20151231McDougal Direct.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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IN THE MATTER OF THE
APPLICATION OF PACIFICORP dba
ROCI(Y MOI]NTAIN POWER FOR
APPROVAL OF THE 2017 PROTOCOL
ALLOCATION METHODOLOGY
ROCKY MOT]NTAIN POWER
CASE NO. PAC.E.15.16
DIRECT TESTIMON-Y OF
STEVEN R. MCDOUGAL
CASE NO. PAC.E.15-16
DECEMBER 2015
1 Q. Please state your name, business address and present position with
2 PacifiCorp, dba Rocky Mountain Power (the "Company'o).
3 A. My name is Steven R. McDougal, and my business address is 1407 West North
4 Temple, Suite 330, Salt Lake City, Utah 84Ll6.I am currently employed as the
5 Director of Revenue Requirement.
6 Qualilications
7 Q. Briefly describe your educational and professional background.
8 A. I received a Master of Accountancy degree from Brigham Young University with
9 an emphasis in Management Advisory Services in 1983, and a Bachelor of
10 Science degree in Accounting from Brigham Young University in 1982. In
11 addition to my formal education, I have also attended various educational,
12 professional, and electric industry-related seminars. I have been employed by the
13 Company or its predecessor companies since 1983. My experience at the
14 Company includes various positions within regulation, finance, resource planning,
15 and internal audit.
16 a. What are your responsibilities as director of revenue requirement?
17 A. My primary responsibilities include overseeing the calculation and reporting of the
18 Company's regulated earnings or revenue requirement, assuring that the inter-
19 jurisdictional cost allocation methodology is correctly applied, and explaining
20 those calculations to regulators in the jwisdictions in which the Company
2l operates.
22 a. Have you testified in previous regulatory proceedings?
23 A. Yes. I have provided testimony before the Public Service Commission of Utah, the
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Washington Utilities and Transportation Commission, the California Public
Utilities Commission, the Idaho Public Utilities Commission, the Public Service
Commission of Wyoming, and the Public Utility Commission of Oregon.
Purpose and Overview of Testimony
5 Q. What is the purpose of your testimony in this proceeding?
6 A. My testimony summarizes the analysis performed by the Company to evaluate
7 allocation alternatives, explains how the 2017 Protocol is calculated and reflected
8 in results of operations, and provides a sunmary of the Appendices included with
9 the testimony of Mr. Jeffrey K. Larsen.
l0 2017 Protocol Analysis
11 a. Please describe some of the analysis the Company performed and provided to
12 the Broad Review Work Group (*BRWG") to help develop the2017 Protocol.
13 A. In preparation for the transition from the 2010 Protocol to a new allocation
14 method for filings made after December 31, 2016, the BRWG began meeting in
15 November 201,2 to support the development of a new allocation methodology by
16 evaluating alternative allocation methods. The BRWG met regularly over a three-
L7 year period to ana|yze and discuss various alternatives. The Company prepared
18 foundational studies in20l3 and then updated the base data in the foundational
19 study in 2014 to reflect more current data and to incorporate changes such as new
20 depreciation rates. At the request of the BRWG, various scenarios and sensitivity
2l studies were identified to study the impact of: 1) high load growth; 2) low load
22 growth; 3) varying gas and electric purchase prices; and 4) adding new resources
23 versus front office transactions. Structural separation scenarios were also analyzed
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1 by comparing a slice-of-the-system approach versus a control area assignment of
2 resources by the area in which they are physically located. The BRWG also
3 explored the impact of allocating generation resources on separate factors using
4 differing demand and energy weightings and numbers of coincident peaks and
5 peak weightings rather than the System Generation factor, as currently defined.
6 The Company also provided experts to explain the transmission system
7 and transfer capabilities between the East and West balancing authority areas.
8 Analyses were also performed regarding the variability of the Embedded Cost
9 Difflerential ("ECD") and the demand-side management ("DSM") activities in
10 each state, along with the possibility of system versus situs treatment of those
I 1 costs.
12 2017 Protocol
13 a. How will the2017 ProtocolAdjustment be included in the Company's Results
14 of Operation reports?
15 A. The 2017 Protocol Adjustment is a single line item added to each state's annual
16 revenue requirement. The impact relative to current revenue requirements in each
t7 state is an incremental increase by the amount of the 20ll Protocol Equalization
18 Adjustment. California's annual 2017 Protocol Adjustment is zero, because the
19 Baseline ECD is exactly offset by the Equalization Adjustment ($0.324 million
20 incremental increase); Idaho's 2077 Protocol Adjustment increases its revenue
2l requirement by $0.986 million ($0.150 million incremental increase); Utah's 2017
22 Protocol Adjustment increases its annual revenue requirement by $4.4 million
23 ($4.4 million incremental increase); and Wyoming's 2017 Protocol Adjustment
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reduces its annual revenue requirement by $0.251 million ($1.6 million
incremental increase). Oregon's 2017 Protocol Adjustment will depend on the
amount of the dynamic ECD calculation but it is banded within the ranges
discussed in the 2017 Protocol. Table 1 below summarizes the Baseline ECD,
Equalization Adjustment and 2017 ProtocolAdjustrnent for each state:
Table I
Revenue Requirement ($000)
Total
Revenue Requirement ($000)
2017 Protocol Baseline ECD **
201 7 Protocol Equalization Adjusfinent
201 7 Protocol AdjusEnent
Company California Oregon
(9,s78) (324) (8,238) *
9.074
Utah Idaho Wyoming
0 836 ( 1,851)
324 2.600 4.400 150 1.600
(0) (s,638)4,400 986 (251)
* Oregon's 2017 Protocol Baseline ECD is dynamic and will change over time with the parameters
described in the 2017 Protocol. For the other states, the 2017 Protocol Baseline ECD is fxed and
does not change over time.*!F 2017 Protocol Baseline ECD amounts shown in the table for Califomia, Oregon, and Wyoming are
based on the test year data as filed by the Company in the 2015 Wyoming general rate case (Docket
No. 20000-469-ER-15) on March 3,2015. The amount for ldaho's 2017 Protocol Baseline ECD is
its 2010 Protocol Fixed ECD amount. Utah's 2017 Protocol Baseline ECD is zero based on its
2010 Protocol agreement.
Multi-State Process ("MSP") 2017 P rotocol Appendices
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Please su mmarize the 2017 Protocol App en dices.
The 2017 Protocol has four appendices: Appendix A contains the defined terms
used in the protocol; Appendix B summarizes the allocation factors utilized by
each Federal Energy Regulatory Commission ("FERC") account; Appendix C
summarizes the algebraic derivations of the allocation factors; and Appendix D
explains two alternative allocation treafinents for special contracts.
Please describe Appendix A.
Appendix A of the 2017 Protocol is a sunmary of frequently used terms. Rather
than defining each term in the Protocol itself Appendix A is provided as a quick
reference resource for defined terms. During the development of the 2017
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Protocol, Appendix A was reviewed to identi$ defined terms no longer used or
new terms added to the 2017 Protocol. Terms no longer used were deleted and new
terms were added to the 2017 Protocol.
Please describe Appendix B - Allocation Factors Applied to each Component
for Revenue Requirement.
Appendix B is a summary by FERC account of the appropriate allocation factors
used to allocate either the costs or revenues recorded to that account. Only minor
changes were made to the 2017 Protocol Appendix B from the 2010 Protocol.
These changes included removing any accounVfactor combinations no longer used
or adding new account/factor combinations that have been added since 2010
Protocol was approved. For example, FERC accounts 230 and 254105 are new
accounts added to Appendix B that prior to 2013 the costs were booked to FERC
account 22842.
Please describeAppendix C - Allocation factor - Algebraic Derivations.
Appendix C is a sunmary of the algebraic derivations of the factors used in the
2017 Protocol. The derivations of the factors is the same as the derivations used in
the 2010 Protocol and no new factors were added to the 2017 Protocol
Appendix C.
Please describeAppendix D - Special Contracts.
Appendix D is consistent with the 2010 Protocol, with no differences between this
Appendix in the 2010 Protocol and 2017 Protocol. The appendix has two options
for special contracts designed to provide consistency between the allocation of
revenues, costs and benefits derived from adjusting allocation factors. Under
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option I , the costs of the contract are embedded in the tariff price, resulting in the
jurisdiction approving the contract absorbing the full cost of the program, similar
to DSM costs. Since the costs are absorbed by the jurisdiction approving the
contract, it also receives the benefits associated with the program through reduced
allocation factors. Under option 2, the contract costs are separately identified and
allocated to all states. Since the costs are allocated to all states and not to a
specific jurisdiction, the monthly load used to calculate allocation factors is
calculated assuming no curtailment occurs.
Does this conclude your direct testimony?
Yes.
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