20140915Snake River Alliance Comments.pdf

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September 1,5,2074
To: Idaho Public Utilities Commission
From: Ken Miller, Clean Energy Program Director, Snake River Alliance
Re: Snake River Alliance Comments In the Matter of Avista Corporation's Application to Adjust Its Annual
Power Cost Adjustment (PCA) Rates, Case No. AVU-E-14-06.
On behalf of our members throughout Avista Utilities' Idaho service area and pursuant to Commission
Order No. 33095, the Snake River Alliance appreciates the opportunity to provide its comments on
Avista's Application to Adjust Its Annual Power Cost Adjustment Rates, filed with the Commission on fuly
30,20L4.
These comments address the Alliance's ongoing concerns with the operation of the Colstrip Unit 4 and
how Colstrip Unit 4's history of prolonged outages continues to force additional, unnecessary costs on
Avista's customers. The Alliance does not address the other primary components in Avista's increased
power supply costs over the last 12 months: The net expense of Palouse Wind flowing through the PCA as
a surcharge deferral rather than being included in base rates, and the change in Avista's contract with
Clearwater Paper that allows the company to generate into its own load rather than selling its generation
to the Company.
If approved by the Commission, Avista's PCA application would result in an increase in monthly
residential bills by an average of $3.76 per month, from $81.88 to $85.64, or an increase of 4.59 percent.
As can be seen from comments already submitted to the Commission, Avista customers are experiencing
worsening "rate shock" that will only be exacerbated by this PCA request to extract from them more than
$4 million to compensate for an increasingly unreliable coal-fired generation plant.
Avista and The Colstrip Generating Station
The Colstrip Generating Station, a mine-mouth coal-fired power plant complex located about 120 miles
southeast of Billings, MT, is comprised of four units that went online between 1975 and 1986. Avista has
a 15 percent ownership stake in Unit 3 (740MW, online date of 1984) and Unit 4 (740MW, online date of
1986). Other utility owners of the various Colstrip units include Northwestern Energy, PacifiCorp,
Portland General Electric, PPL Montana, and Puget Sound Energy.
The Colstrip Generation Station is also the subject of a federal lawsuit filed by the Sierra Club and
Montana Environmental Information Center over the status of required environmental controls.
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Colstrip Unit 4
The overwhelming component of this Avista PCA application concerns the operations of Colstrip Unit 4.
According to Avista: "Overall, higher power costs were due primarily to Colstrip, Palouse Wind and
Clearwater Paper. Colstrip Unit 4 was unavailable due to a forced outage from |uly L,20L3, until fanuary
22,20L4. Colstrip's incremental generation expense is lower than the wholesale power prices, therefore,
replacing Colstrip power led to an increase in power supply expense." (William G. fohnson Di P. 3). The
"Factors Contributing to Increased (Decreased) Power Supply Expense fuly 2013-lune20L4 - Idaho
Allocation" [William G. fohnson Di, P.4) reflects an increase attributable to Colstrip Generation and Fuel
Expense of $4,082,573. That is by far the largest share of the additional power supply expense for the
period covered in this PCA application. Due to a half-year Unit 4 outage, the Generation and Load
Differences from the Authorized Level for Colstrip Generation was a decline of 54.5aMW, or 3L.6 percent.
The Colstrip Outages
Last year, Colstrip Unit 4 suffered a significant and unplanned outage that is at the heart of this PCA-
related rate increase:
"0n July 1-, 201-3, an unplanned outoge occurred to Unit 4, with identified damage to the stotor and
rotor assembly. Initial engineering estimates show the unit could be out of service for at least six
months and the estimote for totol repair cosfs rs approximately $30 million, including labor costs,
which will be shared proportionately among all the owners. While the split between capital and
expense has not been fully determined, it is likely that a portion of the repair costs will be capitalized.
"The lost generation of Colstrip Unit 4 will result in a combination of 1) lower surplus wholesale sales
for Avista, and 2) increased thermal fuel costs or purchased power costs to replace the energy, which
will result in increased net power supply costs for the Company. Avista's initial estimates show an
increase in power supply costs of approximately $12 million system-wide for the remainder of 2013
as o result of the outage. AII of the additional costs will be included in the Energy Recovery
Mechanism (ERM) in Washington and the Power Cost Adjustment in ldaho."
Avista Form B-K, filed with U.S. Securities and Exchange Commission July 16, 2013.
In 2009, the same Unit 4 suffered an outage that resulted from unexpected repairs required during a
planned outage:
"During scheduled maintenance in March 2009, turbines in Unit 4 of Colstrip, of which we are a 1-5
percent owner, were found to be in need of repair. These repairs extended the planned outage from
May 2009 until November 2009. We believe the outage was not due to imprudent actions and we
expect there will not be a reduction in fixed costs for the plant outage."
Avista Form B-K, filed with the U.S. Securities Exchange Commission July 1-6, 2013
The Alliance has no reason to believe that the half-year outage in20L3-2014 was a result of imprudent
actions, but we do recommend that the Commission explore this issue in more detail so Avista's bill-
payers can have some assurance that the outage was not the result of imprudent actions, but rather the
result of a worn-out coal-fired power plant. If the outage was a result of imprudent actions, Avista would
expect a reduction in fixed costs associate with the outage.
What the Alliance rs concerned about is the overall stability of Colstrip Unit 4 and how future outages
(Unit 4 has had two significant outages in the space of 5 years) might impact the rates of Avista's
customers.
Customer Impacts of Colstrip Unit 4's Outages
The Colstrip Generating Station's Unit 4 has a history of being unreliable - sometimes for prolonged
periods. These outages are not the fault of Avista's customers, yet it is Avista's customers who bear
Avista's share of expensive plant repairs and upgrades as well as - in this case - the added costs of off-
system purchases. This while still paying for Avista's share of the plant. The Alliance believes the time has
come when utility customers deserve to be inoculated from their utility's ill-advised, continued
commitment to a troubled power plant, particularly since Avista has included coal-fired generation as a
resource for the next 20 years in its Integrated Resource Plan (Avista testimony to ldaho Legislature's
Interim Environment Energy & Technology Committee, Sept. LL,2013, "Avista's Coal-Fired Generation.").
The Alliance understands that a comprehensive discussion of coal generation or even the overall Colstrip
generation complex is beyond the scope of this docket. We do, however, urge the Commission to explore
in detail the prudency of the added expenditures piled onto bill-payers as a result of the Unit 4 outage,
including whether those purchases were the least-cost replacement alternatives to the lost Colstrip
generation.
We also want to underscore to the Commission that utility customers should not be expected to bear the
brunt of repeated operational problems at coal plants owned by Avista or any other regulated electric
utility in Idaho. Given the recent experience with Colstrip Unit 4, there is no reason to think problems
similar to those that led to this PCA recovery request will not occur again, and that once again an ldaho
utility will turn to its customers to pay for repairs and/or interim market purchases to make up for
power lost to a downed coal plant. So far, all the risk for continued operation of plants such as Colstrip
Unit 4, whether for anti-pollution upgrades or to offset prolonged outages, is borne by utility customers
who have no say in the prudency of those investments or operations. It is the Alliance's position that such
risk should be shifted to utility-owners, particularly if, as in this case, the likelihood of a recurrence
remains high.
Utility regulatory commissions in states where Colstrip-owning utilities operate are questioning the
wisdom of continued operation of this power plant. If Idaho determines that plants such as this should
continue to operate - knowing the likelihood of future outages of one or more units for indefinite periods
of time - then the Alliance recommends the Commission explore avenues whereby the utility owner
and/or its shareholder owners bear the risk for future additional expenditures. If there is a turning point
in deciding who should bear the risk of costs such as those contained in this application, the Alliance
believes we have reached it.
Conclusion
This Commission has acknowledged that coal-fired generation is likely to encounter additional health and
environmental regulations that will impact the operations of Idaho utility coal fleets and the cost of
prolonging the lives of those coal plants. Those additional costs, not to mention additional risks, are
reason enough for the Commission to send a signal to coal plant-owning utilities that they cannot
continue to expect to bill customers for investments that are being proven to be not only uneconomic, but
also imprudent.
As always, the Alliance appreciates this opportunity to provide its views on this important issue.
Respectfully submitted,
Ken Miller
Clean Energy Program Director
Snake River Alliance
P.O. Bo 1731
Boise,lD 83701
(208) 344-9r6L
[e-mail]
Hand Delivered
fean fewell
Commission Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise,lD 83702