Loading...
HomeMy WebLinkAbout20241231Annual Review 2023.pdf 4N6 010AW POWER, LISA D. NORDSTROM Lead Counsel RECEIVED Inordstrom(�D_idahopower.com December 31, 2024 IDAHO PUBLIC UTILITIES COMMISSION December 31, 2024 VIA ELECTRONIC FILING Commission Secretary Idaho Public Utilities Commission 11331 W. Chinden Blvd., Bldg 8, Suite 201-A (83714) PO Box 83720 Boise, Idaho 83720-0074 Re: Case No. IPC-E-19-08 Recovery of Costs Associated with North Valmy Power Plant— Idaho Power Company's Application Dear Commission Secretary: Attached for electronic filing, pursuant to Order No. 35058, is Idaho Power Company's Valmy Levelized Revenue Requirement Balancing Account 2023 Annual Review. Please note that Attachment No. 2 of the enclosure contains commercially sensitive and potentially material non-public information under Regulation FD. The undersigned attorney, in accordance with RP 67, hereby certifies that Attachment No. 2 of Idaho Power Company's Valmy Levelized Revenue Requirement Balancing Account 2023 Annual Review contains information that is a trade secret as described in Idaho Code § 74-101, et eq., and § 48-801, et seq., and as such is exempt from public inspection, examination, or copying. If you have any questions about the attached documents, please do not hesitate to contact me. Very truly yours, Lisa D. Nordstrom LDN:sg Attachments 1221 W. Idaho St(83702) P.O. Box 70 Boise, ID 83707 CERTIFICATE OF ATTORNEY ASSERTION THAT INFORMATION CONTAINED IN AN IDAHO PUBLIC UTILITIES COMMISSION FILING IS PROTECTED FROM PUBLIC INSPECTION Case No. IPC-E-19-08 In the Matter of the Application of Idaho Power Company for Authority to Increase Its Rates for Electric Service to Recover Costs Associated with the North Valmy Power Plant The undersigned attorney, in accordance with Commission Rules of Procedure 67, believes that Attachment 2 to Idaho Power Company's Valmy Levelized Revenue Requirement Balancing Account 2023 Annual Review dated December 31, 2024, contains information that Idaho Power Company claims is a confidential trade secret and is a public records exempt from disclosure by state or federal law (material nonpublic information under U.S. Securities and Exchange Commission Regulation FD) as described in Idaho Code § 74-101, et seq., and/or§48-801, et seq. As such, it is protected from public disclosure and exempt from public inspection, examination, or copying. DATED this 31 st day of December, 2024. LISA D. NORDSTROM Counsel for Idaho Power Company VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW December 31, 2024 In Order No. 33771 issued in Case No. IPC-E-16-24 on May 31, 2017, the Idaho Public Utilities Commission ("Commission") approved a balancing account mechanism designed to smooth revenue requirement impacts associated with the accelerated shutdown of Valmy and allow for full recovery of Valmy-related costs near the plant's end-of-life. In addition, it more closely aligns the cost recovery period with the remaining operating life of the plant, resulting in a better matching of cost recovery from customers who benefit from the plant's operations while mitigating the risk of future customers bearing the costs of a plant that will no longer be providing service. There are four types of costs the Company records to the balancing account: (1)the return of and on existing Valmy plant investments as of May 31, 2017, (2) the return of and on the incremental capital investments at Valmy after May 31, 2017, (3) non-fuel operations and maintenance expenses ("O&M"), and (4) decommissioning costs related to the Valmy shutdown. Under the balancing account approach, Idaho Power replaces the base rate revenue recovery associated with the Company's existing investment in Valmy with a Ievelized revenue requirement and tracks it in the Valmy balancing account. The Ievelized revenue requirement is determined by calculating the present value of the revenue requirement of each of the individual balancing account items and converting the values into a level payment stream from customers over the remaining recovery period. In Case No. IPC-E-19-08, the Company requested the Commission (1) approve the North Valmy Project Framework Agreement between NV Energy and Idaho Power dated as of February 22, 2019 ("Framework Agreement"), (2)find that all actual Valmy investments through December 31, 2018, were prudently incurred, (3) allow investments forecasted through December 31, 2025, at Valmy to be included in the Ievelized revenue requirement mechanism, and (4)adjust customer rates to recover the associated incremental annual Ievelized revenue requirement. As part of their approval of the Company's request, the Commission in Order No. 34349 also instructed Idaho Power to file an annual report detailing the amounts recorded to the Valmy balancing account. Specifically, Staff requested the report include any major changes to the forecasted capital expenditures, by unit, as well as a narrative description of the actual investments made at Valmy during the prior year.' A discussion of the balancing account activity from January 1, 2023, through December 31, 2023, is contained below. The Company is not recommending a rate change as part of this report. NORTH VALMY GENERATING STATION The North Valmy Generating Station ("Valmy") is a coal-fired power plant that consists of two units and is located near Winnemucca, Nevada. Unit 1 went into service in 1981 and Unit 2 followed in 1985. Idaho Power owns 50 percent of Valmy and NV Energy is the co-owner of the plant with the remaining 50 percent ownership and operates the Valmy facility. The Company and NV Energy (collectively, the "Parties") work jointly to make decisions regarding Valmy. The plant is connected via a single 345 kilovolt transmission line to the Idaho Power control area at the Midpoint substation. The Company owns the northbound capacity and NV Energy owns the southbound capacity of this line. Idaho Power exited coal-fired operations of Unit 1 December 31, 2019, as acceptedz by the Commission as part of Idaho Power's 2017 Integrated Resource Plan. ' Case No. IPC-E-19-08,Staff Comments at 6-7(May 10,2019). 2 Order No.33983. VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW 1 The ownership and operation of Valmy is governed by three agreements: the Agreement for the Ownership of the North Valmy Power Plant Project, the Agreement for the Operation of the North Valmy Power Plant Project, both of which are dated December 12, 1978, and the North Valmy Station Operating Procedures Criteria, dated as of February 11, 1993, between Idaho Power Company and Sierra Pacific Power Company,3 as amended by Amendment No. 1 to the Operating Procedure Criteria for Valmy Coal Diversion Procedures and Usage, dated as of January 1, 2012 (collectively, the "Existing North Valmy Agreements"). Additionally, the Parties entered into the Framework Agreement, memorializing the terms and conditions under which either partner may elect exit of participation of Valmy.4 SUMMARY OF ACTIVITIES IN 2023 Although cessation of coal-fired operations at Valmy will occur for both parties by year- end 2025, there are investments required to be made to continue the safe and reliable operation of the plant, while remaining environmentally compliant. As explained in the discussion of the levelized revenue requirement update below, approximately $5.2 million of Unit 2 and common facility investments were made at Valmy in 2023. The Company has included a description of projects that resulted in capital investments required to maintain the reliable operations of Unit 2 or common facilities that were greater than $250,000, or approximately $3.8 million of the total investments that occurred in 2023. Unit 2 and Common Facility Plant Additions Greater than $250,000 Unit 2— Steam Turbine Valve Outage. The steam turbine valves are used to regulate the steam flow to the turbine and will help stop the steam flow in the case of a trip. After an extended run, the valves are known to either stick closed or stick open as they degrade with use. Although a valve that is stuck closed affects unit availability, an even greater concern is if a valve sticks open and fails to close. A valve that fails to close and stop the steam flow to the turbine in event of a unit trip, could lead to an overspeed condition, and cause catastrophic failures. The complete steam turbine valve overhaul includes the disassembly of the turbine's high pressure valve, including two main stop valves, six control valves, two reheat stop valves and two reheat intercept valves. Once disassembled, the high-pressure valves are replaced and the reassembly and functional testing of the replacement high pressure valves are performed. Once the work began, it was determined the left main stop and control valves had to be cut apart to aid the disassembly of the components because the assembly seized together, further emphasizing the importance of the overhaul timing. Unit 2 — Baghouse Bag Replacement. The baghouse system is required for environmental compliance and helps maintain a high unit reliability within the permitted environmental limits. A minimum of nine to 10 baghouse compartments are required to be in service to reach full load. Over time, the baghouse bags become fouled and deteriorate. Throughput of fly ash, residual acid, and moisture content in the flu gas affect the rate of deterioration of the bag material which ultimately can cause high stack opacity, tripping the unit. The bags are routinely inspected and sampled to aid in determining the remaining life of the bags. In early 2022, the bags were sent for testing due to opacity issues. The analysis determined the bags were failing at the seams, causing the high opacity issues, which resulted in derates and trips of the units. The replacement of all 10 compartments was completed in 2023. s Sierra Pacific Power Company has conducted business as NV Energy since 2008. 4 Because the 2023 period did not encompass agreements or costs related to the conversion of North Valmy units from coal to natural gas, Idaho Power will address conversion-related issues in future filings and future Annual Reviews. VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW 2 Unit 2 — Boiler Penthouse Insulation. The boiler penthouse insulation on Unit 2 experienced significant damage and needed replacement. The damage was from casing leaks that allowed water in from the roof as well as ash from the floor. In addition, increased expansion/contraction due to changes in the plant's operating profile of cycling and aging materials contributed to the damage. Continued degradation of the insulation caused portions of the roof section to fall away from the support structure. The insulation is critical to maintaining the integrity of the penthouse casing and for protecting the internal components from excessive thermal stress.Absent the work, the unit is more prone to damage or failure due to the internal high pressure steam components. With a total investment of approximately $450,000, the replacement mitigated risks of possible forced outages, reliability loss, and will restore safety of the employee work area should the internal high pressure steam components suffer damage or failure due to thermal stress. Unit 2—Bottom Ash Sludge Return System Update. The bottom ash system produces large water waste stream volumes that flow to the evaporation ponds. The evaporation ponds surface area available to evaporate water was reduced by 33 percent when two ponds were taken out of service with the anticipated low load forecast. The increase in operations in the last few years caused the evaporation pond levels to increase. The water flow to the evaporation ponds needed to be reduced to keep the pond freeboard within permit limits and avoid having to re-line an additional evaporation pond to provide increased surface area for evaporation of the wastewater. If not completed, the units were at risk of forced derates or outages. This project removed solid carryover from the dewatering bins to the settling and surge tanks to allow bottom ash system water to be used for seal water rather than the service water, which is more cost-effective than relining the ponds. Because the ponds support both Unit 1 and Unit 2, the project costs were split between the units, with Idaho Power's responsibility associated with only 50 percent of the Unit 2 project costs. Unit 2— Coal Piping Replacement. The plant had been experiencing considerable erosion in the coal piping between the pulverizers and the burners. The erosion results in coal leaks which are both a fire hazard as well as an environmental issue. Thickness testing showed the need to replace elbows on Al, A4, D1, & D2 coal conduits. Compliance with the OSHA Combustible Dust initiative ensured the ability to safely operate Unit 2 as well as provide greater plant reliability by decreasing pulverizer down time for repairs. Common Facilities — Coal Conveyor Replacement. Following inspection of the coal conveyor belts by two separate vendors, it was determined 10 of the 11 conveyor belts needed replacement. With increased load forecasted to begin in 2023 and material lead times of six months or more, the belts were replaced to ensure that redundant conveyors were available to maintain a reliable coal supply to the plant. LEVELIZED REVENUE REQUIREMENT UPDATE Order No. 34349 issued in Case No. IPC-E-19-08 approved an update to the Valmy levelized revenue requirement amounts in rates based on plant investments as of December 31, 2018. In addition, in Case No. IPC-E-23-11, Order No. 36042 approved, effective January 1, 2024, the removal of the portion of Valmy non-fuel O&M expenses from base rates and incorporated the tracking of all non-fuel O&M expenses into the levelized revenue requirement mechanism. As presented in Attachment 1 to this report, Idaho Power has recalculated the levelized revenue requirement as of December 31, 2023, along with the Case No. IPC-E-23-11 update presented above, and summarized the changes, if any, to the components below: VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW 3 Existing Investments at May 31, 2017. The revenue requirement component related to existing investments is based on the Valmy-related balances in effect prior to the establishment of the Valmy balancing account or existing investments as of May 31, 2017. This component of the revenue requirement, approximately $32.3 million on an Idaho jurisdictional basis, net of the Tax Cuts and Jobs Act of 2017 ("Tax Reform") impact, did not change since the revenue requirement update in Case No. IPC-E-19-08 and will remain constant through the remaining life of Valmy. Incremental Investments. The revenue requirement on incremental investments includes the revenue requirement on incremental investments at Unit 1 from June 1, 2017, through December 31, 2019, and the revenue requirement on Unit 2 and common facility investments after May 31, 2017, including the revenue requirement of Unit 1 beyond 2019. This component was updated to reflect actual Unit 2 and common facility coal-related investments through December 31, 2023, and forecasted Unit 2 and common facility coal-related investments through December 31, 2025. Because coal-related operations of Unit 2 will cease as of December 31, 2025, as can be seen in Confidential Attachment 2, forecasted investments include only those necessary to keep the unit operating for the remaining two years of its life. The updates to this component resulted in an increase to the revenue requirement of approximately $2.4 million for a total levelized revenue requirement of $3.7 million on an Idaho jurisdictional basis, primarily because actual coal-related investments in 2022 and 2023 were higher than forecasted. Decommissioning Costs. There have been no updates to cost estimates associated with decommissioning activities therefore the revenue requirement associated with future decommissioning costs remains unchanged at approximately $1.1 million on an Idaho jurisdictional basis. Non-Fuel O&M Expenses. Following approval in Case No. IPC-E-23-11, the Valmy levelized revenue requirement mechanism includes the tracking of all non-fuel O&M expenses through 2025. Idaho Power has updated the revenue requirement associated with non-fuel O&M expenses to include actual Valmy-related non-fuel O&M amounts for the January 1, 2023, through December 31, 2023, time period. Non-fuel O&M expenses over the life of the plant continue to come in higher than originally estimated resulting in a total Idaho jurisdictional revenue requirement of$4.0 million. Load Variance. The Company has computed the true-up resulting from collections of levelized revenue requirement amounts for the January 1, 2023, through December 31, 2023, time period. Actual Idaho jurisdictional sales volumes were higher than forecasted resulting in a total overcollection, including applicable carrying charges of $2.5 million as of December 31, 2023. The result is an overcollection to be refunded over the remaining recovery period through 2028 of$521,104 per year. Adding this to the load variance true-up included in the June 1, 2019, rate change, which was an under collection of $9,183 per year, results in a total load variance true-up since establishment of the levelized revenue mechanism of negative $511,921, or a reduction in the total levelized revenue requirement for Valmy. The updated levelized revenue requirement associated Valmy includes $32.3 million associated with existing investments, $3.7 million related to incremental investments, $1.10 million in decommissioning costs, $4.0 million in non-fuel O&M savings, and a load variance true- up of negative $511,921, for a total levelized revenue requirement of $40,607,926 on an Idaho jurisdictional basis, which is $3,650,425 greater than the existing Valmy-related levelized revenue requirement currently included in customer rates. Differences between the annual Valmy-related levelized revenue requirement updates and the associated level of collection in customer rates will continue to be tracked in the balancing account. VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW 4 CONCLUSION Annually, Idaho Power will recalculate the Valmy levelized revenue requirement and provide an update to the Commission, detailing the amounts recorded to the balancing account while also identifying any major changes to the forecasted capital expenditures. The Company maintains that actual investments made are prudent and only necessary for environmental compliance, and the continued safe, reliable and economic operation of the plant. VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW 5 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 31st day of December 2024, 1 served a true and correct copy of IDAHO POWER COMPANY'S VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2023 ANNUAL REVIEW upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Hand Delivered Dayn Hardie U.S. Mail Deputy Attorney General Overnight Mail Idaho Public Utilities Commission FAX 11331 W. Chinden Blvd., Bldg No. 8, X Email Dayn.Hard ie(a)puc.idaho.gov Suite 201-A (83714) P.O. Box 83720 Boise, Idaho 83720-0074 Idaho Conservation League Hand Delivered Idaho Conservation League X U.S. Mail 710 North 6th Street Overnight Mail Boise, Idaho 83702 FAX Email Stacy Gust, Regulatory Administrative Assistant ATTACHMENT 1 Valmy Levelized Revenue Requirement Balancing Account 2023 Annual Review Existing Coal Incremental Coal Non-Fuel 0&M Idaho Jurisdiction Investments Investments Decommissioning Costs Expenses Load Variance Total Levelized Rev Req Levelized Revenue Requirement in Rates,Effective June 1,2019' $32,282,687 $1,307,372 $1,095,533 ($4,796,353) $9,183 $29,898,422 Full Annual Levelized Non-Fuel 0&M Expenses' 7,059,079 7,059,079 Levelized Revenue Requirement in Rates,Effective January 1,20243 $32,282,687 $2,307,372 $1,095,533 $2,262,726 $9,183 $36,957,501 Change in Levelized Revenue Requirement' 0 2,434,690 0 1,736,839 (521,104) 3,650,425 Updated Levelized Revenue Requirement,Effective January 1,2024 $32,282,687 $3,742,062 $1,095,533 $3,999,565 ($511,921) $40,607,926 1-Case No.WC-E-19-08,Approved with Order No.34349. 2-Change in the annual levelized revenue requirement due to a change in methodology to remove Valmy non-fuel 0&M from base rates and incorporate all non- fuel O&M amounts into the levelized revenue requirement mechanism. 3-Case No.WC-E-23-11,Approved with Order No.36042. 4-Updated with actuals through December 31,2023.