20211108English Direct.pdf

BEFORE THE Rfc:tvtro
:i:; ::,J,f -g pH 3: S?
IDAHO PUBLIC UTILITIES COMMlSSJqN.ilf: ;.l.,ili.tc
'.;l. : .:' i ;l i, .1,.,; r;';$$t0ti
IN THE MATTER OF ROCKY MOUNTAIN
POWER'S APPLIGATION FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES IN IDAHO AND
APPROVAL OF PROPOSED ELECTRIC
SERVICE SCHEDULES AND
REGULATIONS
GASE NO. PAC-E-21-07
DIREGT TESTIMONY OF DONN ENGLISH
IN SUPPORT OF THE SETTLEMENT
STIPULATION
IDAHO PUBLIC UTILITIES COMMISSION
NOVEMBER 8, 2021
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o.
A.
11331_ W
83714.
Please state your name and business address?
My name is Donn English. My business address is
Chinden Blvd., BLDG 8, STE 20L-A, Boise, Idaho
O. By whom are you employed and in what capacity?
A. I am employed by the Idaho Public Utilities
Commission as a Program Manager overseeing the Accounting
and Audit Department in the Utilities Di-vision. f am also
the Program Manager overseeing the Technical Analysis
Department, also within the Utilities Division.
O. Please describe your educational background and
professional experience.
A. My educational background and professional
experiences are shown in Exhibit No. 101.
a. What is the purpose of your testimony in this
proceeding?
A. The purpose of my testimony is to describe Rocky
Mountain Power's ("Rocky Mountaj-n" or "Company")
Application to increase its rates and charges for electric
service in Idaho, descrj-be the proposed Settlement
Stipulation ("Settlement") reached by the parties in this
case, and explain Staff's support for the proposed
Settlement.
O. How is your testimony organized?
A. My testlmony is orqanized under the following
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headings:
Background Page 2
Staff Investigation Page 3
Settlement Evaluation Page 5
Settlement Overview Page 6
Background
0. Please describe Rocky Mountain's Application.
A. Rocky Mountain made its original fi-ling with the
fdaho Public Utilities Commission on May 21, 202L,
requesting authority to j-ncrease its revenue by $19.0
mi1Iion, or approximately 7.0 percent. The Company's
proposed increase was based on a hlstorical twelve-month
period ending December 31, 2020, adjusted for known and
measurable changes through December 31, 2021,. The Company
proposed a capital structure of 41.76 percent Iong-term
debt and 52.84 percent equity, with a return on equity
(*ROE") of I0.2 percent. The Company proposed to allocate
the price change to customers in l-ine with the class cost
of service results filed in its Application; however, the
rate increases for all major rate schedule classes were
limited to 10 percent.
The Company's Application reflected net power
costs (*NPC") of $1r365.1 million on a total-Company basis
and $86.4 million on an Idaho jurisdictional basis. This
was a $120 million r oL 8.1 percent, decrease in NPC on a
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total-Company basis compared to the 2016 NPC update. The
Application also requested recovery of capital additions,
including costs associated with its Energy Vision 2020
proj ect.
O. How was the case processed after the Company's
Application was received?
A. The Commission issued a combined Notice of
Application, Notice of Suspension, and Notice of
Intervention Deadline ("Notice") on June 11, 202L. The
Notice suspended the proposed effective date of July l,
2027, for thirty days plus five months and established an
Intervention Deadline of July 8, 2021,. Intervenor status
was subsequently granted to the Idaho Irrigation Pumpers
Association, Inc. ("IIPA"), Bayer Corporation ("Bayer"),
and Pacificorp Idaho Industrial- Customers ("PIIC")
intervened. Idaho Conservatlon Leagrue and Community Action
Partnership Assocj-ation of Idaho al-so intervened, but later
withdrew from the case.
The Company, Staff, IIPA, Bayer, and PIIC
(coll-ectively the "Parties") participated in four
settl-ement conferences, and on October 25, 2027, a
Sett1ement Stipulation was filed with the Commisslon,
signed by the Parties.
Staff Investigation
O. What type of investigation did Staff conduct to
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evaluate the Company's rate increase request?
A. Staff's approach in any general rate case is to
extensively review the Company's Application and associated
testimony, attachments, exhibits, and workpapers; identlfy
adjustments to its revenue requirement, revenue
normalization, rate spread, and rate design; and prepare to
file testimony for a fu11y litigated proceeding. There
were 15 Staff members analyzing this case, including
auditors, engineers, utility analysts, and consumer
investigators, and supervisors. Staff auditors reviewed
the Company's 2020 resul-ts of operations, capital budget.s,
capital spending trends, operations and maj-ntenance ("O&M")
expenses and trends and verified all- of the Company's
calcul-ations and assumptions regarding the overal-l- revenue
requirement. Because of the continued public heal-th
emergency due to variant strains of the COVID-19 virus,
Staff was unable to conduct onsite audits or reviews of the
Company's books and records and they did not have extensive
interviews with Company personnel. However, the auditors
reviewed thousands of transactions, selected samples, and
performed transaction testing in accordance with standard
audit practices. Staff reviewed the Company's l-abor
expense, incentive plans, and employee benefits to ensure
the appropriate l-eveI of expenditures are lncl-uded in
rates.
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Staff reviewed both completed and proposed
Company investments to determine the prudence of capital
additions. Expenditures including pension expense,
salaries, and O&M expense were also exami-ned.
Additionally, Staff evaluated the Company's cost of
capital, capital structure, cl-ass cost of service, rate
spread, and revenue normalization. In totaf, Staff
submitted 228 production requests and hel-d several virtual-
meetlngs with Company personnel as a part of its
comprehensive investigation. Staff al-so reviewed the
Company's responses to 365 production requests submitted by
intervening parties. Based on its investigation, Staff was
prepared to defend over 30 proposed adjustments to the
Company's revenue requirement in testimony and at hearing.
Settlement Evaluation
0. How did Staff determine that the overall
Settlement was reasonable?
A. In every settlement evaluation, Staff and other
parties must examine the risks of losing positions at
hearing and determine if the settl-ement agrreement is a
better overall outcome. Staff must evafuate each
i-ndividual adjustment and determi-ne the likelihood of the
Commission accepting or rejecting Staff's rationale for the
adjustment. Ultimately, Staff's intent in every settlement
conference is to negotiate the best possible outcome for
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customers.
O. Does Staff support the proposed Settlement as
reasonable?
A. Yes. After a comprehensive review of the
Company's Application, thorough audit of the Company's
books and records, and extensive negotiations with the
parties to the case, Staff supports the proposed
Settlement. The proposed Settlement offers a reasonable
balance between the Company's opportunity to earn a
reasonable return on its investment and affordabl-e rates
for customers. Staff believes the proposed Settlement,
supported by the Parties, is in the public interest; fa:-r,
just, and reasonabl-e; and should be approved by the
Commission.
Settlement Overview
O. Wou1d you please describe the terms of the
proposed Settlement?
A. The proposed Settlement provides a reduction in
the Company's requested revenue requirement. Instead of
the Company's proposed base rate increase of $19.0 million,
or 7.0 percent, Idaho base rates woul-d increase by $8.0
millionr ox 2.9 percent, effective January L, 2022. The
increase is further reduced by the refunding of $8.5
million in excess deferred income taxes ("EDfT") over two
years. The net effect is a first-year increase of
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approximately $3.8 mil,Iionr oL 1.4 percent, provided the
corporate tax rate does not change.
The proposed Sett.lement provides the amortization
period for certain deferred requlatory assets; establishes
the NPC, Production Tax Credits ("PTC"), Renewable Energy
Credits (*REC"), and the Load Change Adjustment Rate
("LCAR") for incl-usion in the Energy Cost Adjustment
Mechanism ("ECAM"); the return of the remaining benefits
from the Tax Cuts and Jobs Act ("TCJA"),' the value of the
Bayer curtailment products; and raLe spread and rate
design. The proposed Set.tl-ement does not detaif all- of the
different components of the revenue requirement
calculation, including the cost of capital, return on
equity, or net rate base bal-ances.
a. Please explain how the proposed Settlement
addresses the amort j-zation of deferred regrulatory assets.
A. In Order No. 34154, Case No. PAC-E-18-08, the
Commission approved a settlement stipulation allowing the
Company to defer j-ncremental depreciation expense of
$13,9401303 as a regulatory asset. Under the terms of the
proposed Settlement, this regulatory asset will be
amortized over four years and included in the base rate
increase.
In Order No. 33304, Case No. PAC-E-14-L0, the
Commission authorized the Company to defer for future
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recovery certain costs assocj-ated with the closure of the
Deer Creek Mine. The Parties agreed to amortize the Deer
Creek Mine regulatory asset over three years consistent
with the Company's initial f i1j-ng in t.his case. The
balance in the regulatory asset account is approximately
$82.4 mill-ion (total system) , which includes $14,347,296 in
unpaid royalties and $6,521,059 of unpaid future
remediation expenses.
In Order No. 33954, Case No. PAC-E-11-06, and
Order No. 34104, Case No. PAC-E-17-0'l I the Commission
authorized the Company to defer the costs for certain
repowered and new wind facilities through a Resource
Tracking Mechani-sm (*RTM") included as a component of the
ECAM up to the amount of the benefit.s customers received
from those projects. Any costs above the benefits were to
be deferred as a regulatory asset with recovery to be
determined in the next general- rate case. The Part j-es
agrreed to exclude the RTM regulatory asset from recovery in
this case, and the Company will continue to defer the
incremental costs in the RTM through December 31, 2021r dS
a regulatory asset. There will be no carryi-ng charge and
recovery of this regulatory asset will be determined j-n the
Company's next general rate case.
O. Please explain the ECAM components addressed in
the Settlement.
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A. Attachment 1 to the proposed Settlement provides
the calculation of certain components for the Company's
annua1 ECAM filing on a total system basis, which are
summarized below:
o NPC - $1.368 billion or $24.54/Megawatt-hour ("MWh")
o PTC $256,612,477 or $4.16lMWh
o REC 54,32'l ,004 or $0.O7lMWh
o LCAR - $8.74/Mwh
O. Please describe the tax benefits associated with
the TCJA.
A. On January 11, 20L8, the Commission opened Case
No. GNR-U-18-01 to investigate the impact of the TCJA on
utility costs and ratemaking. The Commission reduced the
rates Rocky Mountain Power charges customers in Idaho to
reflect the reduced j-ncome tax expense at the new 21
percent corporate tax rate. However, the TCJA also
requlred companies to revalue their deferred tax amounts at
the new corporate tax rate which resulted in excess
deferred federal income tax reserve balances. Balances
associated with regulated utillty operations resulted in a
bafance sheet reclassification from a deferred tax to a
deferred regrulatory asset or liability. Thls reval-uation
affected plant (protected or permanent tax benefit) and
non-p1ant (unprotected or temporary tax benefit) balances.
For plant-rel-ated EDIT, the utilities had to
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amortize the ba1ance over the remaJ-ning life of the assets.
Non-p1ant EDIT balances could be returned to customers in
any manner approved by the Commission.
On June 7, 2018, the Commission issued Order No.
34012 approving a settlement stipulation that woul-d return
$8.385 million to customers, either through a separate
tariff schedule, at offsetting deferred amounts in the
ECAM. The remaining benefits of the TCJA were to be
determined in a separate phase of the case.
On May 3, 2019, the Commission issued Order No.
34331 approving the Phase 2 settlement stipulation, which
outlined how the remai-ning benefits would be returned to
customers. Beginning on June L, 20L9, non-protected plant
and non-pIant EDIT balances were to be amortized over seven
years (approximately $2.1 mi-Ilion per year) and be used to
offset the 20L3 incremental depreciatlon expense deferral
approved by Commission Order No. 329!0 in Case No. PAC-E-
13-04. However, in t.hat settlement stipulation, the
parties agreed that changes to the seven-year amortization
period for the unamortized bal-ances could be proposed in
the Company's next general rate case.
In Order No. 34384, Case No. PAC-E-20-03, the
Commission approved a settlement stipulation, which in part
discontinued the seven-year amortj-zation of the remaining
EDIT balances and used the balances to offset the
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unrecovered balances of the Company's Cholla Unit No. 4
that cl-osed at the end of 2020. Remaining EDfT balances
would then be used to mitigate the impact of the rate
increase in thi-s case.
The Company has approximately $8.5 million in
remaining EDIT bafances to return to Idaho customers. The
Parties to the proposed Settlement aqreed to return the
bal-ance to customers over two years through Electric
Service Schedule No. L91 . However , Lf federal corporate
tax rates increase before the balance is completely
amortized, the Parties agreed that the Company will- stop
the amortization as of the effective date of the tax
increase. If there is a change to the corporate federal
tax rate before the Company's next general rate case, the
Parties will support the Company's filing of an application
seeking to defer the incremental tax impacts as of the
effective date of the new tax rate.
O. Please explain the value of the Bayer curtailment
products contalned in the Settlement.
A. The Parties agreed to a credit amount for Bayer's
ability to interrupt and curtaj-l- el-ectric service during
times of high demand on the system. The Parties agreed the
amount and method for calculating the credit in this
Settlement should not be construed as precedential. The
Parties also agreed that the terms and conditions of the
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Energy Service Agreement fil-ed with the Commission as
Supplemental Exhibit No. 36 on September 76, 2021, are
fair, just, and reasonable.
O. Please explain the rate spread and rate design
contained 1n the proposed Settlement.
A. The Parties agreed to a rate spread based upon
the $8.0 million rate increase as set forth in Attachment 2
to the proposed Settlement. The rate design and tariff
chanqes are consistent with the Company's proposed methods
to move customer classes toward cost of service utilizinq
the normalized billing determinants included in the
Company's original filing.
The Parties agreed to increase the monthly
customer charges based on the proposal in the Company's
original filing. This includes, but is not limited to,
raising the customer service charge from $5.00 to $8.00 for
Schedule 1 residential customers, from $14.00 to $15.00 for
Schedule 36 Time-of-Day residential customers, and from
$16.00 to $18.00 for Schedule 23 qeneral service customers.
The Parties agreed with the Company's proposal to
migrate the Schedule 401 special contract customer t.o
Schedule 9. Rates for Schedule 9 will be designed for the
current Schedule 9 customers prior to the migration of the
Schedule 407 customer, based on the system average rate
increase. Electric Service Schedule 9 will be revised to
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increase the limit on the customer's maximum power
requirement from 15,000 kilowatts ("kW") to 30r 000 kW.
Similarly, the Parties agreed with the Company's
proposal to mi-grate current Schedule 19 customers to
Schedule 23, since al-I new customers that once qualified
for Schedule 1,9 are currently being classj-fied as Schedule
23 customers. To mitigate the rate impact. of migrating
existing Schedu1e 19 customers to Schedule 23, Schedule 23
customers will use a seasonal difference rati-o of 1.20 and
a primary customer charge of $48.00.
The Parties also aqreed that Schedule J I Schedule
ll, and Schedule 72 street and area lighting customers will
receive a rate decrease to move rates 50 percent cfoser to
cost of service.
O. Do you have any other comments on t.he proposed
Settfement?
A. Yes. Staff has reviewed Attachments l-4 to the
proposed Settlement and verified they are consistent with
the agreement. The agreed upon rate design wiII offer the
Company a reasonabfe opportunlty to recover the proposed
revenue requirement. As implied throughout this testimony,
the proposed Settfement represents a fair, just, and
reasonable compromise of the positions put forth by aII
parties and is in the public interest. Therefore, Staff
recommends the Commission approve the proposed Settlement
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without material changes or modifications.
O. Does this conclude your testimony?
A. Yes, it does.
CASE NO. PAC-E-21-07tL/ 08 /21,
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Professional Qualificationsof
Donn English
Program Manager - Accounting and Audit
Program Manager - Technical Analysis
Idaho Public Utilities Commission
EDUCATION
Mr. English graduated from Boise State University in 1998 with a
Bachelor of Business Administration degree in Accounting. Hls
studies concentrated on corporate finance and taxation. He was
a member of the Alpha Beta Psi honor society for Accounting
students. He completed the Annual- Regulatory Studies Program,
the Advanced Regulatory Studies Progiram, and the Accounting and
Ratemaking Course offered through t.he Institute of Public
Util-ities at Michigan State University. Additionally, he
regularly attends meeti-ng and conferences sponsored by the
National- Association of Regulatory Commissioners (NARUC) and the
Society of Utility and Regulatory Financial Analysts.
In 2001,, Mr. English became a designated member of the American
Society of Pension Professionals and Actuaries (ASPPA) and was
awarded the professional desi-gnation of Qualified Pension
Administrator (QPA) and Qualified 401 (k) Administrator (Qfal .
Mr. English was also a member of the Association of Certlfi-ed
Fraud Examinators.
BUSINESS EXPERIENCE
Prior to joining the Idaho Public Utifities Commission (IPUC),
Mr. English was a trust Accountant with a pension
administration, actuarial, and consulting fi-rm in Boise, Idaho.
In 1999, he was promoted to Pension Administrator, and in 2007
he was promoted to Pension Consultant. fn that capacity, Mr.
English performed actuarial calculations and the required non-
discrimination calcul-ations for hundreds of qualified retirement
plans. He completed and fil-ed Form 5500s and represented
clients during audits by the Department of Labor and the
Internal Revenue Service. He also participated on the task
force that wrote questions for the ASPPA administrator and
actuarial exams.
Exhibit No. 101
Case No. PAC-E-21-07
D. EngIlsh, Staff
Ll/08/27 Page l- of 2
Mr. English joined the IPUC in 2003 as a Staff Auditor. In
20L6, he was promoted to Audit Team Lead, and in 20L8 he became
the Program Manager for the Accounting and Audit Department
within the Utilities Division. In 2420, Mr. English also
accept.ed the responsl-bility of supervising the Technical
Analysis and Energy Efficiency team. At the CommJ-ssion, Mr.
English has audited a number of utilities incl-udj-nq electric,
water, and natural gas companies, and provided comments and
testimony in numerous cases that deal with qeneral rates, tax
issues, pension issues, depreciation and other accounting
i-ssues, and other regulatory policy decisions. Mr. Englishparticipates in the Energy Efficiency Advisory Groups and
External Stakeholder Advisory Committees for Idaho Power, Avista
Utilities, Rocky Mountai-n Power, and Intermountain Gas Company.
He is the Commission's representative on the NARUC Subcommittee
of Accounting and Einance and the Subcommj-ttee on Education and
Research. Mr. English j-s also a volunteer on the faculty of
NARUC Rate School.
Exhibit No. 101
Case No. PAC-E-21-07
D. English, Staff
1,1,/08/2L Page 2 of 2
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8th DAY OF NOVEMBER 2021,
SERVED THE FOREGOING DIRECT TESTIMONY OF DONN ENGLISH IN
suPPoRT OF THE SETTLEMENT STIPULATION, IN CASE NO. PAC-E-21-07,
BY E-MATLING A COPY THEREOF, TO THE FOLLOWING:
TED WESTON
ROCKY MOTINTAIN POWER
I4O7 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I 16
E-MAIL: ted.weston@pacifi com.com
ficom.com
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@paci fi corp. com
ANTHONY YANKEL
I27OO LAKE AVE
UNIT 2505
LAKEWOOD OH 44107
E-MAIL: [e-mail]
BRIAN C COLLINS
MAURICE BRUBAKER
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD #I4O
CHESTERFIELD MO 63017
E-MAIL : [e-mail]
mbrubaker@consultbai. com
LANCE KAUFMAN
AEGIS INSIGHT
E-MAIL: lance(r?aesrsr nsisht.com
EMILY L WEGENER
MATTHEW D McVEE
ROCKY MOUNTAIN POWER
1407 WN TEMPLE STE 320
SALT LAKE CITY UT 84I 16
E-MAIL: [e-mail]
matthew.mcvee@,paci fi corp. corn
ERIC L OLSEN
ECHO HAWK & OLSEN PLLC
PO BOX 6U9
POCATELLO ID 83205
E-MAIL: [e-mail]
RANDALL C BUDGE
THOMAS J BUDGE
RACINE OLSON
PO BOX 1391
POCATELLO ID 83204
E-MAIL: rand
[e-mail]
JAMES R SMITH
MIKE VEILE
BAYER CORPORATION
E-MAIL: [e-mail]
[e-mail]
KEVIN HIGGTNS
COURTNEY HIGGINS
MILLI PICHARO
NEAL TOWNSEND
ENERGY STRATEGIES
E-MAIL: [e-mail]
chi eeins@enereystrat. com
mpichardo@energystrat. com
ntownsend@energystrat. com
CERTIFTCATE OF SERVICE
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
PO BOX 388
BOISE ID 83701
E-MAIL : [e-mail]
ADAM GARDNER
IDAHOAN FOODS
E-MAIL: [e-mail]
VAL STEINER
ITAFOS CONDA LLC
E-MAIL: [e-mail]
BRADLEY G MULLINS
MW ANALYTICS ENERGY
E-MAIL: [e-mail]
KYLE WILLIAMS
BYU IDAHO
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE