1. How much of an increase is Idaho Power requesting?
2. When will customers actually begin paying more?
3. What are the proposed increases for each customer group?
4. What are “base rates?”
5. Why are you requesting to raise rates now?
6. Why does Idaho Power need to make investments in its system right now?
7. What is causing the increase in the cost of materials for Idaho Power
8. Why are your labor costs going up?
9. Why is it important to recover the requested increase from customers?
10. If there’s so much water this year, why are rates going up?
11. What is Idaho Power doing to “tighten its belt?”
12. Is Oregon paying for growth in Idaho?
13. Where can customers review a copy of the filing?
14. How do customers share their opinions on the filing?
15. What are you doing to help your customers in this tough economy?

 

1. How much of an increase is Idaho Power requesting?

Idaho Power is sensitive to the challenges faced by its customers in these difficult economic times and does not take lightly any request to increase rates. We are continually looking for ways to provide services to our customers efficiently and at low cost. Our customers continue to pay some of the lowest rates in the country for electric service.

Idaho Power is requesting an increase in Oregon base rates of approximately $5.8 million, or a 14.67 percent overall average increase. This increase in rates is important for Idaho Power to achieve fair and timely recovery of investments it has already made in its electrical system, which today’s rates do not fully provide. Idaho Power has not earned its authorized rate of return in any of the last five years and does not expect to in 2011.

In the current economic environment, timely and fair recovery of investments is critical to helping us attract capital investment and manage financing costs. By providing for fair and timely recovery of investments in the systems and activities that serve our customers, this rate increase is in the best interests of Idaho Power, its shareholders, and the people and communities it serves.

2. When will customers actually begin paying more?

The OPUC may take up to 10 months to consider Idaho Power’s request for the proposed rate change, so customers would not see their base rates increase until June 1, 2012.

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3. What are the proposed increases for each customer group?

Idaho Power provides reliable, responsible, fair-priced energy service to 18,453 customers in all Oregon rate classes. Our largest Oregon customer group is Residential (13,432). The following is a summary of proposed changes to Oregon rates:

Revenue Impact By Class

Idaho Power’s average Oregon residential customer who uses 1,240 kilowatt-hours per month would see an increase in their monthly bill of $19.13.

4. What are “base rates?”

Base rates are the portion of rates that pay for Idaho Power’s cost of conducting business under normal operating conditions. Revenue from base rates provides recovery of cost categories such as operating and maintenance expenses and capital investments.

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5. Why are you requesting to raise rates now?

This rate change will continue to address a long-term, substantial imbalance between the cost of providing service in Oregon and Idaho Power’s ability to recover those costs under current rates.

Decisions about energy are some of the most important choices facing our nation and our company today. Continued growth in demand for electricity, investments in aging infrastructure and expenses related to higher compliance and reliability requirements are driving the need to invest large amounts of capital to expand and improve electricity supply and reliability for our customers. This increases our need to access both the debt and equity markets to fund large amounts of capital investment in the system. These are challenges facing utilities across the nation, and our company is no different.

Under regulation, Idaho Power invests up front to serve customers and recovers the cost of the investment, along with a fair return, later. Since our last general rate case in 2009, we have added more than $316 million in our total system investments needed to continue to provide safe and reliable electric service to our customers.

We also need to pay our expenses as they occur. Two major expenses for the company are fuel costs and the cost of power we buy on the open market to serve customers. After years of growing demand on our system, we are in the position of trying to catch up while building for the future.

6. Why does Idaho Power need to make investments in its system right now?

Idaho Power and the utility industry in general are experiencing a cycle of heavy infrastructure investment. Although there has been a pause in the rapid growth experienced a few years ago, there is still growth. Idaho Power continues to add new customers, albeit at a slower rate. However, data shows that our service area will continue to grow and we must be prepared for that growth when it occurs.

Despite considerable investment and expansion in recent years, much of our system today is fully utilized. To provide safe, reliable service to all customers we must make major investments in both new and existing infrastructure. We are adding capacity to our base load generation, transmission system and distribution facilities in order to ensure an adequate supply of electricity to customers, to provide service to new customers, and to maintain system reliability.

Idaho Power’s aging transmission and distribution infrastructure requires continuing upgrades and replacement. Our aging hydroelectric and thermal generation facilities also require continuing upgrades and component replacement, and environmental concerns require the replacement or retro-fitting of aging equipment—often with more expensive technology. In addition, we are operating in an environment of ever increasing reliability and compliance standards that require increased levels of investment.

Idaho Power’s legal obligation to serve and its sense of responsibility to customers provide no other options to serving the continued needs of existing customers and those that are expected to come to our service area. We are addressing them on both the supply-side and demand-side of the equation. In addition to expanding our production and delivery systems, we are aggressively promoting demand-side management and energy efficiency programs and services. These efforts serve to reduce the pace of growth in a cost-effective manner by delaying the need for additional generating resources. Additionally, these efforts help to educate customers on wise, responsible use of their precious resources.

7. What is causing the increase in the cost of materials for Idaho Power?

We are experiencing dramatic price shifts related to the costs of key materials like transformers, wood poles, pole line hardware and cables/conductors due to the significant increase in commodities (copper, aluminum, and steel) prices over the last couple years. As we continue to make investments in our aging infrastructure, we experience increased overall product costs. Idaho Power proactively engages the market to ensure competitive pricing from its suppliers through its strategic sourcing process.

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8. Why are your labor costs going up?

Idaho Power closely monitors trends in the utility industry and attempts to ensure that our overall compensation package is within market ranges. Our compensation philosophy is to provide a balanced, competitive and sustainable total compensation package to our employees, ensuring we attract and retain high-quality employees and motivate them to achieve performance goals that benefit our customers and shareholders. Maintaining a competitive compensation package allows us to recruit and retain our highly skilled workforce to serve customers.

In recent years we have been more conservative with our general wage adjustments in comparison with the increases of our peer intermountain utilities. Because of this we have fallen behind those companies on base salary for some of our critical operations roles. Again this year, in light of the current economic conditions, Idaho Power made the decision to grant a general wage adjustment that was below the required increase to remain competitive.

Idaho Power granted a 2 percent general wage adjustment in 2011. According to its analysis of Salary Increase Budget Surveys in the utility industry, companies were projecting an average salary increase budget of 2.8 percent.

9. Why is it important to recover the requested increase from customers?

One of the reasons is rates in effect today do not provide the rate of return necessary to assure access to the capital markets under reasonable terms to finance needed investments. Any delay in or lack of recovery of prudent operating or financing costs is seen as unnecessary risk by the financial community, including the credit rating agencies, during this time of plant expansion and difficult economic times.

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10. If there’s so much water this year, why are rates going up?

Even though it has been a good water year, power supply expenses only represent a portion of our total revenue requirement. The expenses addressed in this case relate to all other costs we are incurring to provide safe, reliable service to our customers.

11. What is Idaho Power doing to “tighten its belt?”

Similar to businesses across the nation, we have taken numerous steps to eliminate and lower costs without jeopardizing our system reliability, service quality and commitment to serve. These included aggressive measures to control labor costs, including, but not limited to, senior management pay freezes in 2009 and employee reorganization designed to improve operational efficiencies, which resulted in a decrease in employees from 2008 to 2010. Although helpful, our cost-cutting measures do not eliminate the need to raise rates to recover expenses.

12. Is Oregon paying for growth in Idaho?

Customer demand on our system comes from all parts of our service area. From 2009 to 2011, exclusive of depreciation, Idaho Power’s electric system investment required to serve our Oregon customers will have increased approximately $18 million. We also experienced escalating costs associated with providing service since the last Oregon rate case in 2009. Oregon demand is growing as well as Idaho, and all customers in our service area benefit from system improvements.

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13. Where can customers review a copy of the filing?

Copies of the filing are available on Idaho Power’s website at www.idahopower.com/oregonrates, and also will be posted on the OPUC website, www.puc.state.or.us. In addition, Idaho Power’s testimony and exhibits are available for customer review at the company’s Payette Operations Center, 1550 South Main Street, Payette, ID, and at its corporate headquarters at 1221 West Idaho Street, Boise, ID. Or customers may call Idaho Power at 1-800-488-6151 or OPUC at 1-800-522-2404 for more information.

14. Why is it important to recover the requested increase from customers?

OPUC will begin a comprehensive review of the company’s application and will seek public input on the filing. The public involvement process includes public meetings and other ways for customers to share their opinions on the rate case. Idaho Power supports this process, values customer input and encourages participation.

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15. What are you doing to help your customers in this tough economy?

Idaho Power is committed to helping all customers through a variety of ongoing energy assistance initiatives. The most important is helping consumers use energy efficiently and take advantage of programs that can help cut costs by reducing consumption. Go to www.idahopower.com/energyefficiency for information on programs and tools to help make wise energy choices and save energy and money for your home or business.

In addition, Idaho Power has a number of energy assistance programs to help customers:

• In our Project Share program, Idaho Power teams up with The Salvation Army year round to help those who cannot pay energy bills due to illness, disability, age, or unemployment. We provide several Winter Pay programs as well as work with the local and state agencies that provide assistance to lower income residents.


• Through its Weatherization Assistance Program, Idaho Power provides financial assistance to Idaho and Oregon Community Action Partnership (CAP) agencies to help cover the cost for weatherization of electrically heated homes of qualified customers.


• We have a Winter Protection Program, in which customers who are having difficulty paying their winter utility bills, and have children or someone who is elderly or ill in their household, are protected from having their electric service disconnected for non-payment of electric bills during the months of December through February. Also through this program, customers can arrange a Winter Payment Plan to protect themselves from disconnection November through March when they make agreed-upon monthly payments that are less than their monthly bill for electricity use.


• Information on these programs, as well as our other energy assistance programs, is available on our Web site at http://www.idahopower.com/energyassistance.

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