20240820Staff Comments .pdf

RECEIVED
Tuesday, August 20, 2024 1.36.42 PM
IDAHO PUBLIC
UTILITIES COMMISSION
CHRIS BURDIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9810
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR AN ) CASE NO. IPC-E-24-14
ORDER AUTHORIZING INCLUSION IN THE )
BRIDGER BALANCING ACCOUNT OF ALL )
NON-FUEL OPERATIONS AND ) COMMENTS OF THE
MAINTENANCE EXPENSES ASSOCIATED ) COMMISSION STAFF
WITH PLANT OPERATIONS )
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Chris Burdin, Deputy Attorney General, submits the following
comments.
BACKGROUND
On June 1, 2022, the Commission issued Order No. 35243 in Case No. IPC-E-21-17
authorizing Idaho Power Company("Company") to establish the Jim Bridger Power Plant
(`Bridger")balancing account to track the incremental costs and benefits associated with the
Company's cessation of participation in coal-fired operations at Bridger. The Company has
since decided to convert all Bridger units from coal to natural gas to comply with Environmental
Protection Agency("EPA") and Reginal Haze ("RH") rules.
On March 29, 2024, the Company filed an application ("Application") with the Idaho
Public Utilities Commission("Commission")requesting an order authorizing inclusion of all non-
STAFF COMMENTS 1 AUGUST 20, 2024

fuel operations and maintenance ("O&M") expenses associated with plant operations in the
Bridger balancing account.
STAFF ANALYSIS
Staff reviewed the Company's request to record all non-fuel O&M expenses associated
with plant operations, whether coal or natural gas, in the Bridger balancing account. Based upon
its review of the Company's Application,production request responses, and related previous
cases, Staff believes that:
1. The Company's decision to convert the Bridger Units from coal to natural gas is prudent;
2. Recording Bridger non-fuel O&M expenses,both natural gas and coal, in the Bridger
balancing account is proper;
3. Account 502, Steam expenses, is the appropriate account to record non-fuel O&M
Bridger expenses; and
4. Prudence of non-fuel O&M expenses recorded to the Bridger balancing account should
be reviewed in a future rate proceeding.
Prudence of Bridger Conversion to Natural Gas
A regulatory asset such as the Bridger natural gas O&M costs proposed to be included in
the Bridger balancing account needs a reasonable assurance that the costs can be recovered; thus,
the need for a determination of decisional prudence at this time. Staff reviewed the Company's
Application, its 2019 and 2021 Integrated Resource Plans ("IRP"), and responses to Staff
discovery requests, and Staff recommends that the Commission determine that the decision to
convert Bridger Units 1 and 2 to natural gas in order to comply with EPA and RH final rules as
prudent. However,before the Company can recover the natural gas O&M costs to be included in
the balancing account, and any capital costs necessary to convert the units to natural gas-fired
operations, the Company will need to show that these actual costs were cost-effectively incurred
before being included in rates in future filings.
The circumstances regarding compliance with RH for Bridger Units 1 and 2 were
complex. To illustrate the circumstances, in 2019, PacifiCorp submitted a proposed State
Implementation Plan("SIP")revision to limit overall output of nitrogen oxides "NOx" and sulfur
dioxide emissions across all four Bridger units in lieu of installing Selective Catalytic Reduction
STAFF COMMENTS 2 AUGUST 20, 2024

("SCR")technology on Units I and 2. Wyoming issued a permit for the new limits and
submitted the SIP revision to the EPA in May of 2020. However, after the EPA indicated its
approval, the EPA failed to act on the SIP revision by November 2021, as required by law,
leaving the solution unresolved while maintaining the original RH SCR requirements. Because
the SIP revision unexpectedly fell through, the Governor of Wyoming was granted a temporary
emergency order that allowed time to resolve the compliance issues at the plant while being able
to continue operating Units 1 and 2 as coal units. Although a consent decree to convert both
units in 2024 to natural gas became the only path left for compliance, Staff believes the decision
to convert to natural gas requires independent support of prudent decision-making regardless of
the circumstances.
To determine whether the Company's decision to convert Units 1 and 2 to natural gas
was prudent, Staff simplified the conditions of the analysis by evaluating three potential options
it believes were available to the Company had decisions been made when there was sufficient
lead time to meet the EPA's compliance deadlines. The alternatives are as follows:
1. SCR technology on Unit 2 by December 31, 2021, and on Unit 1 by December 31,
2022, to comply with the 2014 EPA RH final rule;
2. Exit operation of Unit 2 by December 31, 2021, and Unit 1 by December 31, 2022,
and obtain other resources to ensure continued reliability; or
3. Convert Units 1 and 2 to natural gas.
Although Staff's analysis of these options greatly simplifies the reality of the
circumstances and events that transpired, Staff believes that focusing on the economic
comparisons of these three options illustrates the Company's decision to convert these units to
natural gas as the best option given that doing nothing and being out of compliance with RH is
not viable.
Staff believes installing SCRs on Bridger Units I and 2 would not have been economical
even if the decision was made with sufficient lead time to meet the 2014 EPA approved SCR
implementation dates. The Company evaluated early exit dates of all four Bridger units in the
2019 IRP by allowing the Company's models to allow early exits of all four Bridger units. Unit
I was allowed to exit starting in 2022 and Unit 2 was allowed to exit beginning in 2026. The
resulting preferred portfolio showed Units 1 and 2 exiting in 2022 and 2026, respectively, the
earliest allowed without including the cost of SCRs in the analysis. Second Amended 2019 IRP
STAFF COMMENTS 3 AUGUST 20, 2024

at 90. For comparison, the cost of installing SCRs on Units 3 and 4 was projected to cost the
Company approximately $130 million. Application- Case No. IPC-E-13-16 at 8. Had SCR
costs been included in the analysis, Staff believes the economics of installing them would have
been worse and the Company would have been justified in deciding to exit Units 1 and 2 by the
then current EPA authorized SCR implementation dates.
Since installing SCRs was not economical and operating Units I and 2 out of RH
compliance was not an option, the only two alternatives to maintain system reliability was to exit
Units 1 and 2 and obtain other resources to maintain system reliability, or by converting Units 1
and 2 to natural gas. The Company evaluated these alternatives in the 2023 IRP.
The Company allowed its models to exit Unit 1 coal operation by year-end 2023 and fill
any capacity gaps by selecting any of the available future supply-side generation and storage
resources in the selection table or by converting Unit 1 to natural gas, allowing it to operate
through 2034. Similarly,Unit 2 was allowed to exit between the end of years 2023 through 2026
or convert Unit 2 to natural gas as early as the end of 2023 and let it operate through 2034. In
both cases, conversion of both units to natural gas was selected by the Company's models and
the net present value of those portfolios over the 20-year IRP planning horizon under various
alternative futures verified that conversion of Units 1 and 2 to natural gas was the least cost least
risk solution.
Accounting Treatment
Currently, the Company is tracking all non-fuel O&M related expenses and savings from
coal operations in the Bridger balancing account. The Company requests that natural gas non-
fuel O&M expenses and savings be tracked in the Bridger Balancing account as well. This will
allow the Company to seek recovery of all expenses over base level costs related to the
conversion of Bridger units from coal to natural gas in a future rate proceeding. Staff agrees that
tracking all non-fuel O&M expenses and savings related to converting Bridger units from coal to
natural gas in the Bridger balancing account is acceptable.
The Company stated that"According to Code of Federal Regulations, because Bridger
will continue to produce steam for electric generation, all operation and maintenance "O&M"
expenses will be recorded in steam production accounts in a similar manner in which coal
expenses." The Code of Federal Regulations states under section"502 Steam Expenses"that
STAFF COMMENTS 4 AUGUST 20, 2024

"This account shall include the cost of labor, materials used, and expenses incurred in production
of steam for electric generation. This includes all expenses of handling and preparing fuel
beginning at the point where the fuel enters the first boiler plant bunker, hopper, tank or holder
of the boiler-house structure." Because natural gas production at Bridger constitutes a steam
expense, Staff agrees that account 502, Steam Expenses, is the appropriate account to record
ongoing Bridger coal and natural gas non-fuel O&M expenses.
STAFF RECOMMENDATION
Staff recommends that the Commission:
1. Recognize the Company's decision to convert Bridger Units 1 and 2 from coal to
natural gas as prudent, but prudence of actual cost will be determined in a future case
before being included in rates; and
2. Approve the Company's accounting methods proposed for all non-fuel O&M
expenses in the Bridger Balancing Account.
Respectfully submitted this 20th day of August 2024.
U,A-�A-
Chris Burdin
Deputy Attorney General
Technical Staff: James Chandler, Mike Louis, Joe Terry, Ty Johnson
I:\Utility\UMISC\COMMENTS\IPC-E-24-14 Comments.docx
STAFF COMMENTS 5 AUGUST 20, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS DAY OF AUGUST 2024,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-24-14, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
LISA D NORDSTROM TIM TATUM
LEAD COUNSEL VP REGULATORY AFFAIRS
IDAHO POWER COMPANY IDAHO POWER COMPANY
PO BOX 70 PO BOX 70
BOISE ID 83707-0070 BOISE ID 83707-0070
E-MAIL: lnordstromgidahopower.com E-MAIL: ttatumkidahopower.com
docketskidahopower.com
tax
PATRICIA JORDAN, ECRETARY
CERTIFICATE OF SERVICE