20210910PAC to PIIC Attach 52.pdf

CASE NO. PAC-E-17-07
STIPULATION – Page 1
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF ROCKY MOUNTAIN POWER FOR A
CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY AND
BINDING RATEMAKING TREATMENT
FOR NEW WIND AND TRANSMISSION
FACILITIES
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CASE NO. PAC-E-17-07
STIPULATION
This stipulation (“Stipulation”) is entered into by and between Rocky Mountain Power, a
division of PacifiCorp (“Rocky Mountain Power” or “the Company”) and the Staff of the Idaho
Public Utilities Commission (“Staff”). The Stipulation refers to the Company and the Staff as a
“Party,” and collectively, as the “Stipulating Parties.”
I. INTRODUCTION
1.The terms and conditions of this Stipulation are set forth below. The Stipulating
Parties agree that this Stipulation represents a fair, just and reasonable compromise of identified
issues raised in this proceeding, and that this Stipulation is in the public interest. The Stipulating
Parties, therefore, recommend that the Idaho Public Utilities Commission (“Commission”)
approve the Stipulation and all of its terms and conditions. See IDAPA 31.01.01.271, 272, and
274.
II. BACKGROUND
2. On July 3, 2017, the Company filed its application for a certificate of public
convenience and necessity (“CPCN”) to (1) construct or acquire four new wind projects with a
total combined capacity of 860 megawatts (“MW”), and the 140-mile, 500 kV Aeolus-to-
Bridger/Anticline transmission line, plus network upgrades, associated with the Company’s
Gateway West transmission project; and (2) approval of binding ratemaking treatment for the
investment in the combined projects.
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STIPULATION – Page 2
3. On July 27, 2017, the Commission issued a Notice of Application and invited
interested persons to intervene by no later than August 8, 2017.
4. Monsanto Company (“Monsanto”) petitioned to intervene July 12, 2018, Idaho
Irrigation Pumpers Association (“IIPA”) petitioned to intervene August 9, 2018, and PacifiCorp
Idaho Industrial Customers (“PIIC”) petitioned to intervene July 25, 2017, and the Commission
authorized all petitions.
5. On November 3, 2017, the Company requested an extension of the deadline for the
Company to pre-file rebuttal testimony from December 8, 2017 to December 18, 2017, and to
change the date of the technical hearing from April 6, 2018 to March 12-14, 2018.
6. Pre-filed testimony was filed as follows: on November 20, 2017, intervenors and
Staff filed direct testimony; on December 18, 2017, the Company filed rebuttal testimony; on
January 16, 2018, and February 16, 2018, the Company filed supplemental testimony related to
the request for proposals (“RFP”) results; on April 11, 2018, intervenors and Staff filed
supplemental direct RFP testimony; and on April 30, 2018, the Company filed supplemental
rebuttal RFP testimony.
7. In its January 16, 2018 first supplemental direct testimony, the Company described
its preliminary selection of the final four wind projects selected from the RFP results, and in its
February 16, 2018 second supplemental direct testimony, the Company described its final selection
of the four winning wind projects that included 1,311 MW, consisting of 1,111 MW of Company-
owned facilities including three benchmark facilities (TB Flats I and II combined as a single project
and Ekola Flats), and two new facilities including Cedar Springs, a one-half build-transfer
agreement (“BTA”) and one-half power purchase agreement, and Uinta, a BTA.
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STIPULATION – Page 3
8. With the intent of resolving the issues raised in the Company’s application filed in
this proceeding, the Stipulating Parties, Monsanto, IIPA and PIIC met on February 28, 2018,
March 26, 2018, April 5, 2018, April 25, 2018, April 30, 2018, and on May 2, 2018, under IDAPA
31.01.01.271 and 272 for settlement discussions. Based upon the settlement discussions, as a
compromise of the positions in this proceeding, and for other considerations as set forth below,
the Company and Staff reached an agreement on all issues in this case, except as expressly stated
in this Stipulation. The Stipulating Parties did not reach an agreement with Monsanto, IIPA and
PIIC. The Stipulating Parties stipulate and agree as follows, subject to Commission approval of
the terms and conditions of this Stipulation.
III. TERMS OF THE STIPULATION
9. The Stipulating Parties request that the Commission issue an order granting a
CPCN for the proposed Aeolus-to-Bridger/Anticline transmission line; the Ekola Flats, TB Flats I
and II, and Cedar Springs wind projects (“Wind Projects”); and the related network upgrades as
described in the Second Supplemental Direct Testimony of Rocky Mountain Power (“Stipulated
Projects”). The Stipulating Parties request that the Commission find that: (1) the Stipulated
Projects are prudent and in the public interest, and (2) in accordance with Idaho Code § 61-526,
the Stipulated Projects are a reasonable way to meet the present or future public convenience and
necessity.
10. The Stipulating Parties request that the Commission approve the Company’s
proposed ratemaking treatment for recovery of the new investment, energy production, and
production tax credits (“PTC”) associated with the Stipulated Projects. The Stipulating Parties
further agree that the Commission should enter an order approving the Company’s proposed
Resource Tracking Mechanism (“RTM”) as a component of the Energy Cost Adjustment
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STIPULATION – Page 4
Mechanism (“ECAM”). See Direct Testimony of Jeffrey K. Larsen and Exhibit 62 (describing
design and operation of RTM), with modifications incorporated herein. The RTM, along with the
ECAM, will capture the costs and benefits of the Stipulated Projects until the Company’s next
general rate case, at which time the Stipulating Parties will re-evaluate the use of the RTM going
forward.
11. Under the ECAM’s existing sharing bands, 90 percent of the net power cost
(“NPC”) benefits associated with the energy production from each of the wind facilities listed
above will be credited to customers and 10 percent will be assigned to the Company. For purposes
of this settlement, the Company would agree to pass that 10 percent of the NPC benefits of these
new wind facilities that would otherwise be assigned to the Company through the ECAM, back to
customers. Thus, customers will receive 100 percent of the benefit of the energy produced by the
Wind Projects.
12. The Stipulating Parties further agree that 100 percent of the full gross-up pre-tax
value of all the PTCs generated by each of these new wind facilities will be credited to customers
through the existing ECAM, consistent with the current treatment of PTCs. The Stipulating Parties
further agree that there will be no return on any deferred tax assets that may be created as a result
of the Company’s inability to contemporaneously monetize PTCs to full value. The Company will
begin deferring the costs and benefits associated with the Stipulated Projects in the first month
following actual in-service dates, until those costs and benefits are included in base rates through
a general rate case. The Stipulating Parties agree that a 9.2 percent pre-tax rate of return on
investment will be utilized in the RTM calculation. This equates to an after-tax return on
investment of 6.96 percent. Following the next general rate case, the return on the net plant balance
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will be consistent with the rate of return authorized by the Commission in that case. The Stipulating
Parties reserve all rights to challenge the rate of return in future rate cases.
13. The Company will include the actual costs and benefits it incurs for the Stipulated
Projects in the RTM for recovery in the ECAM. Actual capital costs included in the RTM, before
the next general rate case, cannot exceed $1,946 million, which are the estimated costs for the
Stipulated Projects included in the Second Supplemental Direct Testimony of Rocky Mountain
Power in this proceeding. Parties will have the opportunity to verify these costs as part of the
annual audit of the ECAM deferred balance. Although the Stipulating Parties agree that the
Commission should find that the Company’s decision to build the Stipulated Projects is prudent
and in the public interest, the Stipulating Parties agree that a Party may challenge the prudence of
actual costs incurred in constructing the projects in a later proceeding. The Stipulating Parties
further agree that the Company will include the costs and benefits that are tracked in the RTM in
its quarterly ECAM filing updates beginning after the in-service date of the first facility placed in-
service.
14. The Stipulating Parties agree that the Company will maintain a cap on the annual
total cost of the Stipulated Projects not to exceed the annual project benefits in the ECAM and
RTM. Costs that are passed on to customers through the RTM, before the next general rate case,
will be capped at the level of benefits that will flow through the ECAM, as such, on a combined
basis, the ECAM and the RTM will not result in a net cost to customers associated with the
Stipulated Projects. Any costs above this cap will be deferred as a regulatory asset for recovery to
be set in the next general rate case.
15. In recognition of receiving timely investment recovery through the ECAM and
RTM, the Company will provide $300,000 annually until the next general rate case, that will be
CONFIDENTIAL
CASE NO. PAC-E-17-07
STIPULATION – Page 6
deferred as a regulatory liability, beginning in 2020 in the month the first facility’s costs are
included in the RTM, with the ratemaking treatment to be set in the next general rate case. If the
RTM deferral period is a partial year, the annual $300,000 will be pro-rated for the deferral period.
16. The Stipulating Parties reserve all rights to argue in this case for or against an
overall capital cost cap for construction of the Stipulated Projects. The Stipulating Parties agree
that such a cap, if any, would be applied at the time of the Company's next general rate case, or
when the Stipulated Projects are placed into base rates.
17. The Stipulating Parties agree that the Company will bear the risks related to
construction cost overruns associated with the Stipulated Projects. As such, the Company will not
be allowed to recover any imprudent costs or costs due to Company mismanagement. Further, the
Company has the burden of going forward and the burden of proof regarding the recovery of any
of the costs associated with the Stipulated Projects. However, the Stipulating Parties agree not to
challenge RMP’s prudence related to the decision to build the Stipulated Projects or recovery of
the actual capital costs associated with the Stipulated Projects except to the extent (1) the actual
costs of constructing the Stipulated Projects, exceeds $1,946 million, or (2) there is evidence of
mismanagement. The standard audit function to verify actual costs and to review operational
prudence will continue to apply for all costs.
18. The Stipulating Parties agree that the Company will bear the risks related to any
portion of the Wind Projects that do not qualify for PTCs due to completion delays beyond the
timelines associated with the five-percent safe harbor. To the extent any of these wind projects fail
to qualify for PTCs, in whole or in part, PTCs will be imputed to each such project based on that
project’s actual wind output for equipment placed in service and included in rate base at full
revenue value (i.e., including full gross up for federal and other applicable taxes). The only
CONFIDENTIAL
CASE NO. PAC-E-17-07
STIPULATION – Page 7
exceptions are the failure to qualify for PTCs as a result of either: a) a change in law; or b) a Force
Majeure Event. In the event of a change in law, the Company will make all commercially
reasonable efforts to mitigate the loss of value to customers including, but not limited to, cancelling
the acquisition or construction of facilities to the extent practical and cost effective from the
customers’ perspective. In the event of a change in law or a Force Majeure event, the Company
will promptly file a notice with the Commission describing the change or event, its impact, and
the Company’s assessment of the ability to complete the Stipulated Projects in whole or in part,
and other relevant information regarding the change or event and any possible remediation. If the
Company encounters a Force Majeure Event, or there is any dispute regarding the applicability of
this provision or the extent of its applicability to a particular facility, or any dispute about the
Company’s actions in the face of a change of law or Force Majeure Event, such dispute will be
resolved by the Commission in the first general rate proceeding where the Company seeks to
include the capital costs of the facility into rates.
19. The Company will negotiate availability guarantees for the Wind Projects in any
third-party provided maintenance, as provided by the competitive market, which is currently
97 percent. The Stipulating Parties agree that all liquidated damages received by the Company
under contractual agreements with vendors for these facilities will be passed onto customers
through the ECAM including, but not limited to, liquidated damages received due to the equipment
not meeting specified availability and performance.
20. In each ECAM filing until base NPC is reset either in the next general rate case or
in another appropriate proceeding, the Company will report the NPC and PTC benefits associated
with the Wind Projects. A Party’s support of this Stipulation does not waive or limit their right to
contest these costs or benefits when the Company seeks recovery of such items in the Company’s
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STIPULATION – Page 8
next ECAM or general rate case, except as expressly provided in the Stipulation. The Stipulating
Parties agree to meet and determine by December 31, 2018, the appropriate RTM and ECAM
schedules and documentation to be filed to separately reflect the Repower and Stipulated Projects.
21. If there is a material change in circumstance, such as a change in the projected costs
or benefits, or for some other reason, the Stipulating Parties agree that the Company may make a
filing with the Commission to allow for additional review and a determination of whether the
Company should proceed with the implementation of the Stipulated Projects under the terms and
conditions of this Stipulation and the ratemaking treatment for costs incurred prior to such filing.
22. The Stipulating Parties agree to reconvene and to reconsider and amend the terms
and conditions of this Stipulation if the Company executes and obtains approval of a settlement
agreement with parties in Utah Docket No. 17-035-40 and that settlement agreement includes more
favorable terms and conditions for customers, recognizing that differences exist in current
regulatory treatment or mechanisms between the states that will impact any settlement structure
achieved in other states, than those set forth in this Stipulation including, without limitation, a
lower overall rate of return on the new investment. If after reconvening, the overall terms of a
settlement agreement reached and approved in any state, where pre-approval was requested, is
more favorable than the agreement reached herein, the Company will file with the Commission to
align the overall outcome of this Stipulation with the other state.
IV. GENERAL TERMS
23. The Stipulating Parties agree that this Stipulation represents a compromise of their
positions on all but one issue—an overall capital cost cap—in this proceeding. All negotiations
relating to this Stipulation will not be admissible as evidence in this or any other proceeding
regarding this subject matter.
CASE NO. PAC-E-17-07
STIPULATION – Page 9
24. The Stipulating Parties submit this Stipulation to the Commission and recommend
approval in its entirety pursuant to IDAPA 31.01.01.274.
25. The Stipulating Parties hereby waive any right they may have to appeal any portion
of this Stipulation or the Order approving the same. If this Stipulation is challenged by any person
not a party to the Stipulation, the Stipulating Parties reserve the right to file reply comments as
they deem appropriate to respond fully to the issues presented, including the right to raise issues
that are incorporated in the settlement embodied in this Stipulation. Notwithstanding this
reservation of rights, the Stipulating Parties to this Stipulation agree that they will continue to
support the Commission’s adoption of the terms of this Stipulation.
26. In the event the Commission rejects or modifies any part or all of this Stipulation,
or imposes any additional material conditions on approval of this Stipulation, each Party reserves
the right, upon written notice to the Commission and the other Stipulating Parties to this
proceeding, within 15 days of the date of such action by the Commission, to withdraw from this
Stipulation. In such case, no Party will be bound or prejudiced by the terms of this Stipulation, and
each Party will be entitled to seek reconsideration of the Commission’s order, file testimony as it
chooses, and do all other things necessary to put on such case as it deems appropriate.
27. The Stipulating Parties agree that this Stipulation is in the public interest and that
all of its terms and conditions are fair, just and reasonable.
28. Neither Party is bound, benefited or prejudiced by any position asserted in the
negotiation of this Stipulation, except to the extent expressly stated herein, nor will this Stipulation
be construed as a waiver of the rights of any Party unless such rights are expressly waived herein.
Execution of this Stipulation is not, and will not be construed as, an acknowledgment by any Party
of the validity or invalidity of any particular method, theory or principle of regulation or cost
recovery. No Party will be deemed to have agreed that any method, theory or principle of
regulation or cost recovery employed in arriving at this Stipulation is appropriate for resolving any
issues in any other proceeding in the future. No findings of fact or conclusions of law other than
those explicitly stated herein may be implied or inferred from this Stipulation.
29. The obligations of the Stipulating Parties under this Stipulation are subject to the
Commission's approval hereof in accordance with its terms and conditions and, if judicial review
is sought, upon such approval being upheld on appeal by a court of competent jurisdiction.
Respectfully submitted this g•h day of May, 2018.
Rocky Mountain Power
Title: Vice President and General Counsel
CASE NO. PAC-E-17-07
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Idaho Public Utilities Commission Staff