20250731Final_Order_No_36694.pdf

Office of the Secretary
Service Date
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION July 31,2025
IN THE MATTER OF THE APPLICATION ) CASE NO. IPC-E-25-03
OF IDAHO POWER COMPANY FOR )
APPROVAL OF THE NORTH VALMY )
POWER PLANT NATURAL GAS ) ORDER NO. 36694
CONVERSION AGREEMENT WITH NV )
ENERGY )
On January 31, 2025, Idaho Power Company ("Company") applied to the Idaho Public
Utilities Commission ("Commission") requesting an order approving a Natural Gas Conversion
Agreement ("Agreement") between the Company and Sierra Pacific Power Company d/b/a NV
Energy ("NV Energy"), relating to the North Valmy Power Plant("Valmy") ("Application").
On February 24, 2025, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Order No. 36476.The Commission granted intervention to the city of Boise
City ("City of Boise"), Micron Technology, Inc., and the Idaho Irrigation Pumpers Association,
Inc. ("IIPA"). Order Nos. 36496, 36523, 36548.
On April 8, 2025, the Commission issued a Notice of Modified Procedure, establishing a
May 29, 2025, deadline for initial comments and a June 12, 2025, deadline for the Company to
file reply comments. Order No. 36530. Commission Staff("Staff'), the City of Boise, and IIPA
filed comments. No other public comments were received. The Company filed reply comments.
Having reviewed the record in this case, we now issued this Final Order approving the
Company's Application with modifications as described below.
THE APPLICATION
Valmy is a coal-fired power plant near Winnemucca, Nevada consisting of two units.
Application at 2. The Company represented that it has a 50 percent ownership stake in the facility,
with the remaining 50 percent owned by NV Energy.Id.
The Company stated that the conversion of the Valmy units from coal to natural gas
operations is necessary for the Company to continue to provide safe and reliable electric service.
Id. at 1-2. The Company represented that as of its 2023 IRP, an AURORA modeling analysis
indicated that the conversion of Valmy is approximately $78 million more cost effective on a net
present value("NPV")basis than the portfolio that assumed the Company's exit from participation
of all Valmy operations at the end of 2025. Id. at 3.
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The Company represented that after it had agreed with NV Energy as to the terms of the
conversion, an additional AURORA analysis was performed with changes to three inputs: (1) the
capital costs associated with the conversion were updated to mirror the most recent forecast; (2)
the transport expenses were updated to reflect the latest estimate, and (3) the Boardman to
Hemingway transmission line in-service date was moved to November 2027 to reflect the latest
construction schedule concerning the completion of the line.Id. at 4. The updated results indicated
the conversion of Valmy to natural gas operations in 2026 continued to be more cost-effective,
"by more than $880 million on a NPV basis over the 20-year planning period,"than the portfolio
that contemplated the Company exits from Valmy in 2025.Id. at 4-5.
The Company stated that the terms necessary for the conversion to natural gas operations
at Valmy including the allocation of costs, rights to output from the units, and maintenance and
operation of Valmy, are memorialized in the Agreement, filed with the Application. Id. at 4. The
Company requested that the Commission approve the Company's execution of the Agreement and
acknowledge that the conversion of Valmy is the least-cost, least-risk option necessary to continue
providing service to customers after 2025. Id. at 5. The Company represented that it would make
a future rate filing to address the cost recovery associated with the conversion of Valmy to natural
gas operations.Id.
STAFF COMMENTS
Staff reviewed the Company's Application, production request responses, and related
previous cases. Staff Comments at 2. To determine the prudence of the decision to convert the
Valmy units to natural gas, Staff evaluated three alternatives it believed were available to the
Company. Id. at 3. The first alternative was for the Company to exit Unit 2 as planned at the end
of 2025 and obtain other resources to ensure reliability. Id. The second alternative was for the
Company to convert Unit 1 and/or 2 to natural gas in 2026 and continue the partnership in Valmy
with NV Energy.Id. The third alternative was for the Company to operate Unit 1 and/or 2 as a coal
plant through 2028at which time Valmy is no longer allowed to produce electricity using coal
according to federally enforceable retirement dates included in the current air permits—before
converting the units to natural gas.Id.
Based on these three alternatives, Staff believed the Company sufficiently analyzed the
first two alternatives.Id. Staff opined that the Company's methods and models used to perform its
analysis were reasonable.Id. at 2. However, Staff did not believe the Company provided adequate
ORDER NO. 36694 2

evidence that the third alternative should have been ruled out.Id. at 3.As such, Staff recommended
the Commission approve the Agreement, updates to existing agreements, and the decision to
convert Units I and 2 to natural gas in 2026 as prudent, contingent on the Company providing
sufficient evidence that operating Units I and 2 as a coal plant through 2028 before ultimately
converting the units 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.Id. at 2.
Staff was concerned with the financial commitments associated with Exit Fees for Unit I
and the inability of the Company to provide information regarding the decommissioning and
conversion costs, for which the Company represented negotiations were ongoing.Id. at 6-7. Staff
recommended that the Company provide a report as a compliance filing once a financial agreement
is reached between the Company and NV Energy. Id. at 7. Additionally, Staff recommended the
Company provide an updated report in its filing when the Company seeks recovery for those
financial commitments. Id. According to Staff, that 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. Id.
INTERVENOR COMMENTS
The City of Boise expressed general support for the proposed conversion of Units 1 and 2
from coal to natural gas as an interim step to maintain grid reliability and affordability while
transitioning away from fossil fuel resources. City of Boise Comments at 1-2. The City of Boise
stated that it was supportive of the conversion "only to the extent that it remains consistent with
[the Company's] 2045 clean energy goal and that it is explicitly identified as temporary."Id. at 2.
The City of Boise recommended the Company develop and share a planned timeline and strategy
for fully exiting natural gas operations at Valmy as part of achieving its stated 2045 clean energy
goal.Id.
IIPA believed the Company failed to demonstrate that the Valmy conversion was the least-
cost, least-risk option to meet the Company's needs and that the proposed investment does not
meet the standard of prudency and should be rejected. IIPA Comments at 14-15. IIPA believed
other shorter term, potentially less expensive alternatives, such as new and efficient simple cycle
or combined cycle combustion turbines were not fairly evaluated and that the conversion
ORDER NO. 36694 3

represents a last-minute resource acquisition secured to meet unexpected industrial load growth.
Id. at 3. IIPA asserted that there are risks to the conversion that could result in significant ratepayer
exposure and recommended that the Commission impose cost containment measures to protect
ratepayers, should it approve the Company's request. Id.
Specifically, IIPA stated:
First, I recommend a capital cost cap on total project costs above which a separate
prudency review should be required. I recommend using the figures provided in the
Company's current models as a starting point for the cost cap. Second, I suggest
stranded cost safeguards in the event utilization falls below a given threshold (e.g.
below 10% of the capacity factor). And finally, in light of the selection
irregularities, I suggest that the Commission require the Company to file annual
reports showing dispatch hours and costs per [megawatt hour] compared to
shortlisted resources.
Id. at 8. According to IIPA, the proposed measures would ensure that ratepayers are not bearing
the risk of cost overruns, poor utilization, or uncompetitive operations over the life of the project.
Id.
COMPANY REPLY COMMENTS
Concerning Staff's recommendation that the Company be required to provide sufficient
evidence that operating Units I and 2 as a coal plant through 2028 was imprudent, the Company
stated that it was obligated to exit coal operations at Valmy(on or before December 31, 2019, for
Unit I and on or before December 31, 2025, for Unit 2)pursuant to the multi-party, Commission-
approved, settlement in Case No. IPC-E-16-24. Company Reply Comments at 2. The Company
added that the appropriateness of the shutdown date of year-end 2025 for Unit 2 was implicitly
confirmed by the Commission in the Order approving the 2019 Framework Agreement between
the Company and NV Energy regarding the Company's exit from coal operations at Valmy, and
expressly confirmed by the Commission in its Order acknowledging the Company's North Valmy
exit date, and expressed again in an analysis as part of the Company's 2021 IRP. Id. at 3, 8-9;
Order Nos. 34349, 35217, and 35603. Accordingly, the Company stated that operating Units I
and/or 2 as a coal plant through 2028 before converting the units to natural gas would be in conflict
with prior Commission orders.Id. at 5.
Additionally,the Company stated that it was contractually prohibited from participating in
Valmy after 2025 pursuant to the 2019 Framework Agreement entered into by the Company and
NV Energy, the terms of which contemplated the settlement of Case No. IPC-E-16-24. Id. at 10.
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The Company argued this prohibition could only be lifted by approval of the Agreement sought in
the instant case,which amended the Framework Agreement to reflect the Company's participation
in natural gas operations at Valmy. Id. at 10-11.
Furthermore, the Company asserted that Staff was incorrect in its belief that the only hard
limitation restricting the operation of Valmy as a coal plant beyond 2025 was the current federally
enforceable retirement date of December 31, 2028. Id. at 11. Rather, the Company stated, though
this retirement date was identified as part of a revision to Nevada's Regional Haze State
Implementation Plan ("SIP") filed with the Environmental Protection Agency in 2022, following
the identification of natural gas operations at Valmy as a potential cost-effective resource, NV
Energy met with the Nevada Division of Environmental Protection in 2023,and the Regional Haze
SIP was rescinded prior to the EPA acting on it.Id. at 11-12.The Company stated that the Regional
Haze Rule legally enforceable date was revised to reflect completion of the natural gas conversion
by July 1, 2027, preventing the ability to continue coal-fired operations at Valmy. Id. at 12.
The Company stated that it was not opposed to providing a report detailing the financial
commitments of the conversion project when known, but it also noted that because the Valmy
conversion to natural gas operations is scheduled to occur in 2025,the costs have been included in
the Company's general rate case request, currently pending with the Commission, providing an
opportunity for Staff's review as part of that proceeding.Id. at 14. The Company suggested that in
lieu of the Commission requiring a compliance filing in this case, review of the expenses could be
better accomplished in its pending general rate case, where the information is already available.
Id.
In response to IIPA's concerns that the Company had failed to sufficiently justify the gas
conversion as the least-cost,least-risk option to continue to provide reliable electric service beyond
2025, the Company defended the modeling it used both as part of its 2023 IRP portfolio and
following finalization of the terms of the Agreement. Id. at 15. For the IIPA modeling, the
Company contended IIPA was incorrect in its assertion that the results were based solely on a Loss
of Load Expectation ("LOLE") analysis. Id. at 15-16. Rather, the Company stated that Aurora's
Long-Term Capacity Expansion modeling platform was used to develop least-cost portfolios
through the selection of a variety supply- and demand-side resource options, including both
existing and potential future resource options, for a variety of alternative future scenarios. Id. at
16.According to the Company, the LOLE methodology was then used to ensure "those portfolios
ORDER NO. 36694 5

meet the annual reliability hurdles over the same 20 year planning horizon, not simply the
`reliability standards for the summer 2026,' as indicated by IIPA."Id. The Company represented
that the selection of the conversion to natural gas of both Valmy units was identified as one of the
least-cost, least-risk resource options over the 20-year planning period. Id.
The Company also reiterated that the analysis performed after finalization of the terms of
the Agreement indicated conversion of Valmy to natural gas operations in 2026 continued to be
more cost-effective than the portfolio assuming the Company exits from Valmy in 2025, by more
than $880 million on an NPV basis over the 20-year planning period. Id. at 13. The Company
represented that the conversion had initial capital costs of only a fraction of what a new, 261 MW
resource would cost and comparable fuel costs and non-fuel operations and maintenance expenses.
Id.
Concerning the City of Boise's position that the proposed conversion should be identified
as temporary, the Company believed it was more appropriate to evaluate the economic exit of the
Valmy units in future IRPs, and that evaluating unit exits immediately after conversion is
premature. Id. at 17-18.
APPLICATION FOR INTERVENOR FUNDING
On June 23, 2025, IIPA applied for intervenor funding in the amount of $8,172.85
("Petition"). IIPA Application for Intervenor Funding at 7. According to IIPA, the requested
amount was comprised of witness fees, attorney fees, paralegal fees, and soft costs (copies/legal
research). IIPA argued that an award of costs of its intervention is justified under Idaho Code § 61-
617A and IDAPA 31.01.01.161 through .165 because its participation was material to the case;the
costs of intervention are reasonable and would represent a hardship to IIPA; the recommendations
made by IIPA differed materially from those made by Staff; and IIPA's participation addressed
issues of concern to the general body of the Company's customers.Id. at 1-4.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company's Application and the issues in this
case under Title 61 of the Idaho Code including Idaho Code §§ 61-301 through 303. The
Commission is empowered to investigate rates, charges,rules,regulations,practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order. Idaho Code
ORDER NO. 36694 6

§§ 61-501 through 503. The Commission has reviewed the Application, all submitted materials,
and all submitted comments.
Company's Application
Based on our review of the record, the Commission finds it fair, just, and reasonable to
approve of the Agreement between the Company and NV Energy, relating to the conversion of
Valmy to natural gas, subject to conditions described below.
The Commission finds it would be redundant to require the Company to file a compliance
report concerning the decommissioning and conversion costs associated with the Valmy
conversion. The Company's pending general rate case provides ample opportunity for the
Commission and the parties to evaluate the prudency of such costs.
Concerning Staff s position that the feasibility of operating Valmy as a coal plant through
2028 should have been evaluated before the Nevada Commission approved the conversion of the
units to gas, the Commission finds the Company's response compelling. As the Company
represented in its reply comments, it has been facing pressure to exit coal operations at Valmy for
many years and committed to such an exit in 2017. Projects of this nature require extensive,years-
long planning. It would be impractical to require the Company to evaluate or reevaluate the
feasibility of continuing operations it had already agreed to cease.
As to IIPA's recommendations, the Commission finds that the prudency of project
expenditures will be thoroughly evaluated in the Company's pending general rate case, in which
it seeks recovery of costs associated with the Valmy conversion. Therefore, the Commission
declines to impose a capital cost cap on the Valmy total project costs above which a separate
prudency review is required, stranded cost safeguards in the event utilization falls below a given
threshold,or a requirement that the Company file annual reports showing dispatch hours and costs
of the Valmy units per megawatt hour compared to shortlisted resources.
The Commission finds that ordering the Company to develop and share a planned timeline
and strategy for fully exiting natural gas operations at Valmy as part of achieving its 2045 clean
energy goal, as recommended by the City of Boise, would be premature.
IIPA's Petition for Intervenor Funding
Commission decisions benefit from robust public input. "It is hereby declared the policy
of this state to encourage participation at all stages of all proceedings before the commission so
that all affected customers receive full and fair representation in those proceedings."Idaho Code
ORDER NO. 36694 7

§ 61-617A(1). Recoverable costs can include legal fees, witness fees, transportation, and other
expenses so long as the total funding for all intervening parties does not exceed$40,000.00 in any
proceeding.Idaho Code § 61-617A(2). The Commission must consider the following factors when
deciding whether to award intervenor funding:
(1) That the participation of the intervenor materially contributed to the
Commission's decision;
(2) That the costs of intervention are reasonable in amount and would be a
significant financial hardship for the intervenor;
(3) The recommendation made by the intervenor differs materially from the
testimony and exhibits of the Commission Staff; and
(4) The testimony and participation of the intervenor addressed issues of concern
to the general body of customers.
Id.
To obtain an award of intervenor funding, an intervenor must further comply with
Commission's Rules of Procedure 161-165, IDAPA 31.01.01.161-165. Rule 162 of the
Commission's Rules of Procedure provides the form and content requirements for a petition for
intervenor funding. The petition must contain: (1) an itemized list of expenses broken down into
categories;(2)a statement of the intervenor's proposed finding or recommendation;(3)a statement
showing that the costs the intervenor wishes to recover are reasonable; (4) a statement explaining
why the costs constitute a significant financial hardship for the intervenor; (5)a statement showing
how the intervenor's proposed finding or recommendation differed materially from the testimony
and exhibits of the Commission Staff, (6) a statement showing how the intervenor's
recommendation or position addressed issues of concern to the general body of utility users or
customers; and (7) a statement showing the class of customer on whose behalf the intervenor
appeared.
Commission Rule 165.02—.03 requires the payment of awards of intervenor funding to be
made by the utility and is an allowable expense to be recovered from ratepayers in the next general
rate case. IDAPA 31.01.01.165.02—.03. Awards of intervenor funding are chargeable to the class
of customers represented by the intervenors. IDAPA 31.01.01.03.
The Commission finds that IIPA's Petition satisfies the intervenor funding requirements.
IIPA intervened and participated in all aspects of the proceeding. IIPA's Petition for intervenor
funding was filed timely and no party objected to IIPA's Petition.
The Commission finds that IIPA materially contributed to the Commission's final decision.
IIPA explored issues that were highly relevant to the case. Although the Commission ultimately
ORDER NO. 36694 8

did not adopt IIPA's recommendations, its intervention in the case was valuable and factored in
the Commission's decision. IIPA's recommendations also materially differed from the request in
the Company's Application and Staff s recommendation. IIPA's participation addressed issues of
concern to the irrigation class of customers. Finally, we find the expert witness fees, legal fees,
paralegal fees, and soft costs incurred by IIPA are reasonable in amount for this case, and that
IIPA, as a non-profit organization, would suffer financial hardship if the request is not approved.
IIPA's request for intervenor funding does not exceed the statutory maximum award
allowed in any single case. Accordingly, we find it reasonable to award IIPA its full request of
$8,172.85 in intervenor funding. We hereby authorize a total of$8,172.85 to be paid to IIPA.
ORDER
IT IS HEREBY ORDERED that the Agreement between the Company and NV Energy,
relating to Valmy is approved, effective with the issuance of this Order.
IT IS FURTHER ORDERED that IIPA's Petition is granted in the amount of$8,172.85.
See Idaho Code § 61-617A(2), IDAPA 31.01.01.165.01. The Company is ordered to remit said
amount to IIPA within 28 days from the date of this Order. IDAPA 31.01.01.165.02. The Company
shall be permitted to recover the cost of this intervenor funding in its next general rate case from
its Schedule 24, Irrigation customer class. See Idaho Code § 61-617A(3).
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626.
ORDER NO. 36694 9

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 3 1" day of
July 2025.
G
EDWARD LODGE, P SIDENT
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rT R. HAMMOND JR., COMMISSIONER
DAYN HA IE, COMMISSIONER
ATTEST:
MoA1'ca' Aeo nchez
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-25-03_Valmy\orders\IPCE2503_FO jl.docx
ORDER NO. 36694 10