20131114Volume I.pdf

ORIGINAL
o
o
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANYIS APPLICATION FOR A
CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY FOR
THE INVESTMENT IN SELECTIVE
CATALYTIC REDUCTION CONTROLS ON
JIM BR]DGER UNITS 3 AND 4.
CASE NO.rPc-E-13-16
TECHNICAL HEARING
HEARING BEEORE
COMMISSIONER MARSHA H. SMITH (Presiding)
COMMISSIONER MACK A. REDEORD
COMMISS]ONER PAUL KJELLANDER
PLACE: Commission Hearing Room
472 West Washington StreetBoise, Idaho
DATE: November 7, 20!3
VOLUMEI-Pagesl-205
EE-
HEDRIGK
POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208
COURT REPORTING
S*w;g, tlo 0Xa/wxrnty,shco /fl6
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HEDRICK COURT REPORTING
P. O. BOX 5'78, BOTSE, rD
APPEARANCES
For the Staff:KRISTINE A. SASSER, Esq.
Deputy Attorney General
472 West WashingtonBoise, Idaho 83702
LISA D. NORDSTROM, Esq.
-and-
JENNIEER REINHARDT-TESSMER, Esq.
Idaho Power Company
L22L West fdaho StreetBoise, Idaho 83702
For Tdaho Power Company:
Eor Industrial Customers
Idaho Power:
of RICHARDSQN ADAMS, PLLC
by PETER ,J. RICHARDSON, Esq.
515 North Twenty-seventh Street
Boise, fdaho 83616
Eor Idaho Conservation
League:
BEN,JAMIN J. OTTO, Esq.
Idaho Conservation League
710 North Sixth StreetBoise, Idaho 83702
McDEVITT & MILLER, LLP
by DEAN J. MfLLER, Esq.
420 West Bannock StreetBoise, Idaho 83702
For Snake Ri-ver Al-liance:
83701
APPEARANCES
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Lisa Grow(Idaho Power Company)
Ken Miller
(Snake River Alliance)
Tom Harvey
(Idaho Power Company)
NUMBER
Ms. Nordstrom (Direct)
Prefil-ed DirectMs. Nordstrom (Direct-cont. )Ms. Sasser (Cross)
Mr. Mill-er (Cross )Mr. Richardson (Cross)
Mr. Otto (Cross)
Commissioner Redford
Commissioner Smith
Commiss j-oner Kj ellander
Ms. Nordstrom (Redirect)
SwornMr. Mil-l-er (Direct )Prefiled Direct
Ms. Sasser (Cross)
Ms. Nordstrom (Cross)
Mr. Mi-1ler
Ms. Nordstrom (Direct)
Prefil-ed DirectPrefil-ed Rebuttal-
Mr. Mil-l-er (Cross )Mr. Richardson (Cross)
Mr. Otto (Cross)
Commissioner Redford
Commi-ssioner SmithMs. Nordstrom (Redirect)
EXHIBITS
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PAGE
WITNESS
]NDEX
EXAMINATION BY PAGE
For Idaho Power Company:
1. 72/07 BART Analysis for .Tim BridgerUnit 3, 9'l pgs
72/07 BART Analysis for Jim Bridger
Unit 4, 96 pgs
BART Appeal Settl-ement Agreement,
L7 pgs
2.
3.
PremarkedAdmitted 168
Premarked
Admitted 168
PremarkedAdmitted 168
HEDRICK COURT REPORTING
P. O. BOX 578, BOTSE, rD
INDEX
EXHIBITS83701
4.
tr
L/7 / 11 Vflyoming State Implementation PremarkedPIan, Regional Haze, 206 pgs Admitted 168
Premarked(confidential'
odmitted 168
5A. 2/8/L3 Coal Envj-ronmental Compliance Premarked
Upgrade Investment Evaluation, 52 pgs Admitted 168
6. 20tt IRP Update, 30 pgs PremarkedAdmitted 168
For fdaho Conservation League:
302 . Pg . 60 , 2013 IRP, 1 pg (l-ater marked Marked 12as Exhibit No. 301)
For Snake River Al-l-iance:
401. Typical Resource Portfolio Fuel Mix, Marked 51pg
402. (Omitted)
403. 6/25/13 Presidential Memorandum, 2 pgs Marked 5
404. LL/!/L3 Clearing Up, 3 pgs Marked 5
405. Idaho Power Company's Response to Staff Marked 5
Request No. 11, 2 pgs
406. Idaho Power Companyrs Response to Staff Marked 5
Request No. 18, 1 pg
407. Idaho Power Company's Response to Staff Marked 5
Request No. L9, 5 pgs
408. (Confidential-) Marked 5
409. 1L/5/13 IDACORP Announces Third Quarter Marked 5
20L3 Resu1ts, I pg
410. Commission Staff's Response to the Marked 5First Production Request of Snake RiverAlliance, 3 pgs
41,1,. Pgs . 1,0-1,2, Pref iled Testimony of Marked 5
Ken Mi11er, Snake River Alliance, 3 pgs
4L2. l2/37/I2 IDACORP Form 10-K, 2 pgs Marked 5
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HEDRICK COURT REPORTING
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HEDRICK COURT REPORTING
P.O. BOX 578, BOISE t rD
BOISE, IDAHO, NOVEMBER 7, 201,3, 9: 33 A. M.
COMMISSIONER SMITH: Good morning, ladies and
gentlemen. Iltrelcome to the hearing room of the Idaho Pub1ic
Util-ities Commission. This is the time and place set for a
hearing in our Case No. IPC-E-13-16. It's further identified
as In the matter of Idaho Power Company's applicati-on for a
certificate of public convenience and necessity for the
investment in selective catalytic reduction controls on Jim
Bridger Units 3 and 4.
My namers Marsha Smith; I'm going to chair
today's hearing. The other Commissioners are President Paul
Kjellander on my left and Commissj-oner Mack Redford on my
right. The three of us are the Public Utilities Commission who
wj-11- be making a decision in this matter.
lfle'11 begin this morning with appearances of the
parties, starting with you, Ms. Nordstrom.
MS. NORDSTROM: Good mornj-ng. I am Lisa
Nordstrom, representing Idaho Power Company. And seated wj-th
me j-s my cocounsel Jennifer Reinhardt-Tessmer.
COMMISSIONER SMITH: Okay. Eor the Staff.
MS. SASSER: Good morning. Kristine Sasser,
representing Commission Staff.
COMMISSIONER SMITH: MT. Otto.
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HEDRTCK COURT REPORTING
P.O. BOX 578, BOTSE, rD
MR. OTTO: Ben Otto with the fdaho Conservation
League.
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: Thank you, Madam Chairman. Dean ,J.
Mil-ler of the firm McDevitt and Mi11er, appearing on behalf of
the Snake River Al1iance.
COMMISSIONER SMITH: And Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair. Peter
Richardson of the firm Richardson Adams, oil behalf of the
fndustrial Customers of Idaho Power.
COMMISSIONER SMITH: According to my notice of
parties, those are all- of the parties of this case. If anyone
knows anything different, now is the time to tel-l me.
Otherwise, all the partj-es have appeared, and thank you for
doing that.
Are there any preliminary matters that need to
come before the Commj-ssion before we take up with the
testimony?
Mr. Mil-ler.
MR. MILLER: Thank your Madam Chairman. This is
a topic that Ms. Nordstrom and I have discussed:
Due to the rescheduling of this hearing, a
conflict for the Snake River witness Mr. Miller was created in
that he had prevJ-ously committed out-of-town travel for this
afternoon. So Ms. Nordstrom and I have discussed that he could
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HEDRICK
P.O. BOX
COURT REPORTING
578, BOISE, ID
be cal-Ied out of order sometime this morning so that his
testimony could be spread on the record and he could be subject
to cross-examination and stil-l- meet his travel- commi-tments.
COMMISSIONER SMITH: Woul-d it be your preference,
Mr. Miller, that he be called first r ox would it be your
preference that we begin with the Companyrs case and just see
to it that he's on before noon?
MR. MILLER: f think our preference would be to
have the Company begin with its case, and then later in the
morning, depending on how much cross-examination the Company
anticipates, we coul-d cal-l- him at 10:30 or 11:00 or something
like that.
COMMfSSIONER SMITH: Okay. Is that procedure
acceptable to all- of the parties? Seeing no
Ms. Nordstrom.
MS. NORDSTROM: We1I, the Company would like to
keep its case together if at all possible. We don't have any
objection to him testifying this mornj-ng, however that's the
Commission can best accommodate them.
COMMISSIONER SMITH: Al-l- right, we'11 do the best
we can. Maybe in an abundance of optimism, we can think we
might be done by noon.
MS. NORDSTROM: I al-so have some preliminary
matters.
COMMISSIONER SMITH: Go ahead.
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HEDRICK COURT REPORT]NG
P.O. BOX 578, BOTSE, rD
MS. NORDSTROM: For administrative efficiency,
Idaho Power recommends that it sj-multaneously present the
testimony of its witnesses with both direct and rebuttal-
testimony, but it would like to reserve the right to recalI
witnesses if necessary after the parties have presented their
evidence.
COMMISSIONER SMITH: I think everyone is wel-l-
aware that my posit j-on j-s itrs your decision how you present
your case, and if you want to do rebuttal with direct, that's
fine with me. And being the Applicant, I think you have the
burden and so have the opportunity to have the last word.
MS. NORDSTROM: Thank you. And there is a number
of confidential materials that have been filed in this case,
and to the extent that the parties wish to discuss confidential
materials with any specificity, Idaho Power requests that they
advise the Commission in advance of the disclosure pursuant to
RuIe of Procedure 243 so that the hearing room can be
restricted to those that have signed the protective agreement
in this matter.
COMMfSSIONER REDFORD: I don't think there should
be any objection to that. I think that's our standard
operating procedure.
I woul-d note that we have people listening in on
the telephone. If it becomes necessary to clear the hearing
room in order to cross-examine or use confj-dential material, we
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HEDRICK
P.O. BOX
COURT REPORTING
578, BOTSE, rD 83701
will have to disconnect the telephone bridge and then
reestablish it. If that happens, we'11 set a time for
reestabl-ishing, we hope, so people can have some certainty as
to when to cal-l- back in.
Given that there are people on the phone, I woul-d
just ask that you mute yourselves so we don't hear any noise
from your end -- papers rustling, you know, dogs barking,
everything we have all heard on conference cal-l-s when people
fail to mute their line and that would be very much
appreciated.
Anything else?
MR. MILLER: Just one other thing,
Madam Chairman:
I've handed out to the Commission and parties a
sma11 package of exhibits that f may want to use during the
course of the hearing and Irve just distributed those in
advance so that everyone can see them in advance and also
expedite the hearing, not having to do them one at a time.
One of the exhibits is at this point marked
"confldentialr" and we could deal- with that one when we come to
it. It would be in connection with the testimony of
Mr. Youngblood when he testifies.
COMMISSIONER SMITH: A11 right. Thank you,
Mr. Mi11er.
(Snake River Alliance Exhibit Nos. 401 and
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HEDRICK COURT REPORTING
P.O. BOX 518, BOTSE, rD
403 through 41,2 were marked for identification. )
COMMISSIONER SMITH: Mr. Otto.
MR. OTTO: Madam Chair, I've been in an awkward
situation: My witness is just unavailable to make the hearing
today. We thought we could move some scheduling around and
have her avail-abl-e. Ms. White j-s running a large conference at
Boise State University, it's been in the works for two years.
She's in charge of that conference. She's brought in
professionals from all over the world. I just don't know what
to do about that and I apologize for her not being availabl-e.
That's my fault, itrs not trying to hide the ba11, but it j-s
what it is, so the Commission can --
COMMISSIONER SMITH: Wel-I, why don't we deal with
that when it's your turn.
MR. OTTO: Okay, fair enough.
COMMISSIONER SMITH: So, anything else?
Start with you, Ms. Nordstrom.
MS. NORDSTROM: Thank you. Idaho Power call-s
Lisa Grow as its f irst wi-tness.
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HEDRICK COURT REPORTING
P.O. BOX 578, BOTSE, rD 83701
GROW (Di)
]PC
LISA GROW,
produced as a witness at the instance of Idaho Power Company,
being first duly sworn, was examined and testified as follows:
DIRECT EXAMINAT]ON
BY MS. NORDSTROM:
O. Good morning.
A. Good morning.
O. Pl-ease state your name and spe1l your last name
for the record.
A. My name is Lj-sa Grow. Last name j-s spelled
G-R-O-W.
a. By whom are you employed and in what capacj-ty?
A. I'm employed by Idaho Power Company, and I'm the
senior vice president of power supply.
O. Are you the same Llsa Grow that filed direct
testimony on June 28, 20L3?
A. I am.
O. Did you have any exhibits?
A. I did not.
A. Do you have any corrections or changes to your
testimony today?
A. I do not.
O. If f were to ask you the questions set out in
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HEDRICK COURT REPORTING
P.O. BOX 578, BOTSE, rD
GROI'I (Di )
IPC
your prefiled testimony, would your answers be the same today?
A. They would.
MS. NORDSTROM: I would move that the prefiled
direct testj-mony of Lisa Grow be spread upon the record as if
read.
COMMISSIONER SMITH: If there is no objectionr w€
wj-1l spread the pref iled test j-mony of Ms. Grow upon the record
as if read.
(The followj-ng prefiled testimony of
Ms. Grow is spread upon the record.)
83701
1 Q. Please state your name and business address.
2 A. My name is Lisa A. Grow and my business
3 address is L221 9rlest Idaho Street, Boise, Idaho 83102.
4 Q. By whom are you employed and in what capacityZ
5 A. I am employed by Idaho Power Company ("Idaho
5 Power" or "Company") a.s the Senior Vice Presj-dent of Power
7 Supply.
I Q. Please describe your educational background
9 and work experience with Idaho Power.
10 A. i graciuated from the University of fdaho in
11 1987 with a Bachelor of Science degree in Electrical
L2 Engineering. I received an Executive Masters of Business
13 Administration from Boise State University in 2008. I
L4 began my career at Idaho Power after graduating from the
15 University of Idaho in 1987, and have held severaL
16 engineering positions before moving into management in
l7 2005. In 2005, I was named Vice President of Delivery
18 Engineering and Operations. In 2009, T was appointed to my
19 current position as Senior Vice President of Power Supply.
20 My current responsibilities include overseeing the
2L operation and maintenance of fdaho Power's generation
22 fleet, power plant engineering and construction,
23 environrnental affairs, water management, power supply
24 planning, and wholesale electricity and gas operations. I
25 also oversee Idaho Power's load serving operations, which
GROW, DI 1
Idaho Power Company
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is responsible for delivering rel
through the Company's grid using
iable energy to
its generation
customers
port fo1 io
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3 and system purchases.
0. What is the Company's request in this
5 proceeding?
A.The Company is requesting that the Idaho
Pub1ic Utilities Commission ("Commission") issue a
Certificate of PubIic Convenience and Necessity (*CPCN")
and provlde binding ratemaking treatment under Idaho Code S
6l-541 related to the Selective Catalytic Reduction (*SCR")
j-nvestments planned for Jim Bridger Units 3 and 4 ("Bridger
SCRs").
O. What is the purpose of your testimony in this
proceeding?
A.The purpose of my testimony is to: (1)
provide an overview of the Company's case, (2) describe the
important role that the Jim Bridger power plant ("Jim
Bridger Plant") serves in maintaining the diversity and 1ow
cost structure of the Company's generation resource
portfolio, (3) provide the Commission with an understanding
of the regulations and analyses that led to the Company's
plans to commit to the investment in the Bridger SCRs, and
(4) explain the Company's rationale for requesting a CPCN
and binding ratemaking treatment in this proceeding.
GROW, DI 2
Idaho Power Company
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3 case.
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I. OVERVIEW
O. Please provide an overview of the Company's
A. In this case, the Company will support its
5 request for a CPCN and associated ratemaking treatment
6 related to the investment in the Bridger SCRs by
7 demonstrating that the SCR investrnent is prudent,
B necessary, and in the best interests of the Company and its
9 customers.
i0 Mr. Tom Harvey, Joint. Frojects ivlanager, will present
11 testimony that describes in detail the federal and st,ate
72 emissions regulations that require the Bridger SCRs. Mr.
L3 Harvey wiII also describe the analyses that were performed
14 to determine that the Bridger SCRs represent the most cost-
15 effective retrofit technology that will allow the Jim
L6 Bridger Plant to operate in compliance with those emissions
11 regulations. Lastly, Mr. Harvey wiIl provide a description
18 of the Company's economic analysis that determined that the
19 investment in the Bridger SCRs represents the lowest cost
20 and least risk option of serving future customer demands.
2t Mr. Michael J. Youngblood, Manager of Regulatory
22 Projects, will present testimony that discusses the
23 portfolio analyses performed in the 2013 Integrated
24 Resource Plan ('IRP") which supports the continued
25 operation of the Jim Bridger Plant. Mr. Youngblood will
L1 GRow, Dr 3
Idaho Power Company
1 also present the cost estimates for the Bridger SCRs and
2 the estimated revenue requirement impact of including that
3 investment in the Company's rate base. Finally, Mr.
4 Youngblood will discuss how bj-nding ratemaking treatment is
5 requested to operate in this case.
O. What is your role in the Company's decision-
7 making process regarding the investment in the Bridger
I SCRs?
A. As the Senior Vice President of Power Supply,
10 f oversee the Joint Projects and Water and Resource
11 Planning groups. These groups were responsible for
L2 preparing the economic analyses related to the Bridger SCRs
13 as well as the 20L3 fRP. Under my leadership, the Joint
14 Projects group manages the Company's ownership interest in
15 the Jim Bridger Planti therefore, f am the officer
16 responsible for the Jim Bridger Plant and the SCR project.
11 AIso, I am the officer that oversees the reliable operation
18 of Idaho Power's system and electric generation portfolio.
19 Over the past several- years, I have had regular
20 dj-scussions with Mr. Harvey regarding the regulations,
27 financial/economic analyses, and engineeri-ng studies
22 related to the need and viability of the Bridger SCRs.
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GROW, DI 4
fdaho Power Company
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II. THE ROLE OF THE JIM BRIDGER PIA}iIT IN THE COMPENY' S
GENER,ATION RESOI'RCE PORIE'OLIO
a.PIease describe fdaho Power's current
portfolio of generation resources.
A.Idaho Power's current resource portfolio
consists of a diverse mix of low-cost generation types
totaling nearly 3,600 megawatts ("MW") of nameplate
capacity. Idaho Power's resource portfolio is anchored by
the Company's hydroelectric system consisting of L1
projects located on t.he Snake River and its tributaries.
These 11 projects provide 7,109 MW of nameplate capacity
and approximately 8.4 million megawatt-hours ("MWh")
annuaLly under median water conditions. Idaho Power is the
non-operating partner in three coal-fired power plants that
provide the Company with 1. LL9 MW of nameplate capacity.
Idaho Power's share of these resources includes the Jim
Bridger Plant at 77L MW, the North Valmy power plant
("Valmy") at 284 MW, and the Boardman power plant
("Boardman") at 64 MI^I. Idaho Power's resource portfolio
also includes three natural gas-fired combustion turbine
plants. Langley Gulch, a combined-cycle plant, provides
318 MIll of nameplate capacity. The Company's two simple-
cycle "peaker" plants, the Danskin power planE and Bennett
Mountain plant, provide a combined 444 MW of nameplate
capacit,y. Idaho Power also owns a small diesel-fired
GROW, DI 5
Idaho Power Company
13
1 generator located in Salmon, Idaho, that provides
2 approximately 5 MW of nameplate capacity.
O. In addition to energy from its own resources,
4 does ldaho Power serve its customer energy demands from
5 other generation resource types?
A. Yes. The Company currently has power purchase
7 agreements with one wind project and two geothermal
8 projects. Elkhorn Va11ey wind project, located in
9 northeastern Oregon, provides 101 MW of nameplate wind
10 generation. The Raft River geothermal power plant, located
11 in southern Idaho, provj-des 13 MW of nameplate capacity.
L2 The NeaI Hot Springs geothermal project, located in eastern
O 13 Oregon, provj-des 22 MW of nameplate capacity.
L4 Idaho Power also contracts with Qualifying
15 Facilities for energy purchases under the PubIic Utility
16 Regulatory Policies Act of 1978 (*PURPA"). As of May 31,
17 20L3, Idaho Power had 103 PURPA contracts with independent
18 developers for approximately 784 MV0 of nameplate capacity.
19 The PURPA generation facilities consist of low-head
20 hydroelectric projects on various irrigation canals,
21- cogeneration projects at j-ndustrial facilities, wind
22 projects, anaerobic digesters, landflII 9ds, wood-burning
23 facilities, and various other small, renewable-power
24 projects. There is one additional PURPA project under
25
GROW, Dr 6
Idaho Power Company
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contract scheduled to come on-Iine by December 2013 with a
nameplate capacity of 4.1 MW.
0.How does a diverse generation portfolio
benefit fdaho Power and its customers?
Idaho Power has learned from nearly a century
of operations that energy diversity means energy security.
The Company's resource porifolio is among t.he most diverse
and therefore secure in the naticn. The Company leverages
its hydro, coal, and natural gas resources to provide
dependable "baseload" energy to customers, along with
purchased renewable resources and a robust set of energy
efficiency programs. It is the same principle as
maintaining a diversified investment portfolio to manage
risk,' a variety of resources. mi-nimizes the risk that comes
with having all your eggs in cne basket.
A.
0.
Plant add to
A.
What value do coal plants like the Jim Bridger
the Company's resource portfolio?
Clean, renewable hydropower remains the lowest
cost foundation of Idaho Power's resource portfolio,
providing for more than half of its customers' energy needs
in most years. However, in Iow water years like the one
southern Idaho is experiencing in 2013, water can be scarce
during sumner months when demand reaches its peak. Wind
and solar cannot always satisfy the re.sulting generation
shortfall. For example, Iast '.luIy, Idaho Power customers
GROW, DI 7
Idaho Power Company
15
1 set a record for electricity demand. At that time, Idaho
2 Power had 600 MW of wind capacity connected to its system.
3 Unfortunately, on that hot, calm day the wind turbines were
4 only able to generate about 14 MW when customer demand was
5 peaking in the late afternoon. It is at those times that
6 the Company's reliab1e, low-cost coal resources, like the
7 Jim Bridger Plant, can be dispatched to help meet customer
8 demands. The Jim Bridger Plant not only provides highly
9 valuable capacity during periods of peak demand, but also
10 l-ow cost and dependable baseload energy.
1L O. Please describe the Company's Jim Bridger
12 Plant.
13 A. Idaho Power owns one-third of the Jim Bridger
L4 coal-fired power plant located near Rock Springs, Wyoming.
15 The plant consists of four generating units. After
L6 adjustment for scheduled maintenance periods and estimated
L'l forced outages, the annual energy generating capability of
18 Idaho Power's share of the plant is approximately 625
19 average meqawatts. PacifiCorp (formerly known as Pacific
20 Power e Light Company) has two-thirds ownership and is the
2L operator of the Jim Bridger Plant
22 O. How does the variable cost of operating the
23 Jim Brldger PLant compare to the Company's other resource
24 alternatives?
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GROW, DI 8
fdaho Power Company
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A. The Jim Bridger Plant has the lowest dispatch
cost of Idaho Power's entire thermaL generation fleet.
Based on the Company's t'rlay 2013 Operating Plan, the Jim
Bridger Plant's average dispatch cost is expected to be
J!/ttWh over the period of June 2oL3 through May 2014.
For comparison purposes, the average dispatch cost for the
remaining baseload thermal fleet is expected to be
anmh over the same period.
o.When fj-xed plant investment is also
considered, does the Jim Bridger Piant continue to rank
among the Company's lowest cost resources?
A.Yes. The Jim Bridger Plant is also the
Company's lowest cost thermal resource from an installed
cost of nameplate capacity perspective. Based on actual
20L2 fi-nancial inforrnation, the total cost of nameplate
capacity (excluding fuel and per-unit energy Eaxes) for the
Jim Bridger Plant was $8.24lkilowat.t ('kW")/month. For
comparison purposes, the average 20LZ installed cost of
nameplate capacity for the remaining baseload thermal fleet
was $13.39lkWlmonth.
IrI. REQUTREMENTS At{p ECONOMIC A}rArySES qEIdONSTRATING
THE NEED FOR TIIE BRIDGER SCRS
o.
investments
the Company
PIease describe the emissions control
planned at Jim Bridger Units 3 and 4 for which
is seeking a CPCN.
GROW, DI 9
Idaho Power Company
l7
1 A. The emissions cont.rol investments proposed
2 in this CPCN are SCR systems and associ-ated ancillary
3 equipment for Jim Bridger Units 3 and 4. These emissions
4 control equipment .investments wil1 result in the
5 reductj-on of nitrogen oxide (NOx) emissions from Jim
6 Bridger Units 3 and 4 in compliance with already binding
7 state and proposed federal emissions requirements.
B Q. Which federal and state emissions
9 requirements are the Bridger SCRs intended to satisfy?
10 A. The Bridger SCRs are required to comply
11 with existing Regi-onal Haze Rules and are al-so required
12 to comply with stand-alone requirements in the Wyoming
13 State Implementation Plan ("SIP"). Mr. Harvey describes
\4 these emissions requirements in greater detail- in his
15 testimony.
16 O. When must the SCRs be installed at Jim
L1 Bridger Units 3 and 4 in order to successfully comply
18 with the federal and state emissions regulations?
19 A. The BART Appea1 Settlement Agreement and the
20 Wyoming Regional Haze SIP require the installation of SCR
2l on Unit 3 by the end of 2015 and on Unit 4 by the end of
22 2016. On May 23, 2QL3, the Unit,ed States Environmental
23 Protection Agency ("EPA") proposed to approve the Wyoming
24 SIP for instal.l-ation of SCR on Jim Bridger Units 3 and 4
25 in 2OL5 and 2016, respectively, as outlined in the SrP.
GROW, DI 10
fdaho Power Company
18
1 The EPA has indicated it will sign a noti-ce of fina.I
2 rulemaking on November 27, 2013, making t.hese emission
3 reduction requirements at Jim Bridger Units 3 and 4
4 federally enforceable as well.
5 Q. 0{hat would result if the Company did not, make
6 these investments within the compliance time frame?
7 A. If the environmental upgrades are not
I lnstalIed within the time frame given by the EPA, Idaho
9 Power would be forced to stop generating from these units.
10 Unlawfully operating the units in violation of federal and
11 state regulations is not an option for fdaho Power.
12 a. As a minority partner in the Jim Bridger
O L3 Plant, what is the Company's decision authority regarding
L4 projects Iike the Bridger SCRs?
15 A. Several- provisions in the agreement for the
16 operation of t.he Jim Bridger Project Between Idaho Power
L7 Company and Pacific Power & Light Company ("Operatj-on
L8 Agreement") address Idaho Power's payrnent obligations
19 related to operating expenses, capital additions, and
20 maintenance costs at the Jim Bridger Plant. Some of those
2l provisions set forth below.
22 Article 74 of the Operation Agreement, Capital
23 Additions, states:
At any time that either party shalIdetermine a capital addition,
improvement or betterrnent is required
L9 GRotil, Dr 11
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Idaho Power Company
1 or useful (other than replacements2 budgeted under the maintenance and
3 repair provis j-ons of this Agreement ) ,4 the Operator shall have prepared a cost5 estimate of such cap j-tal addition and,6 if the parties agree, proceed with
7 construction and installation, the
8 costs thereof to be paid one-third by
9 Idaho and two-thirds by Pacific unless
10 otherwise agreed to at the time.
111,2 Articles 5 and 6 of the Operation Agrreement,
13 Expense of Operation, Maintenance, Repairs, and
74 ReplacemenLs and Payment of Operating Expenses, also
15 contaj,n sections related to the payment of costs at the
76 Jim Bridger Plant. Section 5.1, for example, outlines
1-'7 certain operating expenses attributable to the Jim Bridger
18 Plant ("Operating Expenses"). Section 5.4 then
1,9 establishes a process for the review and approval of the
20 budget as follows:
2L On or before October 1 of each year,
22 Pacific shall submit to fdaho a budget
23 of its estimate of Operating Expenses24 by calendar months for the calendar
25 year beginning January L next
26 following. Such budget shall be
27 subject to approval by ldaho, which
28 approval shall not unreasonably be
29 withheld. If such approval is not
30 given by November 1 in any such year,
31 the parties shall- agree upon a revised
32 budget not later than December 1 of
33 such year. Each budget sha1l include
34 such items of expenditures for
35 replacement and repair of Project36 facilities as are normal to projects of37 a similar character and shal-l provide
38 an adequate contlngency item for
GROW, Dr L2
Idaho Power Company
20
emergency repairs and replacements.
Pacific will submit any budgetrevisions which changes the budget by10? or more during any calendar year
which fdaho shall promptly consider and
which shall similarly be subject to
approval by Idaho.
ldaho Power representatives have been, and continue to be,
fulIy engaged wlth the operating partner, PacifiCorp, to
provide a thorough review of the cosLs and benefits
assocj-ated with the installation of the Bridger SCRs
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13 according to the provisions of the Operating Agreement
o.PIease describe the interactions that have
been taking place between the Company and the operating
partner, PacifiCorp, in regard to the SCR project.
A.The Company and PacifiCorp have been
discussing the Regional Haze regulations and their impact
on the Jim Bridger Plant since the EPA promulgated the
Regional Haze Rules (40 CFR Part 51) in 1999. Most
recently, senior officers of Idaho Power and PacifiCorp met
at the Jim Bridger P1ant, discussed the SCR approval
process and contemplated the provisions to be included in a
"Limited Notice to Proceed" for the Engineerj-ng,
Procurement, and Construction ("EPC") contract. A
subsequent meeting between Company represent,atives and
PacifiCorp occurred to review the SCR procurement process,
bidders, drawings, evaluations and recomrnendations on the
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EPC contract. PacifiCorp and the Company continue to have
communications on the SCR project.
O. How wiII the investment in the SCRs impact the
economic viability of the .Iim Bridger Plant as compared to
other resource alternatives?
A.To determine the economj-c viability of
installing the Bridger SCRs, Idaho Power prepared the Coal
Unit Environmental Investment Analysis ("CoaI Study") which
is included as Exhibit Nos. 5 and 6 to Mr. Harvey's
testimony. The CoaI Study analyzed the SCR j-nvestment at
Jim Bridger Units 3 and 4 as part of a larger analysis
conducted for all four units at the Jim Bridger Plant and
the two units at the Va1my plant.
The methodology used in the CoaI Study examined
future investments required or reasonably anticipated for
environmental compliance for t.he existing coal units.
Those investments were then compared to the costs of two
alternatives: (1) replace such units with combined-cyc]e
combustion turbines or (2) convert the existing coal-fired
units to natural gas. For the complete evaluation, Idaho
Power used a combination of third-party analysis, input
from the operating partners of each coal plant, and a final
economic dispatch analysis conducted by the Company to
assure a complete and fair assessment of the alternatives.
GROW, Dr 74
Idaho Power Company
22
1 Q. Do you believe the CoaI Study results support
2 retrofitting Jim Bridger Units 3 and 4 with SCRs?
3 A. Yes. As outlined in greater detail in Mr.
4 Harvey's testimony, the CoaI Study supports retrofitting
5 Jim Bridger Units 3 and 4 with emissions control equipment
6 to allow ongoing coal-fueled energy production from this
7 facility through the study period as t.he least-cost,
8 adjusted for risk, outcome for customers.
9 IV. CPCN A}ID RATEI{AKING IRE]ATLTENIT
10 O. Why r-s the Company requesting a CPCN and
11 binding ratemaking treatment under ldaho Code S 61-541 at
12 this time?
13 A. The Company is requesting a CPCN and binding
L4 ratemaking treatment under Idaho Code S 6L-541 for the SCR
15 investment because of the magnitude of the j.nvestment, the
16 uncertainty surrounding coal-fired generation in today's
71 political and social environment, and the amount of
18 interest expressed by stakeholders. With the magnitude of
L9 the investment and the changing climate for investments in
20 coal-fired generation, the Company has chosen to request a
2l CPCN even though it does not believe it is required to do
22 so by ldaho Code S 6l-526. In this way, a public process
23 is initiated to provide the Company, Commission, and
24 interested parties a regulatory forum to fully vet these
25 contested issues.
GROW, DI 15
Idaho Power Company
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o.Please explain further what you mean by
"today's political and social environment.
A.The political uncertainty surrounding the
ongoing operation of coal-fired resources has been a
reality for many years now, complete with discussion about
cap and trade legislation, addition of a carbon tax, etc.
The Company has experj-enced a number of events in recent
years that attest to the heightened sensj-tlvity to the
issues surrounding coal-fired generation. For example, in
the Company's last general rate case in Oregon, the
Citizens' Utility Board of Oregon objected to the Company's
proposal to recover a prior investment in Jim Bridger Plant
pollution control equipment. Over a year later, even
though the Public Utility Commission of Oregon (*OPUC")
found that the Company's $400,000 investment in
environmental controls was not imprudent nor caused harm to
Oreg'on customers, the OPUC stated on page 7 of Order No.
13-132 that the Company "failed to exercise the reasonable
standard of care" they expected utilities to exercj-se as
co-owners of a generation facility. Thus, to ensure future
compliance with that standard, the OPUC found that a one-
time disallowance to management expense equivalent to 10
percent of the Oregon portion of the investment was
appropri-ate.
GROW, DI 16
Idaho Power Company
24
O. tdhat are other experiences the Company has had
that indicate a changing political and social environment
regardinqf coat-fired generation?
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A.fn its review of the Company's 20LL IRP filing
in Oregon, the OPUC would not acknowledge any fRP provision
relating to new investments in coal plants until the
Company completed a study of its coal invest.ment compliance
costs and other parties had the opportunity to comment on
the study. fn Order No. l2-L11, the OPUC directed Idaho
Power to complete an evaluation of environmental compliance
costs for existing coal-fired plants. Action Item L1 in
Appendix A of Order No. 12-1,7 7 stated:
In its next IRP Update, Idaho Power
wi I1 include an Eva luat i on of
Environmental Compliance Costs for
Existing Coal-fired Plants.The
Evaluation will investigat.e whetherthere is flexibility in the emerging
environmental regulations that wouldallow the Company Lo avoid early
compliance costs by offering to shut
down individual units prior to the end
of their useful lives.The CompanywiII also conduct further plant
specific analysis to determine whetherthis tradeoff would be in the
ratepayers' interest.
RecentIy, when the Company filed an informational
copy of its zO1-L IRP Update with the Commission under
Docket No. IPC-E-I1-11, environmental groups expressed
concern regarding the use of coal-fired power generation by
Idaho's regulateC electric utilities and plans by those
GROW, Dr 11
Idaho Power Company
25
1 utilities to make significant j-nvestments in the coal
2 plants to keep them in compliance with state and federal
3 regulations. These groups believed a rigorous review and
4 public evaluation of additional coal plant investment
5 should occur, and even suggested a CPCN proceeding.
6 Q. During the Company's development of the 2073
7 IRP, were there other indicatj-ons of the changing social
8 and politlcal- concerns with regard to coal-fired
9 generatlon?
10 A. Yes. Over the course of a year, the Company
11 involved representatives of the public in the resource
L2 planning process. On a monthly basis, the Company met with
13 members of the Integrated Resource PIan Advisory Councll
14 (*IRPAC"), which included representatives from the
L5 political, environmental, and customer sectorsr ds welI as
16 representatives of other public-interest groups. The IRPAC
71 actively participated throughout the resource planning
18 process. Members of the IRPAC representing the Idaho
19 Conservation League and Boise State University suggested an
20 additional resource portfolio which eliminated the
2t Company's involvement in all of its coal-fired generation
22 plants be included and analyzed as part of the 20L3 IRP.
23 In addition to the resource portfolio suggested by
24 the IRPAC members representing the Idaho Conservation
25 League and Boj-se State University, Idaho Power developed a
GROW, DI 18
fdaho Power Company
26
1 resource portfolio that was derived from the study of the
2 Idaho Power coal investment compliance costs. The resource
3 portfolio was also analyzed as part of the 20L3 IRP.
4 During the development of the 201,3 IRP, NV Energy
5 announced its intention to remove coal from its portfolio.
6 fdaho Power is a one-half owner of Valmy and NV Ertergy is
7 the operating partner. As a resul[ of ttrat announcement,
8 Idaho Power included two additional resource portfolios
9 designed to estimate the effects of closing Valmy. The
10 20L3 IRP is included as Attachment 4 to the Application
11 filed contemporaneously with this direct testimony.
12 A. What were the results of the IRP's analysis of
13 the four coal-replacement scenarios?
14 A. The IRP's analysis supported the Coal Study in
15 that the coal-retirement portfolios are not the least cost
16 alternatives. The cost to replace the coal resources is
L7 simply too high.
LB 0. Are emission control investments at Va1my part
L9 of the Company's current CPCN request?
20 A. No. While the Valmy plant is not a part of
2l the Company's request for a CPCN for the SCR investments at
22 Jim Bridger Units 3 and 4. the Nevada legislation
23 associated with NV Energy's announcement is yet another
24 indication of the changing climate with regard to coal-
25 fired generation.
GROW, DI L9
Idaho Power Company
27
1 Q. Do you believe that the installation of the
2 Bridger SCRs represents a prudent investment that is in the
3 best interests of the Company and its customers?
4 A. Yes, I do. As supported by the comprehensive
5 analyses presented in this case, the investment in the
6 Bridger SCRs represents the lowest cost and least risk
7 option of serving future customer demands. The SCR
8 investment wil-l allow the Jim Bridger Plant, the Company's
9 lowest cost thermal generation resource, to continue
10 providing customers with reliable energy and wilI maintain
11 the Company's diverse portfolio of generation resources.
12 O. Does this conclude your direct testimony in
13 this case?
L4 A. Yes, it does.
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Idaho Power Company
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HEDRTCK
P.O. BOX
COURT REPORTING
578, BOTSE, ID
GROW (Di)
IPC
(The fol-Lowing proceedings were had in
open hearing. )
I have just a
Commi-ssion as
was filed.
o.
A.
o.
A.
a.
is that a
some other
A.
NORDSTROM: With
short questj-ons
events that have
MS.
few
to
the Commission' s indulgence,
for Ms. Grow to update the
occurred since her testimony
page 11 of your testimony, you state that the EPA has indicated
it will sign a notice of final rulemaking on November 21,201,3,
making these emj-ssj-on reductj-on requirements at Jim Bridger
Units 3 and 4 federally enforceable as well.
Subsequent to the filing of your testj-mony, has
the EPA indicated that this date may change?
COMMISSIONER SMfTH: Okay.
BY MS. NORDSTROM: Ms. Grow, on the top of
They have.
How so?
They are asking for a deIay, although we don't
And when you say that they're asking for a deIay,
date that they set by themsel-ves or is that set by
venue?
That was part of a court proceeding.
29
know the specific timeline that they are asking for. Some of
the informatj-on we have appears to indj-cate maybe December or
January, but they are they're asking for a delay beyond
November 2tst.
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HEDRICK COURT REPORTING
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IPC
O. So they're askJ-ng the Court for permission to
delay it?
A. Correct.
O. I see. How will that impact Idaho Power's
decision-making regarding the selective catalytic reduction
control investments at Jim Bridger Units 3 and 4?
A. WeII, w€ still have the binding settlement
agreement with the State of Wyomj-ng that requires the
j-nvestment in the SCRs by the dates that I have in my
testimony, so it rea11y does not change the compliance dates.
Irile cannot operate beyond those dates per the Wyoming settlement
agreement.
O. Thank you.
MS. NORDSTROM: I have no further questions, and
tender this witness for cross-examination.
COMMISSIONER SMITH: Thank you.
Ms. Sasser, do you have any questions?
MS. SASSER: I do. Thank your Madam Chairman.
CROSS_EXAMINATION
BY MS. SASSER:
O. Good morning, Ms. Grow.
A. Good morning.
O. On page 15 of your direct testimony where you
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HEDRICK
P.O. BOX
COURT REPORT]NG
578, BOTSE, rD
GROW (X)
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begin discussing CPCN ratemaking treatment, you tal-k about how
the Company didnrt feel- l-ike it needed to file for a CPCN in
this case but did so anyway. fs that correct?
A. Well, we fel-t like it wasnrt required but we did
so for the reasons I stated in my testimony: That it is a very
hotly debated j-ssue and we feel l-ike this was a good venue, lt
was requested by some of the groups that we have, such an
opportunity to vet the issues.
O. So is it your opinion then if the Commj-ssion
werenrt to grant binding ratemaking treatment under Idaho Code
6L-541,, would the Company proceed?
A. We would have to take it under advisement. V[e
would have to understand why it was not approved and,
certainly, it is it j-s a big investment and it is a very
controversial one, so we woul-d have to take that under
advisement. It would put us in a very tough spot, it would put
our customers in a tough spot, in that we wouldn't have those
resources available if we didn't proceed; but we would have to
do so with some more consideration.
a. So for clarification, I was askj-ng specifically
about the binding ratemaking treatment statute and not about
the CPCN alone. But you're saying that without the binding
ratemakj-ng treatment, your answer would apply?
A. ft would. And to restate it, we woul-d have to
take it under advisement and understand why those decisions
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HEDRICK COURT REPORTING
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IPC
were made, and then we woul-d decide the ultimate steps we would
take
A. Okay. Thank you. Have you reviewed mister -- my
witness, Mr. Louis's, testimony?
A. I have.
O. And would it be correct to summarize his position
as only granting binding ratemaking treatment on those costs
that are known and measurable?
A. That is my understanding of his testimony, yes.
O. So why do you believe that it would be prudent
for this Commission to grant binding ratemaking treatment for
any costs that are not already known and measurable?
A. We11r we believe that werve put the best case
forward with the best information that we have at the time,
that we have now, so there will be costs that are not
completely known now but for those costs that have that we
know we're going to have to spend something, you know, we
belj-eve we put that case forward. So we believe that we've
identified to the best of our ability those costs. And that's
our case, thatrs our request.
O. Okay. Thank you. That's all I have.
COMMISSIONER SMITH: Thank you.
Mr. Mi11er.
MR. MILLER: Thank you, Madam Chairman.
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HEDRICK COURT REPORT]NG
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GROW (X)
IPC
CROSS-EXAMINATION
BY MR. MILLER:
a. Good morning, Ms. Grow.
A. Good morning.
O. Ms. Nordstrom asked you a couple of supplemental
questions regarding the Environmental Protection Agency and
when they might do somethj-ng, and you gave a answer. Was your
answer based on something that EPA has put in writing?
A. I am not sure if they put it in writing. I think
it's been a combination of discussions not that I have been
privy to but it has been articles, and so it's not specific
knowledge. It's just what we're gleanj-ng from what j-nformation
is avail-ab1e pub11cly.
O. So what, exactly, is the source of your
information on that point?
A. It's j-n discussions with the experts in my
company.
O. So to your knowledge, there isn't a court
pleading or a statement in writing from EPA indicating their
present intentions?
A. I'm not aware of one. There may be one.
O. On the witness stand in front of you, is there a
blue packet of papers entitled "Snake River Alliance Hearing
Exhi-bits" ?
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HEDRICK COURT REPORTING
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A. There is not.
MR. MILLER: Could I approach the witness?
Apparently, I gave one to everybody except the witness.
MS. SASSER: ,Joe, I don't have one.
COMMISSIONER SMITH: You may.
O. BY MR. MILLER: My apologies.
A. No worries. Thank you.
MS. SASSER: Thank you.
O. BY MR. MILLER: And do you have your direct
testj-mony with you?
A. I do.
0. Could I direct your attention to page 5 of your
direct testimony. With me?
A. I am.
O. Starting on page 5 and going on from there, you
have a discussion of the diversity of the Idaho Power Company
generation portfolio. Is that correct?
A. Thatrs correct.
O. And your discussion there evaluates portfolio
diversity based on megawatt capacity?
A. Correct.
A. Are there other ways to eval-uate resource
polio -- portfol-io diversity?
A. Wel1, the itrs a standard industry practice
that you look at the nameplate capacity of your resources as
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you describe your portfolio, and the types of fuels as well.
A. Okay. Would you now turn to the blue packet of
exhibits and look at Snake River Alliance Exhibit 401-?
A. Uh-huh.
O. And is this a publication of ldaho Power Company
from its Web site?
A. It appears to be.
0. Exhibit 401 j-s a correct me if I'm wrong a
evaluation for a assessment of resource portfolio diversity
based on fuel mix as opposed to capacity. Correct?
A. Right.
0. And there is a littl-e graph in the middle of the
page, and bel-ow that a indication of fuel mix by percentages?
A. Correct.
a. And to the best of your knowledge, is this a
correct
Well-, to the best of your knowledge, is the
materj-al published here by Idaho Power Company correct?
A. It appears to be for what it is.
O. Right. Let me direct your attention to page 10
of your testimony 1f I could, and just so that it's clear in
the record, what dates or l-et me dj-rect your attention to
lines 21, and 22. The installation dates for these investments
that the Company is hoping for is the end of 2075 and the end
of 2016. Is that correct?
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GROW (X)
]PC
A. That's correct.
A. Now let me direct your attentj-on to page 16,
starting on line 3, and there and in the following pages you
start a discussion of what you characterize as political-
uncertainty surrounding the ongoing operation of coal--fired
resources. Ts that correct?
A.Basically.
A. And as I understand, your testimony was fil-ed on
,June 28, 20L3. Is that correct?
have there been additional- occurrences that add to the
political uncertainty surroundJ-ng coal-fired resources?
A.
a.
A.
o.
That I s correct.
Since the time of the filing of your testimony,
I beLieve there has.
Would you look at Exhibit 403, and I'11 represent
to you that this is a copy of an executive order j-ssued by the
Presi-dent of the United States, directing the Environmental
Protection Agency to develop greenhouse gas emission regulatlon
for existing coal plants, with the proposed regulatJ-ons to be
j-ssued not later than June 14th and enacted by and adopted by
June of 20L5.
We, of course, at this moment donrt know what
those regulations might look like or even if -- whether, due to
Iega1 challenges, they may be adopted by those dates, but would
you agree that pendency of federal emissions regulations adds
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to the political uncertainty surrounding the operation of
coal-fired resources?
A. I would.
O. Woul-d you now look at Exhibit 404. Are you
familiar with the publication entitl-ed "Clearing Up"?
A. I am.
O. And is it, in your mind, a reputable source of
information regarding energy and utili-ty news in the Pacifi-c
Northwest?
A. I woul-d say so.
O. The item I'm interested in is Item No. 4, which
is at the bottom of page 1 of three, and then continues on
pages 2 and 3 of three. And without going into detail-, does it
appear that your majority partner in these projects is facing
some utility some regulatory headwind in Oregon?
A. I would agree.
O. And would you agree that that adds to the
political uncertainty surrounding the ongoing operation of
coal-fired resources?
A. Certainly for PacifiCorp.
O. Now let me turn your attention to page 18.
A. Of what?
O. Of your direct testimony.
A. Okay.
O. And starting on line -- with the question on
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line 6 and then continuing into the next page, you have a
discussion of the Company's 2013 integrated resource plan
process. Would that just be a faj-r summary of that bl-ock of
testimony?
A. I would say so.
O. As I understand it, the Companyrs 2013 integrated
resource plan was filed with the Commission either
simul-taneously with the filing of the present case or about the
same time. Am I correct on that?
A. I belj-eve you are.
a. And in the j-ntegrated resource plan case, it's my
understanding that that case is still in progress. I believe
comments were due this week or sometime around now. Is that
your understanding?
A. That's my understanding.
0. So at this moment, the Commission has not
eval-uated the Companyrs 201,3 p1an, and has not decided whether
to acknowledge it or do something else with it. Is that
correct?
A. We1I, I wouldn't say that I have any knowledge as
to whether or not they have evaluated it, but they certainly
have not acknowledged it.
0. Vf,ell letrs assume for the moment just for talking
purposes that the Commission hasn't yet reviewed a1l of the
comments and gone through its decision-making process with
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respect to the integrated resource plan. And just so I'm sure,
you're not suggesting, are you, that the Commission decide in
this case issues that are pending before it j-n the integrated
resource plan case?
A. Actuallyr we are. We are, because our analysis
in the IRP, the coal study, and as wel1 as our application for
this, we believe that it is the low cost, least risk to our
customers in terms of reliabi-1ity, and the lowest cost
portfolio at this tj-me. So certainly it is really hard to
speculate when j-f we were to say we were not going to
continue coal operations on these two plants because we decj-ded
not to make this investment, we would only have, you know, the
unj-verse of what's available today to replace that resource of
those two units, and it would put our customers at great risk
in that it woul-d -- it would be a cl-iff that we'd have to just
jump off of rather than have a glide path.
So we be1ieve that these lnvestments help on a
glide path to reduce our carbon emissions over time, but to
simply prematurely shut them down for to avoid these
investments we would see is great risk to the customers.
a. Wel-l-, would you agree wi-th me that, dt a minimum,
this creates something of a dil-emma for the Commissj-on in terms
of deciding where it decides things?
A. We1I, actua11y, I don't think that. I think that
we have run the fRP given the best information, the best
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analysis we have, that demonstrates a very compelling case as
to why we would keep coal in a portfolio for the analysis term
of the IRP.
And there's al-so the point that the IRP
acknowledgment doesn't necessarily approve any of the resources
in the portfolio.
O. The are you aware of how many parties are
participating in the integrated resource plan case?
A. Personally, I donrt know. I know of at least a
couple.
a. Would it surprise you to know that the diversity
of viewpoints that appear in the integrated resource plan case
is greater than the diversity of viewpoints that have appeared
in this case?
A. Irm sorry, what was your question?
O. Inartfully said, but would it let me try it
this way:
Would it surprise you to know that the diversity
of viewpoints represented in the integrated resource plan case
is greater than the diversity of viewpoj-nts represented in this
case?
A. WeIl-, the IRP covers a wide -- much wider range
of issuesr so I think -- and we deal with diversity of opinion
every day, so Irm not exactly sure what you're getting to,
comparing to what.
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O. Thanks for your tj-me. Thatrs all I have.
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair.
CROSS-EXAMINATION
BY MR. RICHARDSON:
O. Good morning, Ms. Grow.
A. Good morning.
O. It is your understanding, isn't it, that the
Industrial Customers of Idaho Power is not opposing the
granting of the CPCN for Idaho Power in this case?
A. That's my understanding.
O. V0hy do you think that Idaho Power does not need
to fil-e for a CPCN in this case, a certificate of public
convenience and necessity?
A. Well, just according to the rules, it wouldn't
have required it.
O. And what do you base that understanding on
specj-f ica11y?
A. Based on the interpretation that f received from
my 1egaI and regulatory staff.
MS. NORDSTROM: As Ms. Grow poj-nts out, thj-s is
calling for a legal conclusion and she has relied on the advice
of Counsel.
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O. BY MR. RICHARDSON: Would you turn to page 15 of
your testimony, line 20, where you state that the Company has
chosen to request a CPCN even though it does not believe it is
required to do so by Idaho Code 61,-526.
So, that I s not your testimony; that I s someone
else's testimony?
A. No, that's my testimony, based on the 1egaI
opinions from the Idaho Power experts.
O. So under a normal, regular old upgrade to your
pIant, you woul-dn't fil-e for a CPCN?
A. It woul-d depend.
O. on?
A. The factors of that situation.
O. So what's different about this from a standard,
non-CPCN upgrade?
A. Wel-1 just the controversial nature of it, the
magnitude of the expenses.
O. Anything el-se?
A. Not that comes to mind.
O. So yourre not concerned that future Commissions
may find this to be an improved investment?
A. WeII, f think that the test would stj-Il be what
we knew now when we woul-d come in laterr so it's based on this
data statr so to me it's just werre having the conversation now
not then, but it would be based on the same data.
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O. So yourre not concerned about future regulatory
disapproval, disallowance?
A. I'm not speculating on that.
O. So why is the Company then asking for binding
ratemaking treatment in this case?
A. So that we understand where our Commission is on
this type of fuel and this investment.
O. So a regular o1d CPCN application would answer
those questions, wouldnrt 1t, where this Commission stands on
those issues?
A. To the extent of the CPCN, y€s, but we also think
that we would }ike to have some understanding of how they woul-d
view the expense.
0. Now --
A. And that's what the binding ratemaking would
create, y€s.
O. How this Commission understands the expense?
MS. NORDSTROM: With this line of questionJ-ng,
this witness does not have a 1egaI background and this is
interpreting Idaho Code 61,-541,, so I would object to this line
of quest j-oning of this wj-tness.
MR. RfCHARDSON: Madam Chair, I haven't
referenced the code section whatsoever. Irm asking the witness
about her testi-mony on page 15. If the witness isn't able to
respond to questions about that section of testimony, maybe we
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ought to strike it.
COMMISSIONER SMITH: We11, Mr. Richardson, I'm
going to overrule the objection and allow you contj-nue.
MR. RICHARDSON: Thank your Madam Chair.
COMMISSfONER SMITH: P1ease don't ask for legal
conclusions.
O. BY MR. RICHARDSON: So you're asking for a CPCN
in this case. Correct?
A. That's correct.
O. And you're also asking for what you call binding
regulatory treatment?
A. That's correct.
O. And the binding regulatory treatment does what,
in your mind?
A. It allows us to move forward, knowing that we
have the support of the Commission and for these two resources
or these two investments.
O. What about future Commissj-ons?
A. In terms of what?
O. What about future Commissions? Let me ask you
this way:
Eirst of all, would you agree wj-th me that
binding regulatory treatment shifts risks to the ratepayers
away from Idaho Power's shareholders?
A. To the extent that we are trying to understand
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what our reguLators and stakeholders think about these
investments before we make them, we think that reduces risk for
our customers and our company.
O. How does binding regulatory treatment reduce risk
for your ratepayers?
A. Because if we decide for whatever reason not to
proceed with these investments because we are therers just
too much uncertainty about whether or not we could get
recovery, then we would have to shut down those plants, and
that provides great risk to the customers.
O. So if you don't get binding regulatory approval,
you're going to shut down the plants?
A. That is one option. Irm not saying we wifl; I'm
saying that is part of the risk that f would say faces our
customers.
0. And you've done an analysis of that option?
A. Yes.
A. And where is that?
A. ft's in the 20L3 IRP.
a. So if this Commissj-on gives binding ratemaking
treatment to this investment, and you go ahead and construct
the pollution control equlpment you're proposing to bui1d, and
a year after the equj-pment is installed and buil-t the plant is
closed for whatever reason, are the ratepayers still on the
hook for that investment?
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A. WeI1, I don't see a future where that woul-d
happen. And we wouldn't it doesn't go into rates
immedj-ateIy.
O. You do see a future where that could happen,
because you've studied the closure of the plants?
A. Right, and j-t was
O. And if the plants close and you had binding
regulatory treatment, are the ratepayers still on the hook for
that investment?
A. If we proceeded with the rate case to put it in.
O. Is that a "yes"?
A. Wel-I, it's it depends if that's what we do.
I'm sayj-ng that you also have to consider the
risks of what resources we would have to replace those
resources with, so itrs not just the ratemaking risk that the
customers would be exposed to.
a. So I'11 re-ask the question and see if we can get
a direct answer:
If this Commission gi-ves binding ratemakj-ng
treatment to this investment, you construct the facilj-ties, a
year after the facilities are constructed the plant is closed
for whatever reason, are the ratepayers stil-I goi-ng to pay the
tab for that equipment?
A. If we go in for the rate case, y€s.
O. OkaY.
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MR. RICHARDSON: That
COMMISS]ONER SMITH:
MR. OTTO: Thank you,
's all- I have, Madam Chair
Mr. Otto.
Madam Chai-r.
CROSS-EXAMINATION
BY MR. OTTO:
O. Ms. Grow, Irm going to start on page 4 of your
testimony. Towards the bottom on line L9, you state that you
and Mr. Harvey have been talking for several- years about the
Bridger coal and then the coming clean air regulations?
A. Among other things, yes.
O. Yes. So if it's been several years, why was this
not discussed in the 201-L integrated resource plan?
A. Well-, we werenrt necessarily talking about this
specifically. There's been a 1ot of things that have gone on
since 201-0 when -- that we woul-d have been into the IRP
planning process. And given when we were talking about these
types of things, we have there are sorry, I'm losing my
train of thought.
The Jim Bridger power plant is the least cost,
most reli-abl-e plant in our thermal fleet, and so when we were
discussing these regulations that were getting worked out, it
would have there was not a scenario where we believed we
would need to shut them down instead of investing in these
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resources or in these projects, in these pollution control-s.
O. Are you saying that since 2010, the Company's
never considered a realistic scenario to phase out of Bridger?
A. Based on the fact that it is a Iow cost, highly
reliable, high capacity, dispatchable resource, it woul-d be the
Iast resource in our therma] fleet that we would remove.
O. So are you saying that regardless of what
pollution control-s are coming down the l-j-ne, the Company was
just going to commit to spending that money?
A. No, thatrs not what I'm saying.
What Irm saying is when we did the analysi-s
looking at what was being discussed, we are looking at each one
of them and saying, you know, is that is that something that
we can justify, j-s that something that we can Ij-ve with, and
the answer was "yes. "
0. Woul-d that decision-making process have been more
transparent or more incl-usive by using the IRP process?
A. I -- f 'm not sure. And at the time I can't
articul-ate exactly what we knew back then. So we rea11y try to
make the fRP process transparent and very interactive. So I
can't I can't answer what we would have known exactly and
what we would have brought to the IRPAC to decide. I
understand that there is there are people that reaI1y don't
like coal and want it out of our portfolio.
And so I think the discussj-ons, you know, are
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more about, first of all-, note that we have no future coal
plants in our IRP anywhere, so we understand that there is a
glide path here; and we have you know, there's al-I kinds of
regulations that are continuing to be discussed. And so we
we plan to bring those kinds of dj-scussions and we're starting
now.
You know, so much has changed since 20L0. This
very hearing is to open the discussion of how, exactly, are we
going to do this glide path.
O. So in 2010, the State of Wyoming proposed to
install selective catalyti-c reup- or r not reuptake
inhibitors SCRs?
A. Right.
O. Wel-come to the world of too many acronyms when
you combine the Cl-ean Air Act and utility regulation.
A. Right.
O. So in 2010, the State of Wyoming proposed to
instal-l SCRs on these Bridger units in 2015 and 2016?
A. Uh-huh.
a. You brought that into the IRP as into the 20L3
IRP?
A. Well-, to the extent we checked the resources in
the portfolio.
0. So you knew in 201-0 this writing was on the wall?
A. Right.
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O. You chose not to bring that up in the 20LL IRP?
A. I believe thatrs so.
O. In the 20L3 IRP, that information was presented
as an update to 20LL. Why wasnrt it part of the 2013 IRP, an
integral part?
A. The I'm sorry, which part?
O. Weighing the resource alternatives, investment
al-ternatives, specifically to Bridger's Unit 3 and 4. Why
wasn't that an integral part of the 20L3 IRP when the Company
has known about it since 2010?
A. I think I would say that it's because we -- when
we were lookj-ng at the analysis, there's really only high cost,
high risk replacement, so it wouldn't have made sense.
And in the '13 IRP we did do the portfolios that
were requested on removal of coal, so we are starting to have
those conversations, but at the time there wasn't reaIly
another option that we saw that was going to make sense, and so
the current resource portfolio of the resources that are on the
ground, it wasn't a decision that we felt made sense. So we
werenrt -- we weren't contemplating removing it from the
portfolio at the time.
O. For how many IRPs has the Company considered
Boardman to Hemingway?
A. Oh, my goodness. I'm not sure I know. Multiple.
O. Because it's uncertain?
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A. Wel-I, y€s.
A. But Bridger was clearly certain?
A. In what way?
O. Wel-I, you just said you never saw a scenario
where Bridger would be out of the system?
A. Within the time frame of the IRP, yes. But
Boardman to Hemlngway i-s not buiIt, so its uncertainty centers
around mostly permitting at this point in time. Bridger is
here and operating, working and providing a critical part of
our reIiable system.
O. But the required pollution controls are not yet
built either?
A. Correct.
O. Just like Boardman-Hemingway?
A. Correct. But in terms of cost differences, I'd
have to say that Boardman to Hemingway is a much blgger
proj ect.
O. Why did fdaho Power bring this j-ssue to the fdaho
Commission after entering the engineering procurement and
construction contract?
A. We signed the limited notice to proceed after
dj-scussions with our partner on how we were going to meet the
compliance deadline of the Wyomlng requirement, and without
compressing the schedule to the point that our customers incur
additional- costs.
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A. So PacifiCorp brought this same issue to the
Wyoming Commission more than a year ago. Is that correct?
A. I believe so.
a. But you didn't fj-nd you had sufficient
information for Idaho Power to bring the issue to the
Commission then?
A. WeIl, it's been sort of an evolution as we go
along where we felt like we were hearj-ng from many of you in
this room that you wanted to have this discussion, and we were
invol-ved in the IRP process as wel-l as the coal- study process,
so some of that needed to run its course so we could link up
the data inputs, run those analyses, and have the whole package
so that we werenrt having timing differences in the studies.
So some of it was just a factor of having the interest in the
stakeholders, and part of it was running our analysis and
having it ready to go, and we have -- we belj-eve that we have
time to have this conversation before we need to sign the final
notice to proceed.
o.
A.
0.Plenty of time.
Ms. Grow, does
system of resources that work
and capacity demands?
A.I woul-d say so.
On December lst?
That's correct.
Idaho Power operate an integrated
together to meet Idaho's energy
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O. So in the application, Attachment 4 is the IRP?
A. Uh-huh.
A. And on page 60 of that -- which I can help the
parties out here. I have just copied out that page and maybe
I'11 hand it around too so people see this instead of having to
flip all the way to page 60 of Attachment 4.
So while those are being passed out, Ms. Grow,
I'm also going to ask you about something on page 8 of your
testimony, and on l-ine 15 through 19, you state that Bridger
Idaho Power's share of Brldger is approximately 625 average
megawatts. Do you see that?
A. f do.
O. Now, is that for alI the Bridger plant as a
whole?
A. That j-s our share of the Bridger p1ant.
O. Of the whole plant?
A. Yes.
O. Right. So each unit would be about a quarter of
that total?
A. Correct, roughly.
O. And so I did some quick math. Thatrs about 156
average megawatts per unj-t?
A. That's in the ba11park.
O. Okay. So now I passed around that piece of
paper. And what that shows is from the is the average
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the resource bal-ance by average megawatts for the energy
portion of the IRP. Is that a good characterization of that?
A. I believe sor yeah.
A. Can you identify where on that chart
WeI1, first of all-, being above zero means you
have more energy than is required to meet the 7Oth percentile
planni-ng requirements?
A. On average.
O. On average. Can you identify where on that chart
and what year the Company -- the resources dip sorry, this
is I want to get thi-s right because it's a complicated
question.
Can you identify where on the chart the deficit
posJ-tion dips below the 200 average megawatt l-evel?
A. On this chart, it does not.
O. So at no time in the planning period is Idaho
Power less than 2OO average megawatts j-n excess?
A. WeIl, thatrs where you have to be careful,
because averages can lead you down a path. Averages -- we have
to deal with it on a second-by-second basis, and so having
available resources so we can respond to contingencies, respond
to unexpected weather, unexpected 1oad, unexpected loss of
another resource. So if you're heading towards we don't need
those Bridger units, that is not a correct assumption.
O. So whatrs the purpose of having the 70th
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percentile and average energy planning criteria?
A. WeII, it's a place to analyze it. But it doesn't
necessarily set the absolute megawatts of resources that we
need in terms of -- in terms of nameplate capacity.
So if any of these years that we're looking at,
there could very wel-l be a situation where we're 600 megawatts
deficit because of a contingency. So we're looking at
averages, that's to sdy, weII, you know, if you're crossing a
river and one foot is on the beach and one foot is in the
river, you can stil1 drown, it can be very deep. So we have to
be careful- with averages.
O. So what you're speaking to is the need for a
reserve margin above kind of your so you predict your loads
and then there's a reserve margin, correct
A. Uh-huh.
O. to kind of account for those.
Now, my understanding of the IRP is you use the
7Oth percentile Ioads and 70 percentile water as a planning
margin?
A. For energy.
O. Right. So that's contingencies are captured in
that graph?
A. To some extent. I'm just saying you have to be
careful with averages.
O. Eair enough. But we're talking about just a
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planning criteria the Company has chosen?
A. Uh-huh.
A. But what you're saying is that this average
energy, that excess thatrs out there, that's just not available
to absorb any reductj-on in coal generation?
A. The nature of the megawatts is very important as
we11, so depending on what resource these megawatts come from.
Al-so, pure energy doesn't necessarily cover that. So I wou1d
say it would be it would be great risk to the system and to
the customers that we would get rid of those resources and not
have them avail-able.
And it's not just this chart that would decide
that. There are other factors that you would have to consider.
O. Which other factors?
A. Reliability, dispatchability, capacj-ty factor.
O. Are those factors that could be explored in the
integrated resource planning process?
A. Sure.
O. Would it have benefited the Commission and
stakeholders to begin talking about that when the Company knew
in 2010 that this was the path we were headed down?
A. We11, you are talking about two different thlngs.
In 2010 you know, we updated our load forecast every year.
Lots of things change. So to take the IRP all the way back to
201,0, Irm not sure thatrs a good comparison. This is driven by
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lots of factors that have changed subsequent to 20L0.
O. There was another big factor is the peak hour.
Is that correct?
A. Uh-huh.
0. And that's rea1Iy what drives resource planning?
A. Thatrs true.
O. So are you aware that on November 4th, Idaho
Power filed to change the capacity deficit perj-od for the
surrogate avoided resource methodology?
A. Yes.
O. Did you help review that filing?
A. I'm not sure that I did.
O. V[e]-l-, are you aware that the filing states that
Idaho Power now doesn't foresee peak hour deficiency until
202L?
A. f am aware of that.
O. But in the 201,3 IRP, that that deficit's in 2013?
A. WeII, the hard part in the IRP process, you know
very wel-l- that things change after you run the analyses and by
the time it gets published, and so there are things that have
changed subsequent to the 20L3 IRP anal-ysis.
O. Would you agree or disagree that a seven-year
change in the peak hour deficit j-s a significant change?
A. I would -- I would say so.
O. Shou1d that factor into the Commission's
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decision-making?
A.
o.
As to what?
Whether the Company adequately analyzed its
alternative options.
A.I would say we -- we absolutely have, given the
information we've had at the time. So that, again, the notion
that we woul-d now shut down l-ow cost, highly dispatchable,
highly reliable resources prematurely I think j-s a bigger
factor that would drive the Commisslon's consideration and the
impact of that. Itrs not sj-mply you can't just puII them out
of here, because this graph, you know, that these are
indicators, but it isn't the final decision-making.
And the consequences of actually taking it out of
the portfolio are also not described here. They are in the
portfolios that we ran on coal removal.
O. So to sum up, it's the Companyrs position that
the excess average energy that's shown in the IRP and the lack
of a peak hour capacity deficit until 202L that the Company now
claj-ms, both those factors, they're just simply not avaj-labl-e
in the consideration of how to structure an alternative
resource to Bridger?
A. Wel1, again, given the tj-me frames that we are
facing to meet the compliance deadlines, there aren't very many
alternatives to meet that. You canrt supply it with wind and
solar. They don't have the same operating profile. They
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don't they wouldn't provide the same sort of flexibility and
reliability that Jim Bridger Units 3 and 4 do. So so that
the notion that this this the graph that we're looking at
here, we're not saying we donrt need Bridger Units 3 and 4.
We're not saying we don't need any of our exi-sting resources.
Werre saying we don't need any new resources.
O. But what you're afso saying is the existing
resources just simply -- it's not even worth considering
whether they can absorb a loss of one or two of the Bridger
units ?
A. Based on my experi-ence, which I've been with the
Company for 26 years and I've been in operatlons for most of
those years, I woul-d be very concerned about our ability to
serve our load and keep prices reasonable if we took that out.
O. But for the past three years, you haven't chosen
to deal- with that in the IRP until now?
A.We11, I bel-ieve that we have, because we have
kept the resource in the portfolio.
o.So I'm going to move on. On page 15
Mr. Richardson covered this ground quite a bit and so f won't
go too far, but you just Ij-nes 13 through about 25, and
you're talking about the reasons why you request a CPCN and
it's uncertainty in a political environment and the changing
cIj-mate for investments in coal-fired generatlon. That's what
is driving you?
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A. Correct.
O. So on the face of this uncertainty and changing
investment climate, why should ratepayers shoulder this risk
today?
A. WeIl, ds I mentioned before, we are on a glide
path. These resources aren't going to last forever. And so we
do need to start talking about how does that glide path -- what
does it look like?
We donrt have any future coal plants in our IRP
process, you know that. And we are we're shutting Boardman
down, werre not going to burn coal there after 2020. There
is there -- we're unsure of exactly what Valmy's future is,
gJ-ven the circumstances with our partner and wj-th those units
themselves. And Bridger would just be the last one that we
would take out of the portfol j-o.
So if we were to say we're never going to invest
in pollutj-on controls -- which I will remind your pollution
controls reduce pollution, so in the near term it helps the
environmental impact, it reduces the environmental- impactr so
that we can buy some time so other technol-ogies can develop
as I mentioned before, if all we have to make the choice of how
we woul-d replace it is what exists today and then ten years
down the road something else comes that we really wish we could
have taken advantage of, this keeps these resources in the
portfolio compared to what it would cost to replace these units
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so that you would have another, essentially, Langley Gulch and
we would need to do it in two years, whi-ch I think is virtually
impossible. I think that we thj-s j-s a low cost, 1ow ri-sk
investment so that, again, the glide path, we can continue to
work on it. And, you know, pollution controls and reducing the
impact are very much part of that glide path.
So we understand, we hear your that there is al-l-
kinds of uncertainty and, you know, dislike for coal-. We
understand that and we are doing our best to move our portfolio
through this very complex and, you know, very contested time in
the best way possible, and we believe this is the best way
possible. So it isn't a statement of al-l- coal- plants and all
pollution. It's about these two units, these pollution
controls, move us forward, and thatrs our case. And we'1I be
watchj-ng and figuring out, you know, through the IRP process,
through some other public outreach, to figure you, you know,
where do we go from here.
0. So the best way forward was to present this
information to the Commission and the public in the middl-e of
the summer of 2013?
A. That's when we put our best case together, that
was when we completed our analysis, yes.
MR. OTTO: Thatrs aII f have.
COMMISSIONER SMITH: Thank you, Mr. Otto.
Are there questions from the Commissioners?
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HEDRICK
P.O. BOX
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GROW (Com)
IPC
COMMISSIONER REDEORD: Yes, I just have a couple
of questions.
EXAMINATION
BY COMMISSIONER REDEORD:
O. Ms. Grow, you have selected the EPC contractor.
Is that correct?
A. That's correct.
O. And is that selectj-on based upon your
collaboratj-on with PacifiCorp or Rocky Mountain Power?
A. Yes.
a. And in the event
I understand you've also issued a limited notice
to proceed?
A. That's correct.
O. What is the limitations on the notice to proceed?
A. It starts some of the preliminary work, and
Irm -- Tom Harvey would be better to articulate the specific
detail-s of the project, but it allows us to go forward to a
point that we wouldn't have to compress a1l- of that work into
the ful-I notice to proceed. So I thlnk it's preliminary
design, primarily.
A. Have you had discussions with PacifiCorp as to
what the case will be in the event this Commission turns you
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down for the CPCN or the binding rate treatment?
A. [f,e1Ir w€ certainly will have, depending on the
outcome. At this poJ-ntr w€ believe we have a very compelling
case, so it isnrt something we are actively working on, but
will if that's what the outcome is.
a. If this Commission did turn you down, do you
sti11 plan to go ahead with the rehab of Bridger 3 and 4?
A. We would need to take that under advisement,
depending on why it was disapproved. So I canrt sit here today
and say 1-00 percent we would or wouldn't. We would have to
take it under advisement.
0. WeII, now, there arenrt al-ternative plans in the
event that that should happen?
A. Not good alternativesr oo.
A. Thank you. I have no further questions.
EXAMINATION
BY COMMISSIONER SMITH:
a. I just had a couple, mostly on page 7, but just
to foI1ow up on Commissioner Redfordrs questions:
To me, it seems the difference is that in 2009,
there is a new statute put on the books that all-ows you to come
here and request this treatment, while prior to that, the
Company probably would have just made i-ts own decision and
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HEDRICK
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moved on?
A. I -- it's rea1Iy not in my job description, but I
wou]d assume that would be true if that statute didn't exist.
O. Okay. On page 7 at the very bottom, l-ine 25, you
reference "last Julyr" and just for clarity, that's .Iu1y of
20L2, isn't it?
A. No, I believe that was '13.
O. Because this testimony was fil-ed June 28th.
A. Oh, we1l, then I guess it must have been 'L2.
O. That's why I wanted to clear this up, because it
confused me, and then I saw when you fil-ed it and I thought,
well, it must be 201,2.
A. Thank you, Commissioner Smith. I have the
result was very simil-ar for this summer and that's why my
confusi-on.
O. Okay. And on that page in your answer that I
think starts on line 5, you're talking about diversity of your
resource portfolio. Is that correct?
A. I'm sorry, which page are we on?
O. Seven.
A. Yes.
0. So does the diversity of your resource portfolio
include your demand side measures?
A. It wou1d.
O. And so you consider those also?
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A. V[e]-l-, in the not as a generation resource.
That's handled in the load.
a. So woul-d you have been part of the decision this
year of the Company to request to suspend all of our demand
sj-de programs 11ke the air condj-tioning, recycling, and
irrigation stuff?
A. I was part of that discussion.
a. Okay. It's probably unfair to ask how that l-ooks
now.
A. Wel1r w€ were abl-e to serve the load and we have
a much more reasonable price for our customers going forward.
O. I guess we'Il find out if that if you actually
did get a more reasonable price.
A. That's fair.
a. A11 right.
COMMISSIONER SMITH: Commissioner Kjellander.
EXAMINATION
BY COMMISSIONER K.]ELLANDER:
O. Ms. Grow, you were asked several questions trying
to get at the reduction of risk associated with a decisj-on out
of the Commissj-on. My assumption is you'd be looking at
borrowing money in order to complete the upgrades at the
facility in question?
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A.It would be partly funded internally, part
externally.
A. Okay. So on the external- part, could you talk a
little bit about the benefit of having either a CPCN or some
preapproval of some of those costs from the Commission and what
impact that may have j-n terms of going out and borrowing money,
getting that capital?
A.Having that, much like we did in the Langley
Gul-ch case, having that approval helps us access capital at
much better rates, which ul-timately result in lower costs to
the customers for the overall project.
a.Thank you.
COMMISSIONER SMITH: Ms. Nordstrom, do you have
any redirect?
MS. NORDSTROM: r do.
REDIRECT EXAMINATION
BY MS. NORDSTROM:
o.Ms. Grow, you testified earlier that the Company
put its best request forward and the dollar amount identified
was the Company's best estimate of what construction costs
would be incurred by the Company to construct these
environmental upgrades. Is that correct?
A.That I s correct.
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O. Do you believe that this investment is necessary?
A. I do.
O. And do you believe that it is likely that
investments beyond the EPC contract are Iike1y to result in
zeTo expense?
A. I do not.
O. Do you bel-ieve that other expenses besides the
EPC agreement are certain to occur?
A. fn terms of this project?
O. Yes.
A. I think we've covered what we expect. I am not
sure what other costs might show up that we haven't identified
the potential.
O. So, the EPC agreement is one component of the
entire commitment estimate. Correct?
A. Correct.
O. And so to the extent that there are expenses for
investments outside of the EPC agreement, are you certaln that
those expenses are going to some expense is going to be
incurred?
A. I'm not sure I understand your question exactly.
a. Okay. WeIl
COMMISSIONER SMITH: Itrs the usual thing that
the hardest questions come from your own lawyer.
MS. NORDSTROM: So true.
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COMMISSIONER SMTTH: It happens everytime.
THE WITNESS: I believe that we fully
encapsulated the cost of these of this project in our
request, and to my knowledge -- maybe Mr. Harvey would be
better at portioning through -- but it is my understanding that
the EPC contract, you know, covers the i-nvestment and if
there's some external things inside the Company, I guess Irm
not sure what those might be.
A. BY MS. NORDSTROM: I think I'l-l- bring this up
wj-th Mr. Harvey, thank you.
Do you think it's possible that expenses can be
prudent even if theyrre not known with exact certainty today?
A. Yes, I do.
O. You discussed earlier that it's your
understanding that regulators are not generally to use
hindsight when making cost determinations; that those decisions
are based upon what was known at the time that the investment
was made. Is that correct?
A. That's my understanding.
O. As evj-denced by PacifiCorp and Idaho Power's
regulatory experience j-n Oregon that was referenced previously
on cross-examination, is it possibl-e that a regulator could
reach a different conclusion about these investments based upon
what is known today?
TELEPHONfC VOICE: How can you call- in?
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COMMISSIONER SMITH: So, there is someone on the
telephone who needs to mute their line because we can hear you.
Thank you.
THE WITNESS: I'm sorry, could you ask the
question again?
O. BY MS. NORDSTROM: Sure. As evidenced by
PacifiCorp and Idaho Power's regulatory experience j-n Oregon,
is it possible that a regulator could reach a different
concl-usion in the future based upon what was known today?
A. I suppose that woul-d -- that could happen.
A. And would that pose a risk to recovery of these
investments?
A. It more than 1ikely could.
0. And is that why it would be beneficial for this
Commission to preapprove ratemaking?
A. I bel-ieve it would.
O. There was quite a bit of discussion by Mr. Otto
on cross-examinatlon related to what the Company knew and when
it knew it. Has Idaho Power prevj-ously analyzed cap and trade
scenarlos when coal was phased out over a number of years?
A. Yes.
O. And j-snrt it true that that occurred in the 2009
IRP?
A. I'm not sure f could specify the actual- year, but
I know discussions have occurred.
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O. Mr. Otto al-so asked you questions about this
graph
A. Uh-huh.
O. on page 60 of the IRP, and do you have that in
front of you?
A. I do.
O. And he specifically mentioned the 200 average
megawatt 1ine. And if you take a rea11y cl-ose look at that in
the outer years, is it your opinion that it never dips bel-ow
the 200 megawatt, average megawatt l-ine?
A. On this graph?
O. Yes.
A. V{e1l-, just looking at the graph, it doesn't go
bel-ow.
COMMISSIONER SMITH: None of us have magnifying
glasses, so it's probably hard to tel-l-.
THE WITNESS: Yeah, there's the little hash
marks; but those look like more sort of time increments but
so maybe those do have slight deficj-encies.
0. BY MS. NORDSTROM: Can you read this particular
graph very clearly that you have in your hands or is it
difficult to read?
A. WeIl, it's a little difficult to read.
0. Okay. Mr. Richardson asked you a number of
questions about the uncertaj-nty of coal and carbon issues. Did
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the Company's analysis in this case include scenarios that
address the uncertainty of coal- and carbon issues going
forward?
A. I believe i-t did.
0. Do you believe that the range of scenarios
adequately addressed uncertainty?
A. I think so. We used a carbon adder with multiple
ranges of high a 1ow medium and low expected and high, and
as weII we I ve l-ooked at all of the pollution controls that we
know of as what the impacts might be.
A. Thank you. No further questions.
COMMISSIONER SMITH: Thank you, Ms. Grow.
Appreciate your help.
(The witness left the stand. )
COMMISSIONER SMfTH: I want to take about a
ten-minute break right now. When we come back, do you think it
would be prudent to put Mr. Mi11er on, Mr. Miller?
MR. MILLER: We'11 be prepared, Madam Chairman.
And just as a suggesti-on for the benefit of the
record, woul-d the Commission want to consider marking as an
exhibit the one page
COMMISSIONER SMITH: It already J-s, isn't it?
MS. NORDSTROM: This page is
COMMISSIONER SMITH: Oh, it is an attachment to
the appl j-cation.
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SRA
Excellent suggestion, Mr. Mi11er. Shal1 we make
it
MR. OTTO: That woul-d be Exhibit 302, the
Conservation League.
COMMISSIONER SMITH: Do you want to have that
number or Exhibit 8? 302? All rightr w€'l-l- mark it as
Exhibit 302.
(Idaho Conservation League Exhibit No. 302
was marked for identification. )
COMMISSIONER SMITH: And please be back, oh dear,
promptly at two minutes before 11:00.
(Recess. )
COMMISSIONER SMITH: We'11 go back on the record.
KEN MILLER,
produced as a witness at the instance of the Snake River
Alliance, being first duly sworn, was examined and testified as
fol-lows:
MR. MILLER: Again, Madam Chairman and parties,
we appreciate the parti-esr accommodations in al-l-owing us to
caII Mr. Mil-l-er at this time.
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HEDRICK COURT REPORTING
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DIRECT EXAMINATION
BY MR. M]LLER:
O. So I'11- start in the usual manner, Mr. Miller:
Would you state your name for the record, please?
A. Ken Miller, M-I-L-L-E-R.
O. And what is your occupation?
A. I'm an energy policy analyst with the Snake River
Alliance here in Boise.
0. Mr. Mi11er, did you prevj-ousIy have occasion to
file prefiled written testimony in this case consisting of 27
pages?
A. Yes, I did.
O. And were there any exhibits accompanying your
testimony?
A. I believe -- weII, the ones that you provided, I
think.
O. With respect to your written testimony, there
were no exhibits?
A. No, there were no exhibits with my written
testimony.
A. Are there any additions or corrections that you
woul-d like to make to your testimony?
A. Yes, there are two that I would like to make, and
they're on page 6, on l-ine L6, we tal-k about "goaI-filed"
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HEDRICK COURT REPORTING
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SRA
generation and it should be "coa1-fired" generation.
On page 16 at line 72, "20L!'r should read "201-2"
instead.
O. With those corrections, if today f asked you the
questions that are contaj-ned in your written prefiled
testimony, would your answers be the same?
A. Yes, they woul-d.
O. Are those answers true and correct to the best of
your knowledge?
A. To the best of my knowledge, they are.
MR. MILLER: Madam Chairmanr we would ask that
the written prefiled testimony of Mr. Mill-er be spread on the
record as if it was read in fu11, and woul-d tender Mr. Mill-er
for cross-examination.
COMMISSIONER SMITH: Thank you. Seeing no
obj ection
MS. NORDSTROM: Actually, Idaho Power does have
an objection.
COMMISSIONER SMITH: Okay, Ms. Nordstrom.
MS. NORDSTROM: Idaho Power objects to the
portion of his testimony that begins on page 2L, line t,
through page 22, line 6.
COMMISSIONER SMITH: And the nature of the
obj ection?
MS. NORDSTROM: Idaho Power has several
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HEDRICK COURT REPORTING
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obj ections:
First, this line of question and answer addresses
an Oregon PUC order which speaks for itself and is quoted, but
then the questions and subsequent answers mischaracterize the
quote that appears in this answer. The OPUC's directive in
that order was to investi-gate whether there is flexibility in
emergj-ng regulations and to conduct analysis about whether the
trade-offs would be in the ratepayersr j-nterest,' however, this
portion of testj-mony misconstrues the order's language as
requiring Idaho Power to conduct discussions that would upend a
BART settlement agreement with two Wyoming regulators that was
entered into two years before this directive was issued.
Second, Idaho Power objects because the
conclusions that are drawn in this passage constitute a 1egal
interpretation by a 1ay witness, as evidenced on page 2L, line
12, where it reads: Did Idaho Power satisfy this directive
from the Oregon PUC?
The answer that fol-Iows is a legal
interpretation.
Third, Idaho Power objects to this passage
because this portion of testimony assumes facts not in
evidence. In particular, page 2L, lines 16 through 18, says:
Our conclusion is that Idaho Power assumed negotiations would
not be fruitful, so it did not contact EPA to attempt
negot j-at j-ons.
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HEDRICK COURT REPORTING
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SRA
This j-s not in the record anywhere, and Idaho
Power requests that this passage on pages 2l through page 22,
line 6, be struck from the record.
COMMISSIONER SMITH: So I want to be perfectly --
I want to be very clear: Are you requesting that it be
stricken from line l, the question and the following quote, ox
are you requesting something after the quote be stricken?
MS. NORDSTROM: Irm -- the question
mischaracterizes the quote, so f think the question j-s also at
issue.
COMMISSIONER SMITH: All- right. Mr. Mi11er.
MR. MILLER: Thank you, Madam Chairman. We
object to the objection because it really simply is a matter of
argument. The witness is available for cross-examination on
these points. If the Company disagrees with his testimony,
it's entitled to cross-examine him, and the Commissi-on is
entitled to thereafter weigh the testimony based on the
witnessrs answers.
We afso note that this objection has not
previously been communicated to us and this is the first time
we've heard that the Company believes something is
objectionabl-e to the extent that it should be stricken.
So we'd recommend that the Commission allow the
witness to be cross-examined, and based on his answers
determine the accuracy of his testimony.
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P.O. BOX
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SRA
COMMISSIONER SMITH: Ms. Nordstrom.
MS. NORDSTROM: Not only does not only is this
passage troublesome because it mischaracterizes and interprets
with that mj-scharacterization an order from another Commission,
it also has a number of passages from discovery that are not
exhibits and are not part of the record in this case. So, the
Company's concerns, you know, are numerous and not all- of them
can be rectified on cross-examination.
MR. MILLER: I might just add one additional
point: The Company had rebuttal testimony opportunity and
fil-ed rebuttal- and did not file rebuttal on this passage of
testimony, to my knowledge, so we think that
MS. NORDSTROM: And part of that would be
MR. MfLLER: -- they have waived an objection to
its being in the record. We can debate whether j-t's accurate
or inaccurate or how much weight to be given to it, but having
passed up the rebuttal opportunity, having made no previous
objection to this, and now simply arguJ-ng a i-nterpretation of
it, we think is too late and the Commission should a11ow the
witness to be cross-examined on it.
MS. NORDSTROM: To the extent
a legaI interpretation, it's very difficult
rebuttal, and that's why we are raising it
nature of the evj-dentj-ary objection.
COMMISSIONER SMITH: So, MS.
that this is about
to do that on
here given the
Nordstrom, I am --
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HEDRICK COURT REPORTING
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SRA
what's the ri-ght word -- I will- not sustain the objection. I
think the correct approach is, as Mr. Mi1ler outl-ined, to
cross-examine and object to that when j-t's apparent that you
can't draw Iega1 concl-usions.
Mr. Ml11er, I think j-t's very reasonable and fair
to object to testimony while the witness gets on the stand. I
don't think anyone has a duty to tell- anybody else in advance
that they're going to move to strike. I don't think they have
a duty to put it in their rebuttal or object in advance. I
mean, this is the nature of having a contested case hearing is
that lawyers get to do their fancy footwork l-j-ve while the
witness is here.
So that's not the reason that I am not sustaining
the objection, but f do believe that it's appropriate for
Ms. Nordstrom to cross-examine on this. To the extent after
she hears the witness ' s answers she believes material shoul-d
still be stri-cken, she can then renew her moti-on and the
Commission wil-L consider it. And, of courser we always have,
after hearing the cross-examination and the response, the
opportunity to give the testimony whatever weight that we feel
it deserves.
So, with that, if there's no other objection, we
will spread the prefiled testimony of Mr. Mill-er upon the
record as if read.
(The following prefiled testimony of
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Mr. Mi1ler is spread upon the record. )
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SRA
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Introduction and Background
Please state your name and business address.
My name is Ken Miller and my business address is 223 N. 6th Steet, Boise,
Idaho.
By whom are you employed and in what capacity?
I am employed by the Snake River Alliance as its Clean Energy Program
Director.
Please describe your educational background.
I graduated from Kansas State University in 1977 with bachelor degrees in
journalism and in political science. I have also attended multiple extended
education programs in the journalism and energy fields.
Please describe your professional work experience.
I worked as a journalist from 1977-2002 at newspapers and news services in
Oklahoma, Washington, D.C., Kansas, Nevada, Hawaii and Idaho. My
assignments in my joumalism career ranged from covering state, local and
federal govemment affairs, including Congress and national politics. As the
national energy and environment correspondent for Gannett News Service in
Washington, D.C., my assignment included the U.S. Environmental Protection
Agency and the Department of Energy. Upon leavingjoumalism to work in the
nonprofit community, I worked from 2002-2004 as Eduoation and Outreach
Coordinator and Public Policy Coordinator for the Winter Wildlands Alliance in
Boise and from 2004-2005 as a nonprofit grant writer for Idaho Public
Television and other entities. I was hired in 2005 as the first Idaho Energy
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Advocate for the Seattle-based NW Energy Coalition, and in May 2007 my
position was shifted from the Coalition to one of its Idaho mernbers, the Snake
River Alliance, where I became the Alliance's first Energy Program Director
and where I am currently employed. I have served as Idaho Caucus Chair for the
NW Energy Coalition and also served on the NWEC Executive Board and as
NWEC Board Chair from 2008-2010. In that capacity, I worked with Coalition
stafi Board members, and NWEC members in the Pacific Northwest on state,
regional, and national energy policy issues in which the NW Energy Coalition
and its members are involved, including in Idaho. I have served on the Idaho
state wind, geothermal, and solar PV working groups; I participated in the
development of the 2007 and 2}l?Idaho Energy Plans; and I have presented
two papers on utility coal plant issues to the Western Energy Policy Research
Conference. tn my capacity with the Alliance and with the NW Energy
Coalition, I regularly attend energy conferences and workshops in ldaho, the
Northwest, and nationally.
Please describe your experience in working with Idaho electric utilities and
before the Idaho Public Utilities Commission.
I have served on the ldaho Power Integrated Resource Plan Advisory Council
and the Idaho Power Magrc Valley Electrical Plan Community Action
Committee and other ldaho Power planning initiatives. As Clean Energy
Program Director, I have represented the Snake River Alliance in electric utility
dockets before the Idaho PUC, and I have participated in and provided
comments to the Idaho PUC on a variety of regulatory matters on behalf of the
Miller, Di
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NW Energy Coalition and the Snake River Alliance for the past nine years,
beginning in 2004. ln addition, the Snake River Alliance successfully partnered
with Idaho Power and local planning entities to conduct workshops on how
local governments can improve their energy efficiency and reduce their energy
consumption.
Please describe what experience, if any, you have had regarding Idaho Power
and the operation of its coal fleet.
Aside from my participation in the past five ldaho Power Integrated Resource
Plans, I have met on multiple occasions with Idaho Power representatives to
discuss the company's coal plant operations. I have prepared multiple reports
for the Snake River Alliance, including its Septernber 20ll report, "Idaho's
Dangerous Dalliance with King Coal"; its August 2012 report, "Kicking Idaho's
Coal Habit, Charting a Cleaner Energy Future," and its September 2013 white
paper, "Putting Down a Coal Plant: Retiring a Utility Asset," which we
presented at the 2013 Western Energy Policy Research Conference in
September 2013.
Have you also participated in cases before the Commission involving setting
rates for electric utilities?
Yes. I represented the Alliance in cases IPC-E-I1-08 (Application of ldaho
Power Company for Authority to lncrease Its Rates and Charges for Electric
Se,nrice in Idaho) and IPC-09-30 (Application of Idaho Power Company for an
Accounting Order to Amortize Additional Accumulated Deferral Income Tax
Credits and an Order Approving a Rate Case Moratorium). The Alliance
Miller, Di
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I participated in all discussions in both cases. We signed the settlernent agreement
2 in the first, and declined to sign the agreement in the second. I have also
3 represented the Alliance in Idaho Cost Adjustments, Efficiency TariffRider
4 Adjustments, the treatment of Renewable Energy Credits and Sulfur Dioxide
5 Emissions Allowances, and other dockets before the Commission.
6 Interest of Snake River Alliance
7 Q. On whose behalf are you testiffing?
8 A. I am testiffing on behalf of the Snake River Alliance and its members, most of
9 whom are customers of Idaho Power.
l0 a. Please describe the Snake River Alliance's interest in this case.
I I A. The Snake fuver Alliance was formed 34 years ago to monitor cleanup efforts
12 at what is now known as the U.S. Department of Energy's ldaho National
13 Laboratory. Six years ago, with my arrival at the Alliance, the Alliance became
14 ldaho's first public advocacy organization to address energy issues on a full-
15 time basis. As an environmental advocate, the Alliance promotes clean energy
16 resources such as energy effrciency and other demand-side resources and
17 renewable energy development while also working to reduce utility reliance on
18 traditional fossil fuel supply-side resources. The Alliance recommended to the
19 Commission in March 2013 ("SRA Additional Comments" in Idaho Power's
20 201I IRP Case IPC-E-I1-l l) that significant generation assot investments such
21 as those contemplated in this docket be subjeot to a Certificate of Public
22 Convenience and Necessity (CPCN) process so that the proposed investments
23 would be subject to greater public review and comment.
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The issues presented in this case warrant the full Commission and public review
that a CPCN proceeding provides.
Summary of Testimony and Recommendations
Please summarize your testimony in this case.
The Alliance's testimony will discuss concems about the thorougbness of Idaho
Power's "Coal Unit Environmental lnvestment Analysis" and its conclusions.
Our testimony will also address Idaho Power witness Harvey's Redacted
Exhibit 5A, "Coal Environmental Compliance Upgrade lnvestment Evaluation,"
(Coal Study), which Idaho Power filed in redacted form subsequent to a Snake
River Alliance request to Idaho Power. Our testimony will also address our
concems that the known future investments planned by Idaho Power and its coal
plant partners are not included in this CPCN case to more accurately reflect the
overall costs of the Company's planned coal plant investments as outlined in
both of the above-mentioned analyses. And we intend to address the issue of the
financial and other risks these investrnents pose to Idaho Power customers in a
time of extraordinary regulatory uncertainty, and whether this investment is
premature in light of the uncertainty regarding the state of Wyoming's State
Implementation Plan (SIP).
Please summarize your recommendations to the Commission in this case.
The following analysis demonstrates it is premature to shift the risks associated
with the proposed investrnents to ratepayers at this time. Accordingly, the
Alliancerecommends that the Commission not issue a CPCN.
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Altematively, if the Commission feels constrained by the circumstances to issue
a CPCN, it should be issued zubject to the conditions that:
The Commission makes no finding that the proposed investments are
prudent for ratemaking purposes;
The Commission does not make any binding ratemaking commitrnents
pursuant to Idaho Code $61-549.
Is the Alliance suggesting that the Commission enter an order prohibiting Idaho
Power from making the proposed investments?
No. The Alliance is suggesting it is premature to shift the risks of proposed
investments to ratepayers. Rather, the Company's management should evaluate
options and make investment decisions subject to the traditional understanding
those decisions will later be reviewed for prudence.
Does the Alliance object to the installation of pollution controls on coal-fired
power plants?
As a general proposition, the Alliance obviously supports measures that reduce
the toxic effects of goal-filed electric generation. As discussed below, however,
the answer is not so simple in this case.
The Alliance's General Concerns About CoaI
Why does the Alliance believe that extending the life of the Jirn Bridger coal
plant and that ldaho Power's continued reliance on coal is not in the best
interests of its customers?
There are a variety of reasons, beginning with the known impacts coal
combustion are having on the climate. Those impacts are now widely acccpted
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by the scientific community, as well as the electric utility sector, and are the
primary reason many utilities are retiring coal plants before the end of their
useful lives and replacing those coal plants with other supply side and demand
side resources. Similarly, coal combustion presents undeniable risks to human
health both in the communities in which they are located but also regionally and
globally. In addition, as a fuel source for power generation, coal faces the
highest amount of risk from future environmental regulations that, if not yet
promulgated, are anticipated by the electricity sector. There are also legitimate
questions about both the environmental and economic sustainability of coal as a
fuel source. Finally, it is presumed that carbon emissions will eventually be
regulated in one form or another, and that such regulations, along with existing
regulations on other coal plant emissions and waste, may make operation of
utility coal plants uneconomic when compared to other demand-side and
supply-side resources. Committing Idaho Power customers to another
generation of coal plant operations in light of the current uncertain regulatory
climate is not a defensible planning decision, nor is it the least cost/least risk
option to meet expected future load growth. Committing ratepayers to
responsibility for a $130 million investment in such an evolving regulatory
environment poses undue risks to utility customers.
Tip of the trceberg
Can you explain your concerns about Idaho Power's decision to not analyze
expected future health and environmental regulations as part of this case?
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A.While Idaho Power appropriately employs a carbon "adder" in its IRP process,
it does not address the fundamental issue of how future carbon regulations may
impact continued coal plant operations. It is now established by federal court
decisions that carbon dioxide (CO2) is subject to regulation as a pollutant under
the Clean Air Act. It is also clear that the current presidential adminishation
intends to regulate carbon from new and existing powerplants. On Septernber
20,2013, EPA issued proposed New Source Performance Standard regulations
for Greenhouse Gas (GHG) ernissions from new coal plants and stated it would
issue proposed rules by June of 2014 for existing coal-fired power plants.
Furthermore, according to the utility trade group the Edison Electric
lnstitute,Ottp ://www3.eei.org/meetin es/Meeting%2ODocuments/2 009-06 -
22_GCC IntlElecPartnership-CCStimelineFlNAl03 I 809.pd0, the technology
to "capture" and "se,quester" CO2 emissions from generating units on the scale
of a utility coal plant has not been deployed, and will not be for a number of
years. That further exposes utilities and their customers to additional unknown
risks from carbon restraints beginning as soon as 2015. Failure to consider the
probability of CQZ controls in the not-too-distant future raises serious questions
about the prudency of making an investment of this magnitude at this time.
Can you explain the Alliance's concerns about the incremental fashion in which
these environmental controls are taking place?
The Allianoe has long been concemed about the piecerneal basis in which
Idaho Power is moving fonnard with these retrofits, and we expressed those
concerns to the Commission in March 2013, after Idaho Power filed its Z0l t
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IRP Update, which included Idaho Power's assessment of its coal fleet to
determine the economics of deciding whether to make anti-pollution upgrades
or to replace one or more plants with natural gas generation. Specifically, the
Alliance told the Commission: "These investments are intended to prolong the
life of particular power plants, but their impact is also to add significantly to the
balance of the assets' debt that must be retired well beyond the original,
expected life of the plants as initially approved by the Idatro Public Utilities
Commission" (PC-E-l l-11). The Alliance also told the Commission that, once
investments such as these are committed to, further investments to meet new but
unknown regulatory requirements will be more difficult to resist and that this
build-and-retrofit model cofilmon to extending the life of coal-fired power
plants is analogous to the "Company Store" model. Once ratepayers are hit
with the initial sticker shock of coal plant investments such as those
contemplated in this application, they are drawn into a pattern of repeated
additional investments in the name of economics but which can be
unnecessarily onerous compared to other alternatives. Given the magnitude of
the investments sought by Idaho Power here, there is a risk that approval of
these investments will place utility customers on an irreversible course toward
future investments of unknown size, as Idaho Power clearly intends to extend
the life of these coal plants as long as possible.
What are other impacts of making these improvements incrementallf
Taken together, as the Alliance cautioned the Commission in the above-
referenced memorandum in IPC-E-I 1-11, they can amount to a defacto
Miller, Di 9
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development of new supply-side energy resources that, if not for their
incrernental nature, would otherwise be subject to CPCN review. Unless such
investments are thoroughly scrutinized by utility regulators, once new
investments in an existing generation asset such as a coal plant are in place and
sunk into rates, these repeated upgrades will almost always compare favorably
to the overnight costs of new, low-risk resources or even market purchases.
Cumulatively, however, there is a risk that the aggregate arnount of such
retrofits may make coal plant's un-economic rate-based costs when compared to
other resources.
Shortcomings of the Coal Study and Related.dnalysis
In your opinion, does the Coal Study, Redacted Exhibit 5Al, provide sufficient
analysis to justify shifting the risks of the proposed investments to ratepayers?
No. The Coal Study appears to be a high-level preliminary planning document,
not a conclusive basis for investment decisions.
Can you identify parts of the Coal Study that lead to that conclusion?
Yes.
E At Pg. 3 of Exhibit 5A, the Coal Study states: "To the extent that
statements, information and opinions provided by the client or others
have been used in the preparation of this report, SAIC has relied upon
the same to be accurate, and for which no assurances are intended and
no representations or warranties are made. SAIC makes no certification
and gives no assurano€s except as explicitly set forth in this report."
I Thc Alliancc ap,prcciates IPCo's cooperation in providiug a non-confidential vcrsion of Exhibit 5. See
Lcttcr of Lisa Nordstnrm to Jean Jewell, Scptember 27,2013,
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At Pg. 7 of Exhibit 5A., the Coal Study states: "At this stage of the
decision process, SAIC felt that due to the uncertainties involved in the
future environmental regulations, capital expenditures, and fuel
forecasts, a planning level study was the most appropriate approach.
This study examined the likely ranges of eosts involved with the relevant
options identified for each unit, based on a simplified analysis of the
costs of generation for each of those options."
At Pg. 8 of Exhibit 5A, the Coal Study states: "Nothing contained in this
Report is intended to indicate conditions with respect to safety or to
security regarding the proposed upgrades or to conformance with
agreemurts, codes, permits, rules, orregulations of anypartyhaving
jurisdiction with respect to the construction, operation, and maintenance
of the Jim Bridger and North Valmy plants, which matters are outside
the scope and purposes of this Report."
At Pg. 10 of Exhibit 5A, the Coal Study states: "Other proposed or
potential environmental regulations that could impact IPC's coal-fired
generating plants include the Clean Water Act Section l6(b) regulations,
Coal Combustion Residuals ("CCR") environmental regulations, and
carbon legislatior/regulation. Such proposed or potential regulations
could require additional capital expenditures and an increase in the
Fixed and Variable Operation and Maintenance ("O&M") costs of
affected generating units. Compliance with these environmental
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regulatory changes could also impact the efficiency or heat rate of
affected units."
At Pg. l l of Exhibit 5A, the Coal Study states: "In addition to the SCR
and mercury control costs, certain other environmental rehofit costs
have been identified for the plant site, including costs for landfill
closures, catalyst replacements, and new pond construction for solid
waste disposal. SAIC did not perform any plant site visits as part of this
study, and as such, SAIC does not have enough information to address
the adequacy of these costs."
At Pgs. 36-37 of Exhibit 5A', the Coal Study states: "IPC should
consider conducting additional detailed analysis to evaluate the most
promising alternatives considered in this preliminary study. Such
studies should consider both annual and cumulative projected present
value power costs, production costing simulation with and without the
various proposed alternative conversions/retirernent scenarios and
sensitivity cases and review of the O&M expenses under scenarios and
sensitivity cases where a major shift in the operation of generation
resources might be expected."
In addition the CPCN Application and the Coal Study omit an analysis
of expected regulations on neu, Clean Water Act requirements for existing coal-
fired power plants; coal combustion residuals (CCR,
www.epa. sqv,/cgalashrule) ; National Ambi ent Air Quality S tandards (NAAQS,
htto://Ivynv.epa, eoy4lr/naao s4 for parti culate matter (soot, PM2. 5) ; and
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I Mercury and Air Toxic Standards (MATS,
2 http://www.epa.qov/mats/tctior.rs.html). Exclusion of these known requirements,
3 when there is a high degree of confidence that they will take place, raises
4 additional questions about restricting this CPCN application to two SCRs at Jim
5 Bridger Units 3 and 4.
6 Q. In light of the disclaimers identified above, how would you characterize
7 Redacted Exhibit 5A?
8 A. In my opinion, Redacted Exhibit 5A is a planning document, similar to what
9 might be found in a utility Integrated Resource Plan.
l0 a. Has the Commission recently commented on the weight to be given to utility
l1 planning documents?
12 A. Yes. The Commission recently reviewed Rocky Mountain Power's 2013
13 Integrated Resource Plan, Case No. PAC-E-13-05. In Order No. 32890, the
14 Commission said:
l5 "An IRP is a utility planning document that incorporates many
16 assumptions and projections at a specific point in time. It is the ongoing
17 planning process that we acknowledge, not the conclusions or results.
l8 The commission oflers no opinion or ruling regarding the prudency of
19 the Company's selection of its preferred resource portfolio".
20 a. Does inclusion of only the emission control upgrades at Jim Bridger Units 3 and
21 4 understate the cost of likely environmental compliance measures?
22 A. Yes. The Company's Application recognizes, as discussed above, the uncertain
23 nature of the regulatory environment in this case as well as the uncertainty of
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possible future regulations affecting all of Idaho Power's coal plants. If the
Company were to include the expected requirements for additional regulations,
the cost of compliance with those regulations would be far greater than the $130
million in costs attributed to the currently proposed investments.
Can you provide an example of the uncertainties involving this proposed
investment?
The Company's Application at Pg. 7 states: "Because of the scope of the
Project, the extended period of time it takes to plan, permit, engineer, procure,
and construct SCR systems, and the uncertainty of the EPA's final ruling
approving the portion of the Wyoming Regional Haze SIP that addresses the
SCRs at Jim Bridger Units 3 and 4, a Limited Notice to Proceed (LNTP)
contract was signed with the successful Engineering, Procurement and
Construction (EPC) bidder on May 31, 2013." And on Pg. 8: "Idaho Power
requests the Commission issue a CPCN and authorize binding ratemaking
heatment under Idaho Code $ 6l-541 for the SCR investment because of the
magnitude of the investment and the uncertainty surrounding coal-fired
generation in today's political and social environment." On this current
trajectory, Idaho Power could secure the needed $130 million for these SCRs
before its environmental obligations are more clearly understood.
You stated that, in addition to the Coal Environmental Compliance Upgrade
Investment Evaluation (Coal Study), Redacted Exhibit 5A, Idaho Power
pre,pared a "Coal Unit Environmental lnvestment Analysis For The Jim Bridger
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and North Valmy Coal-Fired Power Plants" that was submitted to the
Commission as part of Idaho Power's 2011 IRP Update (IRP Coal Study).
Why is the IRP Coal Study relevant to this proceeding?
The IRP Coal Study reflects IPCo's methodological approach to analysis of
coal-based resources.
What are your concerns about that study?
The IRP Coal Study submitted with Idaho Power's 2011 IRP Update contains
an overarching flaw that we believe calls its conclusions into question. It
examined three options for Idaho Power's coal plants: upgrade existing plants to
comply with state and federal health and environment regulations; replace one
or more units with a Combined Cycle Combustion Turbine (CCCT); and
converting one or more units to natural gas.
Why does the Alliance believe such an analysis is insufficient?
The study as submitted appears to have omitted for analysis purposes other
possible replacernent resources for retired coal plants, such as energy efficiency
and renewable energy resources. As mentioned above, the analysis omits the
impact of a carbon regulatory regime, which if enacted would dramatically alter
Idaho Power's resource stack.
Has the Commission recently been critical of planning methods that fail to
consider efficiency and renewables?
Yes. As noted above, the Commission recently reviewed Rocky Mountain
Power's 2013 IRP. In its Final Order, No. 32890 (September 11,2013), Pg.l2,
the Commission said:
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"The Commission dirests the Company to increase its efforts toward
achieving higher levels of cost-effective DSM. Instituting cost-
effective energy efficiency measures that reduce customer demand
benefits everyone. Such measures can obviate the need for new
generation resources and thereby decrease the constant upward
pressure on energy pricing. Cost-effective reductions in customer
demand, particularly in peak hours and months, are almost always
preferable to the construction of a new natural gas plant or purchases
on the wholesale power market."
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l0 a. Has ldaho Power acknowledged the lack of certainty in accommodating future
I I environmental regulations in other public filings?
12 A. Yes. In its 201I annual report to the U.S. Securities and Exchange Commission,
13 Idaho Power acknowledged that it "anticipates that a number of new and
14 impending EPA rulemakings and proceedings addressing, among other things,
l5 ozone and fine particulate matter pollution, emissions, and disposal of coal
16 combustion residuals could result in substantially increased operating and
17 compliance costs in addition to the amounts set forth above, but Idaho Power is
l8 unable to estimate those costs given the uncertainty associated with pending
19 regulations." It appears from this filing that Idaho Power lacks sufficient
20 information needed to invest in coal plants with the intent of extending their
2l lives.
22 a. Did that SEC filing provide any additional reasons to question the prudency of
23 the investments proposed in this application?
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A.ldaho Power cautioned that "There are many legislative and rulemaking
initiatives pending at the federal and state level that are aimed at the reduction
of fossil fuel plant emissions. Idaho Power cannot predict the outcome of
pending or future legislative and rulemaking proposals, or the compliance costs
Idaho Power would incur in connection with that legislation. Future changes in
environmental laws or regulations goveming ernissions reduction may make
certain electric generating units (especially coal-fired units) uneconomical and
subject to shut-down, D&y require the adoption of new methodologies or
technologies that significantly increase costs or delay in-service dates, and may
raise uncertainty about the future viability of fossil fuel as an energy source for
new and existing electric generation facilities."
What is the purpose of SEC Arurual Reports?
In part, the Report advises current and potential investors of risks faced by the
Company. Current and potential investors can then "vote with their feet" in
deciding whether to take on those risks. Ratepayers, by contrast, do not have
that luxury.
Wyoming and EFA Regional Haze
Can you explain why the SCR installations at Jim Bridger are required by the
Environmental Protection Agency (EPA) and explain the State Implementation
Plan (SIP) process that impacts these coal units?
The federal Clean Air Act (CAA) requires each state to develop plans to meet
various air quality requirements, in this case the improvement of visibility
(CAA sections 110(a), 169(A) and 1698 referenced in the Federal Register,
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Vol. 78, No. 1l l, Monday, June 10, 20l3,P.3474l, "Approval, Disapproval
and Promulgation of Implementation Plans; State of Wyoming; Regional Haze
State Implementation Plan; Federal Implernentation Plan for Regional Haze").
In this instance, these air quality compliance plans are known as State
lmplementation Plans (SIPs) and demonstrate how each state will meet
Regional Haze requirements to improve visibility in certain "Class l" fderal
lands such as national parks and wilderness areas.
Did the state of Wyoming complete a SIP?
Yes, on January 12,2011. On June 10, 2013, EPA approved portions of the
Wyoming SIP and disapproved other portions. As a result, under Section 110 of
the Clean Air Act, EPA proposed a Federal Implementation Plan (FIP) to
address rvhat it viewed as the deficiencies in the state SIP. EPA intends to issue
a final rule in this case by Novemba 21, although the state of Wyoming has
indicated it strongly opposes EPA's action with regard to the FIP and the
implementation date of the final rule is unknown.
This CPCN Application is incomplete when EPA has yet to finalize the
Wyoming Regional Haze SIP or FIP, particularly in light of ongoing efforts by
its rnajority partner, PacifiCorp, to attack EPA's requirement that SCRs be
installed on Jim Bridger Units 3 and 4.
Are the SCRs proposed in Idaho Power's applioation in this case the optimum
method to comply with EPA's Regional Haze requirements?
Based on the pre-filed testimony in this case, that is difficult to determine.
Idaho Power's majority partner in the Jim Bridger enterprise, PacifiCorp, is
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crurently actively engaged in a campaign ("Wyoming for Affordable Power",
www.stopepawy.com) with other Wyoming utilities to attempt to fend offthe
federal EPA FIP, so it remains unknown what technologies may be required to
be installed at Jim Bridger 3 and 4. Idaho Power's current CPCN Application
before the Idaho Commission is prernature, particularly so long as its majority
partner (PacifiCorp) continues to wage an ongoing campaign against the federal
re-proposal in Wyoming.
Idaho Power is seeking binding ratemaking treatment to install
technology at Jim Bridger 3 and 4 while simultaneously its majority partner in
Wyoming (PacifiCorp) is attempting to undermine the required installation of
the same emissions upgrades for which Idaho Power is seeking ldaho PUC
CPCN approval. The two strategies appear to conflict with each other.
Did Idaho Power's coal plant analysis consider its requirernent to comply with
mercury emission controls under the MATS rule?
Idaho Power states in Response to Request No. 4 by the Alliance that the SCR
additions at issue in this CPCN docket "will not satisff the requirements of the
MATS rule" and that it intends to recover such costs for future emissions
control investments in a future general rate case. The Alliance believes those
costs are known by Idaho Power and should be included in this docket.
Is Idaho Power required to comply with the MATS rule?
Yes, it is. Idaho Power states in its Response to Request No. 8 by the Alliance
that "all four units at the Jim Bridger power plant are required to comply with
the MATS ruIe," which took effect on April 12,2012, and which established a
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three-year compliance period. Idaho Power is aware of its obligations to comply
with the MATS rule, yet such compliance costs are omitted from this CPC'I{
application.
Failure to Pursue Alternatives
Could Idaho Power and its coal plant co-owners have negotiated with the EPA
and other regulators to reduce the scope of the required emission control
equipment in exchange for a commitment to decommission the plants earlier
than scheduled?
Idatro Power says it could not, but there is no evidence it attempted to do so.
According to Page 4 of the Coal Unit Environmental lnvestment Analysis that
was submitted with ldaho Power's 2011 IRP Update, in its "Compliance Timing
Alternatives" section, the Company indicates it "evaluated the economic
benefits of delaying coal unit investments required under the emerging
enviroffnental regulations." The Company said that, as part of that evaluation, it
assumed it could negotiate with state and federal entities a five-year period
where no additional environmental controls are installed in exchange for
shutting the unit down at the end of the five-year period. Idaho Power then
referred to compliance timing alternatives as "strictly hlpothetical" and that it
'tnay not have any basis under current regulations to negotiate this delay." The
Company added in that report on Pg. 4 that regulators "have not offered any
such dolay''but does not indicate whether Idaho Power or its oo-owners
atternpted to contact regulators on this issue.
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Was Idaho Power directed by a utility regulatory body in either Idaho or Oregon
to conduct such discussions with environmental regulators?
On May 21,2012, the Oregon PUC gave Idaho Power explicit directions to do
so in its Order 12-177 in Case No. LC 53, ldaho Power Company 2011
Integrated Resource Plan: "ln its next IRP Update, Idaho Power will include an
Evaluation of Environmental Compliance Costs for Existing Coal-fired Plants.
The Evaluation will investigate whether there is flexibility in the emerging
environmental regulations that would allow the Company to avoid early
compliance costs by offering to shut down individual units prior to the end of
their useful lives. The Company will also conduct further plant specific analysis
to determine whether this tradeoffwould be in the ratepayers' interest."
Did Idaho Power satis$ this directive from the Oregon PUC?
Idaho Power indicates it did not contact the EPA on this matter. The analysis
submitted to the Idaho and Oregon PUCs as part of its 201I IRP Update (IRP
Coal Study) states on Pg. l3 that "it is highly unlikely Idaho Power would have
the ability to negotiate alternative scenarios as described above." Our
conclusion is that ldaho Power assumed negotiations would not be fruitful, so it
did not contact EPA to attempt negotiations.
Idaho Power's Response to Discovery Request No. 3 submitted by the
Alliance states that "There were no communications between Idaho Power and
the Environmental Protection Agency, PacifiCorp or the state of Wyoming
regarding the delay of installation of environmental controls on any unit in
exchange for shutting that unit down." Furthermore, Idaho Power states in its
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Response to Discovery Request No. 6 by the Alliance that "Based on the
importance of the Jim Bridger power plant to the resource portfolio of
PacifiCorp and Idaho Power, [daho Power anallzed but did not discuss with any
state or federal agenoies the possibility of avoiding the installation of required
ernission controls at Jim Bridger by delaying the compliance requirements in
exchange for shutting down the units."
Idaho Power's Coal Study, Redacted Exhibit 5,A. and its IRP Coal Study)
Update indicate that the Company must make its commitments to upgrade its
coal plants in Wyoming and in Nevada no later than the end of 2013. Is that a
realistic timeline?
No, it is noL As mentioned earlier, the timeline laid out on Pg. 33 of ldaho
Power's 201 I Integrated Resource Plan Update cannot be met. For one thing,
Idaho Power acknowledges its planning for these investments is mostly in the
hands of its power plant owner-partners - certainly that seems to be the case
with the Jim Bridger upgrades, according to ldaho Power's filings in Oregon.
What are Idaho Power's estimates for when it needs to commit to making
retrofits in the Jim Bridger and North Valmy coal plants?
According to the Near-Term Action Plan in Idatro Power's 201 I Integrated
Resource Plan Update, the Company states it must commit to installing a Dry
Sorbent lnjeotion system to comply with the Mercury and Air Toxics Standards
(MATS) regulations in North Valmy I no later than the third quarter of 2013.
Idatro Power also states in the same Update that it anticipates it will need to
commit to install SCR technology at Jim Bridger 3 by the second quarter of
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2013, which has passed. And it states that it anticipates having to commit to
making the same SCR investment at Jim Bridger 4 also by the second quarter of
2013. To date, the Idaho Commission has yet to review any of these anticipated
commihnents to install emission-control equipment at any of its coal-fired
power plants, and given the uncertain regulatory environment confronting Idaho
Power's majority partner in the Jim Bridger plants in Wyoming, it is not likely
that such commitrnent can be made in 2013. The situation with the North Valmy
plants in Nevada, now that NV Energy has announced plans to divest its coal
assets, is even more uncertain.
Do you agree with the statements in the direct testimonies of Idaho Power
witnesses Grow (Grow Di, Pg. 11) and Harvey (Harvey Di, Pg. 14) that:
"Unlawfully operating the units in violation of federal and state regulations is
not an option?
Of course. Neither the Alliance nor any other party in this case has suggested
Idaho Power operate any of its coal units in violation of state or federal law, but
that is beside the point in this case. It assumes Idaho Power has only two
options: violating the law or installing the upgrades it says are required. In fact,
as our testimony shows, there are more than two options, including retiring one
or more of the coal units and replacing that generation with supply side and
demand side resources, but that option does not appear to have been fully
analyzed, if it was analyzed at all, by Idaho Power or the contractor it secured to
prepare its analysis.
Q:
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Portfolio Diversity
At pages 5-7 of her testimony, Witness Grow discusses the Company's resource
portfolio and concludes that [PCo resources portfolio is among the most diverse
in the nation. (Pg. 7, L. 7-8). Do you agree with that analysis?
Ms. Grow's analysis is based on nameplate capacity of various generating
resources. From an environmental perspective, this is the wrong matrix.
Because pollutant emissions are a function of annual generation, not nameplate
capacity, arrnual generation by fuel type gives a better picture. According to
another Idaho Power Publication
(//www.idahopower.com/AboutUs/EnergySources/FuelMix/tlpical-fuelMix.cf
m), the Company's supplied energy rnix in a typical year is:
Hydro:
Coal:
Gas:
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Geothermal: .4%
Other: .8%
Viewed from this perspective, the Company's energy mix is not diverse
at all. Putting aside embedded hydropower, about 4% of arurual energy comes
from environmentally benign sources (wind, biomass and geothermal) and
almost half of its annual energy comes from a source (coal) with signifioant
environmental concems and risks.
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O I Timing of Application
2 Q. When did Idaho Power's co-owner of the Jim Bridger coal plant, PacifiCorp,
3 apply for approval of its SCR investments in Wyoming and Utah?
4 A. PacifiCorp filed its applications for approval of its SCR investments in
5 Wyoming and Utah in August 2012, approximately nine months prior to Idaho
6 Power's filing for the CPCN at the ldaho PUC.
7 Q. Has Idaho Power signed any contracts associated with the SCR investments at
8 Jim Bridger 3 and 4?
9 A. Our understanding based on the direct testimony of Idaho Power witness
l0 Harvey @gs. 14-15) is that Idaho Power entered into a contract for this
I I investment. According to ldaho Power witness Harvey, "Because of the scope
12 of the project and the extended period of time it takes to plan, permit, engineer,
13 procure, and construct SCR systems, the uncertainty of the final ruling from the
14 EPA on approval of the portion of the of the Wyoming Regional Haze SIP that
15 addresses the SCRs at Jim Bridger Units 3 and 4, and the fact that the Wyoming
16 Regional Haze SIP deadlines are legally binding, a Limited Notice to Proceed
17 (LNTP) was signed with the successful bidder on May 31,2013. The Company
l8 and PacifiCorp determined this to be a prudent approach that allows for
19 consideration of the Company's Application for a CPCN while waiting for {inal
20 approval of the Wyoming Regional Haze SIP by the EPA."
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Assurance of Binding Ratemaking Treatment Not Required for Froject
Finaucing
Does it appear that the Company requires an assurance ofbinding ratemaking
treatment under Idaho Code $61-541 in order to finance the proposed
investments?
No it does not. Company witness Youngblood states in his testimony at Pg. 6:
"Ongoing operation and maintenance of the plant, including the investment in
emission controls mandated by state or federal environmental regulations,
would not typically be an investment for which the Company would request a
CPCN."
Further, in response to StaffProduction Request No. 18, the Company
stated: "Idaho Power expects to finance this project consistent with the
financing of its total construction program. The Company expects to finance its
capital requirements with a combination of intemally generated funds and
externally financed capital. ldaho Power has not entered into any alternative
financing agreements and therefore has not developed a financing payment
schedule based on non-traditional financing schemes."
From these responses it does not appear that the Company needs an
assurance of ratemaking treatment to attract external financing.
How does this circumstance compare to circumstances in which the
Commission has provided a binding ratemaking commitment?
To our knowledge the only previous circumstance in which assurances under
Idaho Code $ 6l-541 were provided was in connection with construction of the
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Langley Ctulch generation station, Case No. IPC-E-09-03. There, the very large
investment required coupled with uncertainty in capital markets argued in favor
of a binding assurance to attract outside financing.
Does this conclude your testimonfl
Yes it does.
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HEDRICK COURT REPORTING
P.O. BOX 578, BOTSE, rD
MTLLER (X)
SRA
(The followj-ng proceedings were had in
open hearing. )
MR. MILLER: And he's avail-able for
cross-examination.
COMMISSIONER SMITH: Thank you.
Mr. Richardson, do you have questions?
MR. RICHARDSON: Thank you, Madam Chairman. We
have no questions.
COMMISSIONER SMITH: Mr. Otto.
MR. OTTO: I have no guestions, Madam Chaj-r.
COMMISSIONER SMfTH: Thank you. Ms. Sasser.
MS. SASSER: I have a couple. Thank you,
Madam Chai-r.
CROSS-EXAMINATTON
BY MS. SASSER:
O. Hi, Mr. Mi11er.
A. Good morning.
O. I may have been the only one who missed it, and r
am sl-ow that way. Your second change to your testimony, I did
not get.
A. Yeah. On page L6, Iine 12, the date 'r2011rr
should be "20L2."
O. Okay. Thank you. That wasn't my only question.
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HEDRICK COURT REPORTING
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I didn't think it woul-d be.
If you refer to page 8 of your testimony, Iine
Okay. So
Unless there's a trading mechanism of some sort.
So your posi-tion isn't that they could have done
16, you talk about failure to consider the probability of CO2
controls j-n the not-too-distant future raj-ses serious questions
about the prudency of making an investment of this magni-tude at
this time.
Other than a carbon adder, what do you be1ieve
Idaho Power could have util-ized given the level of uncertainty?
A.WeI1, I think -- I mean, the carbon adder has
been used in multj-pIe IRPs to Idaho Power's credit, but what
we're referring to is the probability or Likelihood of carbon
caps or emissions caps on emissions. So i-f, for instance,
we were to restrict the emissions from certain from power
plants, then that would raise the questj-ons about whether these
plants could continue to operate, at least as they are
currently. But a price on carbon, you could pass that price on
to ratepayers; but if you put a cap on carbon, then you have to
deal with how a plant operates.
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more than consider the carbon adder; they just they should
have l-ooked at closing it down entirely. Is that correct?
A. No, I didn't suggest that they should close it
down entirely at this point. That has to be studied in much
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SRA
more detail.
Irm suggesting that if they considered the
possibility of a cap mechanism, then f think the outcome of
this study would have been different.
A. Okay. And in speaking to legj-slation and things
Iike a carbon cdp, j-s it your understanding that there
typically is a difference when rules are promulgated between
what is imposed upon new facil-ities that are being built and
what is -- what rules are imposed upon existing facil-ities?
A. I think there will be a distinction between the
two. I mean, we know what has been proposed for new
facilitj-es. What we don't know yet is what may be proposed for
existing facilities and we won't know that untj-l next summer,
and I think that the regulatory regime is going to be entirely
different for existing facilities than it is for new
facilities. And all we can base that on is what we've heard
from the White House and about what may be proposed, but we
don't you know, it's anyone's guess.
O. Thank you. That' s al-I I have.
A. Thank you.
COMMISSIONER SMITH: Ms. Nordstrom.
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HEDRICK
P.O. BOX
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MILLER (X)
SRA
CROSS_EXAMINATION
BY MS. NORDSTROM:
a. Good mornj-ng.
A. Good morning.
O. Mr. Mi11er, could you please describe your
experience in utility resource plannJ-ng or grid operations?
A. With resource planning, I've been involved in the
past five Idaho Power integrated resource plan developments. I
have no experience with grid operations, well-, except for
following it from a regulatory standpoint here, but I don't
specialize in grid operations. I do work intensively with
resource planning.
O. Based upon your testimony, is it accurate to say
that you believe Idaho Powerrs analysis supporting this case is
inaccurate or incomplete?
A. I woul-dnrt say "inaccurate." I would say
"incomplete. "
O. Do you believe that the analyses relj-ed upon by
the Wyoming and Utah Commissions were l-j-kewise inaccurate or
incomplete?
A. I was not involved in the Wyoming or Utah
deliberations. If you're referring to the CPCN case, all I
know about those cases is what Irve read from the regulatory
dockets.
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HEDRICK COURT REPORTING
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A. Very well. Turning your attention to page 21- of
your testimony, I know that you were present when I previously
made an objection.
A. Yes, ma'am, I was.
O. Just to be cl-ear, do you have any 1ega1 training
or are you licensed by a bar association?
A. I don't I'm not licensed by a bar assocj-ation.
Irm not an attorney.
O. Vf,hen you read the quote that appears the
quoted portion of Order No. 1,2-L77 that appears in your
testimony between lines 5 and lines l-l-
A. Uh-huh.
O. do you see the word "discussion" anywhere in
that text?
A. It's not -- no, the word "discussj-on" is not in
that passage.
0. So upon what are you basing your your,response
to this question that this passage required discussions?
A. Well , if you'11 allow me to quote from l-ine 5
through l-ine 1,2
A. It's in the record: You may quote it if you
Iike.
A. Sure:
In its next IRP update, Idaho Power wil-1 include
an evaluation of environmental compliance costs for existing
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MILLER (X)
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coal-fired plants. The evaluation wil-l- investigate whether
there is fl-exibility in the emerging environmental regulati-ons
that woul-d allow the Company to avoj-d early compliance costs by
offering to shut down individual- units prior to the end of
their usable lives.
I can continue the quote if you'd 1ike.
O. So the portion that you read, I didn't see the
word "discussions" that appeared anywhere in that text.
A. No, you
O. Did I miss it?
A. No, you already -- I already said that i-t was not
reflected in that passage.
O. So, you know, why is it that you believe that
discussions were required?
A. We11, I just read -- I read -- the quote I just
read f lnterpret as requiring Idaho Power to to conduct an
investigation whether there is flexibillty in emerging
environmental regulations. I think it's to me, it's fairly
straightforward.
O. So when I look at the quote, I see that the
Commission says that the Company is to do an eval-uation that
investj-gates whether there is flexibility, and conduct a
plant-specific analysis to see if a trade-off is in the
ratepayersr interests.
Did -- did Idaho Power do that in its coal study
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HEDRICK COURT REPORTING
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which was found in Exhibits 5 and 6?
A. Wel-I , if I could refer to on the same page, page
21, beginning with l-ine J.9, I think in response to an Al-Iiance
request, the Company says that there were no communications
between Idaho Power and the Envi-ronmental Protection Agency,
Pacj-fiCorp, or the State of Wyoming regarding the delay of
install-ation of environmental controls on any unit in exchange
for shutting that unit down.
So I conclude from reading that that there was no
communication between the Company and either state or federal
regulators.
O. And I appreciate that thatrs your lnterpretation;
however, f donrt belleve that answered my questi-on.
And did ldaho Power conduct an investigation and
do a plant-specific analysis to determine if the trade-off
would be in the ratepayers' interest and does that appear in
Exhj-bits 5 and 6, the Company' s coal study?
A. V[e11r ds I said earlj-er, I don't believe that the
eval-uation was j-ncorrect or in error, I just think it was
incomplete.
When I read the coal study that was submitted in
conjunctj-on with the IRP, then I -- my conclusion was that
there were issues that were not explored or at least if they
were, they werenrt incl-uded in the study. f couldn't read -- I
couldn't discern whether they -- those issues were addressed in
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HEDRICK COURT REPORTING
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terms of other alternatj-ves besides natural gas or retrofitting
the plants.
O. So based upon your i-nterpretation of this order,
is it accurate that the order directed fdaho Power to analyze
the option, not to engage specifically in discussions with a
regulator?
A. WeI1, the way I read it is that the evaluation
will investJ-gate whether there's flexi- it's quoting from
your order.
O. Okay. So on what date was this order i-ssued that
you're quoting from?
A. On what page?
O. What date?
A. Oh. WeII, it was with the 201-L IRP that was
filed in Oregon in Case No. LC-53. I don't oh, it looks
like it was on May 21 of 2012.
O. Thatrs what the date that appears on l-ine 3 of
your testimony.
So there's been testimony previously in this case
and on cross-exami-nation this morning that the BART settlement
agreement that was entered into with the Wyoming Department of
Environmental- Qual-ity and the Wyoming DEQ Division of Air
Quality occurred in 20L0. Were you here for that testimony?
A. Yeah, uh-huh, yes, f was.
O. Okay. So the discussions that you're envisioning
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HEDRICK COURT REPORTING
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SRA
that were supposed to have occurred, is it your understanding
that they were directed at emerging regulations or ones that
had already been settled and had been agreed to with regulators
prevj-ous1y?
A. WeI1, once again quoting from line 7, it says
there is flexibil-ity in the emerging environmental regulations.
And that was an Oregon order, had nothing to do
with what was taking place in Utah or Wyomj-ng, to my
understanding at least. It says specifj-ca1Iy it refers to
emerging regulations.
MS. NORDSTROM: Based upon the witness's answers
to the questions presented here, Idaho Power renews its
objection to this testimony remaining in the record. The
there are portions of it in discovery requests that are cited
that are not in the record. They -- you know, it cal1s for a
legal j-nterpretation, which he is not qualifj-ed to give. And
it mischaracterizes and reads j-nto an order a requirement that
did not specifically exist in the manner in whj-ch he says it
does.
COMMTSSIONER SMITH: Mr. Mi1Ier.
MR. MILLER: Could I ask a question in aid of
COMMISSIONER SMITH: Yes, you may.
MR. MILLER: -- a response?
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HEDRICK COURT REPORTINGP.O. BOX 578, BOTSE, rD
MILLER (X)
SRA
EXAMINATION
BY MR. MTLLER:
O. Mr. Mi1ler, do you know whether PacifiCorp
engaged in discussions with regulatory agencies with respect to
these matters?
A. With respect to flexibility and compliance and --
O. Yes.
A. -- particul-ar time frames?
No, I don't. I donrt know whether they did or
not.
0. In your mind, does a requirement to investigate
encompass a the possibility of dial-ogue wj-th other agencies?
A. That would be my interpretation based on what
is based on this quote and how you know, from the Oregon
order.
O. A11 right.
A. I think it's fairly self-explanatory.
O. So there coul-d be you could have one idea of
what "investigate" means and the Company could have a different
idea. Is that
A. We could get into semantics al-I day, but I don't
think that that would be useful right now.
MR. MILLER: I think our position remains the
same, Madam Chairman, that the witness has been thoroughly
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HEDRICK COURT REPORTING
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MILLER (X)
SRA
cross-examined on this. We have an understanding of what he
thoughtr we have an understanding of what the Company thought,
and they appear to be different, but it's not grounds for
stri-king the testimony altogether.
MS. NORDSTROM: Except that it ca1ls for a 1egal
interpretation, and the line question on line L2 says does
Idaho Power satisfy this directive.
that issue.
the J-mpact
is going to
step out of
And that interpretation goes directly to that
And, you know, semantics are I think mj-nimizes
of this question and answer.
COMMfSSIONER SMITH: Al-l- right. The Commission
ask you to be at ease for a couple moments whiLe we
the room and discuss this.
(Recess. )
COMMISSIONER SMITH:A11 right, we'11 go back on
the record.
After consultation, the Commission has determined
not to strike any of the testi-mony from the record. We believe
that some of it may have come from discovery, but this is the
very way that f think discovery responses get in the record is
when witnesses bring it forward.
As to the objection of a Iega1 interpretation, we
beLieve it's just this witness's opinion. He's not a lawyer.
So in reading the dj-rection and where it came from, I conclude
that the only opinion that realIy matters is the Oregon Pub1ic
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HEDRICK COURT REPORTING
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MILLER (X)
SRA
Util-ities Commission, so and fortuitously, the Company still
has two witnesses who havenrt yet appeared and they coul-d al-so
offer their opinion and the Commission could give appropriate
weight to the testimony that's presented to it in the record.
So, with thatr w€ can move on.
MS. NORDSTROM: Thank you. f have no further
questions.
COMMISSIONER SMITH: Are there questions from the
Commissioners?
COMMISSIONER REDEORD: No.
COMMISSIONER SMITH: Redirect, Mr. Mill-er.
MR. MILLER: I believe that Mr. Mi-I1er has
acqui-tted himsel-f quite weLl- and don't have any redirect. No
redirect.
COMMISSIONER SMITH: Thank you, Mr. Mi11er.
And, thank you, Mr. Mi1ler.
THE WITNESS: Thank you.
COMMISSIONER SMITH: And is there any --
MR. MILLER: And may Mr. Mil-1er be excused?
COMMISSIONER SMITH: I was just goj-ng to sdy, is
there any objection to Mr. Mil-Ier being excused?
Seeing none, you're excused.
(The witness l-eft the stand.)
COMMISSIONER SMITH: And I just wanted to say
that the Commissj-on appreciates the parties actually movlng the
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HEDRICK
P.O. BOX
COURT REPORTING
578, BOTSE, rD
HARVEY (Di)
IPC
hearing date to today. I think it gives us a better time and
fits our schedules better. So we appreciate all of the changes
that were made to accommodate that.
Ms. Nordstrom.
MS. NORDSTROM: Idaho Power calls Tom Harvey as
its next witness.
TOM HARVEY,
produced as a witness at the instance of Idaho Power Company,
being first duly sworn, was examined and testified as follows:
DIRECT EXAMINATION
BY MS. NORDSTROM:
a. Good morning.
A. Good morning.
O. Please state your name and speII your l-ast name
for the record.
A. My name is Tom Harvey, H-A-R-V-E-Y.
A. By whom are you employed and in what capacity?
A. I'm employed by Idaho Power Company in the
capacity of the joint projects manager.
O. Are you the same Tom Harvey that filed direct
testimony on ,-June 28, 2013, and prepared exhlbits numbered one
through six?
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HEDRICK
P.O. BOX
COURT REPORTING
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HARVEY (Di)
IPC
A. I am.
O. Are you the same Tom Harvey that filed rebuttal
testimony on October 29, 201,3?
A. I am.
O. Did you file any exhibits with your rebuttal-
testimony?
A. I did. f believe there were six.
O. With your rebuttal- testimony?
A. Oh, I'm sorry, rror not rebuttal; direct.
O. If I were to ask you the questions set out in
your prefiled testimony, would you have any corrections or
changes to your testimony or exhibits?
A. f would not.
A. If I were to ask them to you today, would your
answers to those questions be the same?
A. They woul-d.
MS. NORDSTROM: f would move that the prefiled
dj-rect and rebuttal testimony of Tom Harvey be spread upon the
record as if read, and exhibits numbered one through six be
marked for identification.
COMMISSIONER SMITH: ff there's no objection, it
is so ordered.
(The followj-ng prefiled direct and
rebuttal testimony of Mr. Harvey is spread upon the record. )
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1 Q. Please state your name and business address.
2 A. My name is Tom Harvey and my business address
3 is L22L West Idaho Street, Boise, Idaho.
4 Q. By whom are you employed and in what capacity?
5 A. I am employed by fdaho Power Company ("Idaho
6 Power" or "Company") as the Joint Projects Manager.
'l Q. Please describe your educational background.
8 A. f have a Bachelor of Business Administration
9 in business management from Boise State UniversJ-ty. I also
10 attended the UtiTity Executive Course in 201-1.
11 O. Please describe your work experience with
L2 Idaho Power.
L3 A. I was hired by Idaho Power in July 1980 and
L4 worked in the Plant Accounting Department bnd continued
15 working in the accounting area through 1985. From 1985
16 through 2009, T was the Fuels Management Coordinator and
11 then was promoted to my current position of Joint Projects
LB Manager.
L9 O. What is the purpose of your testimony in this
20 matter?
2L A. The purpose of my testimony is to provide the
22 Idaho PubIic Utilities Commission with information
23 regarding proposed capital investments in Selective
24 Catalytic Reduction ("SCR") emissions control equipment for
25 the Company's rlim Bridger Units 3 and 4 in support of the
HARVEY, DI 1
Idaho Power Company
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Company's application for a Certificate of Pub1ic
Convenience and Necessity (*CPCN") .
o.Please summarize the topics your testimony
I. i,IM BRIDGER PI.AIE A}ID SCR PROi'ECT DETAIL
O. Describe the Jim Bridger P1ant and the
4 addresses.
A.My testimony describes the following: (1) the
6 Jim Bridger power plant ("Jim Bridger Plant") and emission
7 control projects, (2) the environmental regulations that
g ultimately directed the Company to instal] the SCRs on Jim
9 Bridger Units 3 and 4, (3) time frame of investments, (4)
10 the economic analysis performed by the Company and the
11 alternatives considered, and (5) pending environmental
12 regulations.
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15 operating features of Units 3 and 4.
16 A.The Jim Bridger Plant consists of four coal-
l7 fueled units whj-ch are two-thirds co-owned by PacifiCorp
18 and one-third co-owned by Id.aho Power. The Jim Bridger
19 Plant is maintained and operated by PacifiCorp. Water for
20 operation is conveyed approximately 40 mj-Ies through a
2l pipeline originating at a diversion from the Green River.
22 The Green River water is supplemented by water delivered to
23 the Jim Bridger Plant from the adjacent Bridger CoaL
24 Company. Unit 3 began commercial operation in 1976 and
25 Unit 4 followed in 1979. Unit 3 and Unit 4 have nominal
HARVEY, DI 2
Idaho Power Company
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L net (or "net reliable") generation capacities of 523 and
2 530 megawatts ("MW"), respectively, of which the
3 corresponding Idaho Power one-third share is L7 4 MW and
4 177 MW. Both units are configured with Alstom.(formerly
5 Combustion Engineering) controlled circulation,
5 tangentially-fired, pulverized coal boilers and General
7 Electric steam turbine-generators. Nominal steam
B conditions are 21400 pounds per square inch gauqJe pressure
9 at 1,000 degrees Fahrenheit at the turbine-generator
10 throttle va1ve. Both units are configured with closed loop
L1 circulating water cooling systems that include mechanical
L2 draft cooling towers and electrostatic precipitators. Unit
13 4 was originally equipped with a sodium-based wet Flue Gas
14 Desulfurization ("FGD") system, and Unit 3 was retrofitted
15 in 1985 with a sodium-based wet EGD system.
L6 The Jim Bri-dger Plant is adjacent to Idaho Power's
L7 and PacifiCorp's co-owned Bridger Coal Company mine, which
18 supplies approximately six m.illion tons per year of sub-
1,9 bituminous coal to the plant along a 2.A-mile Iong, 42-inch
20 wide overland belt conveyor at a rate of approximately
2L L,500 tons per hour. Additiona1ly, approximately 2 to 3
22 million tons per year of sub-bituminous coal are currently
23 delivered to the Jim Bridger Plant from the Black Butte
24 mine via rail. Coal combustion residuals are disposed of
25 on plant property in a solid ,."t?2trndfi1l and a FGD waste
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surface impoundment. The Jim Bridger Plant also utilizes
evaporation ponds, which makes it effectively a "zero-
discharge" facility. A1so, the Jim Bridger P1ant currently
employs approximately 350 personnel.
O. Pfease descrj-be the specific emissions control
investments planned for Jim Bridger Units 3 and 4 for which
the Company is seeking a CPCN.
A.The Jim Bridger Uni-fs 3 and 4 emissions
control investments proposed in this CPCN are SCR systems
and associated ancillary equipment for each unit. Each SCR
system would be comprised of two separate universal
reactors, with multiple catalyst levels; inlet and outlet
ductwork; a shared ammonia reagent system; an economizer
upgrade; structural reinforcement of the boiler and flue
gas path ductwork and equipment; and extension of the
existing pIant. distributed control system. An induced
draft fan upgrade and an associated auxiliary power system
variabl-e frequency drive insertion are required on Unit 4
only.
II. WTOMING AI{D FEDERAI ENVITRONMENTAL REGT'I.ATTONS
0.Please describe the primary environmental
regulations requiring the installation of SCR for Jim
Bridger Units 3 and 4.
A.The installation of the SCRs for Jim Bridger
comply with the Clean Air Act
L24
HARVEY, DI 4
Idaho Power Company
Units 3 and 4 are required to
L Regional Haze Rules and the resulting Wyoming Regional Haze
2 State Implementation Plan ("[tlyoming Regional Haze SfP").
3 0. Please describe the significance of the
4 Regional Haze Rules.
5 A. Through the L977 amendments to the Clean Air
6 Act, Congress set a national goal for visibility to remedy
7 impairment from man-made emissions in 156 designated
B national parks and wilderness areas (Cfass I areas). This
9 goal resulted in development of the negional Haze Rules,
10 adopted in 2005 by the United States Environmental
11 Protectlon Agency ("EPA"). Under these regulations, states
L2 are required to develop strategies to reduce emissions that
13 contribute to regional haze and demonstrate "reasonable
L4 progress" toward emissions reductions.
15 O. Please describe the main requirements under
LG the Regional Haze Rules.
L7 A. The Clean Air Act requires each state to
LB develop plans to meet various air quality reguirements,
19 including protection of visibility. The plans developed by
20 a state are referred to as State Implementation Plans
27 ('SIP"). The state must submit its SIP to the EPA for
22 approval and once it is approved, the SIP is enforceabte by
23 the EPA.
24 O. Please describe the function of a SIP under
25 the Regional Haze Rules.
HARVEY, DI 5
Idaho Power Company
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1 A. Regiona.l- Haze Rules SIPs must assure
2 reasonable progress towards the natj-onal goal of achieving
3 natura.l- visibility conditions in Class I areas by the year
4 2064. The Clean Air Act requires states to revise their
5 SIPs to contain such measures as may be necessary to make
6 reasonable progress towards the natural visibility goal,
7 including a requirement that certain categories of existing
B major stationary sources permitted or built between L962
9 and L977 procure, install, and operate the "Best Available
10 Retrofit Technology" (*BART") as determined by the state as
L1 the first phase. Under the Regional Haze Rules, states arb
L2 directed to conduct BART determinati-ons for such *BART-
13 eligi-bIe" sources that may be anticipated to cause or
14 contribute to any visibility impairment j-n a Cl-ass f area.
15 In connection with the BART phase of the EPA's Regi-ona1
t6 Haze Rules are the Reasonable Progress Goal-s (second
L'l phase), which wi}l determine the "Long Term Strategy" to
18 continue to reduce regional haze in these Class I areas.
19 O. What must states consider in determining BART?
20 A. In determining BART, states must consider the
2I five statutory factors in section 169A of the Clean Air
22 Act: (1) the costs of compliance, (2) the energy and non-
23 air quality environmental impacts of compliance, (3) any
24 existing pollution control technology in use at the source,
25 (4) the remaining useful life of the source, and (5) the
HARVEY, DI 6
Idaho Power Company
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degr:ee of improvement in visibility which may reasonably be
anticipated to result from the use of such technology.
o.Please describe the efforts taken to evaluate
available emissions control technologies for BART-eligible
5 sources.
A.As part of the BART review of Jim Bridger
7 Units 3 and 4, fdaho Power and PacifiCorp had CH2MHfLL
8 prepare an evaluation of several other technologies on
9 their ability to economically achieve compliance and
10 support an integrated approach to control criteria
11 pollutants (e.9., sulfur dioxide, nitrogen oxide ("NOx"),
L2 and particulate matter for the facility) , if it were to
13 continue to operate and to burn coal - The SBART Analysis"
L4 for Units 3 and 4 are attached as Exhibit Nos. 1 and 2 to
15 my testimony, respectively. The BART analyses reviewed
16 available retrofit emission control technologies and their
L7 associated performance and cost metrics. Each technology
18 bras revj-ewed against its ability to meet a presumptive BART
19 emission limit based on technology and fuel
20 characteristics. The BART analyses outlined the available
2I emission control technologies, the cost for each, and the
22 projected improvement in visibility which can be expected
23 by the installation of the respective technology.
24 For each unit or source subject to BART, the state
25 environmental regulatory agencies identify the appropriate
HARVEY, DI 7
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727
1 control technol-ogy to achieve what the air quality
2 regulators determine are cost-effective emission
3 reductions. Wyoming's NOx BART determination for Jim
4 Bridger Units 3 and 4 included the installation of Iow NO*
5 burners and overfire air ports. The low NO* burners and
6 overfire air ports were incorporated into both the BART
7 permits issued for the Jim Bridger P1ant as well as the
B Wyoming Regional Haze SfP, and were subsequently install-ed
9 on al-1 four units. The SCRs are also included in the
10 Wyoming Regional Haze SIP as part of the Long Term Strategy
11 to meet the "Reasonable Progress Goa1s." To comply with
L2 Wyoming Regional Haze SIP requirements, PacifiCorp has
L3 moved forward with its permitting and competitive
L4 procurement processes to specify, evaluate, and ultimately
15 select the preferred provi-der for the projects.
16 O. Please describe the EPA action on the Wyoming
l7 Regional Haze SIP on May 23, 2013r ds it relates to the
18 install-ation of SCR on Jim Bridger Units 3 and 4.
19 A. The EPA chose to approve and disapprove
20 portions of the Wyoming Regional Haze SIP in its "re-
2l proposal" on May 23, 2013, with final approval expected in
22 November 20L3. In its re-proposal, the EPA accepted the
23 determination of 'Jim Bridger Units 1-4 as being BART-
24 eligible and determined that low NO* burners and overfire
25 air ports is BART. The EPA also proposed to approve
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t hlyom.i.ng's determination of the Long Term Strategy of
2 installing SCRs on Units 3 and 4 in 20L5 and 2016 and Units
3 2 and 1 in 202L and 2022, respectively. The EPA proposed
4 approving the timeline for installation of the Jim Bridger
5 power plant SCRs on Units l-4, even though the EPA is
6 seeking cornment on an alternative proposal to acceLerate
7 the Jim Bridger Units 1 and 2 SCR installations. The EPA
I established NO, limits for Jim Bridger Units 3 and 4 at an
9 ScR-based emissions limit of 0.07 LblMMBtu.
10 IIT. TI}@ ERAIIE OF II{\TESTMEIITS
Ll O. Does the Company need to make the investments
12 for Jim Bridger Units 3 and 4 Lf it expects to continue
13 operating these units?
L4 A. Yes. fn order to comply with the requirements
15 that are set forth in the BART Appeal Settl-ement Agreement
16 and the V,lyoming Regional Haze SIP, attached as Exhibit Nos.
Ll 3 and 4 of my testimony, it is necessary to instaLl and
l"B operate the controls j.n question. The Company has an
19 obligation to operate its facilities in compliance with its
20 permit requirements and the applicable laws and
2L regulatj-ons, as well as satisfy the Company's other
22 statutory and regulatory requirements. Installing and
23 operating the proposed emissions controL equipment that
24 allows the units to continue operating is the lowest cost
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and least risk option to meet all the applicable
requirements, ds indicated by the Company's analyses, which
I will discuss later in my testimony.
0.Please explain the BART Appeal Settlement
between PacifiCorp and State of Wyomj-ng pertaining to the
Jim Bridger Plant.
A.PacifiCorp filed an appeal in 2010 of certain
BART permits in Wyoming, including those requj-ring SCR for
NO* emissions control on Jim Bridger Units 3 and 4. Wyoming
was the first state to make the determination that BART
required the installation of SCR controls for NO* emissions,
and also to impose long-term strategy requirements for SCR
. in a BART permit. PacifiCorp disagreed with the
determination that SCR was BART and asserted that Appendix
Y of 40 Code of Federal Regulation Part 51 did not
contemplate the installation of post-combustion controls
like SCR. The Company further disagreed that a long-term
strategy requi-rement could be included in a BART permit.
Has this appeal been resolved?
Yes. In November 2010, Pacifi-Corp settled the
Ir'lyoming BART appeal to resolve the matter in a way that did
not require more controls and would not impose additional
costs earlier than originally proposed in the Wyoming
Department of Environmental Quality's ("Wyoming DEQ") BART
permits. To provide maximum flexibility in the event that
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other environmental requirements or uncertainties arose,
PacifiCorp and the Wyoming DEQ included terms in the BART
Appeal Settlement Agreement that would address a
modification if future changes j-n either federal or state
requirements or technology would materially alter the
emissi-ons controLs and rates that would otherwise be
required. A revised BART permit for the Jim Bridger Plant
incorporating the terms of the settlement agreement was
issued by the Wyoming DEQ on November 24, 20L0.
o.By what date must Idaho Power and PacifiCorp
install the emissions control equipment investments for Jim
Bridger Units 3 and 4.
A. The BART Appeal Settlement Agreement and the
Wyoming Regional Haze SIP require the installation of SCR
on Unit 3 by the end of 2Q15 and on Unit 4 by the end of
2016 -
On May 23, 2013, the EPA recommended approval of the
Wyoming Regional Haze SIP for installation of SCR on Jim
Bridger Units 3 and 4 in 2015 and 2016, respectively. The
EPA has indicated it wiII sign a notice of f,ina1 rulemaking
on November 2L, 2013. This would make these emission
reduction requirements at Jim Bridger Units 3 and 4
federally enforceable as weII.
o.Can installation of emissiorrs control
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equipment be prudently deferred?
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A.No. The Company, along with PacifiCorp, has
been engaged in Regional Haze Rules compliance planning
with the state of Wyoming since the promulgation of the
Regional Haze Rules. During the initial 2003 to 2008
planning period, the ldyoming Department of Environmental
Quality Air Quality Division ("WDAQ") required detailed
BART reviews to be conducted for the Ji-m Bridger Plant. It
was the initial expectation of the western states' Regional
Haze program that individual states would establish BART
emission limits for BART eligible units and would require
installation of appropriate control-s by 2013.
As the majority owner and plant operator, PacifiCorp
originally submitted these evaluations of its BART eligible
facilities in Wyoming in January 2001, with revisions
submltted in October 2007. Addenda to individual facitity
BART reviews were developed in March 2008. WDAQ completed
its final review of the BART evaluations and the associated
permit applications and issued air quality permits
(construction permits) for individual emissions control
projects. WDAQ followed up by issuing BART permits for
individual emissions control projects; the BART Appeal
Settl-ement Agreement was executed in November 2010,
followed by issuance of amendments to certaj-n BART permits
in December 20L0. Once complete, the emissions control
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projects presented in the Company's Application wiII
satisfy its obligations in this regard.
o.Do the timelines discussed above provide a
reasonable progression of evaluation, agency coordination,
and decision making for the respective emissions control
proj ects ?
A.Yes. Emissions control projects of the types
discussed above and included in this Application are
extremely complex and require a significant amount of
evaluation and planning to bring to fruition. The
permitting processes described above define the technical
requirements necessary to move forward with establishing
competitive pricing for the work and ultimately executing
the projects. The timeline for securing contracts for this
type of work through project completion often has a multi-
year duration.
Is waiting to install controls until .ia an"
regulations are considered, finalized, and
feasible approach for the Company?
No. The resulting delay would put the
substantial risk of noncompliance. Emission
o.
environmental
quantified a
A.
facilities
reduction
Trying to
themselves
short time
at
projects are complex, multi-year projects.
install multiple controls, which are by
generally fnulti-year projects, within the same
frames poses a significant risk of noncompliance
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with penalties that can be substantial. If the
environmental upgrades are not installed within the time
frame given by the EPA, Idaho Power would be forced to stop
generating from these units. Unlawfully operating
units j-n violation of federal and state regulations
an option.
the
is not
Another factor making a delay in installation not a
feasible approach j-s that the structure of the EPA and the
nature of its rulemaking processes are not conducive to the
agency producing coordinated air quality, waste, and water
rules for the electrj-city sector; these rules address
different issues through varying methods with different
compliance time frames. Nonetheless, the Company
undertakes efforts to ensure that the potential compliance
requirements for all these rulemaking activities are
understood and reflected in its plans, making decisions
based on the best available information, and updating that
information as additional detaj-Is on requirements become
available.
0. Has a contract been signed to proceed with the
installatj-on of the SCRs for Jim Bridger Units 3 and 4?
A. Yes. Because of the scope of the project and
the extended period of time it takes to plan, permit,
engineer, procure, and construct SCR systems, the
uncertainty of the final ruling from the EPA on approval of
HARVEY, D] L4
Idaho Power Company
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1 the portion rrf the Wyoming Regional Haze SIP that addresses
2 the SCRs at Jim Bridger Units 3 and 4, and the fact that
3 the Wyoming Regional Haze SIP deadlines are legally
4 binding, a Limited Notice to Proceed ("LNTP") was signed
5 with the successful bidder on May 31, 20L3. The Company
6 and PacifiCorp determined this to be a prudent approach
7 that alLows for consideration of the Company's Application
I for a CPCN while waiting for final approval of the Wyoming
9 Regional Haze SIP by the EPA. The LNTP concept was also
10 used to reduce the risk and upfront costs of a PutI Notice
11 to Proceed ("FNTP") unti] the final rulj.ng from the EPA is
L2 released, while ensuring the Engineering, Procurement, and
13 Construction ("EPC") contractor can meet the deadli-nes for
74 instaLlation as per the Wyoming Regional Haze SIP. The
15 Company and PacifiCorp must make a decision on the FNTP
16 prior to December 20L3.
L7 O. Please explain the bidding process that
l-8 resulted in the EPC contract for installation of SCR on Jim
19 Bridger Units 3 and 4.
20 A. A competitive Request for Proposal (*REP")
2l process was undertaken by PacifiCorp, as operator of the
22 Jim Bridger Plant, to establish a least-cost EPC contract
23 assocj.ated with the rlim Bridger Units 3 and 4 SCR
24 installations. With input from Idaho Power, PacifiCorp
25 developed a RFP package which included a detailed scope of
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work, performance based technical specifications, concept
drawings, expected performance guarantees and commercial-
requirements. PacifiCorp developed a bid evaluation matrix
establishing selection criteria which allowed for a
balanced outcome for tradeoffs between cost, techni-caI
advantages, and commercial- terms. Responses to the RFP
were evaluated with a number of rounds of additional
j-nformation requests and clarifications. The results of
this extensive evaluation resulted in a short list of the
two lowest-cost evaluated respondents that presented the
best vaIue. PacifiCorp held further technical and
commercial negotiations with the short-listed respondents.
Based on these negotiations, the EPC contract was awarded
to the respondent that the Company and PacifiCorp felt
provided the best overalf val-ue.
I\I. ECONOMIC A}IATYSTS A}ID COMPLIAIICE ALTERNATIVES
o.Please describe the analysis the Company used
to determine the cost-effectiveness of the SCR investment.
A.The Company evaluated the cost-effectiveness
of the SCR investment for Jim Bridger Units 3 and 4 in the
Coal Unit Environmental Investment Analysis ("Coa1 Study")
conducted for all four units at the Jim Bridger P1ant in
Wyoming and the two units at the North Valmy power plant in
Nevada. The CoaL Study was undertaken in response to the
Public Utility Commission of Oregon's directive in Order
HARVEY, DI 16
Idaho Power Company
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1 No, L2-t77 and wa-s f iled with the Idaho Public Utilities
2 Commission in February 2013 as part of the Company's 20lL
3 Integrated Resource Plan ("IRP") Update in Case No. IPC-E-
4 1r.-11.
5 The methodology used in the Coal Study examined
6 future investments required for environmental compliance in
7 existing coal units. Those investments hrere then compared
B to the costs of two alternatives: (1) replace such units
9 with combined-cycle combustion turbines ('CCCT") or (2)
10 convert the existing coal-fired units to natural gas. For
11 the complete evaluation, fdaho Power used a combination of
LZ third-party analysis, input from the operating part,ners of
13 each coal plant, and a final economic dispatch analysis
L4 conducted by the Company to assure a complete and fair
15 assessment of the alternatives.
L6 O. Please provide an overview of the CoaI Study.
L7 A. The CoaI Study consists of two parts. The
18 first part of the analysis is a unit specific forecasted
19 (static) annual generation analysis performed by Science
20 Applications International Corporation (*SAIC"). A copy of
2L the confidential final report by SAIC is provided as
22 Exhibit No. 5 to my testimony.
23 The second part of the Coal Study was an
24 economically dispatched (dynamic) total portfolio resource
25 cost analysis performed by Idaho Power incorporating
HARVEY, DI L7
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O 1 portions of the SAIC study results. A copy of that report
2 is provided as Exhibit No. 6 to my testimony.
3 Q. V'Ihat were the objectives of the analysis
4 conducted by SAIC?
5 A. Specifically, Idaho Power had the following
6 objectives for the SAIC analysis:
7 o Review the Company's assumptions
B regarding the capital costs of the proposed envj-ronmental
9 compliance upgrades;
10 o Review of the Company's assumpti-ons
lL regarding the variabl-e costs of the proposed environmental
L2 compliance upgrades and replacement capacity,'
o Develop estimates of the costs for each
L4 unit going forward, including total costs reflecti-ng
15 environmental compliance upgrade j-nvestments as well as
L6' total replacement costs; and
L7 o Provide conclusions as to the economic
18 feasibility of the environmental compliance upgrades and
19 retirement option.
20 Idaho Power's primary goal for the SAIC study was to
2I obtain specific direction regarding upgrading each of the
22 unj-ts at the North Valmy and Jim Bridger power plants.
23 SAIC used extensive forecast and operational data provided
24 by the Company for each of the units to complle a
25 comprehensive analysis of each option's total cost for the
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duration of the study period. These costs were then
compared to other options for each unit on a net present
value basis.
o.What were the results of the SAIC analysis for
Jim Bridger Units 3 and 4?
A.All Jim Bridger Plant units were examined for
the same three scenarios: (1) upgrade (install SCR), (21
natural gas conversion (SCR not installed), and (3)
retire/replace with CCCT (SCR not installed). Each of
these three scenarios was evaluated under ni-ne different
20-year annual generation forecasts. The nine generation
forecasts correspond to the impacts of varying natural gas
prices (1ow case, planning case, and high case) as well as
future carbon regulation compliance costs (1ow case,
planning case, and high case).
The planning case (planning case carbon/planning
case natural gas) results for both Jim Bridger Units 3 and
4 indicate that the cumulative net present value power
costs associated with the upgrade option is the least cost
option. As shown in Figure 3 on page 15 of Exhibit No. 6,
the cumulative present value power costs associated with
the upgrade option for Unit 3 is $371 million lower than
the next least-cost compliance alternative. The results
for the Unit 4 upgrade option are $332 million lower than
the next least-cost compliance alternative.
HARVEY, DI 19
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1 Q. How did the Company use the SAIC resu'lts in
2 the second part of the Coal Study, the dynamic portion of
3 the comprehensj-ve analysis?
4 A. The Coal Study performed by Idaho Power
5 utilized the AURORAxmp@ model- (*AURORA" or "Aurora Model")
6 to determine the total portfolio cost of each investment
7 alternative analyzed by SAIC. AURORA applies economj-c
B assumptions and dispatch cost simulations to model the
9 relationships between generation, transmission, and demand
10 to forecast future electric market prices. AURORA is Idaho
11 Power's primary tool used to simulate the economic
1,2 performance of different resource portfolios evaluated in
13 the IRP process.
L4 The Company used the simulated operational
15 performance of each investment al-ternative relative to the
16 existing resource under varying future natural gas price
L7 forecasts and carbon adder assumptions. The Net Present
18 Va1ue ("NPV") total portfolio cost was calculated over a
19 2O-year plannj-ng horizon (20L3 through 20321.
20 The fixed costs used by SAIC were incorporated into
2t the Idaho Power study. SAIC reviewed the fixed costs of
22 each investment alternati-ve and scheduled the costs
23 annually for the various investment alternatives for the
24 20-year study period. These annual costs included
25 environmental capital investments, ongoing capital
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expenditures, unit replacement capital, and the fixed
operations and maintenance costs for the specific unit
configuration. The Company's analysis combined the NPV of
the fixed costs from the SAIC model with the NPV of the 20-
year AURORA generated total portfolj.o costs to form the
basj-s for the quantitative evaluation of the investment
alternatives.
o.Why is the Aurora Model an appropriate tool
investmentsfor analyzj-ng incremental environmental
required for coal resources?
A.The Aurora Model is the appropriate modeling
tool when evaluating capital investment decisions and
alternatives to those j-nvestments that might include early
retlrement and replacement or conversion of assets to
natural gas because it is capable of determining capacity
and energy cost tradeoffs between investment alternatives.
The Aurora Model captures the operating and energy market
cost implications of prospective investment decisions by
evaluating total portfolio power costs over the 20-year
study period. When the AUROM costs are coupled with the
capital costs for the 20-year period, a comprehensive Lotal
cost for an investment alternative i,s available for
comparison under varying forecasted future scenarios.
o.What conclusions did the Company derive from
HARVEY, DI 2L
Idaho Power Company
the Coal Study?
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A.The planning case (planning case
carbon/planning case natural gas) results for both Jim
Bridger Units 3 and 4 indicate that the cumulative net
present value power costs associated with the upgrade
option is the least cost option. The NPV of the total
portfolio costs under the planning case for Unit 3 is $254
million less than the next least-cost compliance
alternati-ve. The results are similar for Unit 4 and are
$237 million less than the next least-cost compliance
alternative. Figure 4 on page l-6 of Exhibit No. 6
summarizes the results from the Idaho Power analysis.
o.Has the Company applied least-cost, risk
adjusted principles to the selection of its emissions
control investments?
A.Yes. The analysis performed and described
above demonstrate application of least-cost, risk adjusted
principles by the Company in support of its request for
CPCN approval of the Jim Bridger Units 3 and 4 emj-ssions
control investments.
o.Did PacifiCorp perform a simil-ar analysis for
the SCR upgrade at Jim Bridger Units 3 and 4?
A.Yes PacifiCorp performed an in-depth
economic analysis that was used to support its application
for a CPCN in the state of Wyoming related to the SCR
investments for lIim Bridger Units 3 and 4 as well as a
HARVEY, DI 22
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"volunt,ary request for approval of resource decision to
construct SCRs on Jim Bridger Units 3 and 4" in the state
of Utah. PacifiCorp's economic analysis calculates a
present value revenue requirement differential (*PVRR(d)")
of the SCR investments at Jim Bridger Units 3 and 4 as
compared t,o a number of compliance alternatives. The
PVRR (d) calculated under each scenario was favorable to the
SCR and other incremental environmental investments
required to continue operating Jim Bridger Units 3 and 4 as
coal-fueled assets.
o.Have PacifiCorp's applications to install the
public utility commissionsSCRs received approval from the
in Utah and Wyoming?
A.Yes. As described in more deta.il by Michael
J. Youngblood in his direct testimony and in the documents
themselves found as Attachments 2 and 3 to the Company's
Application, PacifiCorp received orders in both Utah and
Vilyoming approving the installation of the SCRs at Jim
Bridger Units 3 and 4.
V. PEIIDING REGT'I,ATTONS
o.Have emerging environment,al regulations been
I.IARVEY, DI 23
Idaho Power Company
22 factored into the evaluation of Jim Bridger Units 3 and 4
23 emissions control investments?
24 A.Yes. As described in more detail within the
25 CoaI Study, the Company considered the foltowing
L43
1 environmental regulations in its analysis: Mercury and Air
2 ToxLc Standards Rule (*MATS"), proposed National Ambient
3 Air Quality Standards, proposed Clean Water Act 316 (b)
4 water intake rulemaking, greenhouse gas (COz) emissions, and
5 coal combustion residuals regulation.
6 O. tllhat impact did the pending environmental
7 regulations have on the analysis?
B A. Based on the Company's evaluation of the
9 emerging regulations, the Company's Jim Bridger Plant will
10 require additional investment in environmental controL
1l- technology to comply with the MATS regulations with a
72 projected completi-on date of 2015. The anticipated
13 investments related to the MATS regulations were included
L4 in the Coal Study and were determined to be cost-effective.
15 However, those specific investments are not within the
L6 scope of this CPCN request.
L7 O. Is the Company obligated to instaIl emissions
18 controls required by state permits, regardless of whether
L9 the EPA finally approves of the Wyoming Regional Haze SIP?
20 A. Yes. The BART Appeal Settlement Agreement and
2l construction permits issued by the state of Wyoming for the
22 installation of SCR include stand-alone requirements
23 enforceable by the laws of the state of Wyoming. These
24 requirements are enforceable independent of whether EPA has
25 approved the tnlyoming Regional Haze SIP. Notwithstanding
144
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the underlying state requirements, the EPA has proposed to
approve the lnstallation of the SCR controls, which would
also make the obligation federally enforceable upon final
approval.
o.Does the Company believe that any of the
planned emissions control equipment will not be necessary
as a result of future environmental requirements?
A.No. The Company does not anticipate that
environmental regulations will become less stri-ngent and
history demonstrates that regulations become more stringent
over tj-me. fdaho Power's Coal Study evaluates reasonably
anticipated environmental compliance requirements and the
results of the CoaI Study show the continued operation of
Jim Bridger Units 3 and 4 to be the lowest cost option,
a.[rlhat process is in place to explore ongoing
investment in the Company's coal units?
A.The Company's existing IRP process conducted
for Idaho and Oregon provj-des the forum to analyze and
address ongoing investment in the Company's coal units
versus alternatives including retirement, replacement, and
natural gas conversion. The Company's 2OL3 IRP analysis is
described in more detail by Mr. Youngblood and is included
as Attachment 4 to the Comparry's Application.
HARVEY, DI 25
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o.
A.
VI. CONCLUSTON
Please summarize your testimony.
The emissions control equipment presented in
Does that conclude your testimony?
Yes, it does.
4 this case is required to comply with current federal and
5 state environmental regulations. The economic analysis
6 performed by the Company demonstrates that instal-ling the
7 SCRs is the least-cost option and the installation of the
B SCRs allows for the continued operation of a low-cost coal-
9 fired generation facility, while achieving sj-gnificant
10 environmental improvements.
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o.
A.
0.
presented direct testimony?
A. Yes.
o.
A.
Please state your name.
My name is Tom Harvey.
Are you the sarne Tom Harvey that previously
What is the scope of your rebuttal testimony?
My rebuttal testimony wilI begin by
addressing the criticisms of Idaho Power Company's
("Idaho Power" or "Company") CoaI Unit Environmental
fnvestment Analysis ("Coal Study"), Exhibit Nos. 5 and 6
of my direct teitimony, raised by the fndustrial Customers
of Idaho Power ("ICIP") witness Dr. Reading, Snake River
AlI-iance ("SRA") witness Mr. Mi11er, and the fdaho
Conservation League (*ICL") witness Ms. White. I wiII then
explaj-n how the Company's Integrat.ed Resource PIan
("IRP") is aligned with, and served as the foundation for
assumptions in, the Coal Study. LastIy, I will address
certain investments that I believe the Idaho Public
Utilities Commission ("Commission") Staff ("Staff")
witness Mr. Louis inappropriately excluded from his
recommendation for pre-approved rat.emaking treatment.
I. COAI. STI'DY CRITTCISMS
a. How would you characterize each party's
conclusions with regard to the Company's Coal Study?
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A.After a thorough review of the Company's
Coal Study and all of its inputs through several- rounds
of discovery and a number of on-site visits, the Staff
concluded that the Company's Coal Study methodology i-s
reasonable and the conclusions reached by the study
support investment in the Selective Catalytic Reduction
("SCRs") control-s at issue in this case. Dr. Reading,
Mr. Mil-}er, and Ms. White were critical- of Idaho Power's
analysis and cited perceived deficiencies related to the
modeling of uncertainty in carbon regulation. However,
Dr. Reading, Mr. Mil-Ier, and Ms. White failed to provide
any substantive analyses or al-ternative inputs that could
correct the perceived defj-ciencies. In other words, they
critiqued isolated parts of the Company's CoaI Study
methodology, but, practically speaking, they were unable
to propose a better model f or evaluat.J-ng the Company's
options.
O.Does the Company believe there is
uncertainty rel-ated to coal- regulation?
A.Yes, the Company agrees that coal regulation
uncertainty exists, but its recommendation to install- the
SCRs was made based upon what is known today and what can
be reasonably foreseen or modeled. Waiting for perfect
knowledge before taking action is not an option that will
ensure rel-iabl-e service to customers.
HARVEY, REB 2
Idaho Power Company
148
0. How did Ms. Whit.e support ICL's view that
the Company's CoaI St.udy analysis failed to model the
uncertainty?
A.On pages 4 and 5 of Ms. White's testimony,
she provided excerpts from a report published by the
Edison Electric Institute and the McKinsey Global
fnstitute ("McKinsey"), which describe the uncertaj-nties
facing utilities related to "disruptive forces",' however,
she provided no analysj.s or recommendations regarding how
she believes these uncertainties should or could have
been addressed in the Company's analysis.
o.Do you agree with Ms. White's contention on
pages 4 and 5 of her testimony that energy storage
technology should or could have been considered as part
of the Company's CoaI Study?
A.No, I do not. At this point in time, it is
neither appropriate nor prudent to develop a resource
procurement strategy that relies upon an energy storage
technology that is not currently technically nor
economj"cally viable at a utility scale. There is no
question that advancement of storage technoJ-ogy would be
a major breakthrough in the energy wor1d. In particular,
I agree with the McKinsey reportr f,'€ferenced by Ms.
White, in that advanced battery storage systems would
help with integration of solar and wind power. The
HARVEY, REB 3
Idaho Power Company
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1 McKinsey report clearly describes the transformati-ve
2 potent j-al- of energy storage. With continued
3
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technol-ogical advancement, energy storage j-s like1y to
decrease in cost over time. However, there is simply too
much uncertainty around when and to what extent cost
6 decreases will occur for the variety of storage
technologies described in the McKinsey report to be
B modeled and j-ncluded in Idaho Power's Coal Study.
o.On page 7 of her testimony, Ms. White
10 maintains that the Company focused its CoaI Study
11
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16 determininE the least-cost and
analysis on how to maintain nameplate capacj-ty rather
than how to best serve future customer energy needs. Is
this a correct characterization of the Company's
analysis?
A.No. The Company'
l1
18
compliance with environmental
still provide the Company with
s analysis was focused on
Iowest-risk optJ-on for
regulations that would
a baseload resource that
economically meet
ler's contention,
Company's annual
presentation of
19 would continue to reliably and
20 customers' electr j-ci-ty needs .
27 O.Do you agree with Mr. Mil
22 on page 24 of his testimony, that the
23 generation by fuel type is the correct
24 fdaho Power's portfolio diversity?
25
HARVEY, REB
Idaho Power
4
Company
l-50
1 A. No. Mr. Miller's testimony responds to Ms.
2 Grow's description of Idaho Power's resource portfolio as
3 being among the most diverse, and therefore secure in the
4 natj-on. Nameplate capacity is the industry standard for
5 describing the maximum output capability of a resource.
6 In its Coal Study, the Company considered resource
7 nameplat,e capacity as well as capacity factor, a measure
8 of the annual production capability of a resource. This
9 provides for a fair comparison between availabLe baseload
L0 generation resource options. Baseload resources Iike the
11 Jlm Bridger plant must operate at relatively high
12 capacit,y factors to successfully meet energy demands
13 throughout the year. Because the Coal Study analysis was
14 int,ended to ident.ify cost-effective hrays to meet the
15 loads currently served by the Jim Bridger plant, only
16 dispatchable resources with similar nameplate capacities
L1 were appropriately considered. Thus, while Idaho Power
18 agrees with Mr. Miller that supplied energy mix is an
19 appropriate reflection of pollution emissions, the focus
20 of Ms. Grow's testimony and ldaho Power's CoaI Study was
2L on capacity.
22 O. On pages I and 9 of Dr. Reading's testimony,
?3 he point,s to the single scenario in the CoaI Study in
24 which the SCR is not the lowest cost. Please describe
25 the other scenarios included in the CoaI Study.
151
HARVEY, REts 5
Idaho Power Company
A. Eight of the nine sensitivities in the Coal
2 Study identified the SCR investments as being the lowest
3 present value cost alternative. It is only under the
4 unlikely event that a low gas price future is coupled
5 with a high carbon adder future that the SCR investments
6 woul-d resul-t in a higher present value cost than
7 replacing Jim Bridger Unj-ts 3 and 4 with a Combined Cycle
8 Combustion Turbine (*CCCT"). The other eight analyzed
9 combinations of natural gas and carbon futures support
10 the installation of SCR controls.
11 O. Did the Company analyze a reasonable range
72 of future envi-ronmental- control costs in its CoaI Study?
O13 A. Yes. The Company utilized available
74 i-nformation related to future envi-ronmental control costs
15 when it performed the Coal Study analyses and
16 subsequently filed this request for a Certificate of
11 Public Convenience and Necessity ('CPCN"). What the
18 Company knew at the time it filed the Application was
19 that the Environmental- Protection Agency ("EPA") proposed
20 approving sectj-ons of the Wyoming State Implementation
2L Plan (*SfP"), including the parts pertaj-ning to the SCRs
22 at .Tim Bridger Unj-ts 3 and 4, which wil-l make compli-ance
23 with the Wyoming SIP by the stated deadlines federally
24 enforceable. As the future of carbon regulation is not
25 known, the Company included a "carbon adder" in its Coal-
1.52
HARVEY, REB 6
Idaho Power Company
1 Study that represents those future costs of regulation
2 that are not currently known but assumed to occur in some
3 fashion in the future. This is the same carbon adder
4 that was used in the Company's 2013 IRP which is intended
5 to capture future unknown costs assocj.ated with carbon
6 regulation.
1 Q. Mr. Miller stated on page L2 to 13 of his
I testimony that Idaho Power omitted analysis of ot.her
9 pollution control regulations in its CoaI Study. Is Mr.
10 MiIIer's statement accurat.e?
11 A. No. The CoaI Study conducted by the Company
L2 included the antici.pated impacts of other existing,
13 proposed, or expected regulations. These include the
L4 Clean l,Iater Act requirements for existing coal-fired
15 power plants, Coal Combustion Residuals ("CCRs"),
16 National Ambient Air Quality Standards ("NAjq,QS"), and
L7 Mercury and Air Toxic Standards ("MATS"). The
18 Application for the CPCN simply focuses on the
19 environmental regulations that directed the Company to
20 install SCRs on Jim Bridger Units 3 and 4.
2L 0. Why did the Company not include the
22 compliance costs for the MATS rule in its CPCN request, as
23 Mr. MiIIer suggests on page L9 of his testimony?
24 A. Because the Company is required to comply
25 with the MATS ru1e, Idaho Power included the cost of
153 HARVEY, REB 1
Idaho Power Company
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compliance with MATS in the Coal Study. The Coal- Study
results indicated that it is cost-effective to install
SCRs at the Jj-m Bridger plant even with the additional
costs associated with MATS compliance. However, the
costs of compliance with MATS regulations are not nearly
of the same magnitude as the SCR investments. The
Company views the anticipated investments related to MATS
compliance to be more routine in nature and not of the
magnitude or type of investment justifying the regulatory
treatment associated wi-th a CPCN.
o.On page 8 of Ms. White's testimony she
states that the Company's minority interest in its Jim
Bridger plant exposes customers to risk. Do you agree?
A.f think there are risks unique to being both
a minority shareholder and a majori-ty shareholder of a
plant like Jim Bridger. Idaho Power's counsel works to
minimize that ri-sk through the terms of the Company's
operatJ-ng agreements. Additionally, the Company actually
benefj-ts from partnering with another utility that i-s
simi-larly alj-gned in a fiscal- and regulatory sense as
wel-I as having significant operat,ionaL experience.
Partnering in a plant also reduces the scal-e of
i-nvestment required by each company and subsequently
recovered in rates.
HARVEY, REB 8
Idaho Power Company
154
1 Q. Do you agree with Mr. MiIIer's
2 characterization of the CoaI Study as a "high-level
3 preliminary planning document, not a conclusive basis for
4 investment decisions"?
5 A. No. The quotations on pages 10 through L2
6 of Mr. Miller's direct testimony that attempt to
7 establish that the Company's CoaI Study is simply a
8 "high-level" plannlng document are actually statements
9 included in the analysis performed by the Company's
10 outsi-de consultant SAIC. The statements made in the SAIC
11 analysis are primarily "safe-harbor" statements, much
1,2 like the Company's identification of risks that it
13 includes in its U.S. Securities and Exchange Commission
L4 (*SEC") filings, which is discussed next in my testimony.
15 The results of the SAIC analysis served as independent
L6 third-party planning recommendations regarding the three
1,7 investmenL alternatives to be used in the Company's
18 comprehensive total portfolio resource cost analysis (the
19 CoaI Study). The Company utilized the results from the
20 dynamic CoaI Study to inform its decision on the SCR
2L i-nvestments.
22 O. Did t,he sEatements in the Company's 20LL
23 Annua} Report on Form 10-K filed with the SEC indicate
24 that the Company lacked sufficient information needed to
25 invest in coal- plants with the intent of extending their
HARVEY, REB 9
Idaho Power Company
155
1 Iives, ds Mr. Mi-ller suggests on page 16 of his
2 testJ-mony?
3 A. It is my understanding that risk factor
4 disclosures are a required part of the SEC report and serve
5 to inform the investors of potential risks a company may
6 face in 1ts operating environment. Risk factor disclosures
7 also serve as an important protection for the Company
I against claims of material omlssion or non-disclosure by
9 purchasers and se1lers of its publicly-traded securities.
10 The form of disclosure that satisfies both of these goals
11 i-ncludes a discussion of not only those risks that are
L2 known to exist and/or have measureable outcomes, but also
13 those that are speculative in nature, both in the
L4 probability of occurrence and in the ultimate impact on the
15 Company's operations and financial condition. The risks
16 SRA quotes from the Company's 2OLL Annual Report on Form
11 10-K did not say the Company lacks the information needed;
18 rather, it provides caveats that the Company does not have
19 perfect knowledge on the future of coal regulation and, 1n
20 fact, oo one knows the outcome of future coal reqrulation.
27 O. Would it have been reasonable, as Mr. Mil1er
22 suggests on page 2l of his testimony, for the Company to
23 attempt to negotiate an early shutdown of ,Jim Bridger
24 with the EPA as modeled as an option in its CoaI Study
25 scenario assumptions?
HARVEY, REB 10
Idaho Power Company
156
A. No. Lj.sa Grow testified on page I of her
direct, testimony, "The Jim Bridger Plant not only
provides highly valuable capacity during periods of peak
demand, but a.lso low cost and dependable baseload
energy." Ms. Grow goes on to state, "The Jim Bridger
P1ant has the lowest dispat.ch cost of Idaho Power's
entire thermal generation fleet. " At the time the state
of Wyoming decided to require the SCRs at Jim Bridger
Units 3 and 4, it would not have been reasonable for the
Company to consider the shutdown of the Jim Bridger
plant, its lowest variable cost thermaL resource, as an
economically viable alternative.
IT - IRP IISSUMPTIONS Al{D AITALISTS IN TEE COJII. STIUDY
a.Are the four risks covered by the IRP
"cursory" in naturer ES suggested by Ms. White on page 11
of her testimony?
A.No. For ldaho Power, the conditions
encountered which significantly affect operating costs
and system reli-ability relat,e to water supply, .operating
costs for thermal (gas and coaL) resources, carbon
regulation, and cust,omer demand. The IRP risk factors
were selected to capture the effects of these conditions,
recognizing that extreme levels for any one of these
conditions can cause operating costs for a resource
portfolio to markedly deviate from normal cost levels.
HARVEY, REB 11
Idaho Power Company
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1 The selected risk factors allow the Company, ds a
2 resource planner, to ask meanj-ngful "what ifs." For
3 example, what if the cost. to operate fossil fuel
4 resources increases greatly as a result of carbon
5 regulations? Or, what if natural gas costs soar? What
5 if water supply reaches critical levels? And, fina11y,
7 what if customer demand is much qreater than expected?
I What if all these occur at the same time? The Company's
9 objective is to predict how the IRP resource portfolios
10 perform under a spectrum of possible futures. Through
11 sampling of the four risk factors considered-natural gas
1,2 pri-ce, customer load, hydroelectric variabilj-ty, and the
13 carbon adder-the IRP stochastic risk analysis consj-dered
74 L02 possible futures.
15 The risk analysis included in the IRP, notably the
16 sel-ection of cost-of-carbon scenarios, was t.horoughly
l'7 discussed with the fRP Advisory Council- ("fRPAC")
18 (including ICL), and was not devised by Idaho Power
19 unj-lateraIIy. The Company views risk analysis as a vital
20 component of informed and prudent decision making.
21, O. Ms. White claims on pages I and 9 of her
22 testimony that the AppLj-cation did not characterLze
23 current and future demand needs nor did it identify an
24 adequate range of compliance alternatives.
25
HARVEY, REB 1"2
Idaho Power Company
158
1 Did fdaho Power consider demand needs and
2 compliance alternatives as part of it.s consideration of
3 the SCR investments?
4 A. Yes. This analysis was done as part of the
5 IRP process and memorialized in the 2OL3 fRP, Attachment
6 4 to the Application. The selection of the fRP preferred
7 portfolio is the culmi.naEion of a lengthy and transparent
I process involving input from the fRPAC and public
9 participants at mont.hly IRPAC meetings. NotabLy, this
10 process has included portfolio design workshops as a
11 forum for the IRPAC and the public to offer resource
12 suggestlons. For the 2oL3 IRP, rRPAC members
13 representing fCL and Boise State University ("BSU")
L4 requested a special meeting with the Company t,o propose a
15 coal alternatsj-ve resource portfolio. The product of this
16 collaboration with fCL and BSU IRPAC representatives is
L7 Resource Portfolio 6, which provides for complete coal
L8 retirement by year-end 2020.
19 The studied resource portfolios are Lhen evaLuated
20 through a rigorous stochastic risk analysis, which I
2l described ear.Lj.er in my testimony. With respect to a
22 coal-fired plant such as Jim Bridger, a criE.j-cal risk
23 factor included in the analysis is the carbon adder. The
24 carbon adder for t.he study took on three levels-a low
25 case of $O per ton COz, a planning case of 5L4.64 per ton
HARVEY, REB 13
Idaho Power Company
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COz, and an upper case of $35.00 per ton COz. The three
carbon adder cases were developed collaboratively with
the fRPAC. While there is currently no regulation
imposing costs for carbon emissions from existing fossil
fuel plants, the Company recognizes the importance of
underst.anding the effects of pot.entiaL carbon-emission
costs on operating costs for the IRP resource portfolios.
O. What affect did the carbon adder, which is
intended to be a surrogate for a future carbon tax, have
on portfolio operating costs?
A.The results of the stochastic risk analysis
definitively show the carbon adder has the effect of
increasing portfolio operating costs. Of the LOz total
stochastic futures studied, the highest portfolio
operat5.ng costs predominantly correspond with the 34
futures for which the upper case carbon adder is
selected. Conversely, the 34 futures havi-ng a low case
carbon adder largely cOmprise the set of futures for
which portfolio operating costs are lowest.
The total portfolio costs, which include both
fixed and variable costs, for the IRP preferred resource
portfol-io are the lowest for al-I LOz futures, including
the 34 futures having upper case carbon adder costs
imposed.
HARVEY, REB L4
Idaho Power Company
160
1 Q. How does the preferred resource portfolio
2 from the fRP perform in this analysis?
3 A. The preferred resource port,folio, consisting
4 of a blend of the Boardman to Hemingway transmission Iine
5 ("82H") and demand response, outperforms t,he other
6 resource portfolios for all LOz futures. This means that
7 even for the worst set of conditions, Ehe preferred
8 portfolio's costs are the lowest. This outcome is a
9 testament to the balanced nature of the existing resource
10 portfolio coupled with BZH. Whil-e it is hard to consider
11 a resource decision as having zero risk, the 2OL3 IRP's
12 stochastic analysis results described on page 104
13 (Attachment 4 to the Application) suggest a very slim
14 likelihood of encountering a future for which the
15 preferred resource portfolio would be regret.table
16 compared to the alternaEive portfoLios.
11 O. Do you agree with Mr. Miller (page 15) and
18 Ms. White (pages 7-91 that the Company omitted
L9 replacement resources such as energy efficiency and
20 renewable resources as an alternative for replacing coal-
2L fired generation?
22 A. No, I do not. To put, this recommendation
23 into context, it is import,ant to review the deficit
24 positions that fesult when the coal fleet is assumed
25 retired, as occurred in t.he 20L3 IRP's Resource
HARVEY, REB 15
Idaho Power Company
161
L Portfolios 6 and 7. Charts wi-th the deficit. positions
2 for these portfolios are provided as Eigure 8.6 and
3 Figure 8.7 on pages 93 and 94, respectively, of the 2013
4 IRP (Attachment 4 to the Application). Without coal,
5 summertime deficits, reaching nearly 1,900 megawatts
6 (r\MW") by the end of the planning period, tend to produce
7 the greatest al-arm and recej-ve the most attention.
8 However, not to be overlooked, are wintertime deficits
9 which reach nearly 700 MW. While the benefits of energy
1.0 efficiency are not to be ignored, deficits of this
11 magnitude cannot cost-effectively be met with energy
L2 efficiency or renewable generation. The Company resists
13 the characterization of a resource decision as a bet as
L4 Ms. tr,Ihite does in her testimony. However, soIely for the
15 sake of illustrating a principle, the Company believes a
16 safer bet to meet wj-ntertime deficits is to rely on
L7 dispatchable thermal resources rather than renewables.
18 Betting on renewable resources such as wind and
19 solar to meet summertime deficits is not much safer than
20 it is betting on them duri-ng wintertime. While the sun
2L is at least shining during peak surruner power demand, peak
22 demand is often hours past solar's peak energy output.
23 In fact, the Commissien Staff in Case No. GNR-E-11-03
24 performed an analysis that found peak summer customer
25 demand for power has occurred as lat.e as hour ending 8:00
HARVEY, REB 16
Idaho Power Company
L62
p.m. (MDT) (Staff Comments, p. 5). CIearly,
of installed solar capacity necessary to meet
demand extending to 8:00 p.m. is stagqering,
course, solar capacity installed to meet peak
demand contributes very little to meeting peak
the amount
peak power
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Relying on wind is also risky. Given that peak
customer demand for power, during wint,er and sunrmer
aIike, ordinarily occurs during periods where the weather
is dominated by large stable blocking patterns (i.e.,
high-pressure ridges), the Iikelihood of, high wind
production coinciding wltn peak power demand is low. fn
shorr, urind is quite clearly an enerlly resource and not a
capacity resource.
For this reason, I believe the generating
resources to be considered in replacing coal-fired
generation are those which realistically allow the
Company to maintain reliable service.
O. Did Idaho Power consider energy efficiency
alternative to continued operation of its coal-
2l fired plants?
22 A.Yes. Energy efficiency
23 low-cost resource since 2002 and the
24 average system loads by more than 100
25 ("aMW") between 2002 and 2OL2 through
has been a primary
Company has reduced
average megawatts
energy efficiency.
HARVEY, REB L1
Idaho Power Company
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.1)To help maintain these savings levels and prepare for
nnrl t.'/:\f -r'2073 IRP, the Company contracted with a thit'd-party
the
r" t1: lrl.1
consultant to provide a credible and transpArdnt assessment
of energy efficiency potential in fdaho Power's service
area. The fdaho Power Energy Efficiency Potential Study
("Potentj-a1 Study") performed by EnerNOC Utility Solutions
Consulting was included in the Demand-Side Management 20Lz
Annual Report, Supplement 2z Evaluation, filed in Case No.
IPC-E-13-08. The Potential Study resulted in a forecast of
achievable potential that included a.l-1 cost-effective
energy effj.ciency taking into consideration current and
future market conditions, customer preferences for
efficient technologies, dfld expected program participation.
The Company lncluded the forecast achievable potential from
the Potential Study into the IRP planning process as the
first and lowest cost resource to meet future loads. Idaho
Power added additional arnounts of forecast energy
efficiency outside of the Potential Study to account for
future savings from several large load customers and to
account for program changes occurring after the study was
completed. A total reduction of 25L aMW of system energy
reduction was accounted for over the 2013 IRP 20-year
planning horizon.
HARVEY, REB 18
Idaho Power Company
L64
Idaho Power does not consider the energy efficiency
potent,ial identified in the Potential Study as a ceiling to
energy efficiency and the Company will contj.nue to pursue
all cost-effective energy efficiency.
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a.Can the Company's coal-fired generation be
replaced solely by alternative resources?
A.Although Mr. Miller and Ms. White suggest that
the Company's 35L MW of coaL-fired generation from Jim
Bridger Units 3 and 4 can be replaced by alternative
resources Iike energy efficiency, it would not, be
reasonable to add unsubstantiated amounts of incremental
energy efficiency beyond the 261 aMWs already identified
and included in the 2013 IRP 20-year planning horizon.
IIr. REQUTREp rN\rES1l!{E![tS SEOrrLp BE INCLtTDED rN pRr-
APPROVED RA:rE!{AXING
o.On pages 26 to 28 of his testimony, Staff
witness Mr. Louis recommended that certain cost estimates
be excluded from the pre-approved ratemaking treatment
because the costs are noL known and measureable at this
point in time. Are these invest,ments Staff has excluded
necessary to complete the SCR upgrade?
A.Staff excluded the following investments from
the Company's cost estimate: the boiler and alr pre-heater
reinforcement the economizer upgrade
-,
the flue gas reinforcement proj""t I
HARVEY, REB 19
Idaho Power Company
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I, the spare parts arlowance , and
other cost expense
The economizer upgrade is needed to control the
temperature of the flue gas exiting the boiler and entering
the SCR catalyst. If the temperature is not controlled,
early deterioration of the catalyst will be inevitable.
The boiler and air pre-heater reinforcement project
and the flue gas reinforcement project are necessary to
comply with the National Fire Protection Association
("NFPA") B5 Boiler and Combustion Systems Hazards Code
("Code") requirements. The boiler and air pre-heater
casings and existing flue gas equipment and ductwork from
the air pre-heater outlet through the chimney will be
structurally reinforced to meet Code.
The spare parts allowance will be used to mi-ni-mize
the duration and magnitude of outage and derate events.
Certain capitalized "critical" spare parts wiIl be
purchased and stored on-site. These capitalized critical
spare parts are recommended and priced by the original
equipment manufacturers and represent components that have
long or extended delivery durations and will extend outage
or derate events if replacement spares are not j-mmediately
available.
HARVEY, REB 20
Idaho Power Company
166
1 Other cost expense includes project engineering and
2 consulEant support; initial fiIls of lubricants and ammonia
3 reagent; contracted site construction management and
4 inspection services; cosL of PacifiCorp internal }abor
5 charged to the project; PacifiCorp travel expenses related
5 to t,he SCR project as plant operator and project manageri
7 cost for removal and disposal of existing hazardous waste
I materials encounteredi cost of supplementary plant security
9 and comrnunication features; additional plant perimeter
10 security costs expensed to the project for extended
11 security resouree during on-site construction, plant
12 operating data historian integration; and any addit.iona]
13 special tools determined to be essentiaJ. to maintain and
14 operate the incremental equipment. while the }evel of
15 expense is uncertain, it is certain that expenses wiII be
15 incurred in those categories.
l7 O. Does that conclude your testimony?
18 A. Yes, it does.
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HARVEY, REB 2L
Idaho Power Company
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HEDRICK COURT REPORTING
P.O. BOX 578, BOTSE, rD
HARVEY (X)
IPC
(The following proceedings were had in
open hearing. )
(Idaho Power Company Exhibit Nos. 1
through 6, having been premarked for identificatj-on, were
admitted into evidence. )
MS. NORDSTROM: Idaho Power tenders this witness
for cross-examination.
COMMISSIONER SMITH: Okay. Ms. Sasser, do you
have questions?
MS. SASSER: No questions, Madam Chair.
COMMISSIONER SMITH: Mr. Miller, do you have
questions?
MR. MILLER: Just a few. Thank you, Madam
Chairman.
CROSS-EXAMINATION
BY MR. MILLER:
a. He1lo, Mr. Harvey.
A. He11o.
O. I don't think we've had the pleasure of meeting.
A. We have not.
0. Sorry it has to be under these circumstances.
COMMISSIONER SMITH: I can't j-magine where you'd
go to have more fun.
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HEDRICK COURT REPORTTNG
P.O. BOX 578, BOTSE, fD
HARVEY (X)
IPC
MR. MILLER: What would be more enjoyable than
this. Right?
O. BY MR. MILLER: Have you previously testifled
before the Commission?
A. I have not.
O. Wel-l-, itrs no worse than your standard root
canalr so just reIax.
A. Irve had two of those, so
O. Let me I just had a couple questions:
Direct your attention to page 2 of your rebuttal
testimony, and starting with your answer on line -- we11,
picking up on line 14, you are critical there of the Snake
River Alliance for being critical of the control study but not
proposing a better model-. Correct?
A. That appears to be thatrs correct, y€s.
O. You acknowledge, don't you, that it's the
responsibility of the Company to present sufficient evidence to
justify the requests for the approvals that it's seekj-ng in
this case?
A. I agree with that, and I do believe we did
present adequate evidence.
O. How much did the Company pay for the coal study
which is Exhibit 5, in round figures?
A. In round fJ-gures, less than $50r000.
a. Say again.
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A. Less than $50,000.
O. Less than 50?
A. Uh-huh.
O. Let me turn your attention now to -- might take a
moment to find it. fn front of you, you shoul-d have this
packet of hearing exhibits.
A. I do not.
A. Do not?
MS. GROW: f took them, sorry.
MR. MILLER: Oh, disappeared.
MS. NORDSTROM: May f approach?
COMMISSIONER SMfTH: It doesnrt look complete.
Why donrt you take mine, trade me, see where it stops. I don't
see any yellow pages in there.
MS. NORDSTROM: Oh. Thank you.
COMMISSfONER SMITH: Give me that.
THE WITNESS: Thank you.
COMMISSIONER SMITH: So, Mr. Mil-l-er, before we
start on this, I just happen to notice that although the cover
page says Exhibits 401 through 4L2, I don't detect a 402.
MR. MILLER: I was going to point that out. I
initially had a 402 but then thought better of it, so there is
no 402.
COMMISSIONER SMITH: Okay, thank you. I just
wanted it cl-ear for the record.
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MS. NORDSTROM: Commissioner Smith, I belj-eve I
found 404 through 408.
COMMISSIONER SMITH: A11 right. Thanks very
much.
MS. NORDSTROM: Thank you.
MR. MfLLER: Are we organized now?
COMMISSIONER SMITH: We are, thank you.
MR. MILLER: Thank you.
O. BY MR. MILLER: Could I ask you to look at
Exhibit No. 4LL. It consj-sts of three pages.
A. Okay.
O. And do you recognize this as a extract from the
testimony of Snake River Alliance wj-tness Mil-ler that quotes
certaj-n parts of the coal- study?
A. Yes, I do recognize that.
O. And I take it that you don't disagree that these
are accurate quotati-ons from the coal study?
A. f don't disagree.
A. And let me direct your attentj-on to Exhibit 4L2.
And is this an extract from the Company's 20L2 annual report to
the Securities and Exchange Commission?
A. I bel-ieve it is.
O. And it obviously is only a portion of those of
that report, but it attaches page 2L of the report where the
Company has a discussj-on of environmental- rules, Iaws, and
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regulations that itrs facing?
A. Yes.
O. Now, in your testimony, your rebuttal testimony
on page 9, you comment both on what's now Exhibit ALL and 4L2
and say that the quoted material from Exhibit 4L1, and 4L2 are
primari-ly what you call safe harbor statements?
A. Yes.
O. What do you mean by the word "safe harbor"?
A. In my opinion, that relates to SAIC basically
sayl-ng what they dj-d and did not do, what just generally
things they put in for their own protection.
O. Yourre not trying to say then, are you, that the
statements the Company made in 4L2 in Exhibit 41,2 were just
kind of for the fun of it?
A. No, sir.
O. Those are, to your knowledge, accurate statements
of risks that the Company faces?
A. I believe so.
O. A11 right. Then I'm not quite sure how to
approach this next series of questions, but I think I have made
my point with Ms. Grow so perhaps I don't need to do it at aII,
but with respect to your rebuttal testimony, it's divided into
three sections. Correct?
A. Uh-huh.
0. And the second section startj-ng on page 11 and
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going through page t9 is a discussion of the IRP assumptions
that are included in the 2013 IRP. Is that a fair statement?
A. Itrs a fair statement they cover the risks.
A. And as we covered with Ms. Grow, the 20L3 IRP has
not yet been analyzed by the Commission; the Commission has not
yet come to any conclusion as to whether to acknowledge it or
what level- of comment should go with that acknowl-edgment. Is
that your understanding of the state of affairs?
A. That is my understanding, yes.
A. Al-1 right.
MR. MILLER: Thatrs all I have. Thank you.
COMMISSIONER SMITH: Thank your Mr. Mil1er.
Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair, just
have a couple.
CROSS-EXAMINATION
BY MR. RICHARDSON:
O. Good morning, Mr. Harvey.
A. Good morning.
O. Mr. Harvey, on page 2 of your rebuttal testimony,
you state that Dr. Reading was, quote, cri-tical of Idaho
Power's analysls and that he was that criticized isolated
parts of the Company's coal study methodol-ogy.
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Can you cite to me specifically where Dr. Readj-ng
made those criticisms in his testimony?
A. I don't have those citations with me.
a. Can your counsel please provj-de you with your
Dr. Reading's testimony so I can see where you're being
critical of?
MS. NORDSTROM: f guess is Mr. Richardson
anticipating that, you know, Mr. Harvey is going to go through
page by page to pu11 out the citations?
MR. RICHARDSON: Mr. Richardson j-s anticipating
Mr. Harvey is not going to be able to point to a place in
Dr. Reading's testimony where he made those criticisms, and
Mr. Richardson might be making a motion to strike the reference
to Dr. Readlng's critique of the coal study.
MS. NORDSTROM: We1l,, if that is the case, I
think we would be wil-ling to remove Dr. Reading's name from
line 11 of page 2. Would that suffice?
MR. RICHARDSON: If you strike the reference to
Dr. Reading on page 2 at line 7 and 7!, I would be done with my
questioning.
MS. NORDSTROM: Then 1et's do that.
COMMISSIONER SMITH: Sor w€, if I understand this
correctly, are on page 2 of Mr. Harvey's rebuttal-, and on lines
7 and 11 are striking the words "Dr. Reading. "
MR. RICHARDSON: Thank you. That's all I have,
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Madam Chair.
COMMISSIONER SMITH: Thank you.
Mr. Otto.
MR. OTTO: Thank you, Madam Chair.
CROSS_EXAM]NATION
BY MR. OTTO:
O. He11o, Mr. Harvey.
A. Mr. Otto.
O. So in this case, Idaho Power is seeking to
install control-s to meet a single compliance obligation, the
regional haze rules under the Cl-ean Air Act. Is that correct?
A. The SCR instal-l-atj-ons are requj-red for the
removal of nitrogen oxides, y€s, related to the C1ean Air Act
amendments of L999 and the regional haze rul-es.
O. So this is about the reglonal haze rule?
A. Yes.
A. That's what is driving this division?
A. That's correct.
O. Is it fair to say that this rule requires states
to implement plans to control- sources within their state
borders to ensure overall air quality makes progress towards a
goal of natural visibility by 2064?
A. Thatrs correct, each state is to put together a
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state implementation plan that we call a SIP.
O. Just for the assistance of the Commissioners and
the other parties, what we're actually talking about here is on
page 4 through I of your testimony?
COMMISSIONER SMITH: Is this direct or rebuttal?
MR. OTTO: Of the direct.
COMMISSIONER SMITH: Thank you.
O. BY MR. OTTO: So you just said that this is part
of a statewide plan to ensure long-term progress towards
visibility?
A. Right, through 2064, uh-huh.
O. So one part of the state implementation plans is
to control the subcategory of pollution sources of which
Bridger j-s one, and the lega1 term are that they are BART
e1igib1e. Is that correct?
A. Yes, all four units at Jim Bridger are BART
e1igib1e.
O. Now, in Wyoming, there's quite a few more units
and plants that are BART eligible and part of the state
implementation p1an. Isnrt that true?
A. That is correct.
O. And the state implementation plan sets controls
and a timetable for for all those units?
A. That is correct.
A. And the controls and the timetabl-e isn't the same
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for each unit in the state, is it?
A. No, it is not.
O. And that's because it's this idea of an overall
improvement in the state's air quality, that's the goal of the
regional haze rul-e. Would you agree with that?
A. Yes.
O. Is that your understanding?
A. That's my understanding.
a. Did Idaho Power participate in the development of
the Wyoming state implementation plan to ensure pollution
sources other than Bridger fairly contributed to this overal-1
aj-r quality goal?
A. fdaho Power and PacifiCorp both had negotiations
with the State of [rf,yoming in regards to the BART appeal
settlement agreement which did state the requirements for,
among others, the Jim Bridger plant.
O. Did Idaho Power separately negotj-ate that or did
you negotiate together with PacifiCorp?
A. That was a joint negotiation with PacifiCorp as,
as you know, we are co-owners of the p1ant. We own one-third,
and PacifiCorp owns and operates and they have two-thirds.
A. So PacifiCorp owns several other plants in
Wyoming. Isnrt that true?
A. That is correct.
O. And they're the only owner of several of those
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plants?
A. Pardon me?
O. They're the only owner of those?
A. To my knowledge, that is correct.
O. But Idaho Power only has an interest in the Jim
Bridger plant?
A. That is true.
O. So is it the Company's position that it wasn't
important for Idaho Power to protect its ratepayers' interest
only in Jim Bridger?
A. We did protect the customers' interest in Jim
Bridger by bej-ng part of those negotiations and determj-ning
that the requi-rements for j-nstall-ation of SCR on the four units
of Jim Bridger were properly applied j-n our case.
O. But PacifiCorp's incentive was not to ensure that
the plan made overall sense for Idaho Power; PacifiCorp's
incentive was to make sure that state implementation plan made
sense for PacifiCorp?
A. I woul-d speculate that woul-d be exactly the case.
MS. NORDSTROM: And I bel-ieve "speculate" is the
right word. This seems to be assuming facts not in evidence
and beyond the scope of Mr. Harvey's testimony.
COMMISSIONER SMITH: MT. Otto.
MR. OTTO: Mr. Harveyrs job at the company J-s the
joint I'm sorry, messed up the title the joint projects
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manager.
THE WITNESS: Manager, thatrs correct.
MR. OTTO: Yes. As part of that, I think it
behooves him to understand the full dynamics of what's going on
with the Wyoming state implementation p1an, and I'm just asking
about his understanding of how that worked out.
COMMISSIONER SMITH: f think thatrs fair game,
but he shoul-dnrt be questioned about the motives, intentions,
or actions of PacifiCorp.
MR. OTTO: Eair enough.
O. BY MR. OTTO: So just to recap, you participated
in the Wyoming state implementation plan negotiations jointly
with PacifiCorp?
A. Yes, the BART appeal settl-ement agreement.
0. Much of your does your testj-mony rely on the
coal study, the Tdaho Power Idaho Power's coal- study?
A. Some of my testimony does rely on the coal- study
and its results.
O. And thatrs Exhibit 6?
A. The Idaho Power portion of the coal study is
Exhibit 6. SAIC f beli-eve i-s
O. Right, is 5?
A. Uh-huh.
O. So Exhibit 6 on page 13, you're talking about the
compliance timing alternatives?
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A. Yes.
O. Is it your position that the Cl-ean Air Act and
state implementation plans a11ow for fl-exibil-ity in compliance
dates?
A. Could you re-ask that question, please?
O. Is it your position that the that when
developing a state implementation plan for the regional haze
ru1es, that the rules all-ow for flexibility in the compliance
date?
A. If you're referring to how the state determines
how to comply with regional haze regulatj-ons and its
requirement to put together an implementation plan that
provides for natural conditions in the Class I wilderness and
national parks by 2064, yes.
O. But you state that al-ternative compliance
dates orr in other words, closing the plant before the end
of j-ts useful life are not an option that currently exists?
A. To my knowledge, they are not written in the
rules anywhere where you can delay complj-ance with a federal-
EPA regulatj-on in exchange for shutting down a unit.
O. So on page 6 of your direct testimony, line 20
begins on line 20, the answer you 1ay out five factors that
states and EPA are going to consider as part of these BART
determinations. That's the key part of the state
j-mplementation plan?
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A. Yeah, the state wil-I consider, not the federal-
EPA.
O. And factor four is the remaining useful Iife of
the source?
A. Correct.
0. So if a goal if the goal of the plan is
long-term air visibility, improving long-term air visibility,
and one of the factors is the life of the pollution of the
pollution source, doesnrt that mean that changing the life of
that source is an inherent factor in the decision-making
crj-sis -- process?
A. I donrt agree with that shortening the life of it
is part of that process.
O. So when considering the remaining useful l-ife of
the source, itrs your position that that could only be extended
or kept the same, but never shortened?
A. I believe that at that time, our terminal
retirement dates were not exceeded or lengthened during this
process with the five factor analysj-s.
A. That wasn't the question I asked. The question I
asked is it's your position that thj-s factor, the remaining
useful life of the source, reaIly means whether the source
stays with its remaining useful life or the useful life is
extended?
A. I would say that the remainlng useful life of the
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source is something they considerr Ers in what is the useful-
Iife that PacifiCorp and Idaho Power had for the Jim Bridger
units. Compiling all that informatj-on for the Jim Bridger
plant and for other facil-itj-es in the state gave the State of
Wyoming an j-dea of how much contro1s were required and what
l-eve1 to get back to natural conditions through 2064.
O. Were you part of the decision about the Boardman
plant?
A. Iwasapart.
O. And in that case, do you recall that shortening
the useful life of the plant was a part of the state
implementation plan?
A. Comparing Boardman in the state of Oregon is not
appropriate comparlng Wyoming and the .Iim Bridger pIant. The
State of Oregon, with these five factor tests, make their own
conclusions on what they could do. Idaho Power did not
consj-der shutting down Jim Bridger unit early in lieu of
delayj-ng emisslon control requirements. Jim Bridger is a l-ow
cost, reliable unit, provides highly valuabl-e capacity durJ-ng
peak summertime periods, and is our lowest cost thermal
resource.
O. So itrs your position that you shoul-dn't even
consj-der shortenj-ng the useful life of the plant?
A. It's my position we didn't consider shutting down
the unit early for exactly what I just said.
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A. When did you.make that decision, in 2010?
A. The actual regulations and development of the
BART analysis and such was 2007, 2000 you know, that kind of
time frame, and both companies would have made come to the
same conclusion at that same time period or tj-me frame.
A. So if you decided way back then, why are we just
talking about this today?
A. Wel-I, back then, we did not have the BART appeal
settlement agreement. We did not know exactly where the state
and what controls it woul-d requi-re.
You know, as you see in my exhibits, through the
BART analysis that we provided to the state, SCR wasn't
included in that. It became part of the J-ong-term strategy
phase which is in the state SIP.
O. So you rea11y rely on this BART appeal settl-ement
with the State of Wyoming?
A. I continue to menti-on i-t because that's where the
requj-rement for SCR was agreed to and was subsequently written
into the Wyoming state implementatj-on plan.
O. And itrs your position that this settl-ement
provides no fl-exibility in the face of changing regulations?
A. In regards to nitrogen oxides, the settl-ement
states that all four units of Jim Bridger will have SCR
installed on a particular schedule.
O. So now on page t2 of your testimony, line 20
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A. Is that my direct?
A. Yes. Hold on, I might have that reference wrong,
I apologJ-ze.
I do apologize. Just one moment, pleaser so I
can get the right reference.
Oh, Irm sorry, we're on page 10, starts at the
very bottom of the page, and yourre discussing that PacifiCorp
entered into this BART settl-ement with the State of Wyoming.
And the part I want to ask you about begins at the very l-ast
line, 25, and it goes through 1j-ne 7 of the next page. And in
there, you describe that that settlement includes terms to
address a modification if future changes would materially alter
the emission controLs in rates that would otherwise be
required?
A. What that refers to is a line i-n the settlement
agreement that references that no additional NOx controls will
be imposed on the Jim Bridger plant through 2023.
O. So the statement about a modification -- what you
just saj-d -- a statement about a modification rea11y means we
won't modify?
A. I'm sorry, I'm not following your question.
O. You testify and you rely on the fact that the
Wyoming BART appeal settl-ement wil-I require you to continue on
the path you've decided on and there's no ability to change
that?
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A. There is the ability to change for technology
changes. That's also in the settlement agreement, that as time
goes on if there's a different technol-ogy other than SCR, SCR
itself is not required. We woul-d stil-l be required to meet the
emission l-imits but it coul-d be different technology.
0. But there is no ability to change if the control
standard changes, if the pollution standard or the timing
changes, through the SIP process? You're not all-owed to reopen
the BART settl-ement agreement on -- for that basis?
A. Remember, the SIP written by the State of Wyoming
and the BART appeal settlement agreement agreed to by the State
of ttiyoming are the same.
a. I don't think thatrs true. The BART settlement
appeal was entered in 2010.
A. It was signed l-ate 2010, correct.
O. The SIP is a separate document required under the
Clean Air Act that was not completed until I bel-ieve sometime
in 20L2 to be submitted to the EPA for approval. So I donrt
understand how you say a settlement agreement between
PacifiCorp suing the DEQ in Wyoming courts is the same as the
state implementation plan required under the Clean Air Act.
A. There are certain provisions j-n the BART appeal
settlement agreement al-most verbatim are incl-uded in the state
implementation plan as regards to long-term strategy phase and
the install-ation of SCR on all four units at Jim Bridger.
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O. But theyrre not the same. They're not the same
document?
A. Not the same document; the same reguirements.
O. And they're not even under the same Iega1
structure. One is under PacifiCorp's dealings with DEQ under
Wyoming 1aw, and the other is under Wyomingrs obligations under
the federal Cl-ean Air Act?
MS. NORDSTROM: Is there a question?
MR. OTTO: Withdrawn.
O. BY MR. OTTO: The coal study in your testimony
includes a carbon price forecast that was part of the coal-
study?
A. That is correct.
O. How did the Company develop this forecast?
A. The coal study used the same carbon adder
forecast. There was actually three of them that were used in
the 2013 IRP. That carbon adder forecast was discussed at the
advisory council meetings, and the result of those were the
three that we used.
0. So that IRP, lt's in the record, that's
Attachment 4 to the application. And on page 68, it states
that the carbon forecast was chosen to align with the coal
study. So
A. No, actually we align the coal study to the 20L3
IRP assumptions.
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A. That's not what the IRP states. The IRP states
the carbon price forecast was chosen to align with the coal
study. So it's one of these: We're pointing at each other.
Which one is it: Did the Company choose it fj-rst
in the coal study or did it choose it first in the IRP?
A. We chose the same one, and it's possibly
semantics on when the coal study was originally fil-ed with the
State of Oregon as part of the 2011, IRP update and when the
20L3 IRP was filed this year in June. They are the same. They
were put in there to be the same and be consistent with each
other.
A. But the question was how did you develop that
forecast?
A. That forecast was developed with the integrated
resource planning team of Idaho Power, with input from the
advisory council of the IRP, and thatrs what we used.
O. Is it your position that every member of the
IRPAC supports the carbon price forecast?
A. Not bej-ng at all of those meetings I can't say
precisely, but I doubt that everyone agrees with anything at
the same time.
a. So itrs fair to say the Company internally
developed the carbon price forecast based on some data from the
outside?
A. We adopted the three carbon price curves to be
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used in the 20L3 IRP and the coal- study, yes.
O. Does the carbon price forecast cover -- what does
the carbon --
Vfhat is the point of a carbon price forecast?
What is it supposed to capture?
A. WeI1, ily opinion, it captures the uncertainty of
carbon regulation, and as you know, we had a 1ow case, a
pJ-anning case, and a high case. We don't know what regulations
will be promulgated next June, but we wanted to have an adder
in there that recognized there is going to be some sort of
carbon regulatj-on and we chose a carbon adder.
A. So does the carbon adder also capture uncertainty
around the regulation of other pollutants?
A. It could be construed to j-nclude that, y€s.
A. So, again, thatrs not what the IRP says.
MS. NORDSTROM: Could you please refer to a page
in the attachment to the application in which it says that?
O. BY MR. OTTO: It would be page 68, and the quote
j-s: The purpose of a carbon adder is to estimate the carbon
costs in the price of energy produced by carbon-emitting
resources.
And it goes on to describe how other pollutants
are described by other factors.
A. Okay.
0. So is it fair to say the carbon price forecast
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captures the risk of carbon but not other pollution control-s?
MS. NORDSTROM: This witness has already answered
this question.
O. BY MR. OTTO: Okay. So on your direct testimony
on page 23, you list you begin describing pending
regulations, and that carrj-es over to 24 and even to 25.
A. Okay.
O. At the top of page 24, you l-ist several different
pending regulatj-ons. We have mercury, we have national ambient
aj-r quality standards, Clean Water Act rul-es, greenhouse gas
emissions, and coal ash, artfully named "coal combustion
residuals " ?
A. And sometj-mes "coal combustion byproducts,"
dependj-ng on what publication you're reading.
O. Simply put, it's ash?
A. Correct.
0. Now, the coal study concludes that Bridger wil-J,
require only two things: The SCR to meet regional haze, and
it's caIled DSI to meet the mercury ru1e. Is that correct?
A. Those were the two controls that we caIled out.
We dj-d consider all of these regulations in the coal study and
appropriately added any capital funding required for those.
O. WeIl-, thatrs true, and that's in Exhibit 5 on
pages 48 and 49 have some charts that show a more accurate
representatj-on of the real cost of continuing to operate
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Bridger going forward.
A. Do you want me to look at those?
O. Just for the information of the Commission and
the other parties. I mean, thatrs I think that's an
important page. The reason I'm not calling it out specifj-cally
is it contains confidential numbers, and I'm trying to be
sensj-tive to that and not go through the circus of closing the
room and all- of those things. For those parties who have
signed, they have access to that page and they are free to l-ook
at it, and again thatrs confidential Exhibit No. 5, pages 48
and 49.
And you saj-d the Company did include those
those numbers in the consideration in the coal- study?
A. Again, those regulations that are defined on
those pages in my testimony, we did consj-der each of those in
the possible implicatj-ons at each unit. Keep in mind that just
because there's a new regulation, it does not mean that the
facility is subject to those requirements or isnrt already
meeting those requirements.
A. Is part of your job trying to forecast and keep
track of the development of regulations that may affect the
fdaho Powerrs coal plants?
A. Yes.
O. And one of those is this ash rul-e?
A. Correct.
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O. What's your understanding of the
currently-announced timeline for a decision on the ash rule?
A. The reason I hesitate is that I believe it's
been any number of years before today, and I'm hoping that
those come out next year.
a. And then compliance would be within --
A. Probably three years. Again, have to see what
the final rule looks liker so it would be speculati-ng.
O. So it's fair to say continuing to operate Brj-dger
beyond 201,5 or 20!6, pretty quickly going to have to start
doing somethj-ng about coal ash?
A. Again, there's two different main designations in
the current proposed rules whether coal ash is hazardous or
nonhazardous. We studied the nonhazardous, ds we belj-eve
through industry contacts and dj-scussions with our partners
it's the direction we will go, and we have included in the
capital forecast using the 2013 IRP and in the coal study the
amounts that we expect could come from that. Again, those are
estimates, those are projections how we feel that the
regulation wil-l- actually be final-ized.
O. So I'11 just cut to the chase here. Really what
you're -- by approving the CPCN that's under consideration
today, you're asking the Commj-ssion to send ratepayers down a
path a long-term path in the future that we know is going to
incur additional costs beyond what we're asking for today?
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A. Correct, the CPCN is for just the SCR controls,
but I have to point out we studied all pending regulati-ons and
we include a carbon adder for the future, not the possibil-ity,
for the next year's announcement by President Obama and EPA on
those requirements. We included those costs j-n the analysis
and overwhelmingly the result was to instal-I the SCRs.
a. But the coal- you j-ncluded those in the SAIC
study, that I'l-I agree with you there. Is that correct?
A. They're incl-uded in what SAIC reviewed and
included in the fixed costs that we used from SAICTs analysis
which included those costs are j-ncluded in the coal study in
the AURORA analysis.
O. WeI1, see, that's where it's really confusing,
because when you read the coal study, it says Jim Bridger's
Unit 3 and 4 wil-I require controls for regional haze and for
mercury, and that's it. But now you're saying that they're
going to require more control-s and that they were j-n the study
but they werenrt mentioned in the study. Irm just very
confused about what numbers were actually included in the cost
to operate these plants that was then compared to alternatives.
A. Let's just make the record cl-ear: We did incl-ude
the anticipated costs of those additional- regulations whether
or not they were cal1ed out in the report.
A. WeII, that just strikes me as less than
transparent. If you -- why wouldnrt you just cal-I them out?
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A. WeII, if you read the who1e reportr we talk about
al-l- the different regulations. We were trying to define the
major additions. And in your opinion it appears we didn't do
it correctly, but we did include those costs. We did an
approprlate study and the analysis proves the SCR installation
is the right thing to do for Idaho Power's customers.
O. So you did provide those costs to the to SAIC.
Do you reca1l what their analysis of the accuracy of those
costs and the adequacy of the control technologies they
covered, what was the SAI's opinion on that?
A. We engaged SAIC to revj-ew our capital cost
assumptions and our variable cost assumptions, and they
verified those are withi-n the reasonable band of those kinds of
control-s.
O. So I'11 refer you to confidential Exhibit 5
again, and this part is not confidential-, there is no numbers
involved. And actually want to just take a moment to thank the
Company for releasing a more nuanced redaction to that study;
j-t' s very helpfu1.
But on page 2-2 and it's hard without the l- j-ne
numbers to point you to exact point on the page, but there's a
paragraph that says Idaho Power did provide estimates of cost
for other control- strategies including landfill- closures,
catalysts, pond linings; and they conclude by saying SAIC could
not assess the adequacy of these costs or their ability to
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ensure compliance.
Do you see that?
A. I actual-1y have not found where yourre
ref erencj-ng it.
MS. NORDSTROM: Could you please refer to the
page of the exhibit?
O. BY MR. OTTO: It's page I donft have the
exhibit before me. Itrs page 11 of the exhibit. Itrs page 2-2
of the report?
MS. NORDSTROM: Thank you.
O. BY MR. OTTO: And it's the last sentence on the
page. So you're do you see it now?
A. I do.
A. So your posj-tlon is the coal study is finer we
analyzed those costs, but the person you asked to review
couldn't confirm whether those costs were accurate, but that's
fine. Thatrs your position?
A. You mischaracterize my position. My posi-tion is
SAIC confirmed that the pollution control investments in the
ranges that we provided them, which we discussed in depth with
our operating partners at both the Bridger and Valmy plants,
were within the real-m of reasonabfeness. We did not engage
them to do an engineering study at the plant to say exactly
what control- was.
O. So, fair enough, your position is you provided
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SAIC with numbers, those numbers were plugged into the study,
and the study decided or supported that SCR was the correct way
forward. Is that your position?
A.
Yeah, we
them the
0.
A.
Irm just trying to fo1low your whole 1j-ne there
gave them what we thought the estimates -- we gave
estimates we had.
reasonableness
coal study.
Right.
They confj-rmed that they were within the realm of
, and those were the numbers that we used in the
O. And that right there is the problem, is that SAfC
actually did not confirm that they're reasonable, because this
sentence right there says We don't have enough information to
address the adequacy of these costs and if you continue on
to the next page or their ability to ensure compliance.
So, sure, the numbers that you gave them worked
out in the study, but therers no indication whether those
numbers are actually accurate.
A. And the question is?
a. I guess that's not a question. I'11- I can put
a question mark on 1t, but
Herers the question: Why should this Commission
base this decision on a study where the reviewer of the study
said some of these costs, they have no idea whether they're
accurate or not?
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A. Confirmati-on of the costs we used in the coal
study and used by SAIC are proven out by the commitment
estj-mate and all the work that was reviewed and at least by
Staff and Idaho Powerrs offices in regards to the EPC contract
and other required upgrades.
O. But that commitment estimate doesnrt include
these other control costs that SAIC stated they couldn't decide
whether they're accurate or not. Isnrt that correct?
A. Correct, i-n the commitment estimate that is on
the SCR installation. But, agaln, all those costs were
included, whether or not you agree that they were appropriate,
in the coal study and in the fRP.
O. But the fact is that SAIC is the one who couldn't
decide whether they are appropriate or not. Isnrt that right?
I mean, isn't that what that sentence says?
A. In my opj-nion, it doesn't go to they think
theyrre inappropriate. They're saying they're not sure the
exact estimate we gave them for a particular regulation or a
control- was precisely the correct number. They did identify
and confirm they're in the realm of reasonab.l-eness for that
type of control.
O. Okay. Okay, I'm going to move on to your
rebuttal testimony, and itrs towards the end, it's page 19.
Now, again, Irm not going to be asking about the confidential
i-nformation on this page. I'm actually going to ask you about
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your position on energy efficiency, and thatrs in the middle of
the page.
And you state on page L9, beginning on l-ine 10:
It would not be reasonabl-e to add unsubstantiated amounts of
incremental energy efficiency beyond the 26L average megawatts
already identified.
Do you see that?
A. Yes, that's what I state.
O. How j-s that not a ceiling to the amount of energy
efficiency the Company wil-l- pursue?
A. Can you rephrase it? I'm sorry.
O. The statement that it would not be reasonable to
add amounts of incremental efficiency beyond the 26L average
megawatts, explain to me how that is not a statement of a
ceili-ng on the amount of energy efficiency the Company will
pursue.
A. What I'm referring to in that statement is in the
2013 integrated resource planr w€ included in the load and
resource bal-ance all achievable cost-effective energy
efficiency. That was determined by a thlrd-party consultant in
what we call- the potential study. Any amounts above that would
be unsubstantiated.
O. Any amounts above the achievable potential are
unsubstantiated?
A. Thatrs what I'm saying.
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O. Are you aware that that potential study had a
different category of cost-effective energy efficj-ency?
A. I am aware of that.
O. And that result substantiated that there were 438
average megawatts of cost-effective potential?
A. I don't believe that was in the achievable
category, was it?
O. That's not the question I asked.
I asked are you aware that the study includes
economic it's ca1led the economic potential, and that's
defined as being cost effective?
A. Irm aware of that.
0. Are you aware that that number, the
cost-effective potential, is 438 average megawatts?
A. I'm not aware of the specific number, but,
uh-huh.
O. Is it your position that the Company -- the
Company policy is to not strive to go beyond the identified
achj-evable cost-effective energy efficiency?
MS. NORDSTROM: Irm going to object to this
question. Mr. Harvey is the manager of joint projects and he
oversees the Company's coal fleets, but he j-s not the person
that can state the Commission's pos j-tion wj-th regard to energy
efficiency.
COMMISSIONER SMITH: The Companyr s.
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MS. NORDSTROM: Pardon?
COMMISSIONER SMITH: The Company' s.
MS. NORDSTROM: I'm sorry, the Company's. And
probably not that either.
COMMISSIONER SMITH: Mr. Otto.
MR. OTTO: WeII, Mr. Harvey did, he opened this
door. He opened this door on page 19. He testified that it
would be unreasonable for the Company to go beyond the 261
average megawatts.
COMMISSIONER SMITH: So I don't think I see that
in his testimony. Hers talking about not puttlng
unsubstantiated amounts beyond the 261,. He is not talking
about the Company's position with regard to energy efficiency
and what they're going to pursue.
MR. OTTO: I guess I don't understand the
di-f ference.
COMMISSIONER SMITH: Wel],
MR. OTTO: Maybe that's my problem.
COMMISSIONER SMITH: -- maybe you and I have to
go to l-unch today -- one day and discuss it, not today. So Irm
going to sustain the objection.
MR. OTTO: Nothing further.
COMMISSIONER SMITH: Do we have any questions
from the Commissioners?
COMMISSIONER REDFORD: I just have a couple of
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questions.
EXAM]NATION
BY COMMISSIONER REDFORD:
O. Mr. Harvey, you're the joint projects
administrator. Is that what you're
A. The joint projects manager.
O. Manager.
A. Uh-huh.
O. And what is it exactly that you do?
A. My department oversees Idaho Power's ownership in
three coal-fired power plants, a coal mine, and the fueling of
those plants.
O. Are you the sol-e negotiator or contact with
PacifiCorp?
A. In regards to the SCR project, I'm the main
contact.
O. And have a1so, have you had discussions with
PacifiCorp in the event that this Commission or other
Commissioners should not provide you with a certificate?
A. We discussed that we are unsure of exactly when
the Commission will rule.
O. And what they would rule?
A. And, of course, the outcome.
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a. You said that the coal study cost $50,000?
A. Thatrs what I recol-l-ect. ft's in that kind of
baIlpark, yes.
O. You also -- did you do any alternatj-ve study for
the costs of the alternatives, Iike gas-fired plant, 9ds
conversion, so on?
A. We compared the instal-l-ation of the envj-ronmental
controls to two aLternatives: Replacement with a combined
cycle combustion turbine, and also converting the units to
natural gas.
a. Who did that?
A. The SAIC confirmed the capital costs and such of
those alternatives; and in the AURORA analysis that Idaho Power
performed, we used those inputs.
a. So you didn't use a third party to make a
determinati-on as to the estimate of the costs?
A. As far as the estimate of the costs, those were
provided by our co-owners for the most part. Others, we put in
what we thought was appropriate.
a. So it's a joint, collaborative effort?
A. That's correct.
a. Do you know how much the alternative coal
alternative study cost or was there a cost?
A. In addition to the SAIC work was the Idaho Power
work, which I don't have a cost for what our you know, our
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internal- labor and such
analysis.
It would be attributed to the AURORA
COMMISSIONER REDEORD:I have no further
questions
COMMISSIONER SMITH: Okay.
EXAMINATION
BY COMMISS]ONER SMITH:
O. I just had one, oD page 6 of your rebuttal. At
the top of the page, your answer talks about eight of the nine
sensitivities identifying the SCR as being the l-owest, and then
the next sentence seems to dismiss the only one that showed it
being higher and you call it the unlikely event that a 1ow gas
price future is coupled with a high carbon adder future.
So I was curious how you seemed to come to that
easy conclusion that itrs unl-ike1y.
A. It's my opinion that using the low gas and high
carbon case is almost like a booking. It's the worst case that
could possibly happen as far as let me rephrase that. ft's
not the worst case. It would result in the SCR not being the
prudent investment. I believe it's not a 1ike1y outcome is my
opinion.
O. That's what Irm trying to find out is why you
think it's not Iikely. Is it the low gas price future that you
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don't think is Iikely?
A. If I had to put which of the two I think is less
Iike1y, i-t would certainly be the 1ow gas.
0. Well that's very interesting. What do you base
that on?
A. When f say "l-ow 9dsr" I'm talking about the three
curves that we have. Have to use the 20L3 IRP and the coal
study, and that 1ow gas scenarj-o, you know, being the lowest,
you know, combining that with the highest carbon, j-s the least
likely scenario; something in between.
O. So you're not expressing an opinion on whether
you believe gas prices wil-I remain 1ow?
A. I have no idea what gas prices are going to do.
O. WeIl-, you could make a lot of money if you did.
A. True.
O. Okay. A11 right. Thank you.
COMMISSIONER SMITH: Is there any redirect?
MS. NORDSTROM: Yes.
REDTRECT EXAMINATION
BY MS. NORDSTROM:
O. Mr. Harvey, when you testified earlier, you
stated that the Company didnrt consj-der shutting down the
Bridger units early because they were low cost, reliable, and
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provided critical base l-oad capacity. Is that an accurate
paraphrase of your testimony?
A. That is accurate.
O. Well, but didn't the Company do an analysj-s in
the coal study of this very thing when it modeled what
dj-fferent al-ternatives were out there, and it did so in order
to verify the accuracy of the conclusion the Commission orr
the Company originally -- the position the Company originally
drew?
I didn't say that very wel1. Do you understand
what I'm saying or shal-l I rephrase it?
A. I believe I do. Let me try to answer that.
I think you're referring to the compliance timing
al-ternatives that we did study in the coal study where we
delayed compliance with the regulation for five years and then
shut the uni-t down.
O. That's correct.
A. And I might tel-l- you too that the resul-ts of that
showed stil1 that install-ing the environmental control was the
best best avenue for the customer.
O. Okay. Thank you. I have no other questions.
COMMISSIONER SMITH: A11 right. Mr. Harvey, w€
thank you for your help.
(The witness left the stand. )
COMMISSIONER SMITH: We have passed by the noon
204
83701
1
2
3
4
5
6
7
8
9
10
11
72
13
L4
15
L6
1.7
18
19
20
2L
22
23
24
25
hourr so I think we should take a lunch break unl-ess anyone
thinks we can f inish i-n f ive minutes. So l-et's come back at
1:45.
(Noon recess. )
20s
HEDRICK COURT REPORTING
P.O. BOX 578, BOTSE, rD
HARVEY (Di)
IPC83701