20190419IPC to Staff 3-12.pdf

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An IDACORP Company
JULIA A. HILTON
Senior Counsel
ihi [e-mail]
April 19,2019
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re Case No. IPC-E-19-08
Recovery of CostsAssociated with North Valmy Power Plant- Idaho Power
Company's Response to the Second Production Request of the Commission
Staff
Dear Ms. Hanian:
Enclosed for filing in the above matter are an original and three (3) copies of ldaho
Power Company's Response to the Second Production Request of the Commission Staff.
Also enclosed are four (4) copies each of non-confidential and confidentia! disks
containing information provided in response to Staffs requests. Please handle the
confidential information in accordance with the Protective Agreement executed in this
matter.
lf you have any questions about the enclosed documents, please do not hesitate to
contact me.
Very tru rS
Julia A
JAH:csb
Enclosures
122 1 W. ldaho 5t. (83702)
P.O. Box 70
Boise, lD 83707
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JULIA A. HILTON (lSB No. 7740)
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
i h ilton@ idahopower. com
!N THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE lTS RATES
FOR ELECTRIC SERVICE TO RECOVER
COSTS ASSOCIATED WITH THE NORTH
VALMY POWER PLANT
CASE NO. !PC-E-19-08
IDAHO POWER COMPANY'S
RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
THE COMMISSION STAFF
" ,t;";l l'] Pl'i t+: 5l
lnordstrom@ hopower.com
Attorneys for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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COMES NOW, ldaho Power Company ("ldaho Power" or "Company"), and in
response to the Second Production Request of the Commission Staff to ldaho Power
Company dated April 1 1,2019, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 1
REQUEST NO. 3: Please provide the monthly capacity factors for each Valmy
unitfrom January 1,2016 through March 31,2019.
RESPONSE TO REQUEST NO. 3: Please see the confidential Excel file
provided on the confidential CD for the net generation for the North Valmy power plant
("Valmy") Unit 1 and Unit 2, the capacity factor by unit, and ldaho Power's net
generation for each month from January 1,2016, through March 31,2019.
The confidential CD will be provided to those parties that have executed the
Protective Agreement in this matter.
The response to this Request is sponsored by John Carstensen, Joint Projects
Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 2
REQUEST NO. 4: Please provide the monthly net generation for each Valmy
unit from January 1,2016 through March 31,2019. ln addition, please show separately
ldaho Power's portion of the net generation.
RESPONSE TO REQUEST NO. 4: Please see the Company's response to the
ldaho Public Utilities Commission Staffs ("Staff') Production Request No. 3.
The response to this Request is sponsored by John Carstensen, Joint Projects
Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 3
REQUEST NO. 5: Please provide an update to Exhibit No. 3 of Harvey Direct
Testimony reflecting start and completion dates for each project listed.
RESPONSE TO REQUEST NO. 5: Please see the Excel workbook provided on
the non-confidentia! CD for an update to Exhibit No. 3. Al! amounts reflected in the
exhibit are ldaho Power's share. ldaho Power has added the project level in-service
date to the exhibit, which represents the date the project became used and useful and
plant balances were moved to plant-in-service accounts. ldaho Power does not retain
information for Valmy project start dates. Please note, ldaho Power has separated the
plant adjustments from the plant additions data into its own table. The adjustment
entries included in Exhibit No. 3 are entries that arose after the initial date of in-service
for items such as accounting reclassifications for removal costs or those necessary for
fina! reconciliation of the work order.
The Company also separated the plant additions between two tabs: details of
Valmy plant additions and adjustments to plant recorded between August 1, 2016, and
May 31 ,2017, are included on the "Aug 16 - May 17 Adds & Adj'tab and details of
Valmy plant additions and adjustments to plant recorded between June 1, 2017, and
December 31,2018, are included on the "Jun 17 - Dec 18 Adds & Adj" tab. This
breakout is being provided to better delineate between investment additions included in
the Levelized Revenue Requirement on Existing Investment true-up component and the
investment additions included in the Levelized Revenue Requirement on lncremental
lnvestment true-up component.
The response to this Request is sponsored by Randy Henderson, Finance Team
Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 4
REQUEST NO. 6: ln order to see how the Company's capital investment plans
have changed over time, please provide the Company's capital investment plan,
(including a detailed project description and need for each project, the dollar amounts,
and planned start and completion dates for each project) completed by the Company in
2015,2016,2017,2018, and 2019. Forthe investments in each plan, please indicate if
the investment is tied to Valmy Unit 1, Unit 2, andlor common plant.
RESPONSE TO REQUEST NO. 6: Please see the Excel workbook provided on
the non-confidentia! CD for the Valmy capital investment plans completed by the
Company in 2015,2016,2017,2018, and 2019. The Company's capital investment
plans, located on the budget detail tabs, include a detailed project description, the need
for each project, budget dollar amount, and plant location. Because ldaho Power is not
the constructing partner for projects at Valmy, planned start and completion dates are
not retained in ldaho Power's budget system.
ldaho Power has also included in the Excel workbook a 1O-year summary of
Valmy's annual capita! budget that highlights how the Company's capital investment
plans have changed over time.
The response to this Request is sponsored by Randy Henderson, Finance Team
Leader, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REOUEST OF THE COMMISSION STAFF.5
REQUEST NO. 7: ln order to understand how the Com pany and NV Energy
made decisions about future capital investments relative to NV Energy and the
Company's agreement, please provide the decision criteria and considerations used to
determine whether a capital investment should be made specific to Valmy Unit 1, Unit 2,
or common plant considering anticipated closure dates. Please provide a detailed
explanation of the criteria, including any guidelines or parameters that were used.
RESPONSE TO REQUEST NO. 7: ldaho Power and NV Energy work together
to establish a capital budget for Valmy. Mid-summer, ldaho Power has a meeting with
the plant director, engineering, planning, and NV Energy corporate support personnel to
review each proposed capital project with costs, need, and justification. This meeting is
an extensive review of each project by both ldaho Power and NV Energy before a
project will be entered into ldaho Power's budget system. All projects must be
approved by both ldaho Power and NV Energy and must be required for at least one of
three reasons: reliability, safety, or environmental compliance. The following
summarizes the criteria required to be met:
Reliability. These projects are required to ensure reliable summer
operations and may include failure restoration (equipment failures), replacement of
equipment that has been determined to fail, or scheduled overhauls of critical
equipment. All redundant systems will continue to be evaluated on need for a summer
only operation.
Safety. These projects are required for the safe operation of the plant or
for the safety of plant personnel, most of which are required to keep the plant in
compliance with safety regulations.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 6
Compliance. Projects required to operate Valmy in full compliance with all
federal and state laws, rules, and regulations.
The response to this Request is sponsored by John Carstensen, Joint Projects
Leader, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 7
REQUEST NO. 8: PIease provide copies of e-mails, meeting notes, and/or
records of discussion between the Company and NV Energy related to the decision
whether or not to move forward with capital investments for Unit 1, Unit 2, or common
plant considering proposed closure dates and earlier alternative closure dates for Unit 1.
RESPONSE TO REQUEST NO. 8: ldaho Power is gathering the support for the
request for copies of e-mails, meeting notes, and/or records of discussion between the
Company and NV Energy related to the decision whether or not to move forward with
capital investments for Unit 1, Unit 2, or common plant considering proposed closure
dates and earlier alternative closure dates for Unit 1 and will provide the documentation
in a supplemental response no later than Apri! 26,2019.
The response to this Request is sponsored by Matt Larkin, Revenue
Requirement Senior Manager, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 8
REQUESf I!OJ: Please provide a detailed explanation and supporting
documentation and analysis substantiating the statement quoted below from Harvey's
Direct Testimony, on Page No. 22. Please include a description and a breakdown of
the "certain costs" that could be reduced and why remaining cost categories could not
be reduced.
Therefore, it is unlikely that Idaho Power's exit from Unit 2
operations prior to 2025 would result in material savings
because the only payment obligation relief would come from
a reduction in certain costs associated with ldaho Power's
capacity reduction in Unit 2 operations.
RESPONSE TO REQUEST NO. 9: Under the terms of the North Valmy Project
Framework Agreement between NV Energy and ldaho Power dated as of February 22,
2019, exiting Valmy Unit 2 prior to 2025 would result in variable operations and
maintenance ("O&M") savings and incremental capital investment savings each year
specific to that unit. So long as NV Energy continues to operate one or both units,
ldaho Power will continue to be responsible for 50 percent of the fixed cost of the
unit(s), payable as exit fees and/or fixed shared costs.
Remaining cost categories could not be reduced because NV Energy would not
agree to reduce them. The analysis of costs is based upon the results of the
Company's negotiations with NV Energy. The table below summarizes the annual
estimated variable O&M and capital savings that may be realized by ldaho Power if it
exits earlier than 2025, and NV Energy continues to operate through 2025.
2019-25
Savings
Out V2 End
ot 2023
2019-25
Savings
Out V2 End
ot 2022
2019-25
Savings
Out V2 End
ot 2021
2019-25
Savings
Out V2 End
ot 2020
2019-2s
Savings
Out V2 End
of 2019
Estimated V2
Variable O&M 1,159,248 2,225,164 3,265,379 4,165,206 5,064,984 6,015,186
100,000 300,000 600,000 1,1 18,493 1 ,518,493 2,418,541
OverallV2
Savings
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 9
1,259,248 2,525,164 3,865,379 5,283,699 6,583,477 8,433,727
2019-25
Savings
Out V2 End
ot 2024
Estimated V2
Capital
ldaho Power continues to evaluate the impacts of potentially exiting Valmy Unit 2
prior to 2025 as part of the 2Ol9lntegrated Resource Plan ("!RP"). Cost and operating
data, including the savings noted above, are inputs used in the AURORA Iong-term
capacity expansion modeling that derives resource portfolios. As discussed further in
the Company's response to Staffs Production Request No. 11, portfolio analyses run to
date indicate it is not economic to exit Valmy Unit 2 earlier than 2025 under the
Planning natural gas and Planning carbon future currently considered in the
development of the 2019 lRP.
The response to this Request is sponsored by Randy Henderson, Finance Team
Leader, ldaho Power Company, and Tom Harvey, Genera! Manager of Power Supply,
Planning and Operations, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 1O
REQUEST NO. 10: ln reference to H arvey's Direct Testimony, Page Nos. 22
and 23, please further explain and provide supporting documentation and details related
to the statement:
Moreover, as detailed in the 2017 lRP Appendix C, ldaho
Power's ownership share of Valmy's capacity is utilized to
meet the Company's current peak-hour load and resource
balance. Without it, ldaho Power could experience a deficit
during the year, with potential deficits growing in subsequent
years through 2025. Valmy is a necessary, although
relatively infrequent, contributor to system reliability through
2025.
RESPONSE TO REQUEST NO. 10: Pages 42 through 48 of the 2017 lRP
Appendix C present the Peak-Hour Load and Resource Balance, by month, for the
years 2019 through 2026. The Peak-Hour Load and Resource Balance computes
ldaho Power's monthly surplus or deficit by subtracting from the load forecast a!! the
Company's generation from existing resources, planned purchases, and any resource
additions identified in the 2017 IRP and expected to be on-line. The existing resources
presented in the Peak-Hour Load and Resource Balance tables are differentiated by
type, including a delineation for total coal resources. The total coal generation of 1,020
megawatts ("MW") in 2019 presented on page 42 is the total net dependable capability
of the Jim Bridger power plant ("Bridger"), Valmy, and the Boardman power plant
("Boardman") combined.
ln 2020, the total coal generation drops to 889 MW due to ldaho Power's exit of
Valmy Unit 1, or the loss of 131 MW of net dependable capability. However, this
reduction is offset by the increase of 131 MW in the "Transmission Capacity Available
for Market Purchases" line as the peak-hour load is being met with lower-cost resources
available in the market. ln 2021, the tota! coal generation drops to 835 MW due to
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 11
ldaho Power's exit from Boardman, and the loss of those 54 MW of net dependable
capability is again replaced with 54 MW of transmission capacity available for market
purchases. With all Bridger units and Valmy Unit 2 in operation from 2022 through
2025,ldaho Power's tota! coal generation presented on pages 45 through 48 remains at
835 MW and transmission capacity available for market purchases includes the extra
185 MW associated with exiting Valmy Unit 1 and Boardman.
The "Monthly Surplus/Deficit" line will indicate whether or not the 262 MW
associated with Valmy capacity, whether it's 262 MW of Valmy generation or the
combination of 131 MW of Valmy generation and 131 MW of market purchases, is a
necessary contributor to system reliability. lf, at any point during the year, the "Monthly
Surplus/Deficit" line shows a surplus less than 262 MW, Valmy is contributing to system
reliability. As can be seen on the "Monthly Surplus/Deficit" line of each page from 42
through 48, there is at least one month of the year that, absent the 262 MW associated
with Valmy, ldaho Power would not be able to meet load with the existing resources.
The response to this Request is sponsored by Tom Harvey, General Manager of
Power Supply, Planning and Operations, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 12
REQUEST NO. 11: !n reference to the prior production request, what analysis
has the Company made to determine other options available to offset the required
Valmy generation which could be provided at a lower overall cost recognizing an earlier
closure of Unit #2.
RESPONSE TO REQUEST NO. 11: As described in the Direct Testim ony of
Tom Harvey, Order No. 33771 in Case No. !PC-E-16-24 requires the Company to
evaluate the economics of a Unit 2 retirement as part of the Company's 2019 lRP. The
2019 IRP is currently in the development phase and on April 11,2019, ldaho Power
presented the results of the portfolio analyses to the IRP Advisory Council. For the
2019 lRP, the Company developed 24 resource portfolios using the long-term capacity
expansion capability of the AURORA model, that includes cost, operating, and savings
data. Under the Planning natural gas and Planning carbon future, ldaho Power exited
Valmy Unit 2 in 2025, indicating an earlier exit of Unit 2 is not cost-effective because
there is no other lower-cost resource alternative.
The response to this Request is sponsored by Tom Harvey, General Manager of
Power Supply, Planning and Operations, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 13
REQUEST NO. 12: Has the Company been involved in any discussion or made
any effort with an interested party to negotiate a sale of one or more units of the North
Valmy plant? lf the answer is no, please explain why not.
RESPONSE TO REQUEST NO. 12: Yes , prior to negotiations of the agreement
filed in this case, ldaho Power asked NV Energy if it was interested in purchasing ldaho
Power's ownership interests of Valmy. NV Energy was not interested in purchasing
ldaho Power's interest at that time.
Additionally, ldaho Power engaged the law firm of Baker Botts, LLP, to assist in
connecting to potential third-party buyers of Idaho Power's ownership interest of Valmy.
Baker Botts connected ldaho Power leadership to three potential purchasers of its
ownership interest, and preliminary conference calls to discuss a possible transaction
were held between ldaho Power and each potential purchaser in November and
December of 2017. ln each case, the potential purchasers were no longer interested
after they learned that (1) ldaho Power would only be able to convey its 50 percent
ownership interest in Valmy, (2) it is the non-operating partner of the plant, and (3) there
was no guaranteed long-term purchaser of Valmy's output.
The Company will continue to discuss and evaluate any possible sale of its
ownership interest with potential purchasers and notify Staff if viable options arise.
The response to this Request is sponsored by Tom Harvey, General Manager of
Power Supply, Planning and Operations, ldaho Power Company.
DATED at Boise, ldaho, this 19th day of April 2019.
A.N
for ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 19th day of April 2019 I served a true and correct
copy of IDAHO POWER COMPANY'S RESPONSE TO THE SECOND PRODUCTION
REQUEST OF THE COMMISSION STAFF upon the following named parties by the
method indicated below, and addressed to the following:
Gommission Staff
Edward Jewell
Deputy Attorney General
ldaho Public Utilities Commission
47 2 W est Wash ington Street (837 02)
P.O. Box 83720
Boise, ldaho 83720-007 4
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 North 6th Street
Boise, ldaho 83702
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IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 15