20170331Weston Direct And Exhibit.pdf

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BEFORE TIIE IDAHO PUBLIC UTILITIES COM]\flSSION
IN TIIE MATTER OF TIIE APPLICATION
OF ROCKY MOTJNTAIN POWBR
REQIIESTING APPROVAL OF TIrE $7.5
NILLION NET POWER COST DEFERRAL
AND AUTHORITY TO DECREASE RATES
BY $6.9I/ilLLION
ROCKY MOI]NTAIN POWER
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CASE NO. PAC.E.I7-02
DIRECT TESTIMONY OF
TED WESTON
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CASE NO. PAC.E.I7-02
March 2017
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Please state your name, business address and present position with Roclry
Mountain Power (the "Company"), a division of PacifiCorp.
My name is Ted Weston and my business address is 1407 West North Temple, Suite
330, Salt Lake City, Utah 84116. I am currently employed as the Manager of Regulatory
Affairs for Idaho.
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Qualifications
a. Briefly describe your educational and professional background.
A. I received a Bachelor of Science Degree in Accounting from Utah State University in
1983. I began my employment with the Company in June of 1983 and have held various
accounting and regulatory positions since then. In addition to formal education, I have
attended educational, professional, and electric industry related seminars during my
career with the Company.
a. What are your responsibilities as Manager of Regulatory Affairs?
A. My primary responsibilities include the coordination and management of Idaho
regulatory filings, communications, and oversight of reporting requirements with the
Idaho Public Utilities Commission ("Commission").
Purpose of Testimony
a. What is the purpose of your testimony in this proceeding?
A. My testimony supports the Company's Energy Cost Adjustment Mechanism
("ECAM") filing to seek approval of the ECAM deferral of $7.5 million and presents
an alternative rate proposal to mitigate future rate impacts for customers.
a. Please summarize the Company's ECAM Application.
A. As explained in Mr. Michael G. Wilding's testimony, the Company deferred $7.5
Weston, Di-l
Rocky Mountain Power
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million during the Deferral Period for this filing. Currently, Electric Service Schedule
No. 94 is designed to collect approximately $14.5 million annually or approximately
$7 million more than the new ECAM balance, representing approximately a2.4 percent
rate reduction for customers.
Absent any agreement or approval of an altemative approach, the $7 million
adjustment to Schedule 94 would flow through to all customer rates on an equal
cents/kWh basis, as explained in Mr. Robert M. Meredith's testimony beginning on
June 1, 2017, based on the Commission review and approval of the Application. The
Company recognizes that while implementing a rate decrease would be the simplest
approach, the Company proposes an alternative for consideration by the Commission
and parties in order to mitigate future increases for customers.
12 Alternative Rate Proposal
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Please explain the Company's alternative rate proposal.
The Company views this ECAM rate reduction as an opportunity to provide customers
a rate reduction while offsetting a growing balance associated with the depreciation
deferred regulatory asset. Rather than flowing back to customers the entire ECAM
decrease, a portion of the revenue being collected in Schedule 94 could be utilized to
pay down the balance accumulating on the Company's books for depreciation expense
that is being deferred as a result of Commission Order No. 32910, and will be included
in the next rate case as amortization expense.l
What is the Company's proposal for the $7 million reduction?
The Company's Application requests approval of the $7.5 million ECAM deferred
Weston, Di-2
Rocky Mountain Power
rCaseNo. PAC-E-13-04.
t I balance and authorizationto decrease rates by $7 million or approximately 2.4 percent.
The alternative rate proposal could still provide customers with a rate reduction and
start paying down the depreciation regulatory asset. Rather than reducing rates by the
full $7 million, under the alternative, rates could be reduced by $3 million from the
current level with approximately $4 million of incremental revenue collected from
customers used to offset the deferred regulatory asset owed from customers for the
2013 depreciation regulatory asset. This alternative rate proposal would still provide a
I percent rate reduction for customers, effective June 1, 2017 . Exhibit No. 5 presents
the rates and impacts by class for this alternative proposal.
Didn't the Company propose a Rate Stability Plan in Case No. PAC-E-16-12?
Yes. The Company proposed holding base rates constant for the $ I .1 million net power
cost reset and evaluating the impact of holding ECAM rates constant at current levels
in this 2017 ECANI filing, using the funds to offset the depreciation regulatory asset to
mitigate the rate impact on a future general rate case. While parties appreciated the
proposal and concept, it was ultimately decided to go forward with the 0.4 percent rate
reduction January 1,2017, rather than implementing any future rate mitigation actions
at that time.2 The Company is presenting this alternative for consideration now since
the size of the rate change from this 2017 ECAM filing can accomplish both a decrease
in current rates as well as a significant offset to future rate impacts, thus benefiting
customers both now and in the future.
2 In addition to the January I ,2017 decrease, last year customers received a 0.7 percent rate decrease for tariff
customers and a7 percent decrease for contract customers effective April 1,2016, from the 2016 ECAM, Case
No. PAC-E-16-05.
Weston, Di-3
Rocky Mountain Power
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What is the 2013 depreciation regulatory asset?
In 2013, the Company filed Case No. PAC-E-13-02 to implement new depreciation
rates. The Commission approved3 the 2013 depreciation rates with a January 1,2014,
effective date. The approved rates incrementally increased Idaho's annual depreciation
expense by approximately $1.7 million. OrderNo. 329104 authorized the Company to
create a regulatory asset to defer, on a monthly basis, any aggregate net increase or
decrease in ldaho's allocated depreciation expense beginning January l,20l4,unti1the
date that the 2013 depreciation rates were included in rates. However, the Company
has not filed a general rate case since then so the incremental depreciation expense
continues to be deferred. As of December 31, 2016, the balance of the depreciation
regulatory asset was $4.9 million and growing by approximately $1.7 million per year.
By the beginning of the June 1, 2017 rate effective date for the current ECAM, the
balance is projected to be $5.7 million.
How would this proposal mitigate future rate impacts?
Retaining approximately $4 million of revenue that would otherwise be reflected in the
decrease will offset a significant portion of the current depreciation deferral balance of
$5.7 million, mitigating both the need to increase rates in the future for the amortization
and the double impact from the 2013 depreciation study. Additionally, moderating the
decrease now may minimize potential rate changes needed next year to recover the
ECAM deferral for calendar year 2017.
First, what do you mean by a "double impact" of depreciation expense?
As previously noted, the 2013 depreciation study increased Idaho's annual depreciation
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I 3 Order No.32926.
a Case No. PAC-E-13-04.
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Rocky Mountain Power
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expense approximately $1.7 million; however, that impact has never been included in
rates as a result of previous stipulations. With the incremental depreciation expense
currentlybeingdeferredwithaprojectedbalanceof $5.TmillionbyMay 31,2017,and
growing by $1.7 million per year, if not addressed, the amortization expense from the
deferral would also be included in rates at the same time as the incremental depreciation
expense. Depending on the amortization period, that expense could be as much or more
than the incremental depreciation expense, doubling the impact on rates.
Second, how would moderating the rate decrease now minimize potential rate
changes next year?
The Company anticipates that the 2017 deferral will be larger than the 2016 deferral
reflected in this filing for the following reasons: (1) Case No. PAC-E-76-12, reset
Idaho's base net power costs to $91.4 million approximately $3 million lower than the
base duringthe 2016 deferral period; (2) the deferral associated with Lakeside II will
be approximately $5.4 million and Deer Creek amortization is expected to be $1.3
million; and (3) the incremental deferral associated with Production Thx Credits
("PTC") was approximately $0.5 million during 2016. With more of the plants that
qualified for PTC expiring in 2017, this balance is anticipated to be higher.
Accordingly, moderating the decrease in rates now will minimize any potential increase
next year to recover the 20t7 deferral balance.
Please explain the implementation of the alternative rate proposal.
If approved, on a monthly basis the Company would apply a portion, specifically 65
percent, of the revenue collections from the Schedule 94 rates to the ECAM balance,
and apply the remaining portion, 35 percent, of the collections to amortization expense
Weston, Di-5
Rocky Mountain Power
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I 1 for the depreciation regulatory asset. The percentage proportions are calculated by
taking $4 million of the $11.5 million total targeted collections, or 35 percent, for the
depreciation regulatory asset. The monthly amortization of the depreciation regulatory
asset would equal the incremental revenues collected and would continue until May 31,
2018, at which time the situation could be re-evaluated.
Why would collection of the depreciation regulatory asset in this manner benefit
customers?
Customers benefit in several ways: first, future rate increases would be mitigated;
second, it assures customers pay only what they owe, no more or less; and third,
customers that are benefiting from the use of assets begin to pay for the increased
depreciation since arate case has not been held for several years mitigating long-term
intergenerational inequities. When amortizations are included in base rates, the
recovery is dependent on the timing of future rate cases. Recovering the regulatory
asset through a balancing account ensures only the exact amount owed is paid which is
fair for both customers and the Company.
Please summarize the Company's alternative rate proposal contained in this
Application.
The alternative rate proposal would: (1) reduce Electric Service Schedule No. 94 from
a collection rate of approximately $14.5 million per year to approximately $11.5
million per year, providing a $3 million or 1 percent customer rate reduction effective
June 1, 2017; and (2) begin offsetting the depreciation regulatory asset by
approximately $4 million per year from the incremental revenues collected through
Weston, Di-6
Rocky Mountain Power
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Schedule 94 rates. The altemative would provide customer benefits by addressing
pending regulatory issues and mitigating future rate impacts.
Does this conclude your direct testimony?
Yes.
Weston, Di-7
Rocky Mountain Power
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CaseNo. PAC-E-17-02
ExhibitNo.5
Witness: Ted Weston
BEFoRETHEIDAHoPUBLICUTILITIESCOMMISSION
ROCKY MOI.TNTAIN POWER
Exhibit Accompanying Direct Testimony of Ted Weston
March 2017
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Rocky Mountain Power
Exhibit No. 5 Page 1 of 1
No. PAC-E-17-02
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