20100528Walje Direct.pdf

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 APPROXIMATELY )13.7 PERCENT )
CASE NO. PAC-E-10-07
lDlûHAY 28 Art II: 55
Direct Testimony of A. Richard Walje
ROCKY MnUNTAIN POWER
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CASE NO. PAC-E-10-07
May 2010
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Please state your name, business address and present position with Rocky
Mountain Power ("Company").
My name is A. RichardWalje. My business address is 201 South Main, Suite
4 2300, Salt Lake City , Utah 84111. I am the President of Rocky Mountai Power
5 (or "Company").
6 Qualifications
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Please describe your educational and professional background.
I have worked in the electrc utilty industr since 1972 as a joureyman lineman,
field service engineer with General Electric and as a substation design engineer
for Rocky Mountain Power. At Rocky Mountain Power I have held numerous
management and executive positions with increasing levels of responsibilty in the
areas of engineering, construction, transmission and distrbution operations,
customer service, procurement, information technology and community affai. I
have served on PacifiCorp' s Board of the Directors since 2000 and I am also
currently the Chairn of the Board of the PacifiCorp Foundation. I have a
Bachelor of Science in Electrcal Engineering degree (1984) and a Master of
Business Administration degree (1991), both from the University of Utah. I have
received additional executive level instruction from the University of Michigan
and electrcal engineerig theory from General Electrc's Crotonvile education
center.
Please describe your present duties.
My responsibilties, as President of Rocky Mountain Power, cover all of the
Company's affairs in the states of Utah, Idaho and Wyomig, including ensurng
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that the Company's strategy, infrastrcture investments and operations result in
the delivery of safe, reliable electrc energy to the Company's customers at
reasonable prices.
Please describe Rocky Mountain Power's presence in Idaho.
Rocky Mountain Power provides safe, reliable, and low-priced electric service to
over 72,700 customers in Idaho. Rocky Mountain Power provides nearly 200
jobs in the communities of southeast Idaho. The Company owns and operates 94
substations in Idaho plus over 2,000 miles of transmission lines and 5,600 miles
of distrbution lines. In addition, the Company purchases the output of the
Wolverine Creek wind generation facilty located near Idaho Fals.
What is the purpose of your testimony?
The purose of my testimony is toptovidean overview of the Company's 2010
Idao general rate case ("Application") requesting a revenue increase in the
amount of $27.7 millon, or 13.7 percent on average over Rocky Mountain
Power's current rates.
My testimony also presents policy issues and the implications of the
Company's and industr's need to address rising costs and capital investment
requirements. Specifically, I wil provide a summ of the Company's filng and
introduction of the witnesses who wil address the Company's case. In addition, I
wil address in more detail the following:
. The major cost drvers underlying the need for the price increase,
including the capital investment required to meet curent and futue
customer needs;
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. The impact of the request on Monsanto's rate;
. The Company's efforts to control costs while maintaning reliable service
and customer satisfaction; and
. The cost of service analysis and related tarff structue recommendations.
Please explain why the Company is requesting to increase Idaho electricity
consumers' rates during this downturn in the economy.
Clearly, our customers do not like their electrc rates to increase, nor does the
Company take lightly a request to raise rates; however, it is critical that rates
reflect the current actual costs of serving our customers. Absent the increase
requested in this case, the Company wil not receive the revenues it requires to
fund the future capital investments necessar to provide reliable service to our
customers and customers wil not receive the price signals they need to mae
sound economic decisions regarding efficient energy usage.
The Company continues its multi-year program of investing in renewable
energy, transmission facilities and environmental controls to serve our customers
and to comply with changing environmental requirements in Idaho and system-
wide. This case includes in rates the investments, costs and benefits of the
Company's activities durng and after the test period.
This May 2010 Application means that the new rates wil most likely
become effective Januar 1, 2011. When the new rates from this case become
effective, over 20 months wil have passed since the April 18,2009, effective date
of the 2008 rate case increase. At a total Company level, the test period in this
case includes over $4 bilion of new plant investments and $87 millon increase
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Rocky Mountain Power
1 net power costs that should be reflected in rates.
2 Rate Case Overview
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Please explain the Company's requested rate increase in this Application.
The Company's fiing supports a revenue requirement increase of approximately
$27.7 millon or 13.7 percent. Historical data from calendar year 2009 is used as
a base period, with adjustments for known and measurable changes through
December 31,2010, as the test period. Company witness Mr. Steven R.
McDougal, Director, Revenue Requirement, wil discuss the revenue increase and
the sources of the data use in determning the normalizing adjustments related to
revenue, operation and maintenance expense, net power costs, depreciation and
amortization, taxes, and rate base in developing the Idao revenue requirement.
Mr. McDougal wil also support the Company's proposed inter jurisdictional
allocation of common costs, the allocation treatment of Monsanto's curtailment,
and the Company's irgation load control programs. Mr. McDougal's revenue
requirement analysis is based on a cost of capital that includes a return on equity
of 10.6 percent, which is the equity retu authorized in the Company's recent
rate cases in other states and is within the range of common equity costs
supported by the Company's expert witness. The percentage of common equity
in the proposed capital strcture is 52.1 percent.
Mr. Bruce N. Wiliams, Vice-President and Treasurer, wil testify
concerning the Company's cost of debt, preferred stock and capital structure.
Additionally, Dr. Samuel C. Hadaway, FINANCO, Inc. wil testify concerning
the Company's cost of common equity. Both witnesses describe the significant
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changes in the capital markets that affect Rocky Mountain Power.
The financial challenges and risks that Mr. Willams and Dr. Hadaway
discuss in their testimony are demonstrably reaL. The Company has been in a
period of load growth, though slowed by the recession, which is expected to
continue. The Company must make large capital investments to provide
customers with safe, reliable electric service. This necessar ongoing level of
investment far exceeds both the Company's net operating income and
depreciation expense. Therefore, the Company requires substatial levels of new
financing to fund the investment necessar to meet its customers' electrc service
use. While the Company funds more than 50% of the costs of its investments
with retained earings and equity infusions from its parent, MidAmerican Energy
Holdings Company ("MEHC"), the Company stil needs to access short and long
financial markets for the remainder of its funding needs and those markets remain
risky and volatile.
How have the changes in the economy impacted cash flow and borrowing
costs?
Following a mult-year period of relative calm and accommodative access to
capital the financial markets entered a period of upheaval beginning in the second
half of 2008, featuring more volatilty and substantially less liquidity or access to
credit markets for many paricipants. Financial makets generally view utilties as
relatively stable and creditworty. However, as utilties across the country began
to require access to additional capital to meet environmental compliance
requirements, load growth and routine infrastructure investments, financial
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Rocky Mountain Power
1 markets began to exhibit much greater differentiation in credit qualty within the
2 utilty industr. Highly rated utilties experienced limited diffculty in accessing
3 reasonably priced capital, while lower rated utilties experienced much higher
4 borrwing costs, if they were able to access credit makets at alL.
5 PacifiCorp's solid credit ratings have been beneficial to customers durng
6 the credit crisis, and are expected to be equally important as the Company
7 finances approximately $16 to $18 bilion of infrastructure investment to serve
8 load growth and to implement environmental controls on existing facilties over
9 the next ten years. In addition to having good access to the credit markets, the
10 Company's financing challenge is being substantially supported through the
11 receipt of approximately $990 millon in additional cash equity contrbutions from
12 MEHC, $1.7 billon of earings that have been retained in PacifiCorp and the fact
13 the Company has not paid any dividends to MEHC since the acquisition. These
14 actions, plus the positive impact of ownership by MEHC and its parent, Berkshire
15 Hathaway, have been important in positioning the Company to make additional
16 investments cost effectively.
17 The Company's need for new capital is occurrng at the same time that
18 investors have become increasingly more selective and cautious. While the
19 Company is fortnate that it can stil access the financial markets on reasonable
20 terms (unlike some lower rated utilties), Standard and Poor's April 2010 credit
21 assessment of PacifiCorp states that "the ring-fenced utilty's credit metrcs are
22 more consistent on a standalone basis with a 'BBB' category rating." This is
23 discussed in more detail in the testimony of Mr. Wiliams.
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Rocky Mountain Power
1 In order to moderate the rate increase sought in this case and its impact to
2 customers, the Company is proposing a conservative authorized return on
3 common equity in the middle of the range of common equity costs supported by
4 Dr. Hadaway. The 10.6 percent return on equity requested in this Application is
5 the same retu approved in Februar 2010 by the Public Service Commssion of
6 Utah for Rocky Mountain Power and requested in Oregon and Washington. It is
7 also consistent with recent settlements in Wyoming and in line with recent
8 decisions in Idaho for other utilties.
9 The persistent mismatch between actual cash outlay/end of AFUDC
10 accrual and commencement of revenue recovery though rates results in an
11 earings shortfall as well as a cash flow shortall that must be financed. Coupled
12 with an ongoing high level of capital investments, the Company's financial
13 performance metrics that rating agencies track have been challenging to meet,
14 which in tu increases the risk of a credit rating downgrade. As the credit crisis
15 has shown, a credit rating below 'A-' can limit the abilty of a utilty to access
16 capital markets, which can be very costly in the long run for a utilty and its
17 customers. Additionally, financial analysts regularly cite the need for supportive
18 regulatory treatment during periods of large investments. Rocky Mountain Power
19 requests and needs continued support from the Idaho Public Utilties Commssion
20 ("Commission"), other regulatory agencies, and stakeholders in order to meet the
21 demands of capital markets and to satisfy the growing energy nees of our
22 customers while maintaining safe, reliable, and low cost service.
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If the requested rate increase proposed in this case is not approved, wil the
Company have a reasonable opportunity to recover the costs it incurs to
serve our customers?
No. The investments proposed in this case to be recognized in rates are aleady
serving Idaho customers or will be before the end of 2010. As a consequence, it
wil not be possible for the Company to recover its cost to serve customers and to
make an adequate return on its investments to serve these customers without the
requested rate increase.
Some paries argue that by delaying the inclusion of prudently incurred
costs to serve customers in rates or by otherwise financially pressuring the
Company, new efficiencies and cost savings can be identified to make up for the
fact that certin of its investments have not been put in rates. This argument
ignores the fact that, for many years, the Company has identified and undertaken
successful efficiency improvements with minimal operations and maintenance
cost increases. Delays in recognizing prudently made investments in rates wil
not create addtional efficiency opportnities for the Company and, in fact,
pressure to reduce costs may have an unintended effect on service.
It is a fundamental and universally accepted principle of ratemangthat
customers' rates should reflect the revenue requirements associated with prudent
investments. The investments are either prudent or not and the costs of those
investments are either reasonable or not. An arbitrar delay creates a needless
gap between the end of AFUDC accrual and the commencement of recovery of
the revenue requirement associated with plant beneficially serving customers. A
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delay in recovering the costs of these beneficial investments seems punitive.
Every new generation plant, every transmission line, and nearly every
distrbution facility built today is significantly more costly than similar facilties
currently in rates. The cost difference is caused by simple inflation and the
vintage of existing facilties. The revenue requirement associated with the level
of capital investment that is being made by the Company is a multiple of its
annual depreciation expense and cannot be entirely offset by cost containment
initiatives, productivity gains achieved by the workforce, compensation and
benefit plan changes, or technological improvements. Nor can the Company rely
upon increased sales revenue as the curent economic conditions have slowed or
reversed sales growth forecast in pars of the Company's service area.
Finally, in addition to it being a basic principle of rate regulation,
reflecting prudently-incured costs in rates is also necessar to send customers the
correct price signals regarding the cost of their electricity use.
Why is it important for the test period in thi proceeding to include costs
after the filing date but before the rates become effective?
If the rates in this case were based upon outdted historical investment levels and
costs, the Company would have no chance of earing the return authoried by the
Commssion. If rates are set on purely historical costs ignoring known and
measurable changes, they would not reflect the reality that costs and plant
investment are steadily increasing and would not adequately reflect the
Company's cost of serving customers during the rate effective period. In order to
better align the costs and plant investment placed in service within the rate
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1 effective period (the time period from the rate effective date in this case to the rate
2 effective date in the next rate case) a test period with known and measurable
3 changes is used. The test period in this case uses calendar year 2009 as the base
4 with adjustments for known and measurable changes through December 31,2010,
5 which means at the time of the rate effective date all of the test period revenues
6 and expenses wil aleady have occured. Stated another way, if rates become
7 effective on Januar 1,2011, the test period wil have passed, capital wil have
8 been expended on working facilties and the Company wil continue to invest in
9 additional capitaL. The Company wil be operating on these new rates for at least
10 12 months into the futue, so it is essential that the costs and investments in this
11 case reflect the rate effective period or the Company wil unable to achieve
12 retuns near Commssion's authorized return. This outcome would be neither
13 justifiable nor fair to the Company. The Company would be faced with finding
14 other means to achieve performance nearer to the allowed return, and not just
15 though efficiency gains.
16 Cost Control Efforts
17 Q.Explain the efforts the Company has made to control costs and keep
18 electricity prices reasonable.
19 A.Rocky Mountain Power has an obligation to our customers to provide safe and
20 reliable service, while keeping electrcity prices as low as reasonably possible.
21 Effective management of power costs and operating costs is one of the key
22 elements of the Company's strategy to meet this obligation. Since its acquisition
23 by MEHC, the Company has continued to increase the efficiency of its operations.
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1 The Company has worked hard to strie the right balance between operational
2 expenses, customer service, and preventive maintenance. In addition, the
3 Company has focused on controllng labor costs. This approach helps to achieve
4 maximum value for each dollar spent on operating and maintaining the
5 Company's electrc facilties. Unfortnately, these efforts wil not be enough to
6 offset the cost increases in other aras described in this case.
7 Additionally, the Company has reduced or deferred its capital investments
8 where feasible, implemented reviews of tax matters and coal stripping issues to
9 identify accounting changes, and effectively managed employee labor costs and
10 its renewable energy credit portolio to benefit customers.
11 Case Components
12 Capital Investments
13 Q.Please provide details on the major cost increases in this case.
14 A.The main component of the requested revenue increase in the 2010 Idao general
15 rate case is the significant capital investment the Company has made on behalf of
16 our customers since the last rate case. In this rate case, several major new
17 generation and transmission facilities wil be in-service and providing benefits to
18 customers, so the costs related to these new facilities definitely should be
19 reflected in rates during the rate effective period. These include eight new wind
20 generation plants, the Populus to Termnal 345 kV transmission line from
21 Downey, Idaho to Salt Lake City, Utah, the environmental improvements at the
22 Dave Johnston, Huntington and Jim Bridger power plants, turbine upgrades at
23 Hunter, Huntington and Jim Bridger power plants, and hydro plant relicensing
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and upgrade investments.
Has the Company's capital investment plan changed as a result of the new
load projections?
The Company has scaled back local transmission and distrbution capital
expenditures from previously planned levels to more closely match revised load
growth projections. This reduces situs based costs in Idaho. A reduction in the
rate of load growth has allowed the Company to delay certain projects, such as
transformer change outs and line re-constrctions a year or more. Even with these
plan modifications this case includes over $4 bilion in new plant investments
made since 2008 or that wil be made by the end of the test period, December 31,
2010.
Some argue that the Company should reduce its capital investment plan in
response to the economic recession. What is your response to this argument?
First, as noted above, the Company has already decreased its local capital
spending plans to the extent it can prudently do so and maintain the level of
service customers expect and deserve. Those reductions are reflected by their
absence from this fiing. Second, many long lead projects have a multi-year
development phase. It can take years to obtain permts and these projects wil be
at risk of completion if they are delayed and additional costs wil be incured if
the permtting process is restared later. Because of public opposition to
transmission lines in paricular, we may not be able to resta some delayed
projects. Third, much of the Company's curent prudent investment is for
generation that does not emit greenhouse gases, or reduces environmental
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emissions or improve effciency. Finally, the Company has reduced its projected
10 year capital budget from nearly $2.2 bilion per year to $1.6 bilion per year,
parially in response to the price increases created by the capital plan. After
completion of current projects no investments in new Company~owned generation
is planned until 2014. Capital spending wil focus on distribution, transmìssion
and environmental controls projects.
Some critics have suggested that the Company has complete discretion to
make capital investments, implying that given the current economic
downturn and the corresponding declining load growth, the Company could
choose to cut back. What is your response to this argument?
The decision to build the current long lead capital projects was made years ago,
before anyone knew that we would be in this type of economic downtu. Even if
the Company had perfect vision into the future, it would have continued planning
for growth because our load wil continue to grow . We all know that just as there
are economic recessions, there are also periods of robust economic growth. This is
a normal consequence of the business cycle. This geographic area of the countr,
in paricular, wil continue to grow, and the Company must be prepared for that
growth. Because Rocky Mountain Power has a long term obligation to serve
growing loads and the time between a transmission or generation project's
conceptual inception and completion can exceed five years, it is imprudent to stop
and star projects that are in the permtting process, which can easily take up to
three years. The Company has to make responsible decisions factorig in all
aspects of capital investments and constrction requirements and economic cycles.
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Please explain the major generation additions in Rocky Mountain Power's
capital investment strategy that are included in this case.
To ensure the Company can continue to meet its customers' electricity needs and
address load growth challenges at the same time that several long-term purchase
power contracts are expirng, the Company is in the process of completing or
adding significant new generation resources. Mr. Stefan A. Bird, Senior Vice-
President ofPacifiCorp Energy's Commercial and Trading organization, and Mr.
Mark R. Tallman, Vice-President of Renewable Resource Development, explain
in their direct testimony the prudent steps taken by the Company to meet its
obligation to serve customers by adding new cost effective purchase power
agreements and generation resources. Mr. Chad A. Teply, Vice-President of
Resource Development and Constrction, explains in his direct testimony the
investment the Company has made in existing generation facilities to meet
environmental guidelines and the upgrades made to turbines to increase plant
capacity in order to ensure the reliabilty of the existing fleet.
Please explain the other major additions in Rocky Mountain Power's capital
investment strategy that are included in this case.
As I described above, the Company continues to mae significant transmission
investment. Mr. John A. Cupparo, Vice-President of Transmission and Mr.
Darrell T. Gerrard, Vice-President of Transmission System Planning wil support
the Company's approximate $802 millon investment in the Populus to Termnal
transmission line.
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How would a failure to address the cost related to new investments affect
Rocky Mountain Power's abmty to attract new capital required to serve new
load and maintain its system?
Absent supportive regulatory treatment in this and future rate cases, the
combination of: (1) the Company's needed extensive constrction program;
(2) increasing labor, equipment, materials and fuel costs; and (3) regulatory risks
involving resource coordination among the six states served by the Company
could affect the Company's credit ratings. An unsupportve rate case outcome
would mae it more difficult for the Company to obtain competitively priced
financing that benefits customers. Credit ratings are paricularly critical when
companies are in a "build" cycle and credit markets are as unsettled as they have
been and continue to be.
Did Standad & Poor's rating agency report on PacilCorp note its large
capital expenditure program?
Yes. Standard & Poor's (S&P) recent credit report on PacifiCorp, issued in April
2009, contains the following comments:
"Regulators wil need to consistently support retail rate increases to
recover PacifCorp's planned capital investments..... "
This concern is not unique to S&P. Moody's has expressed similar sentiment
including:
"...Moody's expectation that PacifCorp wil continue to receive
reasonable regulatory treatment for the recovery of its higher capital
expenditures, and that the funding requirements wil be financed in a
manner consistent with management's commitment to maintain a healthy
financial profile. "
Fitch has also expressed its concerns including:
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"The current ratings and Stable Outlook assume PPW continues to benefit
from parent company support and will receive reasonable outcomes in
pending and future rate proceedings to recover anticipated, signifcant
capital investments. Ratings concerns facing the company primarily
relate to cost overruns and the potential inabilty to recover its large,
planned capital investment on a timely basis ina service territory that
spans six states..... "
Does the Company agree with S&P's observation regarding timely cost
recovery during periods of signifcant capital investment?
Yes. We need support from the Commssion and other paries to ensure that we
can continue to meet this challenge and hope to receive that support in this case.
Does MEHC remain committed to the capital investment required by
PacifiCorp?
Yes, MEHC remains commtted to the capital investment required by PacifiCorp.
As previously mentioned, the commtment is made clear by the fact that MEHC
has not taen any dividends from PacifiCorp since the transaction and is not
expected to tae any cash out of the business until at least 2012, while at the same
time providing additional equity infusions. The Company expects to receive $100
milion in additional cash equity contrbutions from MEHC before the end of the
test period and may need more to maintain its current credit ratings. MEHC's
commtment can only continue if the Company is provided with a reasonable
opportnity to ear a fai retu on its investment, including allowing in rates the
increased amount of common equity asked for in this rate case.
24 Net Power Costs
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Please explain the net power costs impacts in this case.
Total net power costs consist of fuel, net wholesale transactions (purchases from
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1 and sales to other utilties and power maketers) and transmission wheeling costs.
2 Total net power costs represent approximately 30 percent of the Idaho revenue
3 requirement.
4 Net power costs currently included in base rates are $982 millon based on
5 the result in the Company's 2008 general rate case, Case No. PAC-E-08-07. The
6 Company's net power costs continue to increase. In this case, the Company is
7 proposing to establish a new base net power cost of approximately $1.069 billion
8 on a total Company basis, or approximately $69.2 millon on an Idaho allocated
9 basis. The main components of this increase are coal costs and the expiration of
10 beneficial long-term contracts. Ms. Cindy A. Crane, Vice-President, Interwest
11 Mining Company and Fuel Resources, wil describe the increases to coal costs
12 and Dr. Hui Shu, Manager of Net Power Costs, wil describe the net power costs
13 in more detail in their direct testimony.
14 Taxes
15 Q.Is the Company proposing changes to the tax treatment of certain items in
16 this case?
17 A.Yes. Mr. Ryan R. Fuller, Assistant Tax Director, in his diect testimony
18 describes proposed changes to: (1) the Company's tax treatment of repairs
19 deductions; (2) flow-though versus full normalization of property related items;
20 and (3) the tax impacts on post-retirement prescription drg coverage from the
21 March 23, 2010, Patient Protection and Affordable Care Act.
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1 Historical Loads
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How do the Company's and Idaho's 2009 loads compare to historical loads?
While the Company's 2009 system energy usage was down approximately' thee
percent compared to 2008, Idaho experienced a reduction of over 12 percent
reduction in energy usage. Idaho's abnormal reduction compared to the system
average was drven by two customer classes: (1) the unusually wet spring
resulted in a decrease of over 20 percent in irgation sales; and (2) Monsanto
operated only 1 or 2 furnaces durng most of 2009, which reduced its energy
usage over 22 percent. Due to these abnormal impacts, the Company has made
specific adjustments to its 2009 loads to account for the curent economic
downturn and Idaho specific impacts. Dr. Peter C. Eelkema is the Company's
Senior Planner in the Load Forecasting Deparent and wil provide additional
details in his testimony about the loads in this case and how they were developed.
14 Pricing
15 Q.Wil the proposed revenue increase have the same percentage impact on all
16 customers' prices?
17 A.No. Customers' rates differ based on the Company's cost to serve them. For
18 example, the overall requested increase in this case is $27.7 million or 13.7% on
19 average, and the cost of service study in the filing shows Monsanto's increase is
20 $11.6 millon or 19.6%. Approximately $6.9 milion of the requested increase is
21 required to bring Monsanto to its full cost of service based on 2008 costs, which is
22 the basis for rates that the rest of Idaho customers are currently paying.
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Does the company understand the impact electricity prices have on a business
such as Monsanto?
Yes. As stated earlier one of the most difficult decisions we face, just. as with any
business, is to ask for price increases, especially at a time of economic challenges.
Since 2003, Monsanto's rates have increased 59 percent nominally and 73 percent
on a compounded basis. This has a significant impact on a company when
approximately one third of its operating costs come from electrcity consumption.
However, although electrcity price increases pose a significant business challenge
to companies such as Monsanto, in Commssion Order 30783, the final order from
the Company's 2008 general rate case (PAC-E-08-07) indicated that Monsanto
was paying only 87 percent of its cost of service-a $6.9 millon shortall per year.
The price increases requested in this case represent the Company's actual costs of
serving Monsanto.
How wil the Company's rates compare to other electric utilties' rates in
Idaho and rest of the country basd on the increase requested in this case?
Rocky Mountain Power's curent overall average Idaho prices compare favorably
to other U.S. investor-owned utilties according to the Edison Electric Institute.
The Company's rates in Idaho have historically been and wil remain favorable
even after incorporating the price increase proposed in this Application.
Is the Company proposing changes to its residential rate design?
Yes. As par of the Stipulation entered into by paries in Case P AC- E-08-07 and
approved by the Commssion in Order No. 30783, the Company agreed to
include an inverted tier rate design proposal for residential customers in its next
Walje, Di - 19
Rocky Mountain Power
1 general rate case. Mr. Wiliam R. Griffth, Director of Prcing, Cost of Service
2 and Regulatory Operations wil present the Company's rate spread and rate design
3 proposals that determe the ultimate prices customers wil see. Mr. C. Craig
4 Paice, Regulatory Consultant in the Prcing and Cost of Service Deparment, wil
5 present the Company's class cost of service study.
6 Conclusion
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Please provide a conclusion to your testimony.
The electrc utilty industr and the Company are in the midst of a significant
capital investment cycle. Additionally, the electric utilty industry is evolving
rapidly and faces many challenges, including climate change, state and federal
energy policies, volatile and rapidly increasing raw material costs, and generation
and transmission shortges. The situation is exacerbated by the ongoing
economic uncertainty. Rocky Mountain Power continues to effectively meet our
customers' growing energy needs in this uncertain business and industry
environment.
. The Company has demonstrated that it is a good corporate citizen and
parner to the state of Idaho. Rocky Mountain Power is managed according to six
core values which are: (1) customer service; (2) employee commtment; (3)
financial strength; (4) environmental respect; (5) regulatory integrity; and (6)
operational excellence. I believe Rocky Mountain Power is an excellent company
that cares about its customers, employees and the communities it serves. The
proposed increase wil allow us to continue to be an excellent provider of energy
services to our valued customers in Idao.
Walje, Di - 20
Rocky Mountain Power
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Is this proposed rate increase in the public interest and why?
Yes. This proposed rate increase is in the public interest because it represents a
justifiable and fai balance between the recovery of reasonable and prudent
expenses incurred by the Company on behalf of customers, requests a reasonable
return on the Company's investment, and supports the provision of safe, adequate
and reliable service stil at among the lowest prices in the nation. This rate
increase fairly balances price increases against the good service and lowrates
provided by the Company. For these reasons, this rate increase is in the public
interest and should be approved by the Commssion.
Does this conclude your direct testimony?
Yes.
Walje, Di - 21
Rocky Mountain Power