20250529Staff Comments.pdf

RECEIVED
May 29, 2025
JEFFREY R. LOLL IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11675
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 THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-25-03
APPROVAL OF THE NORTH VALMY )
POWER PLANT NATURAL GAS )
CONVERSION AGREEMENT WITH NV ) COMMENTS OF THE
ENERGY ) COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its Attorney of record, Jeffrey R. Loll, Deputy Attorney
General, submits the following comments.
BACKGROUND
On January 31, 2025, Idaho Power Company("Company") applied ("Application")to the
Commission requesting an order approving a Natural Gas Conversion Agreement("Conversion
Agreement")between the Company and Sierra Pacific Power Company d/b/a NV Energy("NV
Energy"), relating to the North Valmy Power Plant("Valmy").
The Company represents the 2023 Integrated Resource Plan("2023 IRP") identified the
conversion of both Valmy units from coal-fired operations to natural gas operations in 2026 as
the least-cost, least-risk option and a subsequent updated analysis further supported the
STAFF COMMENTS 1 MAY 29, 2025

conversion to natural gas. Application at 6. The Conversion Agreement memorializes the terms
that will allow the Company's continued participation in the Valmy operations. Id.
On May 31, 2017, in Case No. IPC-E-16-24, the Commission issued Order No. 33771,
approving a settlement stipulation("2017 Settlement") in which the Company agreed to: (1)
conduct ongoing analyses to evaluate the economics of a Unit 2 retirement; (2)negotiate with
NV Energy to permanently end coal-burning operations at Valmy Unit 1 by December 31, 2019,
and Valmy Unit 2 by December 31, 2025; or alternatively, (3)use prudent and commercially
reasonable efforts to end its participation in Valmy along the same timeline. Order No. 33771 at
3.
On May 31, 2019, in Case No. IPC-E-19-08, the Commission approved the Company's
Framework Agreement with NV Energy as prudent and commercially reasonable. Order No.
34349 at 5. The Company represents the Framework Agreement memorializes the terms and
conditions under which either partner may exit participation of Valmy. Application at 3.
On November 3, 2021, the Commission acknowledged December 21, 2025, as the exit
date for Valmy Unit 2 and expected the Company to continue to evaluate all possible options that
would allow it to exit Unit 2 before December 31, 2025. Order No. 35217.
STAFF ANALYSIS
Staff reviewed the Company's request to approve the Conversion Agreement between the
Company and NV Energy associated with the Valmy plant, and Staff evaluated the Company's
Application,production request responses, and related previous cases. Staff recommends that
the Commission approve the Conversion Agreement,updates to existing agreements, and the
decision to convert Units 1 and 2 to natural gas in 2026 as prudent, contingent on the Company
providing sufficient evidence that operating Units 1 and 2 as a coal plant through 2028—at
which time Valmy is required to be out of coal according to federally enforceable retirement
dates included in the current air permits—before converting it to gas was either not feasible prior
to the Public Utilities Commission of Nevada's ("Nevada Commission") approval of converting
the units to gas and/or more costly than the Company's proposal. Staff also recommends that
recovery be based on appropriate and prudently incurred actual cost at the time when the
Company seeks recovery. Furthermore, Staff believes that:
1. The Company's methods and models used to perform its analysis are reasonable;
STAFF COMMENTS 2 MAY 29, 2025

2. The North Valmy Project Framework Agreement and Conversion Agreement both
indicate financial responsibilities for the Company and NV Energy; and
3. The future responsibility for ongoing expenses after conversion is consistent with the
previous agreements.
Prudence of Valmy Conversion to Natural Gas
To determine the prudence of the decision to convert the Valmy generating units to
natural gas, Staff identified three feasible options it believes were available to the Company
given the history and circumstances relative to the Valmy facility and the Company's need for
system capacity that the facility can provide. The alternatives are as follows:
Alternative 1: Exit Unit 2 as planned at the end of 2025 and obtain other resources to
ensure reliability;
Alternative 2: Convert Units 1 and/or 2 to natural gas in 2026 and continue the
partnership in Valmy with NV Energy; or
Alternative 3: Operate Units 1 and/or 2 as a coal plant through 2028 before converting
the Units to natural gas.
Staff believes the Company adequately analyzed and compared Alternatives 1 and 2.
Staff believes that converting Units 1 and 2 to be fueled by natural gas and operating it in
partnership with NV Energy is the least cost and least risk option between the two alternatives.
However, Staff does not believe the Company has provided sufficient evidence showing that
Alternative 3 should have been ruled out.
Evaluation of Alternatives I and 2
As part of the 2023 IRP modeling analysis, the Company evaluated Alternatives 1 and 2
by modeling several different combinations of how and whether to continue to operate Valmy.
Ellsworth Direct at 8. The results of the 2023 IRP analysis showed that converting Units 1 and 2
to natural gas in 2026 was the least cost, least risk option when evaluated over the 20-year IRP
planning horizon on a net present value ("NPV")basis. Id. at 8-9. This option was more cost
effective than other Valmy conversion options the Company evaluated and was $78 million less
than the alternative where the Company exits Unit 2 in 2025 as planned. Id. at 9.
STAFF COMMENTS 3 MAY 29, 2025

To evaluate the risk associated with converting Valmy to natural gas for Alternatives 1
and 2, the Company performed a stochastic analysis by analyzing 6 different variations of its
preferred portfolio with 2 different Boardman to Hemingway ("B2H") transmission line online
dates (July 2026 and November 2026) and 3 different implementations for Valmy using the then-
current agreements as a baseline (exiting Valmy Unit 2 after 2025, converting Valmy Unit 2 to
natural gas in 2026, and converting Valmy Units 1 and 2 to natural gas in 2026). 2023 Integrated
Resource Plan at 142-143. For each of the 6 variations of the preferred portfolio, the Company
ran 60 iterations with varying natural gas prices, customer loads, levels of hydroelectric
generation, and carbon prices and then plotted the NPV distributions for each of the 6 portfolios.
2023 Integrated Resource Plan—Appendix C at 84-88. From these results, regardless of the
B2H online dates, the preferred portfolio with conversion of Valmy Units 1 and 2 to natural gas
in 2026 had the highest overall probability of being least cost over the range of risk variable
values. Ellsworth Direct at 16. These results provided verification that converting Units 1 and 2
to natural gas is both least cost using baseline planning conditions, but also least risk when future
conditions change. Id.
In addition to the 2023 IRP analysis, the Company completed a subsequent updated
analysis that included updated cost responsibilities agreed to in the Conversion Agreement and a
change in the 132H in-service date from 2026 to 2027. The updated analysis shows converting
Valmy Units 1 and 2 to gas in 2026 with B2H in 2027 is more cost effective by $880 million on
a NPV basis than exiting Unit 2 as planned at the end of 2025. Id. at 15. The large increase in
NPV compared to the 2023 IRP analysis is largely due to the delay in the 132H online date.
Furthermore, the Company's analysis showed that the Company could not meet reliability targets
using a portfolio with B2H delayed until 2027 and the Company exiting Unit 2 at the end of
2025. Id. This result indicated the capacity values provided by Valmy Units 1 and 2 after 2025
are required to meet the Company's reliability targets, especially when 132H is delayed until
2027.
Staff believes the Company's 2023 modeling analysis and the subsequent updated
analysis provides sufficient evidence that between completely exiting Valmy at the end of 2025
and converting Units 1 and 2 to natural gas in 2026, converting both units in 2026 is the least
cost, least risk alternative.
STAFF COMMENTS 4 MAY 29, 2025

Evaluation of Alternative 3
Staff does not believe that the Company provided sufficient evidence that would have
ruled out Alternative 3 by performing an analysis on the Company opting into both Units as coal
plants until 2028 and then subsequently converting to natural gas. Through discovery, Staff
asked the Company if it performed an analysis on operating Units 1 and 2 beyond the retirements
agreed to in the 2017 Settlement. The Company responded with the following reasons for not
conducting this analysis:
1. The Company exited coal-fired operations of Unit 1 on December 31, 2019, as
accepted by the Commission in Order No. 33983 as part of the Company's 2017 IRP;
2. The Company agreed to use prudent and commercially reasonable efforts to end
participation in Unit 1 by December 31, 2019, and Unit 2 by December 31, 2025, as
part of the 2017 Settlement approved by the Commission in Order No. 33771; and
3. The Framework Agreement between the Company and NV Energy provides the
contractual mechanism that allows the Company to satisfy its obligation of the
Settlement approved in Order No. 33771.
Response to Staff Production Request No. 3 and 4.
First, Staff does not believe these reasons were sufficient to excuse the Company from
evaluating operating Valmy beyond the agreed upon exit dates, especially given updated
information and the Company's current resource need that has changed since the 2017
Settlement was approved. Furthermore, the 2017 Settlement stated that"Idaho Power will
conduct ongoing analyses to evaluate the economics of a Unit 2 retirement and submit the results
as part of the Integrated Resource Plan." 2017 Settlement at 5. Staff believes the intent for that
provision was for the Company to keep its options open as conditions changed.
Second, when the Commission acknowledges the Company's IRPs, it does not approve
the prudence of a selected resource plan. See Order No. 33983 at 18.
Third, in Staff Production Request No. 5, Staff requested the limitations of operating
Units 1 and 2 as a coal plant beyond 2025 outside of consideration of the current Valmy
agreements and the 2017 Settlement. The Company responded with the following:
1. The federally enforceable retirement dates included in the current air permits require
Valmy to be out of coal by December 31, 2028;
STAFF COMMENTS 5 MAY 29, 2025

2. The Nevada Commission approved the conversion of Units 1 and 2 to natural gas on
March 1, 2024; and
3. In March 2024, NV Energy submitted an application for an air permit modification to
convert Units 1 and 2 to natural gas no later than June 1, 2027, which is expected to
be complete by July 2025.
However, Staff believes the only hard limitation that restricted evaluating operating
Valmy beyond 2025 as a coal plant was the current federally enforceable retirement date of
December 31, 2028. The Company could have performed an analysis of operating both units of
Valmy as coal until the end of 2028 and if it was lower cost, the Company could have negotiated
with NV Energy prior to its case with the Nevada Commission. Additionally, since the
requested air permit modification has not been approved, it does not limit the Company from
operating the Valmy Units as coal beyond 2025.
Staff believes the Company should have evaluated Valmy fueled by coal as long as
possible, if operating as a coal unit is less expensive and carries less risk than fueling Valmy with
gas. Although this alternative would not be a long-term option due to the Valmy enforceable
retirement date in 2028, customers could see incremental benefits. Staff recommends the
Company provide sufficient evidence that operating Units 1 and 2 as a coal plant through 2028
before converting it to gas was either not feasible prior to the Nevada Commission's decision
and/or more costly than the Company's proposal.
Conversion Agreement Review
Staff reviewed the Conversion Agreement (Exhibit No. 5 in Application) and assessed
proposed updates to agreements related to the (1) Ownership of the North Valmy Power Plant
(1978), (2)the Operation of the North Valmy Power Plant(1978), (3) the North Valmy Station
Operating Procedures Criteria(1993), and(4)the North Valmy Project Framework Agreement
(2019). All noted updates and changes appear appropriate to allow existing documents to align
with the proposed Conversion Agreement.
However, Staff is concerned with the financial commitments associated with Exit Fees
for Unit 1, which the company is expected to continue to pay until the conversion is completed,
as outlined in the Exit Fee Schedule of the North Valmy Project Framework Agreement.
Additionally, the Company must contribute 50% of the costs associated with decommissioning,
STAFF COMMENTS 6 MAY 29, 2025

demolition, and closure activities, as well as maintenance and upgrades that support the natural
gas conversion from the original Unit 1 exit date of December 31, 2019, until the Unit 1
conversion is completed. The Company was unable to provide cost information and indicated it
is still negotiating regarding the decommissioning and conversion costs. Staff recommends that
the Company provide a report as a compliance filing to this case once a financial agreement is
reached between the Company and NV Energy. Additionally, Staff recommends the Company
provide an updated report in its filing when the Company seeks recovery for these financial
commitments. The report should include all costs associated with the Exit Fee Schedule of the
North Valmy Project Framework Agreement, including but not limited to, an account number or
brief description of cost, date incurred, the original cost, and the Company's share of the cost.
STAFF RECOMMENDATION
Staff recommends:
1. The Commission approve the Conversion Agreement, updates to existing agreements,
and the Company's decision to convert Valmy Units 1 and 2 from coal to natural gas
as prudent, contingent on the Company providing sufficient evidence that operating
Units 1 and 2 as a coal plant through 2028 before converting it to gas was either not
feasible prior to the Nevada Commission's decision to convert the units to gas and/or
more costly than the Company's proposal;
2. That recovery be based on appropriate and prudently incurred actual cost at the time
when the Company seeks recovery of its investments; and
3. The Commission order the Company to provide a report as a compliance filing in this
case and an update of the report when it seeks cost recovery, as detailed above.
Respectfully submitted this 29th day of May 2025.
�f
effrey . Loll
Deputy Attorney General
Technical Staff Michael Eldred
Vicki Stephens
1:\Utility\UMISC\COMMENTS\IPC-E-25-03 Comments.docx
STAFF COMMENTS 7 MAY 29, 2025

CERTIFICATE OF SERVICE
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I HEREBY CERTIFY THAT I HAVE THIS DAY OF MAY 2025,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-25-03, BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
LISA D. NORDSTROM TIM TATUM
MEGAN GOICOECHEA ALLEN IDAHO POWER COMPANY
IDAHO POWER COMPANY PO BOX 70
PO BOX 70 BOISE ID 83707-0070
BOISE ID 83707-0070 E-MAIL: ttatuinAidahopower.com
E-MAIL: lnordstrom idahopower.com
m oicoecheaallen Lciddahopower.com
dockets aidahopower.com
Ed Jewell Katie O'Neil
Jessica Harrison Energy Program Manager
Deputy City Attorneys Boise City Dept. of Public Works
Boise City Attorney's Office 150 N. Capitol Blvd.
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P.O. Box 500 Boise, ID 83701-0500
Boise, ID 83701-0500 E-MAIL:
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e e� well�,cityofboise.org
iharrison cccityofboise.org
boisecitvattomey�cityof boise.org
Austin Rueschhoff Eric L. Olsen
Thorvald A. Nelson Echo Hawk & Olsen, PLLC
Austin W. Jensen P.O. Box 6119
Kristine A.K. Roach 505 Pershing Ave., Ste. 100
Holland & Hart, LLP Pocatello, ID 83205
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