20071001Shurtz direct.pdf

LAW OFFICE OF
KEVIN B. HOMER
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1565 SOUTH BOULEY AItD
O. BOX 51015
IDAHO FALLS, IDAHO 83405-1015
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KEVIN B. HOMER -- IDAHO STATE BAR. NR.. 2901 DARLENE BONKOSKI, LEGAL ASSISTANT
September 28, 2007
To:
Delivered by U.S. Postal Service mail and e-mail
as indicated on the previously transmitted mailing matrix
..--..
GO
.-/"
Scott Woodbury, Esq. -- Deputy Attorney General, Idaho Public Utilities Commission
Neil Price, Esq. -- Deputy Attorney General, Idaho Public Utilities Commission
Dean Brockbank, Esq. -- Rocky Mountain Power
Data Response Center - Pacificorp
James R. Smith - Monsanto Company
Eric L. Olsen, Esq. -- Racine Olson Nye Budge & Bailey
Conley E. Ward, Esq. / Michael C. Creamer, Esq. -- Givens Pursley LLP
Brian Dickman -- Rocky Mountain Power
Randall C. Budge, Esq. -- Racine Olson Nye Budge & Bailey
Maurice Brubaker / Katie Iverson -- Brubaker & Associates
Anthony Yankel
Dennis E. Peseau, Ph.D. -- Utility Resources, Inc.
Brad M. Purdy, Esq.
Re:Idaho Public Utilities Commission Case Nr. PAC - E 07-
Application of Pacificorp d/b/a Rocky Mountain Power
Written Testimony of Timothy Shurtz, Intervenor
Gentlemen/Ms. Iverson:
As many of you have probably already realized, the formatting of the Written Testimony
of Timothy Shurtz, Intervenor, which I mailed and e-mailed to all of you yesterday, did not
strictly comply with the requirements of Rule 231 of the IPUC Rules of Procedure governing
line numbering, margins, font pitch, etc. I have revised that document to comply with Rule 231
and now transmitting to each of you the revised document. The text of the enclosed revised
document is identical to the original sent yesterday.
I apologize for the inconvenience.
KEVIN B. HOMER , ESQ. - State Bar No.
1565 South Boulevard
Idaho Falls , ID 83404
Telephone: [phone]
e-mail: kbh~khomerlaw.comAttorney for Timothy Shurtz , Intervenor
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TTER OF THE
APPLICATION OF PACIFICORPd/b/a ROCK Y MOUNTAIN POWER
FOR APPROV AL OF CHANGES TO
ITS ELECTRIC SERVICE
SCHEDULES
) Case Nr. PAC-07-
TESTIMONY OF
TIMOTHY SHURTZ
INTER VENOR
(Testimony commences on following page.
ORIGINAL Page 1
SHURTZ, Intervenor- Di
I am Timothy Shurtz.I reside in Firth , Bingham
County, Idaho.I am a private rate payer , and have
intervened on that basis.My testimony comes from that
perspective.
I acknowledge that Pacific Corp. has rendered
valuable electrical service to my home and to thousands of
other rate payers in southeast Idaho.The company
deserves commendation for that.The company apparently
has a sound financial and business structure , and I
recognize that that soundness is crucial to the company
continuing to be able to provide electrical service to me
and my neighbors.I recognize that the company is entitled
to a reasonable profit for providing that serVIce.I hope
that the points raised below in this testimony do not cloud
the fact that I am grateful to the company for the good
service that it does provide to southeast Idaho.
However , as a rate payer I am troubled by several
points which I believe have been ignored by other parties
objecting to the Company s proposed rate increase.Those
points-each of which I will explain separately-are:
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SHURTZ, Intervenor- Di
1. The company s inadequate notice to the rate pavers
and the general public
2. The company s attempts to pass on to the rate payers
certain personnel costs
3. The company s failure to reflect the decreased cost of
natural gas.
4. The company s failure to pass along the benefits of a
recent propertv tax cut.
5. The possibilitv of using electronic bill paying to
reduce mailing costs.
6. Determination of a fair return on Equity (ROE)
7. Necessitv of regulatorv review and. therefore. the
inevitabilitv of "regulatory lag
Inadequate Notice to Rate Payers
I believe that the company could do - and should have
done - more to give the rate paying public adequate notice
of the rate increase request.The company could take the
following steps to give better public notice of requests for
rate increases and , more importantly, notice of the true
facts behind those requests.
Page 3
SHURTZ, Intervenor- Di
(a) Notice of public workshops and hearings should
be given bv the companv in a wav that would guarantee
that the customers receive and see the notice.
It would be a simple matter for the company to gIve
every rate payer/customer a direct , specific , separate and
individual notice of the time , date and place for every
public workshop, meeting and hearing regarding a rate
increase request.I receive my billing from the company
electronically (by e-mail).The company could easily send
a separate and specific reminder message to me (and to
every other customer who is willing to provide his e-mail
address to the company, whether or not he receives his
billing electronically) notifying me of the requested rate
increase request and specifically reminding me
(repeatedly) of the date , time and location of public
workshops , meetings and hearings at which the proposed
rate request would be discussed.
Admittedly, newspaper articles were published , and
formal notices " may in fact be published in the
But in reality those formal notices are verynewspapers.
rarely, if ever , actually read by the average rate payer.
(To the individual members of the commission , I ask this
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SHURTZ, Intervenor- Di
question:When was the last time that your spouse or your
mother actually read the "legal notices " pages of your
local newspaper?)Indeed , with the advent of the internet
that question is rapidly becoming: when was the last time
that you read anything in the newspaper?
(b)The proposed customer/rate paver notice could
and should be individualized and specific
The company s current general notice states that the
average customer s power bill will go up by $ 5.56 per
month.The company should be able to tell each customer
how much the proposed increase will raise his own specific
bill not just "the average." The company tracks each
customer s power usage during the previous month.
would be a simple matter to have the customer s statement
(whether paper or electronic) notify the customer
individually what that customer s bill will actually be for
that same amount of power if the rate increase is granted.
(c)This individualized notice should also reflect the
hidden costs that are assed on to rate ers throu
municIpal charges.
Page 5
SHURTZ, Intervenor- Di
The proposed rate increase will not only cost
customers more for their own individual (i.e. household)
power bills.It will also cost customers more because of
the increased cost to governmental and municipal entities
who pass along their operating costs to the public.Among
other things , the proposed rate increase will raise the cost
of street and area lighting by 20.6 percent.This increased
expense must ultimately be passed along to the residents of
that community, school district , etc..They are entitled to
be informed of that increase.
For example , in my home town of Firth , in Bingham
County, the street lighting bill for the month of August
2007 was $348.63; the proposed rate increase would raise
that bill to $419.63 in August 2008.During the winter
months , the amount of the increase will , of course , be
proportionately even higher because of the shorter days
and longer nights.I asked the city manager personally if
he had been informed by the company of the effect of the
proposed rate increase on the city of Firth; he told me that
the company representative had told him that this rate case
would not impact the city that much.In fact , it will
increase the city s already strained lighting budget by over
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SHURTZ, Intervenor- Di
twenty percent.As a city councilman from Firth for the
past ten years , I know that any twenty percent increase in a
significant budget item like this one is nearly impossible
to accommodate without either raising taxes or
alternatively, cutting existing municipal services.
( d)The public filing documents should be more
easilv accessible
On September 13 2007 , I drove to three of the
company s offices-in Preston , Montpelier , and Shelley-
just to confirm that the information on this rate case was
in fact available to the public as required by law.I was
grateful to find that the information was in fact readily
available (it was provided to me within literally less than a
minute in each of the service centers), and that the
personnel in each service center were polite , courteous
and professional in dealing with my request for the
information.
I was and am still troubled , however , by the fact that
I had to
centers.
eastern
drive 294 miles just to reach these three service
To say it differently, I was troubled that , in the
Idaho area , there are only four service centers to
Page 7
SHURTZ, Intervenor- Di
serVIce approximately 67 000 customers spread out over
wide geographic area.(The Commission should inquire of
the company the exact number of customers like me who
did actually make the trip to one of the four local serVIce
centers just to inspect the filing documents.
The solution to this problem would be to require the
company to make the public filing information and
documents available at public libraries , city halls , senIor
citizens and other areas frequented by the public.This
solution is practicable for those customers who don t use
the internet or who prefer to read technical documents in
printed form.
I acknowledge that the company makes its filings
available to the public on line.However , it would be a
welcome addition to the company s current policy of giving
required public notices , if the company were to send out a
separate e-mail reminding the customers about the online
availability of the filing documents.
The rate payers should not be required to pay for
certain of the company s personnel incentives costs
Page 8
SHURTZ, Intervenor- Di
The Company has a significant employee incentive
program as part of its compensation package. While I like
the company s incentive plan and understand its effort to
separate customer oriented goals from corporate goals , I
still am not sure how much of this incentive program the
customer should have to underwrite.I believe that the
Commission should review in detail the company s sources
of the revenue that funds this incentive program , and then
determine the amount to which that incentive program
actually benefits the company s customers like myself.
Only that portion of the incentive program should be paid
for by the customers through a rate increase.
In acquiring Pacificorp, Mid-America voluntarily
incurred significant expenses for severance packages for
certain "expendable " employees.Expecting the company
rate paying customers to finance these costs is tantamount
to the shareholders and corporate officers of the company
eyeing Pacificorp and saying to themselves
, "
Ahhhh , we
can buy up that comparatively little company.ll have
to pay out a lot of severance packages to avoid duplication
and offer some attractive incentive packages to keep some
of the employees that we want and need , but we ll be able
Page 9
SHURTZ, Intervenor- Di
to pass along the cost of the buyout to the Pacificorp rate
And if we don t even have to tell them why theirpayers.
rates went up, we won t get caught....
Contrary to that implication , Mr. Wilson , in his
testimony, refers to some alleged meetings and discussions
with customers , stakeholders and regulators that led to
reorganization changes (requiring these severance
packages) shortly after Mid America acquired Pacificorp.
am only one of the 67 000 customers of Rocky Mountain
Power , and it is certainly possible that the Company did
talk with customers other than myself.On the other hand
I have been involved as an intervenor in several prior rate
change cases involving the company, and I am well known
to the company s officials.The fact that I personally was
not contacted makes me suspicious.The Commission
should insist on proof-and not just on Mr. Wilson
testimony-concerning this claim.Coupled with that
inquiry, the Commission should also view with certain
skepticism the Company s claim that its severance package
plan ultimately benefits its customers.
By analogy to the field of real estate mortgages , in
which mortgage companies routinely sell and buy
Page 10
SHURTZ, Intervenor- Di
residential home mortgages: to allow the requested rate
increase in order to pay for the cost of this acquisition
would be the same as expecting the innocent home owner to
have to increase the amount of his monthly mortgage
payment just because his mortgage company had decided to
sell his account to another company.
I suggest strongly, that the Commission should reject
any aspect of the proposed rate increase which is being
used to fund the Company s cost of paying severance
packages which were incurred as a result of Mid-America
acquiring Pacificorp.The company shareholders not its
rate payers , should be the individuals who should bear the
financial burden of such corporate transactions.
The companv s failure to reflect the decreased
cost of natural gas.
The cost of natural gas on the open market actually
declined in the past year.I presume that the cost of
acquiring 'futures ' in the natural gas market declined
well. With its huge buyer power (stemming not only from
its own size but also from its relationship with Mid-
America and Mid-America s involvement in the natural gas
Page 11
SHURTZ, Intervenor- Di
industry) the company should have (and , I suspect
probably did) capitalized on those decreased costs.
So I am puzzled that the company has not passed to
its c u s tom e r s (1 i k e my s e If) t hat de c rea s e in its 0 per a tin g
cost.I understand that the company is owned by Mid-
America , which is a major player in the natural gas market.
The company claims to have experts in the gas market (for
instance , Mr. Widmer and Mr. Fehrman , who testified about
the significant expertise in that field), and I am puzzled
how those experts could be so grossly inaccurate in their
forecast of the market.I recognize that the cost of natural
gas fluctuates , and that even in the face of a decrease in
natural gas prices it may be economically necessary-and
therefore understandable-to build in some kind of a buffer
against a possible future price increase.However , I
believe that this particular "inaccuracy because of its
significance-represents something more than ordinary
market fl uctuation.The Commission should determine
whether these increases represents the company
inaccurate forecasting of the natural gas market , and , if so
how much of the cost of that inaccurate forecast should be
borne by the company s customers.
Page 12
SHURTZ, Intervenor- Di
4. The company has failed to pass along the benefits
of a recent propertv tax cut.
The company benefited from a recent significant
property tax cut. However , I do not see where the company
has attempted either to:
Pass along to me , as a customer , the benefit of that
tax cut;
Even account to me how the benefit of that tax cut
was incorporated into the rates that I pay and will
expected to pay for electric power.
By analogy: If I know that the property taxes paid by
my local bakery have gone down and if I know that the
cost of the flour used by that bakery to produce the loaf of
bread I want to buy has gone down then I would expect
that the price of that loaf of bread would also go down.
But if I walk in the door and see a sign announcing that in
fact the price of that loaf of bread has gone up, I would
least be curious to know why. And if I talk to the baker
and he tells me that he had to raIse his prices because his
wife wants a new car , I would smile , tell him I
Page 13
SHURTZ, Intervenor- Di
understand-and then I would walk down the street to find
a new bakery....
But in this case , I don t have that option of walking
down the street to buy my electric power from another
company: if I want to buy electric power , I have to buy it
from Pacific Corp.
And that is the reason why the Commission is
authorized to-and required to-regulate Pacific Corp
attempts to charge me more for my electric power: I am a
captive audience , and have no real choice.That is the very
basis of the Commission s mandate: to protect me when I
because of the situation , have no alternative , no realistic
means to protect myself.In my intervention in this case , I
have asked the Commission to do what it is required to do:
to protect my rights and "reign in " the company.
Mailing (and other bookkeeping) costs could
reduced or eliminated.
In the company filing Mr. Mcdougal also shows the
amount of $ 10 097.00 in increased mailing costs.I use
the Internet to receive my billing and make electronic
payments directly to the company s account. As I stated
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SHURTZ, Intervenor- Di
above in my testimony regarding increasing the public
ability to access the company s filing documents , I
certain that there are literally thousands of the company
other customers who do the same. I believe I am entitled to
know how much it saves the company each month not to
have to mail me (and thousands of others) a bill (and , for
that matter , not to have to open my payment envelope
handle my check , record the payment , and take it to the
bank , etc.
Recent developments in the nationwide banking
industry now mean that most banks "send" my check only
electronically from one bank to another , then on to the
Federal Reserve Bank , etc., and ultimately back to me.
suspect that the Company s own banks have already
adopted this trend.A strong public educational effort
the company about the benefits of electronic billing would
help move the company even faster into this "wave of the
future " of almost universal electronic financial
transactions.The resulting cost saving would benefit the
customers (and shareholders) over the long run -and would
certainly, be good for the environment as well.
Page 15
SHURTZ, Intervenor- Di
The Company s Return on Expenditure must be
reasonable.
Ultimately, the Commission , of course , has a delicate
and difficult job: to balance the company s entitlement to a
profitable return on Equity (ROE) with its customers ' right
to expect that return to be reasonable and not excessive.
The company, of course , is looking out for its own
existence: it depends on the satisfaction of its
shareholders , and it seeks therefore to increase the profits
to those shareholders by doing the following:
Decreasing the cost of doing business; and
Increasing the selling price of the product sold by
that business-in this case , electric power sold to a
captive audience.
The market has already helped the company decrease its
cost of doing business: property taxes and the cost of
natural gas have both gone down.But , without even
acknowledging that decrease in its operating costs , the
company also seeks to increase its revenue Income-
through this requested rate increase.
It is not overstating the point to say that the issue
before the Commission is one of "the rich wanting to get
Page 16
SHURTZ, Intervenor- Di
richer by making the poor get poorer . by charging the
poor
" -
e. the company s rank and file customers-even
more for their electric power.
From my own personal perspective , I believe that any
rate of return on Equity greater than ten percent -at least
in today s delicate economy - is excessive.
Regulatorv Lag " is inevitable: it is necessarv:
and it is the reason why this Commission exists in the first
place.
The term regulatory lag has been used many times in
this case.I can understand the company s point of view
this matter. But the company must remember that the
Public Utilities Commission is required by state law to do
exactly what it is doing: to review proposed rate changes
and ensure that the changes are justified and reasonable , to
balance the competing interests of all parties , and , above
all else , to protect the public consumers-like myself-who
otherwise have no protection and no means of recourse in
the face of such a rate change.I feel that strong and
careful review by the public utility commission will always
be to everyone s benefit.
Page 17
SHURTZ, Intervenor- Di
Conclusion.
I have devoted much of my testimony to the issue of
the public right to know.Freedom of information-
beginning with the right of free speech embodied in the
First Amendment to the United States Constitution-is one
of the foundation principles of this country and of the
capitalist system which has made it thrive.I am grateful
to the Company for its willingness to provide me with the
information I have requested; I acknowledge the courtesy I
received at each of the service centers I visited while
preparing my testimony.I am grateful for the
professionalism of the company s representatives in
dealing with me personally in my intervention in this case.
I am simply asking the Commission to ensure that the
company be required to continue to make all that
information easily available to all of my fellow rate payers
who did not intervene-for whom I am , albeit unofficially,
the lone representative and spokesman.
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SHURTZ, Intervenor- Di
I ask that the Commission ensure that any rate
increase which is in fact ultimately approved be justified
by all the facts of this case , not just those that were
presented by the company in its own favor , and that that
increase be as reasonable as the commission can make it.
I am grateful for the assistance of the Commission
staff to me in preparing this case , and for the work of the
Commission in handling these difficult cases.
This concludes my testimony.Thank you.
Dated:September 28 , 2007
TIMOTHY R TZ , Inte
411 South Main
Firth , ID 83236
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SHURTZ, Intervenor- Di
CERTIFICATE OF SERVICE - by U.S. Mail and by Internet e-mail
I hereby certify that , on this 28th day of September
2007 , I have served a true and correct copy of the foregoing
written Testimony of Timothy Shurtz , Intervenor , in Case
No. PAC-O7-, by delivering the same , by U.S. Postal
Service First Class Mail and , where indicated , by e-mail , to
the following persons at the mailing address and e-mail
address indicated:
DEAN BROCKBANK , Esq.
Senior Counsel
Rocky Mountain Power
201 S. Main Street , Suite 2300
Salt Lake City, UT 84111
e-mail: dean.brockbank~pacificorp.com
DA T A REQUEST RESPONSE CENTER
PACIFICORP
825 N. E. Multnomah , Suite 2000
Portland , OR 97232
e-mail: datarequestigJ,pacificorp.com
JAMES R. SMITH
MONSANTO COMPANY
P. O. Box 816
Soda Springs , ID 83276
e-mail: iim.smith~monsanto.com
ERIC L. OLSEN , ESQ.
RACINE OLSON NYE BUDGE & BAILEY
P. O. Box 1391
Pocatello , ID 83201-1391
e-mail: elo~racinelaw.net
CONLEY E. WARD , Esq.
MICHAEL C. CREAMER , Esq.
GIVENS PURSLEY LLP
P. O. Box 2720
Boise , ID 83701-2720
e-mail: cewav,givenspursely.com
Page 20
SHURTZ, Intervenor- Di
BRIAN DICKMAN
Manager , ID Regulatory Affairs
Rocky Mountain Power
201 S. Main Street , Suite 2300
Salt Lake City, UT 84111
e-mail: brian.dickman~pacificorp.com
RANDALL C. BUDGE , Esq.
Racine Olson Nye Budge & Bailey
P. O. Box 1391
Pocatello , ID 83201-1391
e-mail: rcb~racinelaw.net
MAURICE BRUBAKER
KA TIE IVERSON
Brubaker & Associates
1215 Fern Ridge Parkway, Suite 208
St. Louis MO 63141
e-mail: mbrubaker~consultbai.com
k i v e r son ~ con sui t b a i. com
ANTHONY Y ANKEL
29814 Lake Road
Bay Village , OH 44140
e-mail: yankel~attbi.com
DENNIS E. PESEAU , Ph.
Utility Resources , Inc.
1500 Liberty Street S. E., Suite 250
Salem , OR 97302
e-mail: dpeseau($excite.com
BRAD M. PURDY , Esq.
2019 North 17th Street
Boise , ID 83702
e-mail: bm urd hotmail.com
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SHURTZ, Intervenor- Di