20090302Reply Comments.pdf

.- \' n~ r"'R.. "'.. ,1.-' il t:'..!- ; ,.... ,.
iou~ tilR - 2 PM \2: \ 0
2626 Eldorado Boise, Idaho 83704
Telephone [phone]
Mach 2, 2009
Ida Public Utilties Commion
P.O. Box 83720
Bois, Idaho 83720-0074 CAP- W-08-02
ATTENTON COMMSSION SECRETARY AN HEAD LEGAL SECRETARY
Enclose ar an oriin and seven (7) copies of Applicants reply to th Connts of the
Commsion Staf fied in the Cas on Febr 24,2009
SiL~
Robe Prce, President
Caitol Water Corpraion
Robert Price, President
Capitol Water Corp.
2626 Eldoradö
Boise, Idaho 83704
Ph: (2()8) 375-0931
Fax: [phone]
E-mail: capitolwatercorp(ßworldnet.att.net
Representative for Capitol Water Corp.
C.. i: \\/ r- nRE ,,1--, ,,,'
'lunq ~~R -2 PM \2: \ \
BEFORE THE IDAHO PUBLIC UTILITIES COMMSSION
IN THE MATTER OF THE APPLICATION )
OF CAPITOL WATER CORP. TO )
INCREASE ITS BASIC RATES AND )
CHAGES IN THE STATE OF IDAHO )
CASE NO. CAP-W-08-02
REPLY TO COMMENTS
OF COMMISSION STAFF
COMES NOW Capitol Water Corporation ("Capitol, "Applicant" or
"Company"), and fies these comments in reply to the "Comments of the Commission
Staff" filed in ths case op. Febru 24, 2009.
Stahas agreed to Applicants calculations regarding major repai and
improvements made to the Company's water pumping and distrbution system
subsequent to Commission Order No. 30198 in Case No. CAP-W-06-01. Staffs only
objection to Company's application is in the Calculation of the effect of Idaho Power
Company's rates and charges on Capitol's electrcity costs. These reply comments
address that single issue.
First, and the simplest to verify, is the Sta statement on Page 5 of its comments
tht $82,874 of electrc pöwer costs are included in present rates. This statement simply
is not correct. Rather, the Commssion included $70,509 of electrc expenses to establish
Capitol's curent rates by Order No. 30198. That order at page 6 states:
"The curent expenses for power included in the Company's Application did not
include the past portion of the PCA rate that was charged to the Company's
surcharge account, and are reflective of curent power expenses going forward.
Although the current PCA rate results in a credit (as oppdsed to a surcharge),
Staff did not propose a reduction in the amount of power expense included in the
test year. Staff believes th Company's surharge fuds should no longer be used
APPLICANT REPL Y TO i
COMMENTS OF COMMISSION STAFF
CAP-W-08-2
for power expenses, as the 2005 test year expenses should be more than suffcient
to cover the ongoing power costs of Capitol Water.
In its findings on Page 7 of that order the Commission stated:
Finding: We find that it is reasonable that the above-noted expenses be
recovered though rates rather than though the surcharge. These are all recuring
expenses neòessar for the operation of the business, or are otherwse appropriate
for recovery though rates. This shift in the source of fuds for payment for
power and chemical expenses will allow the Company to retire the sUrcharge
sooner. We direct the Company to \lse the amounts raised through the surcharge
to retire the Company's loan as soon as possible.
The amount of electrc power costs charged to the sutcharge accoUIt in the test year in
that case was $12,365 and is reflected in the footnote on Applicants Exhbit NO.1 in this
case.
On Page 4 of its comments, Staff acknowledges that the Company developed a
computer model to calculate the effects of Idao Power Company rates on Capitol's
electrc power costs. Sta states that the "The tota amount estimated by the model for
2005 ($82,874) was about the same as the actul total electrc bils paid by the Company
in that year." Indeed the Company's model produced a calculated electric cost within
pennies of the actual Idao Power Company billngs. Ths model was provided to sta
for their use in ths case. The model is constrcted to enable a user to change every
element ofIdaho Power Company's rate schedules applicable to Capitol Water Company
bilings and/or change consumption data to see the effect on Capitol's costs. Staff fuher
states on Page 4 ". . . the Company estimated the tota 2008 power cost using 2005 test
year energy usage and 2008 Idaho Power rates. The estimated amount was $96,724....".
Staff has mischaracterized Applicants calculations. The model was not intended to
"estimate" what 2008 electric bils would be but rather to show the effect of curent
electrc rates on the 2005 test year bils. Staff seems to insinuate that because the
calculated amount produced by the model using 2005 etlergy consumption is not the
same as actual 2008 bilings that the model is flawed. Staff s comparson here is an
apples and oranges comparson.
APPLICANT REPL Y TO 2
COMMENTS OF COMMISSION STAFF
CAP-W-08-2
Staf on page 5 has corrctly determned that Capitol's energy use has fluctuated
over the four year period 2005 through 2008. After discussions with Staff, the Company
reviewed its maintenance records and realized there was a signficant leak durg the test
year 2005 that increased the company's power costs. Such leaks are infequent but not
unusuaL. Ápplicant accepts Staff s determination that average use over the four period of
1,575,995 KWh per year is a reasonable approach to "Normalize" the Company's power
costs. The table below shows the effect of Idao Power Company rate changes on the
Company's power costs using the normalized energy use. To produce this table the
Company compared the average cost per KWh, actully experienced in 2005 with the
average cost per KWh produced by the computer model using the Idaho Power rates
approved in 2009.
Average Cost per KWh 2005 4.273t
Average Cost per KWh 2009 rates 5.166t
Apply to Average Energy Use of 1,575,995KWh
Tota Energy Cost ~ 2005 rates $67,342
Total Energy Cost ~ 2009 rates $81,416
Increase in Energy Cost 20.9%
Sta used R different approach to calculate the effect of Idaho Power Company
rate changes. Sta on Page 5 indicates that Idaho Power rate increases over the period
2005 to 2008 were 12.68%. To calculate ths increase, Sta utilzed data from Idaho
Power prior cases to calculate the percent change in that company's rates from 2005 to
2008. Staff however used only average base rate cost per KWh and average PCA costs
per KWh (ignoring other Idaho Power charges) for all Idaho Power Schedule 7 and
Schedule 9 customers rather than using Capitol Water Company specific data. Furer,
by using only Idaho Power Company base rates and PCA charges, the Staff ignored
changes in rate design that shift charges from lower consumption blocks to higher use.
The average cost per KWh will be different for each Idaho Power customer depending
upon the natue of each customer's volume and pattern of use. Staf used a beginng
point mid 2005 and an end point in 2008 in its analysis. Staff failed to recognize the rates
that were in effect for the first 5 months of 2005 whiçh were çipplicable to Capitol's bils
for those months. Comparg Staffs Attchmetit No 3 to the table above demonstrtes
APPLICANT REPL Y TO 3
COMMENTS OF COMMISSION STAFF
CAP-W-08-2
the erroneous methodology employed by Staff. Capitol Water Company's average costs
per KWh for 2005, 2008, and 2009 are signficantly below the average costs per KWh
shown on Staffs attchment NO.3.
Second Amended Exhibit No 1 attched reflects the acceptace ofthe Staffs
proposed "normalized" power consumption.
Æ:i~'
Robert Price, President
Capitol Water Corporation
APPLICANT REPL Y TO 4
COMMENTS OF COMMI&JON STAFF
CAP-W-08-2
Capitol Water Company
Make Whole Rèvenue Requirement
1 Rate Base Approved by Order No. 30198 (Case CAP-W-06-1)
2 Add Ustick Road Rebuild Project
3 Add Well No.6 Rebuild Cost
4 Adjusted Rate Base
5 Rate of Return Authorized by Order no. 30198
6 Income Requirement with Improvements
7 Income Requirement Determined in Order No. 30198
8 incremental Income Requirement
9 Gross-up Factor From Order No. 30198
10 Incremental Revenue Requirement
11 Add Depreciation Expense - 2008 Ustick Project
12 Add Depreciation Expense - 2008 Pump Repair
13 Incremental Depreciation Expense
14 Total Incremental Revenue Requirement-Plant in Service
15 2005 Pumping Power Expense (Per Order 30198) $
16 2005 Electric Power Expense Included in Utilties Expense
17 Total Electric Expense included in Order No. 30198 $
18 2005 Electric Bills Recalculated at Current Rates
19 Incremental Electric Expenses
20 Add Amortization of Rate Case Expense ($1,800/3yrs)
21 Total Incremental Make Whole Revenue Requirement
22 Revenue Requirement Approved by Order No. 30198
23 Increase Required
* Note: During the test year, Capitol Water charged $12,365 of IPCo
PCA charges to its surcharge balancing account. Commission
Order No. 30198 eliminated this accounting procedure from
the Comp~ny's surcharge balancing account and assumed
new rates would cover IPCo PCA c;harges that were negative at the time.
2nd Amended
Exhibit No.1
CAP-W-08,.2