20120409IPC to ICIP 1-4.pdf

IHO PIVER® R ECEIVEt) 4, An IDACORP Company
LISA D. NORDSTROM IDAHO Lead Counsel UTILITIES Inordstromidahoower.com
April 9, 2012
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-12-14
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR AUTHORITY TO INCREASE ITS RATES AND ITS RATE BASE TO
RECOVER ITS INVESTMENT IN THE LANGLEY GULCH POWER PLANT
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 Industrial Customers of Idaho
Power ("ICIP") in the above matter.
Also enclosed are four (4) copies of a non-confidential disk containing information
responsive to ICIP's First Production Request.
Very truly yours,
Lisa D. Nordstrom
LDN:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
LISA D. NORDSTROM (ISB No. 5733)
JULIA A. HILTON (ISB No. 7740)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
Inordstromidahopower.com
ihiItonc~idahopower.com
RECEfVEr1
;DAh UBL4 Ir I rc J I L.) LJIo:H
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
AND ITS RATE BASE TO RECOVER ITS
INVESTMENT IN THE LANGLEY GULCH
POWER PLANT.
CASE NO. IPC-E-12-14
IDAHO POWER COMPANY'S
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE
INDUSTRIAL CUSTOMERS OF
IDAHO POWER
COMES NOW, Idaho Power Company ("Idaho Power" or "Company"), and in
response to the First Production Request of the Industrial Customers of Idaho Power
dated March 19, 2012, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -1
REQUEST FOR PRODUCTION NO. 1: Reference the direct testimony of
Timothy Tatum, p. 10, stating, "The revised base level net 20 power supply expense
was determined using the AURORA model with the original 2010 load and resource
inputs, with the exception of the addition of Langley Gulch as a resource." For each of
Idaho Power's gas-fired generation plants included in the AURORA analysis performed
to derive net power expenses, please list by plant and by year the annual MWh output
and capacity factor at the beginning date of the study through the end of the analysis
period.
RESPONSE TO REQUEST FOR PRODUCTION NO. 1: The AURORA model is
an economic dispatch model that applies economic principles and dispatch simulation
used to model the Company's generation fleet. Since the AURORA model is an
economic dispatch model, the capacity factor for each plant is calculated after the
model has run. The capacity factor for each plant is calculated by dividing the modeled
generation by the plant capacity multiplied by the total study period hours.
The attached Excel spreadsheet includes the AURORA output and capacity
factor for each of the Company's gas-fired generation plants for all 81 water conditions
used during the 2010 study period. The 81 water conditions are included because the
normalization of power supply expenses is an average of all 81 water conditions.
The response to this Request was prepared by Scott Wright, Regulatory Analyst
Il, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead Counsel, Idaho
Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -2
REQUEST FOR PRODUCTION NO. 2: Reference the direct testimony of
Timothy Tatum, p. 10. Please provide copies of all input and output files used in the
AURORA model run discussed.
RESPONSE TO REQUEST FOR PRODUCTION NO. 2: Please see the
attached two Excel files; one file contains the input files and the other file contains the
output files used in the AURORA model.
The input file contains the inputs that were used in the AURORA model as it was
configured in Case No. IPC-E-1 0-01. The inputs were approved by Idaho Public
Utilities Commission ("Commission") Order No. 31042 on April 13, 2010, with the
exception of the Langley Gulch inputs. The individual inputs are described in more
detail below
The attached AURORA output file is a result of using the AURORA inputs
approved by Commission Order No. 31042, with the exception of the Langley Gulch
inputs. The AURORA output file is divided into 82 worksheets. The 82 worksheets are
comprised of 81 individual water conditions (1928-2008) and an average worksheet that
captures the average of all 81 water conditions over the test year. The normalization for
power supply expenses is an average of all 81 water conditions.
In the attached input file, the "Load" worksheet contains the Company's load
inputs for the test year. The monthly load shape factors are used to shape the annual
load for each individual month. For example, the annual load is multiplied by the
individual monthly shape factors to derive a monthly load (i.e., 1,795 average
megawatts ("WW") (annual load) * .992125 (January shaping factor) = 1,781 aMW).
The load inputs are derived from the Company's Sales and Load Forecast.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -3
In the attached input file, the "Fuel Inputs" worksheet contains the Company's
inputs for the natural gas and coal prices. The Company uses the same fuel price for all
81 water conditions. The Henry Hub and Danskin gas shape are applied to the annual
price, similar to the shaping factors described previously, which calculates a monthly
gas price. The Sumas Gas Basis is added to the Henry Hub monthly price, which
calculates a monthly price for Sumas Gas based upon the Henry Hub gas price input.
The coal prices are entered as annual inputs into the model.
In the attached input file, the "Thermal Inputs" worksheet contains the Company's
inputs for each thermal plant's individual heat rate, plant capacity, Equivalent Forced
Outage Rate ("EFOR"), and planned maintenance.
In the attached input file, the "Hydro Capacity" worksheet contains the
Company's inputs for the capacity of each of its hydro plants.
In the attached input file, the "Hydro Inputs" worksheet contains the Company's
hydro generation inputs. The hydro generation for the Company's hydro plants is
modeled separate from the AURORA model, in the Company's hydro generation model.
The output from the hydro generation model is converted into monthly shape factors
that are input into the AURORA model. The AURORA model uses the monthly shape
factors to calculate hourly generation for each plant. The AURORA model has the
ability to ramp certain hydro units up and down on an hourly basis within the month, but
the monthly AURORA hydro output is equal to the monthly hydro inputs that were
developed from the Company's hydro generation model.
In the attached input file, the "Portfolio Contracts" worksheet contains the
Company's inputs for the power purchase agreement ("PPA") between the Company
and PPL EnergyPlus, LLC. The two-year PPA was approved by Commission Order No.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -4
30613 on August 4, 2008. The PPA is modeled as a must-take resource, with 80
megawatts ("MW") being delivered over the heavy load hours of June, July, and August,
at a cost of $92.25 per megawatt-hour ("MWh")
In the attached input file, the "PPA" worksheet contains the Company's inputs for
the Elkhorn Wind and Raft River PPAs. The Elkhorn Wind PPA was approved on
February 27, 2007, by Commission Order No. 30259. The Raft River PPA was
approved on January 8, 2008, by Commission Order No. 30485. The hourly shape
factors were derived from historical hourly plant generation from the respective projects.
In this instance, the historical hourly plant generation was limited to one year. Currently,
the hourly shape for these PPAs is calculated with multiple years of historical plant
generation data. The hourly shape factor is then multiplied by the respective capacity of
each PPA, thereby calculating an hourly energy and cost value.
In the attached input file, the "PURPA" worksheet contains the Company's inputs
for the Public Utility Regulatory Policies Act of 1978 ("PURPA") projects that were
modeled during the test year. The monthly shape factors are multiplied by the total
PURPA capacity to calculate monthly PURPA generation, as previously described with
the shaping factors. The PURPA energy is modeled in the AURORA model as a must-
run resource. This is done because AURORA needs to know what resources are
available for dispatch. Since PURPA is a must-run resource, it will run regardless of
economics based on the PURPA inputs. The PURPA expense, which is tied to the
PURPA generation, is added on later, outside of the AURORA model.
The response to this Request was prepared by Scott Wright, Regulatory Analyst
II, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead Counsel, Idaho
Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -5
REQUEST FOR PRODUCTION NO. 3: Please provide the dollar per MWh the
cost of Langley Gulch using the same procedures and assumptions that the Company
would apply to a QF requesting prices for a contract under the IPR [sic] methodology
approved for Idaho Power on the date of its filing of this case, and under the
methodology proposed in the direct testimony of Karl Bokenkamp in Case No. GNR-E-
11-03. Please include all workpapers and assumptions of the:
a.Natural gas fuel forecast,
b.Firm load forecast,
C. Surplus sales,
d.Firm purchases,
e.Power supply expenses.
RESPONSE TO REQUEST FOR PRODUCTION NO. 3: The comparison
between Langley Gulch and a PURPA qualifying facility ("QF") resource is not as simple
as a dollar per MWh comparison. As stated in Mr. Stokes' testimony, in Case No. GNR-
E-1 1-03, pp. 24-26, the determination of need for Langley Gulch was part of the
Integrated Resource Plan ("IRP") planning process, which is established in order to
evaluate different resource types and allow informed decisions regarding future
generation resources based on cost, risk, and environmental concerns. The IRP
planning process includes a comprehensive study that facilitates the selection of
resources that possess the specific operational capabilities required to serve the
identified need effectively and economically. Also, the IRP planning process involves
input from the public during the creation of the plan through monthly meetings with the
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -6
IRP Advisory Council and, following the completion of the plan, by way of the
Commission's public comment period.
A new IRP is created every two years and it is common for a resource to be
evaluated in two or three IRP cycles before it reaches the point of being considered a
"committed" resource. In addition, before building a new resource, an application is filed
with the Commission requesting a Certificate of Public Convenience and Necessity
("CPCN"). During this process, the proposed resource is again scrutinized by the
Commission and the public is allowed to provide comments.
In the case of Langley Gulch, a 300 MW combined-cycle combustion turbine
("CCCT"), the need for this new resource was identified as early as Idaho Power's 2004
IRP. In the 2004 and 2006 IRP5, this resource was identified as a coal plant; it was not
until 2007 that it was changed to a natural gas CCCI. Between the IRP and CPCN
processes, Langley Gulch was evaluated and scrutinized for over five years before the
CPCN was granted for the addition of this 300 MW resource.
In contrast, Idaho Power was obligated to sign PURPA wind contracts totaling
294 MW during a two-month period in late 2010 without any evaluation or thought given
to whether these wind resources were needed, or how they would impact customer
rates or the reliable operation of Idaho Power's electrical system. In addition, the only
opportunity for the public to comment was during the Commission approval process for
the power purchase agreements, which primarily focuses on whether the established
rules and prior Commission orders regarding PURPA were followed.
However, if a 300 MW CCCT PURPA QF project were to request pricing for a QF
contract using the same procedures and assumptions that the Company would apply to
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -7
a QF under the IRP methodology, and under the methodology proposed in the Direct
Testimony of Karl Bokenkamp in Case No. GNR-E-1 1-03, the following prices would be
the result of that analysis:
Langley Gulch As A QF
20-Year Levelized Price ($/MWh), On-line 2013
90% Capacity Factor 65% Capacity Factor
(flat dispatch) (economic dispatch 3)
Alternative 12/15/2011 Alternative 12/15/2011
Description Method Methodology Method Methodology
Avoided Cost of Energy (from
AURORA) $43.64 $49.71 $61.16 $69.88
Avoided Cost of Capacity (from
Excel) $8.63 $15.61 $16.06 $29.06
Avoided Cost of Energy and
Capacity $52.28 $65.32 $77.21 $98.95
Notes:
1 2011 IRP Preferred Portfolio with no carbon and updated gas and load forecast.
2 An SCCT is the surrogate avoided resource for the alternative method (Bokenkamp Direct Testimony) and a
CCCT is the surrogate avoided resource for the December 15, 2011, presentation.
3 July, August, September, December, and January = 270 MW all hours. February, March, June, and November
= 270 MW HL & 195 MW LL. April, May, and October no generation.
The numbers provided in the table above include the calculation at a 90 percent
annual capacity factor, which mirrors the operational assumptions for a PURPA
resource, and at a 65 percent annual capacity factor, which is representative of the
operation of a utility-owned resource that is economically dispatched. The calculated
rate for the utility-owned resource is higher only because it is economically dispatched
and there are fewer MWh of generation to spread the costs over. In comparing a
PURPA resource at a 90 percent capacity factor to a utility-owned resource that is
economically dispatched, the per-unit cost may be higher for the utility-owned resource;
however, that does not suggest that the utility-owned resource is less economical.
Further, the total cost over time for the utility-owned resource will typically be less than a
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -8
PURPA resource because the utility-owned plant is not operated unless it is needed to
serve load or it is "in-the-money" and can offset net power supply costs through revenue
from surplus sales. In fact, the Company's request in this case is based on an annual
revenue requirement for Langley Gulch of $62,919,483 on a system-wide basis, while
the annual expense for Langley Gulch modeled as a 300 MW CCCT PURPA QF,
running at a 90 percent capacity factor, would be $123,652,656 (300 MW X 90% X 8760
hours X $52.28 per MWH = $123,652,656). This amounts to approximately an
additional $60 million dollars of power supply expense that would be passed on to Idaho
Power's customers for 100 percent recovery.
a.The natural gas fuel forecast workpapers and assumptions are
contained in the attached Excel file "2011 IRP Revised Gas Forecast.xlsx."
b.The firm load forecast workpapers and assumptions are contained
in the attached Excel file "2011 IRP Revised Med Load Forecastxlsx."
c-e. There were no assumptions made for surplus sales, firm
purchases, or power supply expenses. The AURORA model calculates these items
based on Idaho Power's existing and 2011 IRP resource interaction with the Western
Electricity Coordinating Council, specifically the Mid-Columbia market.
The response to this Request was prepared by M. Mark Stokes, Power Supply
Planning Manager, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead
Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -9
REQUEST FOR PRODUCTION NO. 4: Reference the direct testimony of Lisa
Grow, p. 15, stating: "Q. Does the Company's request in this docket include its total
investment of $401 million in the Langley Gulch project? A. No, not at this time. While
the $401 million is $26 million less than the Company's originally filed Commitment
Estimate, the Company is only requesting recovery of the amount of investment that will
be closed to books by June 30, 2012, or $398,133,778."
Please indicate when the Company will request any additional amounts for rate
base treatment above the $398.1 million requested in this docket.
RESPONSE TO REQUEST FOR PRODUCTION NO. 4: Investments in Langley
Gulch in excess of the amounts requested for inclusion in Idaho jurisdictional rate base
in this case will be addressed in a future revenue requirement proceeding.
The response to this Request was prepared by Timothy Tatum, Cost of Service
Manager, Idaho Power Company, in consultation with Lisa D. Nordstrom, Lead
Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 9th day of April 2012.
,~~4,0, SW1
LISA D. NORDSTP.OM
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 9 th day of April 2012 I served a true and correct
copy of IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER upon the
following named parties by the method indicated below, and addressed to the following:
Commission Staff
Donald L. Howell, II
Karl T. Klein
Deputy Attorneys General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
Industrial Customers of Idaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, Idaho 83707
Dr. Don Reading
Ben Johnson Associates, Inc.
6070 Hill Road
Boise, Idaho 83703
Idaho Irrigation Pumpers Association, Inc.
Eric L. Olsen
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
201 East Center
P.O. Box 1391
Pocatello, Idaho 83204-1391
Anthony Yankel
29814 Lake Road
Bay Village, Ohio 44140
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IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -11
Micron Technology, Inc.
Thorvald A. Nelson
Frederick J. Schmidt
Sara K. Rundell
HOLLAND & HART, LLP
6380 South Fiddlers Green Circle, Suite 500
Greenwood Village, Colorado 80111
Richard E. Malmgren
Senior Assistant General Counsel
Micron Technology, Inc.
800 South Federal Way
Boise, Idaho 83716
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Christa Bearry, Legal Assist t\
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE INDUSTRIAL CUSTOMERS OF IDAHO POWER -12