20111201IPC 1-10 to Staff.pdf

JASON B. WILLIAMS (ISB No. 87~ 8)
LISA D. NORDSTROM (ISB No. 5733)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
jwilliamsCcidahopower.com
Inordstrom~idahopower.com
Attorneys for Idaho Power Company
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S REQUEST FOR
ACCEPTANCE OF ITS REGULATORY
PLAN REGARDING THE EARLY
SHUTDOWN OF THE BOARDMAN
POWER PLANT.
)
) CASE NO. IPC-E-11-18
)
) IDAHO POWER COMPANY'S
) RESPONSE TO THE FIRST
) PRODUCTION REQUEST OF THE
) COMMISSION STAFF TO IDAHO
) POWER COMPANY
)
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company"), and in
response to the First Production Request of the Commission Staff to Idaho Power
Company dated November 16, 2011, 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 a copy of the 1976 Boardman operating
agreement, as amended and supplemented.
RESPONSE TO REQUEST NO.1: Please see the following documents
provided on the non-confidential CD:
· Operating Agreement dated October 15, 1976;
. Amendment dated September 30, 1977;
. 2nd Amendment dated October 31, 1977;
. Amendment dated January 23, 1978;
. 3rd Amendment dated February 15, 1978;
· Letter Agreement (Section 18) dated September 1, 1979;
· Letter Agreement (Section 9) dated September 1, 1979; and
. Amendment dated September 1, 1979.
The response to this Request was prepared by Courtney Waites, Regulatory
Analyst, Idaho Power Company, in consultation with Jason B. Wiliams, Corporate
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: Related to the Boardman shut-down plan, please provide the
following:
a. Factors driving early shut down;
b. A list of parties participating in the discussions, and
c. Explanations and copies of all analyses conducted by IPC
pertaining to evaluation options considered with early shut down and the Consent
Decree. (Case No. 3:08-CV-01136-HA in the U.S. District Court for the District of
Oregon, Portland Division).
RESPONSE TO REQUEST NO.2:
a. The process to develop a Boardman shutdown plan started with the
implementation of the Regional Haze Best Available Retrofit Technology ("RH BART")
rule. The RH BART rule was adopted in July of 1999 with the objective of returning the
visibility in national wilderness areas to a natural background level by 2064. This
started by identifying the largest impacts to the visibilty of the wilderness areas during
the RH BARTphase (the first five years). Boardman was identified as having impacts
to the visibilty in wilderness areas, such as Crater Lake National Park and Mount Hood
wilderness areas, along with the other 10 wilderness areas in Oregon. These impacts
would require pollution controls as identified by the state to meet RH BART during this
first phase and Reasonable Progress during the next phase of RH BART. Even though
the Columbia Gorge is not a wilderness area and not part of this rule, there wil also be
positive visibilty impacts to this area.
On June 19, 2009, the Oregon Environmental Quality Commission ("OEQC")
adopted the Boardman requirements as follows:
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 3
Regional Haze:
· Low NOX burners and Over Fire Air (Nitrogen Oxide)
o 0.23 Ib/mmBtu by 2011
· Selective Non-Catalyst Reduction (Nitrogen Oxide) by 2014
· Semi-Dry Scrubber (Sulfur Dioxide)
o 0.12 Ib/mmBtu by 2014
· Baghouse (Particulate Matter)
o 0.012lb/mmBtu by 2014
Reasonable Progress Requirements:
· Selective Catalyst Reduction (Nitrogen Oxide)
o 0.07 Ib/mmBtu by 2018
Because of pending and proposed legislation on carbon emissions, and the
uncertainty of future emissions restrictions on other pollutants, Portland General Electric
("PGE") was concerned that the plant could become uneconomic to run in the future.
PGE proposed a closure date to the Oregon Department of Environmental Quality
("ODEQ") through December 2020 without installng a scrubber and selective catalytic
reduction as meeting the economic criteria and stil meeting the requirements of RH
BART and Reasonable Progress.
The ODEQ proposed the following new RH BART requirements:
· Low NOX burners and Over Fire Air (Nitrogen Oxide)
o 0.23 Ib/mmBtu by 2011
. Dry Sorbent Injection (Sulfur Dioxide)
o 0.40 Ib/mmBtu by 2014
o 0.30 Ib/mmBtu by 2018
· Activated Carbon Injection (Mercury) (Oregon Utilty Mercury Rule)
o 0.6 IblTBtu or 90 percent removal by 2012
There are no Reasonable Progress requirements for the plant because of the
2020 shutdown.
The new RH BART agreement was proposed by the ODEQ, which was adopted
and approved by the OEQC and incorporated into the Oregon State Implementation
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 4
Plan ("SIP"). The OEQC is the policy and rulemaking board for the state of Oregon.
The SIP was approved by the Environmental Protection Agency ("EPA") effective
August 4, 2011.
b. The parties participating in the discussions were the public, Citizens' Utilty
Board of Oregon, Sierra Club, Greenpeace, Friends of the Columbia Gorge, PGE, Idaho
Power, and environmental groups.
c. To evaluate the economic impact of the various early closure scenarios,
Idaho Power compared the expected present value revenue requirement ("PVRR") to
operate the existing Boardman plant to 2040 with additional pollution control
investments as required per the ODEQ's RH BART rules versus the revenue
requirements for the various early closure alternatives (which contained a smaller suite
of pollution control requirements). For the early closure scenarios, the analysis
incorporated the value of replacement power from the proposed closure date through
2040 to allow for an equivalent 30-year present value comparison against the "install the
full suite of retrofits and run the plant to end of life" scenario. Carbon assumptions from
Idaho Powets 2011 Integrated Resource Plan ("IRP") were assumed in the analysis as
welL. The replacement resource assumed in the analysis was a combined-cycle,
combustion turbine plant. Several iterations of PVRR comparisons were made as Idaho
Power was made aware of potential closure scenarios that were being considered by
PGE and its regulators/intervenors. As a smaller minority owner in Boardman, Idaho
Powets approach was to stay "plugged in" as the various scenarios/options were being
discussed and to perform revenue requirement impact analyses in an effort to validate
PGE's conclusions and position throughout the process.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 5
The confidential summary provided on the confidential CD analyzes the cost of
installing the smaller suite of pollution control retrofits and decommissioning the plant in
2020, as now required in the sip and approved by the EPA. The document also lists
the various inputs and analysis assumptions. Given the assumed carbon future
indicated in Idaho Powets 2011 IRP and replacing Boardman with new gas-fired base
load generation, decommissioning the plant in 2020 or even sooner is slightly less
costly than the estimated cost to customers to install the more comprehensive list of
pollution control investments and run the facilty to 2040. While an earlier than 2020
closure date may have proven to be slightly more favorable for Idaho Power, PGE did
not make the same conclusion, primarily due to the difficulty it would have replacing its
larger share of Boardman generation in such a short time frame with market purchases
or new generation.
The confidential summary wil be provided to those parties that have executed
the Protective Agreement in this matter.
There were no additional Idaho Power analyses performed for the evaluation of
the Consent Decree.
The response to this Request was prepared by Tom Harvey, Joint Projects
Manager, and Randy Henderson, Finance Team Leader ", Idaho Power Company, in
consultation with Jason B. Willams, Corporate 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.3: Please explain the Company's involvement in this process.
RESPONSE TO REQUEST NO.3: Idaho Power was involved in the Boardman
RH BART process in the following ways:
· Teleconferences and meetings between Idaho Power and PGE
officials to discuss the status and strategy PGE was pursuing;
. Idaho Power ran various financial analyses to determine whether
various options were beneficial to Idaho Power;
. Idaho Power attended most of the public meetings with the ODEQ
and OEQC; and
. Idaho Power retains an attorney specializing in environmental law and
reviewed the ongoing RH BART process with this attorney.
The response to this Request was prepared by Tom Harvey, Joint Projects
Manager, Idaho Power Company, in consultation with Jason B. Willams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 7
REQUEST NO.4: Please explain why the Consent Decree is the best outcome
for Idaho customers. What benefits wil be experienced/received by Idaho customers?
RESPONSE TO REQUEST NO.4: In determining whether to settle the lawsuit,
PGE and Idaho Power compared the probabilty and cost of a potential judgment (which
included an evaluation of potential penalties imposed by the EPA, the costs of upgrades
that would have to be made at the Boardman facilty if the plaintiffs prevailed, and the
substantial amount in attorneys' fees and costs necessary for a defense) against the
settlement offer set forth by the plaintiffs. In the end, PGE and the Company
determined that the settlement terms constituted the best resolution of the lawsuit in
light of the inherent risks and uncertainties related to the litigation process and the
current regulatory environment. Idaho Power attended the mediation and provided
feedback related to various potential outcomes. Idaho Power believes the settlement
amount wil not have a material adverse effect on Idaho Power's financial position,
results of operations, or cash flow. Accordingly, compared to the risks associated with
continued litigation of this matter, Idaho Power believes the Company and its customers
are better off in having settled this litigation.
The response to this Request was prepared by Adam Richins, Corporate
Counsel, Idaho Power Company, in consultation with Jason B. Wiliams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8
REQUEST NO.5: Please provide a schedule showing the historical actual
operation of the Boardman power plant and power taken by the Company in the last 5
years. Please also show the projected operation of the plant through closure and
expected power to be received by the Company.
RESPONSE TO REQUEST NO.5: Please see the confidential PDF file
provided on the confidential CD. The confidential CD wil be provided to those parties
that have executed the Protective Agreement in this matter.
The response to this Request was prepared by Tom Harvey, Joint Projects
Manager, Idaho Power Company, in consultation with Jason B. Wiliams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9
REQUEST NO.6: Please provide the cost/benefit analysis related to the
emission controls to be installed. Please also list all the clean air requirements or
possible requirements that wil be met with each installation. Please provide a tabular
summary of the different state and federal environmental regulations that are driving
environmental/emission control investments at the Boardman plant and the
corresponding pollutants they intend to control (and at what level). Please include the
approximate cost of each investment.
RESPONSE TO REQUEST NO.6: Please see the Company's response to
Staff's Production Request No. 2 above for a discussion of the cost/benefit analyses
related to Boardman emissions controls.
Emission controls that are being installed at Boardman are the result of the
following state and federal regulations:
. Regional Haze Best Available Retrofit Technology
Low NOX burners and Over Fire Air (Nitrogen Oxide)
Total capital cost approximately $24 milion
0.23 Ib/mmBtu by 2011
Dry Sorbent Injection (Sulfur Dioxide)
Total capital cost approximately $29 milion
0.40 Ib/mmBtu by 2014
0.30 Ib/mmBtu by 2018
. Oregon Utility Mercury Rule
Activated Carbon Injection (Mercury)
Total capital cost approximately $6 milion
0.6 IblTBtu or 90 percent removal by 2012
The Utilty Maximum Achievable Control Technology ("Utilty MACT") rule is
expected to be finalized in December 2011. When the rule is finalized and after testing
is completed and evaluated, it wil be determined if the controls listed above wil help
meet the Utility MACT rule.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 10
The response to this Request was prepared by Tom Harvey, Joint Projects
Manager, Idaho Power Company, in consultation with Jason B. Willams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 11
REQUEST NO.7: Please explain the process to explore the possibilty of
obtaining waivers for a plant that wil be retired. Were any requests made?
RESPONSE TO REQUEST NO.7: PGE met with its congressional delegation
and the EPA to discuss the possibilty of a waiver from the Utilty MACT rule for plants
that have a determined shutdown date. PGE also provided comments to the EPA
during the comment period of the Utilty MACT rule proposing that plants with a
determined shutdown date be exempt from the rule. The final Utilty MACT rule is
expected to be issued in December 2011.
No other waivers have been identified for early closure plants.
The response to this Request was prepared by Tom Harvey, Joint Projects
Manager, Idaho Power Company, in consultation with Jason B. Willams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 12
REQUEST NO.8: Please provide a list of each type of cost liabilties (and
estimates) that wil be booked to the balancing account related to the shutdown (i.e.
what expenses and what share of expenses).
RESPONSE TO REQUEST NO.8: The type of cost liabilties (and estimates)
that wil be booked to the balancing account related to the shutdown of Boardman wil
consist primarily of Asset Retirement Obligation ("ARO") estimates, partially offset by
expected salvage proceeds, associated with the decommissioning of the plant. The
ARO related to Boardman currently considers costs to decommission and remove plant
components, including the power plant and associated facilties, the Carty reservoir
(reservoir supporting the operations of the plant), certain transmission lines, tower
access road, ash field capping or removal, and coal handling facilties. Also, currently
included in the ARO calculation is a 10 percent contingency estimate. Idaho Power
expects to share the expenses to decommission the plant in proportion to Idaho
Power's ownership share in the Boardman plant, which is 10 percent.
In addition to the net decommissioning costs, the balancing account would also
include the revenue requirement, on a levelized basis, associated with the accelerated
recovery of existing investment and the incremental capital investment expected
between 2012 and 2020.
The response to this Request was prepared by Randy Henderson, Finance
Team Leader ", and Tim Tatum, Manager of Cost of Service, Idaho Power Company, in
consultation with Jason B. Willams, Corporate Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -13
REQUEST NO.9: Please provide an analysis of all alternatives considered by
Idaho Power along with the proposed balancing account method for accounting for the
costs. What are the pros and cons of each alternative?
RESPONSE TO REQUEST NO.9: As Idaho Power developed its preferred
approach for recovering the costs associated with the early shutdown of the Boardman
plant, it considered three fundamental objectives: (1) timely cost recovery, (2) rate
stabilty, and (3) the proper matching of costs and benefits. While there are a number of
methods that could be applied to simply recover the costs associated with the early
shutdown of the Boardman plant, the Company identified only one approach that
effectively satisfies each of the three objectives.
The Company's preferred approach to recovering these costs uses a balancing
account to track the recovery of the levelized revenue requirement related to
accelerated recovery of existing investment and the nine-year forecast of incremental
costs of early shutdown. These costs include capital investments forecasted through
the remaining life of Boardman, the costs of accelerating the depreciation of the existing
Boardman plant items, and the decommissioning costs. The levelized revenue
requirement would be determined by calculating the present value of each of the cost
components assuming a level payment stream from customers over the next nine
years.
The Company is proposing to begin tracking the costs associated with the
Boardman early shutdown in a balancing account starting January 2012 with inclusion
of the incremental change to the revenue requirement included in customer rates on
June 1, 2012. Idaho Power envisions an annual review with adjustment to the level of
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 14
recovery to the balancing account to address significant changes if they occur. Any
overage or shortall in the collection of the previous year's incremental revenue
requirement would be incorporated into a new levelized incremental revenue
requirement calculation when necessary. Current customers wil receive the benefit of
the time value of money for paying costs associated with the early shutdown of
Boardman in advance while also benefiting from a rapidly declining plant balance. This
wil also potentially limit large rate increases related to decommissioning costs
anticipated upon Boardman's closure.These same customers are currently
experiencing the benefits of the Boardman plant as a lower-cost base load resource.
The balancing account approach accomplishes the goal of matching costs and benefits
and ensures customers are not paying beyond the useful life of the plant. It also
provides rate stability and ensures customers pay no more than the true costs of the
shutdown.
Alternatives to the proposed levelized recovery using a balancing account, such
as methods using annual filings to adjust rates to reflect the incremental annual
investments, would not achieve all three of the Company's objectives. These more
"traditional" methods would result in shorter recovery times and potential large, one time
increases. Further, a more traditional approach would likely require cost recovery
beyond the useful life of the plant, resulting in a mismatching of cost recovery and
associated benefits.
The response to this Request was prepared by Tim Tatum, Manager of Cost of
Service, Idaho Power Company, in consultation with Jason B. Wiliams, Corporate
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -15
REQUEST NO. 10: Please explain Idaho Powets proposal/expectation/projection
related to total dollar amounts to be reflected in the balancing account over the
remaining life of the Boardman facilty, timing and amortization period for the balancing
account, and magnitude of the expected amounts to be included in rates. Include
current investment, future investment, decommission costs, salvage values and
amortization amounts.
RESPONSE TO REQUEST NO. 10: Idaho Power expects that costs associated
with the decommissioning of the Boardman facility (primarily what makes up the ARO),
estimated salvage proceeds (these first two components are also referred to as net
decommissioning costs), and future investment in the Boardman facilty wil be
components that would be included in the balancing account. Current investment in the
Boardman facilty, through December 31, 2011, is currently being considered in the
depreciation study that is being performed. Idaho Power expects that the revenue
requirement associated with the above-mentioned costs would be included and tracked
utilzing the balancing account. Idaho Power would anticipate that this revenue
requirement would be re-evaluated annually, and that any overage or shortall in the
revenue requirement from the previous year would be incorporated into the calculation
for the revenue requirement to be levelized over the remaining period to December 31,
2020. On December 31, 2020, revenue collections would stop, and the existing and
future investment balances would be fully depreciated, leaving only the net
decommissioning costs to be considered. Subsequent to December 31,2020 (primarily
in 2021 and 2022), the amounts collected pertaining to the net decommissioning costs
would continue to be compared to estimated costs, and any overage or shortall would
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 16
be tracked in the balancing account. Upon final resolution of all decommissioning
activities, Idaho Power would request that any overage or shortall in the balancing
account (by design, there should be minimal difference) would then be returned to or
collected from ratepayers.
Please see the Excel spreadsheet, "Incremental Revenue Requirement for
Proposed Early Boardman Plant Shut-Down," provided on the non-confidential CD for
details on the general magnitude of the expected amounts to be included in rates.
These calculations provide the framework and an ilustration for how the levelized
amounts would be determined. Cost estimates, calculations, and assumptions would
be further refined as part of the initial balancing account filng.
The response to this Request was prepared by Mitchell McClellan, Joint Venture
Analyst, Idaho Power Company, in consultation with Jason B. Willams, Corporate
Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 30th day of November 2011.
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Attorney for Idaho Power Company
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IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -17
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 30th day of November 2011 I served a true and
correct copy of IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER
COMPANY upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Karl T. Klein
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
-- Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-- Email KarI.KleinCcpuc.idaho.gov
1~tI~lliams --
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 18