20030514Application.pdf

BARTON L. KLINE ISB # 1526
MONICA MOEN ISB # 5734
Idaho Power Company
P. O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
Attorneys for Idaho Power Company
Street Address for Express Mail
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER AUTHORIZING THE
INCLUSION OF POWER SUPPLY
EXPENSES ASSOCIATED WITH THE
PURCHASE OF CAPACITY AND ENERGY
FROM PPL MONTANA LLC IN THE
POWER COST ADJUSTMENT.
CASE NO. IPC-E -03- tJ
APPLICATION AND
REQUEST FOR EXPEDITED
CONSIDERATION
COMES NOW , IDAHO POWER COMPANY ("Idaho Power" or the
Company ), and pursuant to RP 52 hereby applies to the Idaho Public Utilities
Commission ("Commission ) for an order approving the Power Purchase Agreement
between Idaho Power and PPL Montana, LLC and authorizing accounting treatment
that allows Idaho Power to include the expenses associated with the purchase of
capacity and energy from PPL Montana LLC in the Company s Power Cost Adjustment.
In addition , for the reasons stated herein , the Company requests that
consideration of this Application be expedited by processing it under modified procedure
APPLICATION , Page
under RP 202. To facilitate expedited consideration , the direct testimony of Company
witness Gregory W. Said is filed concurrently with this Application.
This Application is based on the following:
BACKGROUND
In June 2000, in accordance with long-standing Commission
orders , Idaho Power filed with the Commission its 2000 Integrated Resource Plan
2000 IRP"). The 2000 IRP was acknowledged by the Idaho Public Utilities
Commission on December 18, 2000. The Company s acknowledged 2000 Integrated
Resource Plan concluded that existing resources along with market purchases of 250
average megawatts of energy in July and August and 200 megawatts of energy in
November and December were sufficient to meet expected load growth until the year
2004. Beginning in 2004, however, the 2000 IRP determined that additional firm
resources would be required to serve expected loads.
The Company concluded that a resource equivalent to a 250-
megawatt simple cycle combustion turbine was the optimal resource to satisfy the
seasonal energy deficiencies and peak hour transmission constrained deficiencies
identified in the 2000 IRP. The Company also stated that it would issue a Request for
Proposal ("RFP") to determine whether another entity could provide a solution to future
anticipated deficiencies at a cost to Idaho Power customers that would be less than the
costs of constructing a simple cycle combustion turbine.
On August 4 , 2000, Idaho Power issued its RFP and on
January 23 , 2001 , the Company announced that Garnet Energy LLC ("Garnet") was the
successful bidder.
APPLICATION , Page 2
While Garnet was selected by the Company as the successful
bidder, the Garnet Purchase Power Agreement ("Garnet PPA") was not approved by the
IPUC because in July 2002, in light of the massive changes in the merchant power plant
financing markets , Garnet notified Idaho Power that, without material changes to the
Garnet PPA, it would not be possible to secure financing for the Garnet project.
On August 30, 2002 , the Commission issued Order No. 29085 that
directed Idaho Power to file a report with the Commission addressing whether or not the
Garnet PPA could be made viable and, if not, the options that were available to the
Company for satisfying future load requirements in the absence of the Garnet PPA.
On October 30 2002, Idaho Power filed its "Report to IPUC on
Replacing the Garnet Power Purchase Agreement " commonly referred to as the
Garnet Report. The Garnet Report described the Company s strategy to acquire
resources to replace the power that would have been purchased via the Garnet PPA.
Along with the Garnet Report filing, the Company asked that the Commission take
administrative notice of the Garnet Report in making its ultimate determination as to
whether or not to acknowledge the Company s 2002 Integrated Resource Plan ("2002
IIRP") as supplemented with the Garnet Report.
On February 11 2003 , the IPUC issued Order No. 29189
which acknowledged and accepted Idaho Power s 2002 IRP filing as supplemented with
the Garnet Report.
The Garnet Report considered several potential alternatives to
replace the Garnet PPA. As described in the direct testimony of Company witness
Gregory W. Said, which testimony has been concurrently filed with the Commission in
APPLICATION , Page 3
support of this Application , given the then-current forward prices and estimates of future
market-clearing prices , the recommended replacement for the Garnet PPA was a
combination of firm wholesale purchases and exchanges.
In conformance with this preferred strategy, Idaho Power has
successfully negotiated a firm wholesale power agreement with PPL Montana, LLC to
replace a portion of the Garnet PPA. A copy of the agreement with PPL Montana LLC
(the "PPA") is included as Exhibit 1 to the direct testimony of Company witness Gregory
W. Said , which testimony has been concurrently filed with the Commission in support of
this Application.
ADVANTAGES OF THIS PPA
10.Contracting with PPL Montana, LLC is advantageous because
existing constraints on the west side of Idaho Power s system make power purchases
on the east side of Company s system preferable. In addition , PPL Montana, LLC
owns , operates and maintains substantial generating resources as a result of its
acquisition of most of the generating assets sold by the Montana Power Company when
the State of Montana restructured its electric utility industry. Consequently, PPL
Montana, LLC owns and operates eleven hydroelectric plants located in Montana with a
generating capacity of 474 megawatts. PPL Montana, LLC also owns and operates
coal-fired generating capacity located in the state of Montana in excess of 500
megawatts.
11.PPL Montana , LLC's ownership of generating plants on the east
side of Idaho Power s system and the LLC's favorable credit rating make PPL Montana
LLC a good match for the type of power acquisition that the Company is seeking.
APPLICATION , Page 4
12.In addition and as described in the direct testimony of Company
witness Gregory W. Said , the costs associated with this PPA are favorable when
compared to alternative resource options. Moreover, the limited duration of the PPA
dovetails well with the Company s ongoing efforts to develop DSM programs that target
the Company s summer peak loads.
GENERAL DESCRIPTION OF THE PPL MONTANA LLC PPA
13.The PPA with PPL Montana LLC calls for firm power purchases for
the heavy load hours during the months of June , July and August as identified in the
Company s 2002 IRP. The term of the PPA is five (5) years.
14.With the exception of the month of August 2004 in which the
quantity of energy to be purchased is 26 MW per hour, during each month of the PPA
Idaho Power will purchase 83 MW per hour from PPL Montana LLC at a price of $44.
per MWh. After deducting for losses, Idaho Power will actually receive approximately
80 MW per hour.
15.As consideration for PPL Montana, LLC's agreement to hold the
price in the PPA firm to allow time for Commission review and approval , Idaho Power
has paid PPL Montana LLC a deposit in the amount of $250,000 that is refundable if
this Application is approved by the IPUC no later than July 12, 2003. If the PPA does
not receive Commission approval by that deadline , the Company will forfeit the deposit
and either party to the PPA may terminate the agreement.
16.In addition to power costs under the PPA, Idaho Power will
purchase firm monthly transmission service across NorthWestern Energy s transmission
APPLICATION , Page 5
system to Jefferson. At current rates under NorthWestern Energy s Open Access
Transmission Tariff ("OA TT"), the maximum charge for monthly firm transmission
service is $3.10 per kilowatt of reserved capacity per month.
SERVICE OF PLEADINGS
17.Service of pleadings , exhibits, orders and other documents relating
to this proceeding should be served on the following:
Barton L. Kline
Senior Attorney
Idaho Power Company
O. Box 70
Boise , ID 83707
BKline ~ idahopower.com
John P. Prescott
Vice President - Power Supply
Idaho Power Company
O. Box 70
Boise, ID 83707
J Prescott ~ idahopower.com
MODIFIED PROCEDURE
18.Because of the need for expedited consideration , the Company
requests that this matter be processed under modified procedure.
REQUEST FOR ORDER
19.Idaho Power respectfully requests that the Commission issue its
order (1) approving the PPA between Idaho Power and PPL Montana, LLC, and
(2) approving Idaho Power s requested accounting treatment for inclusion of the power
purchase expenses associated with the PPL Montana contract in the Power Cost
Adjustment as set forth in Mr. Said's testimony in support of this Application.
DATED at Boise, Idaho, this 13th day of May 2003.
~/~
BARTON L. KLINE
Attorney for Idaho Power Company
APPLICATION, Page 6