II, Glenrock III,
High Plains and McFadden Ridge I wind plants.
(g) Chad A. Teply, vice president of resource development and constrction for
PacifiCorp Energy, will testify regarding the prudence of pollution control
equipment, tubine upgrades, and additional generation plant capita
investments being placed in service durng the test period.
(h) John A. Cupparo, vice president of transmission, will explain why the
Company's investment in the Populus to Termnal transmission line was
needed to address congestion, and was supported by all relevant federa
agencies and the Company's own integrated resource plan ("IRP").
APPLICATION OF ROCKY MOUNTAIN POWER Page 4
(i) Darell T. Gerrard, vice president of tranmission planing, will provide an
overvew of the Populus to Terminal transmission line. Mr. Gerrard will also
explain that the benefits of adding this tranmission line are to meet load and
resource requirements for customers and to maitain system reliabilty. Mr.
Gerrard wil also discuss the analyses the Company performed that support
the decision to invest in ths line, including the competitive procurement
process used to make the investment, how cost savings opportties were
identified as well as provide an overview of the constrction process.
G) Dr. Peter C. Eelkema, lead/senior consultat, load and revenue forecasting,
will describe how Rocky Mountain Power developed the test year number of
customers and bils, kilowatt-hour sales at the meter ("sales"), and system
loads and system peaks at the system input level ("loads") for the 12-months
ending December 31,2010.
(k) Dr. Hui Shu, manager of net power costs, wil testify regarding the
Company's net power costs, describe the key changes that occur in the test
period, and sponsor the GRI model that supports the net power costs in ths
application.
(1) Cindy A. Crane, vice president, Interwest Mining Company and Fuel
Resources for PacifiCorp Energy, will explain the Company's overall
approach to providing the coal supply for the Company's coal plants, review
the increase in the Company's afliate mine coal costs and compare them to
other supply alternatives. In addition, Ms. Crane's testimony demonstrates
APPLICATION OF ROCKY MOUNTAI POWER Page 5
the benefits customers realize from the Company's diversified coal supply
strategy.
(m) Ryan R. Fuller, assistat ta director, will testify regarding the calculation of
the income ta portion of the Idaho-allocated revenue requirement requested
in this case. Mr. Fuller also explains why the proposed changes to ta
accounting treatment for repairs deductions and full normalization of property
related differences is appropriate. He will also explai the impact the Patient
Protection and Affordable Care Act had on the deductibilty of certin costs
incured for post-retirement prescription drg coverage.
(n) C. Craig Paice, regulatory consultat in the pricing and cost of service
deparent will present the Company's class cost of service study.
(0) Willam R. Grffth, director of pricing, cost of service, and regulatory
operations, will present the Company's rate spread and rate design proposals
that determine the prices customers will see. Mr. Grffith will also describe the
Company's inverted tier rate design for residential customers.
6. Rocky Mountain Power is notifying its customers of this Application by
means of a press release sent to local media organizations, bil inserts included in customer
bils over the course of a biling cycle, and, in some cases, personal contact with customers or
their representatives. In addition, copies of this Application will be made available for
review at the Company's local offces in its Idaho service terrtory.
7. The Company respectfully submits that the Commission's approval of Rocky
Mountain Power's Application, including the approval and implementation of the proposed
electrc service schedules as filed, is in the public interest. In accordace with Commssion
APPLICATION OF ROCKY MOUNTAIN POWER Page 6
Rule 121(d), Rocky Mountain Power represents that it stads ready for immediate
consideration of ths Application.
WHREFORE, Rocky Mountain Power respectflly requests that the Commssion
issue a final order approving the Company's proposed electrc service schedules effective
June 28, 2010.
DATED this 28th day of May, 2010.
Respectflly submitted,
BYM~l~
Danel E. Solander
Yvonne R. Hogle
Attorneys for Rocky Mountain Power
APPLICATION OF ROCKY MOUNTAIN POWER Page 7
l'~l./ROCKY MOUNAI POWER
SUMMY OF TESTIMONYmID"AY28 AMI' :.52
PAC-E-I0-07
IDAHOP.UHt.¡Ç ..._ ....
Rocky Mountain Power, a divisionofPacifiCorp, provides ths suiYý\§tç~tM\§mpN
filed in support of its general rate case application. Copies of the Company's filing are
available online at ww.pacificorp.com; click on "News and Info" and then select
"Reguatory Information" and "Idaho." Copies of the fiing may also be reviewed during
reguar business hours at the offces of the Idaho Public Utilities Commssion in Boise
and in these Rocky Mountain Power offces:
. 25 East Main, Rexburg
. 509 South 200 East, Preston
. 852 East 1400 North, Shelley
. 24852 U.S. Highway 89, Montpelier
A. RICHA W ALJE
President, Rocky Mountain Power
Company witness Walje provides an overview ofthe Company's 2010 general rate case
filing and testifies in support of the proposed revenue increase. Walje testifies that the
Company requires a revenue increase of $27.7 milion, or 13.7 percent overall, in order to
recover the costs of providing safe and reliable electrc service and to provide a
reasonable opportity for the Company to ear a fair retu on its investments.
Commission approval of this increase will enable the Company to maitain the financial
strengt necessar to attct the requisite capita to meet the electrcal service needs of its
Idaho customers.
Mr. Walje's testimony also presents policy issues and the implications of the Company's
and industr's need to address rising costs and capital investment requiements. It also
introduces the witnesses who will address the Company's case. Mr. Walje sumarzes
the major cost drvers underlyig the need for the price increase, including the capita
investment and net power costs required to meet curent and futue customer needs. Mr.
Walje discusses efforts to control costs while maintainig reliable service and customer
satisfaction.
STEVEN R. MCDOUGAL
Director, Revenue Requirement
Company witness McDougal testifies in support of the calculation of $27.7 milion
revenue increase and the sources of the data used in determining the normalizing
adjustments related to revenue, operations and maitenance expense, net power costs,
depreciation and amortization, taxes, and rate base in developing the Idaho revenue
requirement. Mr. McDougal will also support the Company's proposed inteijursdictional
allocation of common costs, the allocation treatment of Monsanto's curilment, and the
Company's irigation load control program. Mr. McDougal will also address the
Company's proposal to track renewable energy credit ("REC") sales in the Energy Cost
Adjustment Mechansm ("'ECAM") on a dollar-for-dollar basis.
BRUCE N. WILLIAMS
Vice President and Treasurer
Company witness Willams testifies in support of the Company's capita structue, cost of
debt, and cost of preferred stock for the test year used in the Company's fiing. Mr.
Wiliams determines the cost of long-term debt to be 5.92 percent and the embedded cost
of preferred stock to be 5.41 percent. Mr. Wiliams calculates the average capital
strctue for the Company's test year to be 47.6 percent long-term debt, 0.3 percent
preferrd stock, and 52.1 percent common stock equity. When combined with Dr.
Hadaway's 10.6 percent retu on equity ("ROE"), Rocky Mounta Power proposes an
overall weighted cost of capita of 8.36 percent.
SAMEL C. HAAWAY
FINANCO, Inc.
Dr. Hadaway testifies in support of the Company's ROE. Based on his review of
alternative versions of the constat growt and multistae growt discounted cash flow
model, Dr. Hadway proposes 10.6 percent for the Company's cost of equity. His
analysis is confed by a risk premium analysis and a review of comparable companes.
STEFAN A. BIRD
Senior Vice President, Commercial and Trading
Company witness Bird will testify regarding the request for proposal process utilized to
select and the prudence of the Company's decision to enter into the Top of the World
Wind Energy, LLC and Three Buttes power purchase agreements, and to acqui the
Dunlap I wind plant. Mr. Bird also explains the volatility of the REC market, generation,
and futue revenues supporting tracking them in ECAM.
MAR. TALLMA
Vice President of Renewable Resource Development
Company witness Tallman describes the Company's integrated resource plan ("IRP") and
how it is utilized to identify and quatify the need and timing of new supply-side
resources. Tallman provides a description of the Wind Resources, the decision-makg
process leading to their acquisition and a description of updated information for each
Wind Resource. Mr. Tallman supports the prudent investment in wind generation
resources, including the Seven Mile Hil, Glenrock, Rollng Hils, Seven Mile Hil II,
Glenrock III, High Plains and McFadden Ridge I wind plants.
CHAD A. TEPLY
Vice President of Resource Development and Construction for PacifCorp Energy
Company witness Teply testimony supports the prudence of pollution control equipment,
tubine upgrades, and additional generation plant capital investments being placed in
service durng the test period.
\,
JOHN A. CUPP ARO
Vice President of Transmission
Company witness Cupparo will explai why the Company's investment in the Populus to
Terminal transmission line was needed to address congestion, and was supported by all
relevant federal agencies and the Company's own IRP.
DARLL T. GERRRD
Vice President of Transmission Planning
Company witness Gerrard wil explain that the benefits of addig the Populus to
Terminal transmission line are to meet load and resource requirements for customers and
to maintain system reliabilty. Mr. Gerrard will also discuss the analyses the Company
peormed tlat supprt tle decisiou to invest in this lin. includin tle competijiveprocurmeo process us to mae tle investmeul, how cost savigs opprtties were
identified and provide an overview of the constrction process.
DR. PETER C. EELKEMA
Lead/Senior Consultant, Load and Revenue Forecastig
Company witness Eeikema will describe how Rocky Mountain power developed the test
year number of customers and bils, kilowatt-hour sales, and system loads and system
peaks for the 12-months ending December 31, 2010.
DR.HUlSHU
Manager, Net power Costs
Company witness Shu
testifies in support of
the Company's net power costs of$1.070
bilion system-wide approximately $69 millon on an Idaho aiiocated basis as calculated
using the Generation and Regulation Intiatives Decision Tools (GRID) modeL. Dr.Shu
will describe the GRID model and explai how input data is normalized.
CINDY A. cRA
Vice President, Interwest Mining Company and Fuel Resources
Compy witness ere will explai tle Company's overl approach to prvidigtle
coal supply for the Company's coal plants, review the increase in the Company's affliate
mine coal costs and compare them to other supply alternatives. In addition, Ms. Crane's
testimony demonstrates the benefits customers realize from the Company's diversified
coal supply strategy.
RYAN R. FULLER
Assistant Tax Director
Company witnes Fuller will testfy regardi tle calciion of tle iucome ta porton of
the Idaho-allocated revenue requirement requested in this case. Mr. Fuller also explains
why tle prposed changes to ta accountig treut for reairs deductons an ful
normalization of propert related differences is appropriate. Mr. Fuller requests the
Commission approve a regulatory asset/liabilty to trck interest associated with fi IRS
trtment of tle reai deducton. He will also explai tle impat tle Pateut Prtecon
and Affordable Care Act had on the deductibilty of certin costs incured for post-
retirement prescription drug coverage.
C. CRAG PAICE
Regulatory Consultant in the Pricing and Cost of Service Department
Company witness Paice will testify in support of the Company's class cost of service
study that fuctionalizes, classifies, and allocates costs to each customer class based on
the test year in the Company's filing.
WILLIA R. GRIFFITH
Director, Pricing, Cost of Service & Regulatory Operations
Company witness Grffith testifies in support of the Company's rate spread and rate
design proposals. The proposed rate spread has been guided by the Company's cost of
service study filed in this case. The only exception to ths is for rate schedule classes for
which cost of service results suggest the need for price decreases. For those customers,
the Company proposes to make no change to present rate levels. Consequently, Rocky
Mountain Power proposes the following allocation of the net price increase for major
customer classes:
. Residential Schedule 1:
. Residential Schedule 36:
. General Service:
Schedule 23/23A:
Schedule 6/6A/35/35A:
Schedule 9:
Schedule 19:
. Irrgation Schedule 10:
. Public Street Lighting:
. Industral Contract Schedule 400:
. Industral Contract Schedule 401:
8.0%
15.6%
10.8%
14.9%
14.6%
12.0%
9.6%
0%
19.6%
15.9%
CERTIFICATE OF SERVICE n~...?
I hereby certify that on ths 28th day of May, 2010, I caused to be served, via ov~.y 28 ¡UiH: 52
delivery, a tre and correct copy of Rocky Mountain Power's Application for ApprovalLiP, c-.' 'Fre.
of changes to its electrc servce schedules and a price increase of $27.7 miliol\i~l"l.¡le1~ri1;\..r~.j;4:~Ç:¡r ;',1vi l .. "_,,. VU.......¡"..l")¡'
approximately 13.7 percent in PAC-E-1O-07 to the following: . .. ~ .."- ..
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Charered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: eloêracinelaw.net
Radall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Charered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: rcb(fracinelaw.net
Tim Buller
Agrium, Inc.
3010 Conda Road
Soda Springs, ID 83276
E-Mail: tbullerêagrium.com
.
AAlftO \(JArelS~~
Coordinator, Administrative Services