20210527Hoogeveen Direct.pdf

BEFORE TIIE IDAIIO PTJBLIC UTILITIES COMN{ISSION
IN THE MATTER OF TIIE
APPLICATION OF ROCKY
MOI]NTAIN POWER X'OR
AUTIIORITY TO INCREASE ITS
RATES AI\ID CHARGES IN IDAHO
AI\D APPROVAL OF PROPOSEI)
ELECTRIC SERVICE SCHEDTILES
AI\D REGTILATIONS
CASE NO. PAC.E.2I.O1
Direct Testimony of Gary W. Hoogeveen
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ROCI(Y MOTINTAIN POWER
CASE NO. PAC.E.2I-07
}'fay 2O2l
TABLE OF CONTENTS
L INTRODUCTION...
I QUALIFICAIIONS
M. PURPOSE OF TESTIMO}{Y
rV. DESCRIPTION OF TTIE COMPANYAND IDAHO SERVICEAREA
VII. THE COMPANYS CURRENT RAIE FILING
VI[. INTRODUCTION OF WTTNES SES.................
ATTACIIED EXHIBITS
Exhibit No. l-Average Retail Rates by State
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V. COMMITMENT TO CUSTOMERS AND COMMUNITIES........ ............. 6
VI. PROVISION OF SAFE, RELIABLE AND AFFORDABLE ELECTRIC SERVICE... 9
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L INTRODUCTION
Please state your name, business address, and present position with PaciliCorp
dba Rocky Mountain Power ("Rocky Mountain Power" or the "Company").
My name is Gary W. Hoogeveen. My business address is 1407 West North Temple,
Suite 310, Salt Lake City, Utah 84116. I am the President and Chief Executive Officer
of Rocky Mountain Power.
II. QUALTTTCATTONS
Please summarize your education and business experience.
I have a B.S. degree in Physics from the University of Northem Iowa and Masters and
Ph.D. degrees in Space Physics from Rice University. For the last 2l years, I have
worked for the Berkshire Hathaway Energy family of companies. I joined Rocky
Mountain Power in November 2014. Prior to assuming my current position in
November 2Ol8,I was Senior Vice President and Chief Commercial Officer of Rocky
Mountain Power Prior to joining Rocky Mountain Power, from 2010 until 2014, I
served as President of the Kern River Gas Transmission Company headquartered in
Salt Lake City.
III. PT'RPOSE OF TESTIMOIYY
What is the purpose of your direct testimony?
My testimony provides an overview of Rocky Mountain Power, its Idaho service area,
and the sffategies the Company is pursuing to provide its Idaho customers with safe,
reliable, and affordable electricity to power their homes, businesses, and communities.
I also discuss why the Company is filing a rate case at this time. Finally, I introduce the
Company witnesses that provide direct testimony in support of Rocky Mountain
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Power's rate request.
IV. DESCRIPTION OF TITE COMPANYAI\D IDAHO SERVICE AREA
a. Please provide a brief description of the Company.
A. The Company, an Oregon corporation, provides retail electric service as Rocky
Mountain Power in the states of Idaho, Utah, and Wyoming, and as Pacific Power in
the states of Washington, Oregon, and California. As an investor-owned, multi-
jurisdictional electric utility, the Company serves nearly two million customers in six
western states: California, Idaho, Oregon, Utah, Washington, and Wyoming. In addition
to its distribution system in the six states, the Company serves its customers with a vast,
integrated system of generation and transmission that spans 10 states and connects
customers and communities across the West.
The Company owns or has interests in thermal, hydroelectric, wind-powered,
solar, and geothermal generating facilities, with a net-owned capacity of 11,465
megawatts ("MW"). The Company buys and sells electricity in the wholesale market
with other utilities, energy marketing companies, financial institutions, and other
market participants to balance and optimize the economic benefits of electricity
generation, retail customer loads, and existing wholesale ffansactions.
The Company provides wholesale ffansmission service under its open access
transmission tariffapproved by the Federal Energy Regulatory Commission and owns
or has interests in approximately 16,600 miles of transmission lines. [t operates two
Balancing Authority Areas, PacifiCorp East ("PACE") and PacifiCorp West
("PACW"), that together comprise the largest privately owned and operated gnd in the
Western United States.
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lQ.Please provide a brief description of Rocky Mountain Power's operations in
Idaho.
Rocky Mountain Power provides retail electric service in the following 14 counties:
Bannock, Bear Lake, Bingham, Bonneville, Butte, Caribou, Clark, Franklin, Fremont,
Jefferson, Madison, Oneida, Power, and Teton.
The Company has the privilege and opportunity of providing safe, reliable, and
reasonably priced electric service to over 85,600 customers in Idaho.l In doing so, it
employs over 150 people in the state to operate and maintain over 8,000 miles of
transmission and distribution lines. The Company also has contracts with a number of
independent power producers in the state of Idaho that operate facilities representing
over 200 MW of installed capacity.2
The Company's sales and revenues are disributed among residential and
irrigation customers, small businesses, and large businesses served under retail tariffs
subject to the jurisdiction of the Idaho Public Utilities Commission ("Commission").
Table I below provides the December 2020 number of retail customers and usage for
each of the major customer classes that account for the majority of the Company's
customer base.
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I Rocky Mountain Power provides service to about 9 percent of customers and l5 percant of electricity sales in
Idnho. U.S. Energy Information Administration - EIA - Independent Statistics and Analysis (Oct. 5, 2020).
Retrieved ll{'ay 21, 202 I from https ://www.eia. gov/electricity/data/eia86 I .2PacifiCorpblntegratedResourcePlan(IRP)for20l9,CaseNo.PAC-E-19-l6,IRPatTable5.5(Oct. 18,
2019).
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Table 1: Rocky Mountain Power's Number of Customers
and Usage in ldaho Service Area
CIass Number of
Customers
Usage
(megawatt-hours)
Residential 68,7868 742,801
Commercial 10,156 492,420
Industrial 602 1,642,114
Irrigation 5,789 646,312
Lighting 336 2,71,2
Total 85,670 3,526,359
How do the Company's rates compare to other utilities?
PacifiCorp's integrated system allows it to be one of the lowest cost electric utilities in
the lntermountain West. Figure I shows that Rocky Mountain Power has one of the
lowest average rates of all the large utilities in the Intermountain West.
Figure 1
Rocky Mountain Power Idaho Total Average Rate conpared to Other Major Intermountain Utilities
Arizona Public Senrice Co I1.97
Public Service Co ofNM 10.43
10.46Nevada PowerCo
Salt River Project 9.80
hrblic Ssvice Co of Colomdo 9.37
Idaho PowaCo 7.87
7.87
3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 il.00 12.00 13.00
Average Price (l/kWh)
Source: 2019 Energy Information Adrninistration (EIA) Form 861
data
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On a national scale, the comparison of the Company's current average rate is
even more dramatic and compelling. Attached to my testimony as Exhibit No. I is a
chart that compares Rocky Mountain Power's rates in ldaho to national averages. This
shows that Rocky Mountain Power's average rate was more than 25 percent lower than
the national average of 10.64 cents per kilowatt-hour ("kWh").3 The Company's
average rate after the increase in this filing will be 8.55 cents per kwh, and continue to
be well below other utilities both locally and nationally, due in part to the Company's
cost saving initiatives and rate increase mitigation proposals reflected in this filing. In
fact, as I show later in my testimony, the proposed rates will be less than the rates would
have been if they had increased at the rate of in{lation.
Are there other advantages to the Company's large regional footprint?
Yes. The Company's integrated system allows it to deliver low-cost generation from a
diverse portfolio of resources, including from some of the best renewable generation
sites in the country to the Company's customers, reducing power costs and emissions
for customers, and supporting local economies and communities throughout the West.
As the Company looks toward the future, there are even more opportunities for
customers to benefit from the connected west that the Company's integrated system
creates. These opportunities may come from participation in a regional resource
adequacy program and expansion of markets that allow participants to more efficiently
operate their systems or from the future expansion of the Company's vast transmission
network. The Company is, and will remain, actively engaged in finding additional ways
to leverage our vast, integrated system for the benefit of otr customers. It is also
3 Edison Electric Institute - EEI - Winter 2019 Typical Bills and Average Rates Report. Published May 2019.
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committed to fulfilling the policy goals of the states in which it serves and in a manner
that provides the most cost-effective solutions for customers.
V. COMMITMENT TO CUSTOMERS AND COMMUNITIES
What is Rocky Mountain Power's core principle in providing service to
customers?
The Company's core principle is to provide safe, reliable, and affordable energy to
customers in ldaho and throughout the West. The Company has upheld this ideal for
close to ll0 years and remains steadfast in this commitment even as the electricity
sector fransforms through changing economics and public policies, emerging and
maturing technologies, and the rise of a regional energy market. The Company is
meeting the new demands of this transforrnation without losing focus on its
commitment to deliver safe, reliable, and affordable energy.
The provision of safe, reliable, and affordable service became even more
important during the Coronavirus 19 ("COVID-l9") pandemic. The Company has a
long history of preparing for multiple emergencies that might impact our ability to
generate or deliver electricity to our customers and the communities we serve. The
Company's provision of safe and reliable electric service during the pandemic was a
testament to its preparedness and commitment to the obligation to serve its customers.
What measures did the Company take with respect to COVID-I9 over the last
year?
The Company supported its customers and communities in a number of ways over the
last year. First and foremost, throughout the pandemic the Company kept its
commitrnent to keep the lights on. The Company's provision of safe and reliable
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electric service was critical to support families that stayed at home during the lockdown
and helped keep important community services, such as hospitals, functioning. While
many of its support personnel were able to work remotely, the Company's frontline
employees, such as linemen, generation plant employees, and grid operators continued
to report to work onsite, following Centers for Disease Control guidelines that included
social distancing and enhanced sanitation measures, to ensure the provision of safe and
reliable electric service. The Company also suspended residential disconnections for
non-payments beginning in mid-March 2020 and began to resume normal billing
practices in late June 2020 with the provision of flexible payment plans and waived
late fees to help customers through the challenging time. The Company's website
continues to provide information regarding payment plans, energy assistance for
individuals and businesses, and energy saving tips.a
The Company also contributed funds to local food banls and other critical
organizations in Idaho specifically for COVID-I9 community support through the
Rocky Mountain Power Foundation.s
Finally, through collaborative efforts with Idaho Commission staff and other
stakeholders, the Company was able to postpone filing this rate case in2020 and avoid
a general rate increase during this challenging time. The Company appreciates the
efforts of the Commission and stakeholders to suppoft a balanced outcome.
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a https://www.rockyrnountainpower.net/about/newsroom/service-sat-ety-covid-l9.html.
s The Rocky Mountain Power Foundation is funded by shareholder funds.
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In addition to the targeted COVID-l9 response, what are some of the ways the
Company engages with its communities and customers within its Idaho service
area?
The Company has a deep connection to its communities through employee
engagement, sponsorship of community events, and donations to organizations
providing services to Idaho communities.
Company employees serve communities by providing leadership to and
volunteering for community organizations such as the Madison Cares Celebrate Youth
event. This is a large annual back-to-school community event involving approximately
10,000 youth. The Company's linemen participated in the fall2019 event by teaching
attendees about elecrical safety and energy effrciency.
ln2O2O, the Company contributed $53,200 to various organizations, programs
and communities throughout Idaho.6 These organizations help provide ldahoans with
entertainment, community engagement and personal support in times of need. The
Company has provided support for events like the Idaho Governor's Cup, Caribou
County Fair and Rodeo and various city holiday celebrations. The Company also
donates to Idahoans in need through our Energy Assistance Program and to local
community and recreational organizations.
In addition to the donations listed above, the Company supports the community
through donations from the PacifiCorp Foundation.In2020, the Foundation provided
$2.35 million in grants to organizations in the six-state service area. In Idaho, the grants
contributed to community projects such as the preservation of clothing and quilt
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6 Rocky Mountain Power does not recover charitable contributions in rates
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collections at the Oneida Pioneer Museum and new camp area playground equipment
for Jefferson County. The Foundation also provided grants to several other
organizations in 2020, including the College of Eastern Idaho Foundation in part for
computer and technology scholarships, Idaho STEM Action Center Foundation, and
the JuniorAchievement Programs for the Jefferson School District. In the first quarter
of 2021, the Foundation gave $525,000 in grants for health, safety, and wellness
throughout its service territory including grants to several Idaho organizations.
The Company overhauled its website to make customer transactions faster,
easier, and more secure, supporting the ever-increasing number of customers who want
to do business with us online. To increase customer awareness during service
intemrptions, the Company improved its outage map and outage status
communications.
VI. PROVISION OF SAtr'E, RELIABLE AI\D AFFORDABLE ELECTRIC
SERVICE
Please describe how the Company has been able to maintain safe and reliable
service at affordable rates.
The Company proactively implemented cost conffol measures and made investments
in cost-effective energy solutions, while developing new market opportunities.
For example, the Company parmered with the California Independent System
Operator to create the Western Energy Imbalance Market ("EIM") and has supported
the successful expansion of the EIM across the West, saving PacifiCorp customers in
excess of $296 million dollars since its inception. The Company has also taken
advantage of the declining cost of renewable energy resources and the availability of
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federal production tax credits ("PTCs") to repower the existing fleet of wind resources
and invest in new renewable resources and transmission in the West, including the
Energy Vision 2020 projects, which are nearing completion.
a. Please describe the Company's cost control efforts.
A. The Company proactively and aggressively controls the costs that it can. These efforts
are demonstated by the Company successfully minimizing the frequency of general
rate cases. The Company filed a general rate case in Idaho, the 2011 Rate Case, ten
years ago.7 Rates were last increased seven years ago, when the Commission approved
a Stipulated Agreement in lieu of the Company filing of a rate case (*2013 Stipulation
Agreement").8
FurtheE the Company's rates decreased in 2017 as part of a rate stability plan
proposed by the Company and again in 2018 and 2019 to reflect the change in federal
corporate tax rates.e The Company has attempted to align, as closely as possible, its
capital expenditures with its depreciation expense to manage the growth of rate base
and the resulting rate impacts it would otherwise have. The Company is also managing
its controllable costs in a prudent marmer, which is evident in that they are not a material
driver in this case. In fact, this case reflects a decrease in tdaho operation and
maintenance expense since the last general rate case. [n other words, the Company was
7 In the Matter of the Application of PacifiCorp, DBA Roclcy Mountain Powe4 for Approval of Changes to lts
Electric Service Schedules, Case No. PAC-E-l l-12, Order No. 32432, approving the Settlement Stipulation with
one condition (Jan. 10,2012).
E In the Malter of the Application of PacifiCorp, DBA RoclE Mountain Powet to Initiate Discussions with
Inlerested Parties on Akernative Rate Plan Proposals, Case No. PAC-E-13-04, Order No. 32910 (OcL.24,
2013).
e In the Matter of the Applicalion of PacifiCorp dba Rocky Mountain Power to Updale Base Net Power Cosls
and Implement a Rate Stability Plan, Case No. PAC-E-|6-12, Order No. 33668 (Dec. 14,2016); In the Matter
Of the Investigation into the Impact of Federal Tax Code Revisions on Utility Costs and Ratemaking, Case No.
GNR-U- l8-01, Order No. 34072 (June l, 2018) and Order No. 3433 I (May 3, 2019).
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able to reduce costs while completely offsetting l0 years of inflation that occurred since
the last general rate case was filed in 2011. Please see Company witness
Ms. Joelle R. Steward's direct testimony for a discussion of the major drivers of this
rate case proceeding.
a. Please explain the EIM.
A. The EIM is a real-time bulk power trading market, which uses advanced systems to
automatically find and deliver the lowest-cost energy to serve customer demand on a
real-time basis across a wide geographic area. Utilities voluntarily participating in the
EIM maintain control over their assets and remain responsible for balancing
requirements while sharing in the benefits the market produces. Additional benefits of
the EIM include improved situational awareness for increased reliability and more
effective integration of renewables and utilization of the transmission system.
Since the market launched in November 2014, the EIM has produced benefits
of over $1.287 billion, as ofApril 29,2021.10 PacifiCorp customers'share of the EIM
benefits are an estimated $296 million. r I ln addition to monetary benefits, participation
in the EIM has enabled the Company to operate its thermal generation fleet in a manner
that allows more zero carbon-emitting, zero-fuel cost, and variable-energy resources,
such as wind and solar, to serve our customers. As such, the EIM has resulted in a
reduction in regulated emissions or pollution. Since its inception, 14 utilities have
joined the EIM, and eight more have committed to join by 2023, which together will
represent over 80 percent of the West's total electricity demand. PacifiCorp customers
r0 Westem Energy Imbalance Market - Quarterly Benefits. Retrieved April 30, 2021 from
https://www.westerneim.com./Pa ges/About/Ouarterl-vBenelits.aspx.
tt Id.
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and the customers of other market participants will continue to benefit from market
participation.
Please describe Energy Vision 2020.
PacifiCorp's Energy Vision 2020 projects increase the Company's zero-fuel cost
generation portfolio with new and repowered wind generation resources and new
transmission, while leveraging federal PTCs to provide savings to customers over the
life of the projects. These projects support an energy future that decreases the amount
of emissions, while providing benefits to customers over the lives of the resources.
Energy Vision 2020 consists of two major components: (l) wind repowering;
and (2) construction of new wind and transmission. These new projects deliver more
generation to the Company's system along with long-term savings for customers.
Please see the direct testimonies of Company witnesses Messrs. Timothy J. Hemstreet
and Richard A. Vail, who provide construction updates of the new wind generation and
wind repowering projects and transmission projects, respectively, associated with
Energy Vision 2020.
VII. TIIE COMPAI[Y'S CURRENT RATE FILING
Why is the Company filing a rate case at this time?
Since the Company's last rate case in 2011, the Company has completed two new
depreciation studies and has invested in a number of major capital projects. The major
capital projects include the Lake Side 2 natural gas plant, selective catalytic reduction
equipment at several coal-fired plants, Energy Vision 2020, the Pryor Mountain wind
project, repowering of the Foote Creek wind project, conversion of Naughton Unit No.
3 from coal to natural gas, and several transmission expansions. The rates set in this
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proceeding will allow us to recover these prudently incurred investments made since
the last rate case and enable us to move forward to continue meeting the Company's
core principle of providing safe, reliable, and affordable energy to its customers.
As I mentioned earlier in my testimony, the Company's rates have actually
decreased since 2016 and will remain low after this case, as shown in Figure 2 below.
Furthermore, after adjusting for inflation the proposed rates demonstrate a reduction in
real costs.
Figure 2
8.90
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a
7.70 2016 2017 2018 2019 2020 2022 Proposed
-Roclry
Mountain Power (Idaho)
-Rocky
Mountain Power (Idaho) adjusted for inflation
YI[. INTRODUCTION OF WITNESSES
Please identifo the witnesses supporting the Company's application and the
subject of their testimony.
In addition to myself, the Company witresses filing direct testimony in support of the
application and the subjects of their testimony are as follows:
Joelle R Steward, Vice President, Regulation, Rocky Mountain Power, describes the
Company's request in this proceeding in more detail.
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Nikki L. Kobliha, Vice President, Chief Financial Officer and Treasurer, provides the
Company's overall cost of capital recommendation, including a capital structure that
maximizes value and minimizes risk.
Ann E. Bulkley, economist and principal at Concentric Energy Advisors, provides a
comparison of the Company's business and financial risk compared to peer utilities,
recommends a cost of equiry and provides supporting analyses.
Rick T. Link, Vice President of Resource Planning and Acquisition, provides the
economic analyses of repowering the Foote Creek I wind facility, the Pryor Mountain
Wind Project, and the conversion of Naughton Unit 3.
Timothy J. Hemstreet, Managing Director of Renewable Energy Development,
provides an update on the implementation and costs of the new wind and repowering
projects included in Energy Vision 2020, and an overview of the Foote Creek I
repowering project.
Richard A. Vail, Vice President of Transmission Services, discusses important
transmission system upgrades completed to serve customers and provides an update on
the implementation and costs of the transmission projects included in Energy Vision
2020.
Robert Van Engelenhoven, Director of Resource Development, provides the details
on the development of the Pryor Mountain Wind Project, the conversion of Naughton
Unit 3 to natural gas, and details on the development of Lake Side 2 natural gas
generating plant. He also sponsors the Company's updated decommissioning studies.
James C. Owen, Director - Environmental, supports the Company's installation of
selective catalytic reduction retrofit projects at three of its joint owned coal plants -
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Craig Unit2, Hayden Unit2, and Jim Bridger Units 3 and 4.
Craig M. Eller, Vice President of Business Policy & Development, provides an
updated analysis for the economic valuation of the intemrptible products provided by
Bayer under contact with the Company.
Michael G. Witding, Vice President, Energy Supply Management, presents the
Company's proposed net power costs for the test period.
Melissa S. Nottingham, Manager of CustomerAdvocacy, proposes updates to certain
customer service fees to reflect prices that are reasonable, fair, and cost-based.
Steven R McDougal, Director of Revenue Requirement, summarizes the overall test
year revenue requirement, pro forma adjustnents, and the rate base calculation
methodology.
Robert M. Meredith, Director of Pricing and Cost of Service, provides the Company's
proposed revenue allocation and rate design, and discusses how the proposed tariff
changes recover the proposed revenue requirement to achieve fair, just, and reasonable
prices for customers.
Does this conclude your direct testimony?
Yes.
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