20031218Reply Comments.pdf

BARTON L. KLINE, ISB # 1526
MONICA MOEN , ISB # 5734
Idaho Power Company
1221 West Idaho Street
P. O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
F\ECEIVEO
FiLED
,-.,~.
2003 DEC I 8 AM 10: II
" ti,-;LI(;
UnLiTlES COHf'lISSION
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE RATE BASING
OF THE BENNETT MOUNTAIN POWERPLANT.
CASE NO. IPC-03-
REPLY COMMENTS OF
IDAHO POWER COMPANY
Idaho Power Company ("Idaho Power" or "Company ), by and through its
attorney of record , Barton L. Kline, hereby submits the following comments in response
to the comments of the Commission Staff and the Advocates For the West filed on
December 15 , 2003.
Advocates For the West
Advocates For the West (Advocates) recommend that the Commission roll
this case into the Company s current general rate case. There are two problems with
this approach. First, as the Company stated in its application and in its testimony, the
prices from both Siemans Westinghouse and Mountain View are only valid until
December 31 2003. As Staff noted in its comments, because of a current surplus of
REPLY COMMENTS OF IDAHO POWER COMPANY Page 1
turbine generators, Idaho Power was able to obtain an extremely favorable price on the
Siemans Westinghouse turbine generator. Deferring a final decision on the certificate
until June 1 2004 is very likely to cause that favorable pricing to be lost. Second , the
general rate case is already a very substantial proceeding. Adding another major issue
to that case would be disastrous.
Advocates also argue that the RFP process Idaho Power followed was
flawed because the Company should have requested bids from other types of
resources , specifically wind power. In fact, the RFP was open to all generating
technologies, including wind. Advocates express cautious optimism that the 2004
integrated resource planning process will address their concerns. In fact, all of the
issues raised by Advocates in its comments , i.e., benefits of DSM and renewables , peak
load management programs and gas price volatility, will be addressed in the 2004 IRP
planning process. Idaho Power suggests that this is the proper forum for addressing
these extremely complex, long-term resource planning issues.
Commission Staff Comments
While the Commission Staff's comments recommend that the Commission
grant a certificate to Idaho Power, there are several individual portions of the Staff's
comments that require some additional clarification and comment.
Sales Tax: Staff's comments indicate that the Company s commitment
estimate does not include an amount for sales tax and attributes that omission to the
fact that the Siemans turbine generator will be purchased on the secondary market
thereby avoiding sales tax. In fact, the turbine generator will be a new turbine generator
manufactured by Siemans Westinghouse specifically for this project. As a result, Idaho
REPLY COMMENTS OF IDAHO POWER COMPANY Page 2
Power will pay sales tax on the turbine generator and the estimated amount of that
sales tax is included in the Company s commitment estimate. Of course, the final
amount of sales tax for the total project will not be known until the end of construction.
AFUDC : Idaho Power appreciates Staff's acknowledgment that recovery
of AFUDC on amounts booked in conjunction with progress payments made to
Mountain View is appropriate. However, the Company does not understand the
rationale underlying the Staff's comments urging that the Commission limit AFUDC
recovery to "the $2 500 000 project price reduction" and making any additional amounts
subject to a cost/benefit analysis. (Staff Comments, p. 25.) As explained to the
Commission Staff, the initial bids by Mountain View included a single lump sum
payment upon final acceptance. Subsequently it was determined that Siemans was
unwilling to guarantee Mountain View s performance unless periodic progress payments
were made. Without the Siemans guarantee , the Company could not consider
Mountain View s otherwise very attractive proposal. Therefore, the single lump sum
payment option was eliminated. Idaho Power understands that it is obligated to
demonstrate that the AFUDC attributable to the amounts booked in conjunction with the
progress payments is consistent with the Company s actual AFUDC cost. As a result
the Company is requesting that the Commission order allow the Company to include
AFUDC attributable to progress payments based on the Company s actual cost of
money at the time the amounts are booked.
Tax Increment Financinq : The role of Mountain View s use of tax
increment financing (TIF) in the Bennett Mountain Project has been the subject of some
considerable confusion. Staff's comments express concern that Section 2.b(iii) may
REPLY COMMENTS OF IDAHO POWER COMPANY Page 3
be used to increase the cost of the Project. Section 2.b(iii) was included in the Project
Agreement to address a very specific and highly unlikely occurrence. After reviewing
Staff's comments, it is apparent that this section is causing more concern than it is
worth. As a result, both Idaho Power and Mountain View hereby notify the Commission
that they desire to delete subsection (iii) of Section 2.b of the Agreement to eliminate
the confusion associated with that provision. Deletion of subsection (iii) will eliminate
any risk that the base price of the Project could be increased as a result of TIF
financing.
Liquidated Damaqes: On page 23, Staff's comments accurately describe
the liquidated damages that will be assessed against Mountain View if Siemans
Westinghouse has not delivered the turbine generator to the site by December 1 , 2004.
Staff's comments go on to state that Mountain View is required to have the Project
approximately 95% complete by year-end 2004. In fact , Mountain View has provided a
construction schedule that should result in the Project being approximately 95%
complete by year-end 2004 and the above-referenced liquidated damages give them a
strong economic incentive to be 95% complete. In fact, Mountain View is not
contractually obligated to achieve that level of completion by year-end 2004.
DATED at Boise, Idaho, this 18th day of December , 2003.
\Q~tjBARTON L. KLINE
Attorney for Idaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY Page 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 18th day of December, 2003, I served a
true and correct copy of the within and foregoing REPLY COMMENTS OF IDAHO
POWER COMPANY upon the following named parties by the method indicated below
and addressed to the following:
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilities Commission
P. O. Box 83720
Boise, Idaho 83720-0074
Hand Delivered
S. Mail
Overnight Mail
FAX
Peter J. Richardson
Richardson & O'Leary
O. Box 1849
Eagle , Idaho 83616
Hand Delivered
S. Mail
Overnight Mail
FAX
Eric L. Olsen
Racine, Olson , Nye, Budge & Bailey
O. Box 1391
Pocatello, Idaho 83204-1391
Hand Delivered
S. Mail
Overnight Mail
FAX
GJ:~ BARTON L. KLINE
CERTIFICATE OF SERVICE