20081128IPC to Staff 1-5.pdf

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An 10ACORP Company
BARTON L. KLINE
Lead Counsel
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November 28, 2008
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-21
Special Contract to Supply Power to Hoku Materials, Inc.
Dear Ms. Jewell:
Enclosed for filing please find an original and three (3) copies of Idaho Power
Company's Response to the First Production Request of the Commission Staff. In addition,
also enclosed are four (4) disks containing Excel files which Idaho Power is providing in
response to Staffs production requests.
I would appreciate it if you would return a stamped copy of this letter for my file in
the enclosed stamped, self-addressed envelope.
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Barton L Kline
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Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. 10 83702
BARTON L KLINE, ISB #1526
LISA D. NORDSTROM, ISB #5733
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: 208-338-6936
bkline((idahopower.com
Inordstrom((idahopower.com
RECEIVED
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1..DA'"'!u''l F"l ,.." ,'..i¡¡!vbL ItUTILITIES COMM SSION
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR )
APPROVAL OF A SPECIAL )
CONTRACT TO SUPPLY POWER TO )
HOKU MATERIALS, INC. )
)
)
CASE NO. IPC-E-08-21
IDAHO POWER COMPANY'S
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF TO IDAHO
POWER COMPANY
COMES NOW, Idaho Power Company ("Idaho Power" or "the Company"), and in
response to the Commission Staffs First Production Request to Idaho Power Company
dated November 6, 2008, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 1
REQUEST NO.1: Please provide copies of all workpapers and electronic files,
with formulas intact, that were used or relied on to develop the rates contained in the
Hoku Materials, Inc. electric service agreement (ESA).
RESPONSE TO REQUEST NO.1: Please see the enclosed CD.
This response to this Request was prepared by Ric Gale, Vice President of
Regulatory Affairs, Idaho Power Company, in consultation with Barton L Kline, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 2
REQUEST NO.2:Please provide hypothetical calculations showing
computation of at least three monthly bils for Hoku at different energy usage levels, and
provide corresponding PCA calculations and accounting entries.
RESPONSE TO REQUEST NO.2: Please see the spreadsheet on the enclosed
CD that provides bill calculations for varying levels of contract demand and
corresponding energy for the initial contract term. This sheet was originally prepared as
background information for Idaho Power's SEC 8-K disclosure. In all instances, the
costs of providing the first block energy are included in the PCA, while the revenues
from the first block energy would be a PCA offset, exactly as if that energy had been
sold off-system.
This response to this Request was prepared by Ric Gale, Vice President of
Regulatory Affairs, Idaho Power Company, in consultation with Barton L Kline, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 3
REQUEST NO.3: Please explain why Idaho Power believes that Hoku is
entitled to transition from marginal cost-based rates for its 1 st block energy to
embedded costs, over any length of time. Please explain why Idaho Power believes
that 4-year transition period from marginal cost-based to embedded cost-based rates is
reasonable, as opposed to a longer or shorter transition period.
RESPONSE TO REQUEST NO.3: The Hoku ESA is a result of a negotiation
that attempted to balance a number of regulatory and customer objectives, including
obligation to serve, current tariff offerings, existing special contract ratemaking
treatment, impact to existing customers, price signals, costs of new power supply,
transmission and supply limitations, and timing of new resources. The compromise
position that resulted in the ESA balanced Hoku's claim to service against the
Company's ability to provide that service and the cost to do so. The balance fell to a
position that a new customer should incur some of the marginal costs it imposes, but
that at some point in time it could reasonably be expected that the customer could
expect to be treated, for cost of service and ratemaking purposes, like any other
customers in its class. This position called for a bridge from marginal to embedded cost
rates. The transition time period is somewhat subjective; however a four year period (1)
is typical of what the Company would ask of a special contract for an initial term, (2)
commits Hoku to paying a material amount of marginal costs, (3) provides time to get
the contract integrated into resource planning, and (4) likely allows for a rate case of two
to process with Hoku as a customer.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 4
This response to this Request was prepared by Ric Gale, Vice President of
Regulatory Affairs, Idaho Power Company, in consultation with Barton L Kline, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 5
REQUEST NO.4: Did Idaho Power's 2006 IRP assume that the Company would
be providing service to Hoku? If so, what was Hoku's assumed load?
RESPONSE TO REQUEST NO.4: The sales and load forecast used to prepare
Idaho Power's 2006 IRP did not specifically include any assumed load for Hoku.
However, the expected case forecast used. for the 2006 IRP projected a steady average
annual growth rate of 2.3 percent for the industrial sector over the 20-year planning
period.
If specific and actionable information on potential new customers is known at the
time the sales and load forecast is being prepared, it is included in the forecast.
However, the "blocky" or "lumpy" nature of the addition and timing of new large loads is
simply too speculative to estimate and therefore a steady average annual growth rate is
assumed to occur over the planning period. In addition to the growth rate forecast for
the industrial sector, a 1.0 percent average annual growth rate was forecast in the 2006
IRP for additional firm load from existing special contract customers.
The response to this request was prepared by M. Mark Stokes, Manager, Power
Supply Planning, Idaho Power Company, in consultation with Barton L Kline, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 6
REQUEST NO.5: Please make a comparison of the 1 st block (marginal) rates
contained in the ESA to the marginal rates computed using AURORA. For the
AURORA analysis, model the Hoku contract as represented in the ESA and make other
input data assumptions consistent with those used for AURORA analysis in Idaho
Power's ongoing general rate case.
RESPONSE TO REQUEST NO.5: The requested AURORA analysis is
contained on the enclosed CD. The analysis was performed by adding the Hoku
contract to the AURORA run that was prepared for the 2008 general rate case. The
Hoku contract was modeled with the following assumptions: (1) the June 1, 2009,
through June 15, 2010, demands as stated in the contract provided the initial
assumption used for the 12 month time period; (2) the months that contained split
contract levels were averaged to create one contract demand; and (3) the load was
assumed to be flat across all hours within a month with a 90 percent load factor.
The annual incremental cost to serve the Hoku load was calculated by dividing
the incremental power supply expense by the Hoku load in MWh based upon a 90
percent load factor. The incremental cost to serve Hoku based upon this approach
equals $55 per MWh. This $55 per MWh compares to the $61.66 per MWh First Block
Energy Charge (the marginal block) and the $37.70 per MWh Second Block Energy
Charge (the embedded block) contained in the Company's filed Schedule 32.
This response to this Request was prepared by Scott Wright, Pricing Analyst,
Idaho Power Company, and Gregory W. Said, Director, State Regulation, Idaho Power
Company in consultation with Barton L Kline, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 7
DATED this 28th day of November 2008.
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BARTON L KLINE
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 28th day of November 2008 I served a true and
correct copy of the IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER
COMPANY up on the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Neil Price, Esq.
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
-LHand Delivered
U.S. Mail
_ Overnight Mail
FAX
-L Email neil.price((puc.idaho.gov
Hoku Materials, Inc.
Scott Paul
VP Business Development &
General Counsel
Hoku Scientific, Inc.
1075 Opakapaka Street
Kapolei, Hawaii 96707-1887
Hand Delivered
-- U.S. Mail
Overnight Mail
FAX
-- Email spaul((hokusci.com
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Barton L Kline
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9