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HomeMy WebLinkAbout20201123IPC to Staff 16-21.pdf...drai."P.11 IDAHO ftm POWER An IDACORP Company LISA D. NORDSTROM Lead Counsel Inordstrom idahopower.com November 23, 2020 VIA ENCRYPTED ELECTRONIC MAIL Jan Noriyuki, Secretary Idaho Public Utilities Commission 11331 W. Chinden Blvd., Bldg 8, Suite 201-A (83714) PO Box 83720 Boise, Idaho 83720-0074 Re: Case No. IPC-E-20-32 Rate Decrease for Costs Associated with the Boardman Power Plant Dear Ms. Noriyuki: Enclosed for electronic filing, pursuant to Order No. 34602, please find Idaho Power Company's Response to the Confidential Second Production Request of the Commission Staff. Although Staff's Requests were labelled as "confidential," Idaho Power has determined that the information included in the Request was not confidential and thus the narrative has been provided non-confidentially. However, the Company will be providing Confidential Attachments in Response to Staff's Request No. 17 and has labeled those accordingly. If you have any questions about the attached document, please do not hesitate to contact me. Very truly yours, Lisa D. Nordstrom LDN:slb Attachment(s) RECEIVED 2020November 23,PM 4:55 IDAHO PUBLIC UTILITIES COMMISSION LISA D. NORDSTROM (ISB No. 5733) Idaho Power Company 1221 West Idaho Street (83702) P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-6117 Facsimile: (208) 388-6936 Inordstrom idahopowercom Attorney for Idaho Power Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF IDAHO POWER COMPANY'S APPLICATION FOR AUTHORITY TO DECREASE ITS RATES FOR ELECTRIC SERVICE FOR COSTS ASSOCIATED WITH THE BOARDMAN POWER PLANT. CASE NO. IPC-E-20-32 IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF COMES NOW, Idaho Power Company ("Idaho Power" or "Company"), and in response to the Confidential Second Production Request of the Commission Staff to Idaho Power Company dated November 9, 2020, herewith submits the following information: IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 1 REQUEST NO. 16: Please provide a detailed description of the process the Company used to validate and approve costs incurred by its managing partner, Portland General Electric (PGE) RESPONSE TO REQUEST NO. 16: The validation of Boardman costs begins during the Asset Management Plan ("AMP") meetings, as described in Mr. Adelman's testimony, when upcoming capital projects identified by PGE corporate and plant engineering personnel are discussed. At this time, both Idaho Power and PGE personnel ask questions of plant personnel, most often the subject matter experts, concerning details surrounding the forecasted capital investments including justification, timing and cost estimates. This open dialog between the partners and plant personnel leads to a refined, cost-effective forecasted spend. In addition, the Boardman Ownership meetings may include discussions of upcoming capital projects. The next step in the validation process of Boardman costs occurs when PGE sends to Idaho Power's joint venture Accountant the project funding justification and cost information for each upcoming project. As described in more detail in the Company's Response to Request No. 18, upon receipt of the documentation, the joint venture Accountant creates the work order in the Company's work order information software, Asset Suite, and notifies Idaho Power's Joint Projects Leader that the work order is currently awaiting approval. After reviewing the project documentation and estimated project costs, the Joint Projects Leader approves the establishment of the work order in Asset Suite, allowing the work order to accept charges. Once work on the project begins, Idaho Power's payments for the project expenditures become a component of the monthly plant funding and are disbursed upon IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 2 receipt of a Request for Funds from PGE via the joint venture Accountant. The monthly Request for Funds includes a Boardman budget comparison and reconciliation of deposits and expenditures, by Federal Energy Regulatory Commission ("FERC") account as well as the budget by month for the current year. Within this Request for Funds documentation is a summary of the capital expenditures, by project, that the joint venture Accountant uses to assign costs to specific projects, when necessary. The Request for Funds packages are routed to the Joint Projects Leader who reviews and validates the variances. Overages in project costs specifically would appear in the FERC Account 107 Construction Work in Progress line as well as within the project level budget comparison document. Once reviewed and validated, the Joint Project Leader forwards authorization of the invoice to the Company's Accounts Payable department for payment to PGE. In addition to the review via the Request for Funds documentation, as project costs post to the work order, the costs can be viewed in Asset Suite at any time and compared to the initial budget estimate established when the work order was first set up. At a more granular level, Idaho Power performs a formal review of capital expenditures three times per year (in April, July, and October) through a process referred to as "Budget Update." Specific to expenditures at Boardman, individual budget ID's are reviewed during this process, including an examination of actual spend compared to budget, as well as a comparison to the prior quarter's Budget Update. This information is used to monitor capital expenditures at the individual project level, and any significant variances are discussed with the plant to determine the cause and that past and planned expenditures are prudently incurred. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 3 Finally, the Boardman Ownership meetings also provide a forum for discussion of actual capital project spend, when necessary, and another opportunity for Idaho Power to validate project costs. The response to this Request is sponsored by Ryan Adelman, Vice President of Power Supply, Idaho Power Company. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 4 REQUEST NO. 17: For each capital project made from June 1, 2012, through June 30, 2020, please provide the Company's due diligence analysis with supporting workpapers to show that the project was managed to achieve least cost and that the resulting costs were reasonable. Specific to each project, please include analysis showing: a. The project costs for internal PGE project management, oversight, PGE capital loadings and associated direct costs by PGE for labor and materials were verified as correct and prudently incurred; b. The project costs from PGE's project contractor and/or subcontractors were verified as correct and prudently incurred; and c. The project costs for equipment procured by PGE were verified as correct and prudently incurred. RESPONSE TO REQUEST NO. 17: As explained in the Company's Response to Request No. 16, Idaho Power receives from PGE on a monthly basis a Request for Funds that includes a Boardman budget comparison and reconciliation of deposits and expenditures, by FERC account, as well as the budget by month for the current year. Approval of the Request for Funds authorizes payment to PGE and the documentation is used to allocate the expenditures to specific projects, when necessary. Due to the voluminous nature of this documentation, Idaho Power has attached the Request for Funds for April 2017, to provide Staff an example of the budget to actual comparison review. In addition, attached are the Confidential Budget Updates specific to Boardman, as discussed in the Response to Request No. 16, for the calendar year 2016 forward, that document the review and approval of variances between actual and budgeted IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 5 expenditures. Previous year's Budget Updates have been destroyed in accordance with the Company's document retention policy. Finally, Idaho Power is gathering email correspondence between the plant and Company personnel to support its continued involvement in budget to actuals variances at Boardman and will supplement this response with the documentation as soon as possible. The response to this Request is sponsored by Ryan Adelman, Vice President of Power Supply, Idaho Power Company. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 6 REQUEST NO. 18: The Company in Response to Production Request No. 15 provided the file CONFIDENTIAL Attachment - Request No. 15 - Boardman WO Jacket Scans.pdf. On page 261, an email to Cheryl Hobbs notes approval by John Carstensen for setup of three projects into "passport". a. Please explain the context of the email requesting and providing approval to setup the projects into "passport;" b. Please explain the need for Mr. Carstensen's approval; and c. Please explain and provide documentation supporting Mr. Carstensen's due diligence review for approving these projects. RESPONSE TO REQUEST NO. 18: a. Passport, now Asset Suite, is a multifaceted software that manages Idaho Power's work order information and resulting project costs. When the Company receives project funding justifications from the plant following budget approval, Idaho Power's joint venture Accountant will create the work order in Passport/Asset Suite which assigns the work order number and includes the location information, accounting string, the property units and the estimated project costs. At this point the work order is in a "waiting approval" state and the joint venture Accountant contacts the Joint Projects Leader for approval of the project in Passport/Asset Suite pursuant to Sarbanes-Oxley requirements, allowing the work order to accept charges. b. Please see (a) above. c. As evidenced in the email provided as support for the settling pond erosion prevention investments, Mr. Carstensen, the Joint Project Leader, IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 7 approved the project further noting the Generation Fitness Fund needed to be monitored as the project funding summary provided by the plant was associated with PGE's entire generation fleet, not specific to Boardman. The email correspondence referenced was the Joint Project Leader's validation and approval of the establishment of the project and associated costs in Passport/Asset Suite. The response to this Request is sponsored by Ryan Adelman, Vice President of Power Supply, Idaho Power Company. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 8 REQUEST NO. 19: Specific to Production Requests 3(g), 4(g), 5(g), 6(g), 7(g), 8(g), 9(g), 10(g), 11(g), 12(g), and 13(g), Staff requested Idaho Power provide "PGE indirect and/or direct charges made to the project." In response, the Company provided a single amount attributed to internal PGE labor, capital loadings, employee expenses, and other misc. charges. For each PR noted above, please provide a breakdown by internal PGE labor, capital loadings, employee expenses, and other misc. charges and provide original project documentation detailing these costs by capital project. RESPONSE TO REQUEST NO 19: Please see the attached chart for a breakdown of PGE's actual costs by internal PGE labor, capital loadings, employee expenses, and other miscellaneous charges. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 9 REQUEST NO. 20: Please explain the difference in amounts between Exhibit No.4 (Exhibit No. 4_Actual vs Budget.xls), Column S "Actuals" and the noted amounts shown in Response to Production Requests referenced below: EXHIBIT NO. 4 Project Description P24688 - Boardman - Upgrade Fire Protection P26266 - BN-Install New Fire Detection Sys P35469 - BN - Replace Coal Dumper Conduit PCNO94 - Boardman- Purchase Minor Tools & Equ P24067 - Boardman - Install Platforms P35591 - As-Built Drawings - Generation BART-Bdmn Air Quality Controls P35182 - BN - Replace I VSDs for ID Fans BN - Misc. Pumps. Valves, Motors EXHIBIT EXHIBIT PROD PR DIFFERENCE NO. 4 NO. 4 REQ RESPONSE ($) "Actuals" Actual Amount Cell Amount ($) Location ($) S7 ,011,566 1.176,9111 -165,345 S14 1,684,486 5 1,629,7872 54,699 S22 149,856 7 145,919 3,937 S32 1,016,885 8 968,914 47,971 S33 150,701 9 128,980 21,721 S35 362,378 10 385,165 -22,787 S15 36,798,917 11 34,347,359 2,451,558 S20 3,383,190 12 2,530,4673 852,723 S6 2,024,876 13 2,282,907 -258,031 RESPONSE TO REQUEST NO. 20: The variances in the amounts presented in Exhibit No. 4 and those provided in the production responses referenced above are the 1 Reference CONFIDENTIAL Attachment — Request No. 3 — Boardman Upgrade Fire Protection Reconciliation 2 Reference CONFIDENTIAL Attachment — Request No. 5 — New Fire Detection System Reconciliation 3 Reference CONFIDENTIAL Attachment — Request No. 12 — Boardman Replace VSDs Reconciliation IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 10 result of differing time periods. Exhibit No. 4 presents actual costs for the January 1, 2012, through December 31, 2019, time period while the production responses present actuals costs included in the computation of the levelized revenue requirement, or for the June 1, 2012, through June 30, 2020, time period. The projects listed above include costs that fall in 2012 and/or 2020 and, therefore, will not tie to amounts presented in Exhibit No. 4. As detailed in Mr. Adelman's direct testimony, the purpose of Exhibit No. 4 is to provide Staff with a comparison of actual investments by project compared to forecasted amounts used to compute levelized revenue requirement amounts, as requested in Case No. IPC-E-19-32, however the result is not a consistent comparison to amounts recorded by Idaho Power. The response to this Request is sponsored by Ryan Adelman, Vice President of Power Supply, Idaho Power Company. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 11 REQUEST NO. 21: In reference to Exhibit No.4 (Exhibit No. 4_Actual vs Budget.xls), please explain why the "Actual" (Column S) amount is significantly higher than the "Total IPC Budget" (Column T) amount for each of the projects referenced below: EXHIBIT NO. 4 Project Description EXHIBIT NO. 4 Actual Amount ($) EXHIBIT NO. 4 Total IPC Budget ($) 212,340 EXHIBIT NO. 4 Variance (Percentage) P24688 - Boardman - Upgrade Fire Protection 1,011,566 376% P24806 - BN: Expand Maint & Weld Shops 2,085,547 ,500,000 39% P26938 - Boardman - Upgrade Ash 724,258 456,020 Handling Sys 59% P35469 - BN - Replace Coal Dumper Conduit 149,856 50,000 200% PCNO94 - Boardman-Purchase Minor Tools & Equ ,016,885 504,250 102% P24067 - Boardman - Install Platforms 150,701 108,000 40% RESPONSE TO REQUEST NO. 21: • Upgrade Fire Protection: The upgrade of the fire protection system was identified as a risk and necessary investment during an assessment of the fire detection system and initially considered in 2009 with the potential availability of fitness funds as evidenced in Confidential Attachment Request No. 3b — Project Justification — Upgrade Fire Protection — 4-24-2009 and Confidential Attachment Request No. 3 — Boardman Upgrade Fire Protection Reconciliation ("Reconciliation"). As further discussed in the Reconciliation, the preliminary budget estimate was provided to Idaho Power in April 2009, with planned spend in 2010 and 2011. The project was ultimately deferred from 2011 to 2012 with actual spend occurring in 2012 and 2013. Because of the continued deferment of the project, Idaho Power budgeted IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 12 for the fire protection upgrade costs prior to the establishment of the Boardman balancing account on June 1, 2012, and therefore they are not reflected in Exhibit No. 4. • Expand Maintenance and Weld Shops: Similar to the upgrade of the fire protection system, the expansion of the maintenance and weld shops was first identified as a safety hazard and presented for budget approval in mid-2007 and budgeted for in 2008 and 2009, as detailed in the Project Summary/Approval document contained in CONFIDENTIAL Attachment — Request No. 4 — WO 27300604 Packet ("WO Packet"). At that time, the project was expected to cost $1.07 million. However, as described in CONFIDENTIAL Attachment — Request No. 4 — Boardman Maintenance and Weld Shop Reconciliation, the work was delayed and the budget revised to $1.5 million in 2011, with commencement of the work in 2012. As evidenced in PGE's Boardman Coal Plant Construction Budget Comparison included in the WO Packet, in 2012 the budget was revised to $2.24 million. Therefore, the actual expenditures of $2.09 million were below the $2.24 million budgeted amounts. The $1.5 million project budget used by Idaho Power when preparing the initial levelized revenue requirement computation in early 2012, and presented in Exhibit No. 4, was the most current information available at the time. • Upgrade Ash Handling System: Plant support costs for the upgrade of the ash handling system were significantly higher than budgeted due to unanticipated complexities in installation of the new ash handling controls and a shortened time frame due to other planned outage work resulting in an accelerated outage schedule. IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 13 • Replace Coal Dumper Conduit: As explained in the Company's Response to Request No. 7, the coal dumper conduit replacement project was discovered at the beginning of an outage and the work to re-wire the dumper with new electrical conduits was expected to be minimal. However, once the work began, it was determined to be more extensive than initially anticipated, resulting in an underestimated budget. • Purchase Minor Tools and Equipment: The primary driver of the variance reflected in Exhibit No. 4 to Mr. Adelman's direct testimony for the blanket project Purchase Minor Tools and Equipment, as explained in the Company's Response to Request No. 8, is because the majority of these capital expenditures are associated with unplanned equipment failures and the tools or equipment required to perform the repair work. As the plant was nearing its end-of-life, expected capital spend was reduced to include only those investments required to maintain functionality, reliability and safety. Equipment failures that were material in nature and required extensive work were assigned a new project number with costs recorded to that specific project. The unplanned nature of minor equipment failures and resulting purchase of minor tools and equipment leads to larger variances between budgeted and actual expenditures. ■ Install Platforms: These expenditures are costs associated with the installation of platforms that allow for the safe access by employees to equipment within the plant. Similar to the Purchase Minor Tools and Equipment costs, the Install Platforms is a blanket work order and the costs incurred are unexpected as capital IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 14 issues arise. Because the platform installation occurs when unexpected access to plant equipment is required, budgeted and actual expenditure variances occur. The response to this Request is sponsored by Ryan Adelman, Vice President of Power Supply, Idaho Power Company. DATED at Boise, Idaho, this 23rd day of November, 2020. LISA D. NORDSTROM Attorney for Idaho Power Company IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 15 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 23rd day of November 2020, I served a true and correct copy of IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Hand Delivered John R. Hammond, Jr. U.S. Mail Deputy Attorney General Overnight Mail Idaho Public Utilities Commission FAX 11331 W. Chinden Blvd., Bldg No. 8, X Email iohn.hammond@puc.idaho.gov Suite 201-A (83714) PO Box 83720 Boise, ID 83720-0074 Idaho Conservation League Hand Delivered Benjamin J. Otto U.S. Mail Idaho Conservation League Overnight Mail 710 N. 6th Street FAX Boise, ID 83702 X Email bottoaidahoconservation.org Stephanie Buckner, Executive Assistant IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF - 16 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION CASE NO, IPC-E-20-32 IDAHO POWER COMPANY CONFIDENTIAL ATTACHMENT TO REQUEST NO. 17 (ATTACHED TO EMAIL AS SEPARATE ATTACHMENTS) TO IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION CASE NO. 1PC-E-20-32 IDAHO POWER COMPANY ATTACHMENT TO REQUEST NO. 19 TO IDAHO POWER COMPANY'S RESPONSE TO THE CONFIDENTIAL SECOND PRODUCTION REQUEST OF THE COMMISSION STAFF PR Project Total Internal PGE Labor Capital Loadings Employee Expenses Misc Charges 3(g) Upgrade Fire Protection 944,691 5,276 939,210 205 4(g) Expand Maintenance & Weld Shop 660,047 35,156 612,860 8,506 3,525 5(g) Install New Fire Detection System 633,060 97,800 552,287 16,813 (33,840) 6(g) Upgrade Ash Handling System 377,442 109,965 247,040 7,192 13,245 7(g) Replace Coal Dumper Conduit 29,941 29,941 - 8(g) Purchase Minor Tools & Equip 33,169 1,868 8,868 22,434 9(g) Install Platforms 9,230 6,081 6,647 939 (4,438) 10(g) As-Built Drawings 362,813 146,157 194,760 13,196 8,700 11(g) BART Air Quality Controls 3,144,189 1,241,594 856,515 142,715 903,365 12(g) Replace VSDs for ID Fans 404,989 92,753 293,641 18,595 13(g) Misc Pumps, Valves, Motors 314,828 93,179 229,743 198 (8,292) Notes: 1. The $3,144,189 associated with the BART Air Quality Controls project is based on the Company's Supplemental Response to Request No. 11.