20041227Reply Comments.pdf

DAHO
WER
IDAHO POWER COMPANY
O. BOX 70
BOISE, IDAHO 83707
An IDACORP Company
BARTON L. KLINE
Senior Attorney
December 23 , 2004
Idaho Public Utilities Commission
Office of the SecretaryRECEIVED
Jean D. Jewell , Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
. DEC 2 3 2004
Boise, Idaho
Re:Case No. IPC-04-
Idaho Power s 2004 Integrated Resource Plan
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of the
Response of Idaho Power Company To Filed Comments in the above-described case.
Idaho Power acknowledges that Attachment A is not included with this filing. It will be
filed separately next week.
I would appreciate it if you would return a stamped copy of this transmittal
letter to me in the self-addressed , stamped envelope enclosed.
Very truly yours
Barton L. Kline kuo.~b
BLK:jb
Enclosu res
Telephone [phone] Fax [phone] E-mail BKline(g)idahopower.com
BARTON L. KLINE ISB #1526
MONICA B. MOEN ISB #5734
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
Idaho Public Utilities Commission
Office of the SecretaryRECEIVED
DEC 2 3 200~
Boise, Idaho
Attorney 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 FILING BY
IDAHO POWER COMPANY OF ITS
2004 ELECTRIC INTEGRATED
RESOURCE PLAN (IRP)
RESPONSE OF IDAHO POWER
COMPANY TO FILED COMMENTS
CASE NO. I PC-04-
In accordance with Order No. 29614 issued by the Commission on
October 12 , 2004, Idaho Power Company ("Idaho Power" or the "Company ) hereby
replies to the comments filed in response to the Commission s October 12 , 2004 Notice
of Filing. Themes common to several sets of comments will be addressed collectively.
Certain specific comments of the Commission Staff and others will be addressed
separately and the Company will provide a brief summary.
RESPONSE TO COMMON THEMES
IN SEVERAL COMMENTS
Idaho Power has reviewed the comments of the Commission Staff
Staff"), the combined comments of the NW Energy Coalition, Natural Resources
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS , Page
Defense Council, Renewable Northwest Project, and Advocates for the West
(collectively the "Clean Energy Advocates ), the comments of Sempra Energy
Resources , and the comments in support of Capital Enterprises--Warren Chapman
Lemhi Wind Project. Some common themes are apparent in nearly all of the
comments:
First, there is general agreement that Idaho Power s 2004 Integrated
Resource Plan ("IRP") is an improvement over previous IRP documents. Staff and the
Clean Energy Advocates commend the Company for the improved process. Sempra
Energy Resources states that the RP presents a "fair and detailed analysis.
Second , the comments all suggest there is the potential for further
improvement in the analytical process. Staff identifies a number of areas where
analyses could be expanded. The Clean Energy Advocates identify some specific
concerns relating to the RP conclusions, and generally advocate for increased
emphasis on energy-efficiency resources and urge extra caution when evaluating coal
technologies. Sempra Energy Resources points out that a diversified , integrated plan
including significant renewable energy resources needs to be complemented by reliable
base load generation. Sempra indicates that coal-fired generation may be the most
economical and reliable complimentary solution.
Idaho Power generally agrees with all of these common themes.
Unquestionably the 2004 RP process reflects further movement toward more traditional
regulatory oversight and was an improvement over previous IRPs. The Company
expects continued improvement in the 2006 IRP and beyond. It is understandable that
individual points of view will be emphasized within the comments of the parties.
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS , Page 2
However, it is important to remember that the RP process is intended to balance the
views and concerns of all parties. The Company believes that this goal was achieved in
its 2004 IRP.
IPUC STAFF COMMENTS
Idaho Power sincerely appreciates Staff's recognition of Idaho Power
efforts to implement improvements in its integrated resource planning process, and the
resulting 2004 IRP. As Staff has correctly noted, Idaho Power does take the IRP
seriously. Idaho Power s IRP is a real planning document and becomes an important
reference for the Company in its resource decisions. Accordingly, Idaho Power views
the IRP much more broadly than an activity that simply fulfills a regulatory requirement.
Idaho Power has purposely taken steps to address the important issues identified in the
Commission s Order No. 29189 acknowledging Idaho Power s 2002 IRP.
Idaho Power appreciates Staff's many insightful comments regarding the
20041RP. Idaho Power agrees with many of Staff's concerns and suggestions. Idaho
Power offers the following comments in response to the issues raised by Staff.
Selection of Demand-Side Management Programs
Idaho Power acknowledges that among the six energy efficiency programs
analyzed in the 2004 IRP , all of which resulted in a positive benefit/cost ratio, only four
of the programs were selected for implementation. The programs selected were those
with the most favorable benefit/cost ratio. Idaho Power believes that its decision to
select only the top four programs was a prudent decision for several reasons.
First, during the development of the 2004 Integrated Resource Plan, the
Integrated Resource Plan Advisory Council (IRPAC) requested that in addition to the
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 3
energy efficiency and demand response programs considered in the 2004
(programs principally focused on achieving summer peak-hour load reductions), Idaho
Power conduct a study to identify other cost-effective energy efficiency and Demand-
Side Management (DSM) opportunities. Since the RP identifies a need for both
peaking and base-load resources , Idaho Power agreed that other cost-effective energy
efficiency and DSM opportunities should be considered in the plan. Idaho Power
retained Quantum Consulting to perform this study, and agreed to file a copy of the
Quantum Study as an addendum to its 2004 Integrated Resource Plan. This addendum
was filed on December 15 2004. Idaho Power shares Staff's desire to see the most
cost-effective DSM programs implemented. With this in mind, Idaho Power believes
that it is prudent to further analyze the results of the Quantum Study to identify and
possibly incorporate additional cost-effective DSM programs into the 2006 or
subsequent RPs.
Second , Idaho Power is genuinely concerned about its ability to implement
the four energy efficiency programs and the two demand response programs selected in
the 2004 IRP , in the identified timeframe. Idaho Power believes that, since these load
reductions are in effect being "counted before they hatch", it is reasonable for Idaho
Power to gain more experience in large-scale DSM program implementation before
furthering its reliance on DSM programs to meet its near-term needs. Since realization
of benefits under these four programs is heavily dependent on customer participation
adequate resources must be directed to customer participation. Reduced customer
participation will have a direct impact on the amount of load reduction that Idaho Power
can actually realize.
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 4
Finally, the ability to fund DSM programs at levels indicated by the IRP is
an ongoing concern. While Idaho Power believes that an increase in the DSM Tariff
Rider is an appropriate mechanism for recovery of program costs, ongoing funding for
these DSM program costs is unresolved at this time.
Comparisons to the Northwest Planning and Conservation
Council's Estimates.
Idaho Power appreciates the Staff's recognition in its comments that the
DSM estimates within the 2004 RP cannot be directly compared to the Northwest
Power and Conservation Council's (Council) estimates for the region , or even for some
assumed portion "representing" Idaho Power s service territory. Staff acknowledges
that any direct comparison between the Council's estimates and the IRP is an "apples
and oranges" type of comparison. The Staff correctly notes that the Council's estimates
include much more than just utility direct-acquisition programs. The Council's estimates
for cost-effective DSM within the region are aggressive , and include all potential DSM
including DSM acquired through utility-direct acquisition programs as well as changes in
building codes, changes in appliance standards , NEEA's market transformation
programs, and naturally occurring conservation efficiency gains.
Attachment A is a chart showing a comparison of DSM potential within the
Idaho Power service territory to a portion of the Council's estimates representing the
same geographic area. The assumed portion of the Council's estimate is based upon
the Company s contribution to Northwest Energy Efficiency Alliance (NEEA), which is
based upon the Company s percentage of Pacific Northwest retail energy sales. The
chart shows that the Company s DSM efforts identified in the 2004 IRP , combined with
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS , Page 5
NEEA's savings estimates through market transformation, provide Idaho Power DSM
savings much closer to the Council's estimates than would have been apparent from a
more simplistic comparison of the numbers.
Comparison of Resource Options
Staff's comments note that Idaho Power intends to issue a number of
Requests For Proposals ("RFPs ) for new renewable and other types of generation
resources. Staff raises several questions about how responses to the Request for
Proposals (RFPs) will be evaluated. "For example , how will Idaho Power decide
whether bids are too expensive? What other alternatives will renewables be compared
to? How will renewables be compared to Combined Heat and Power projects? How
will different types of renewables with different generation characteristics , different
locations or different on-line dates be compared? Clearly, these questions are valid and
will eventually have to be answered, but the answers are not contained in the 2004
IRP." (Staff Comments, p. 10).
Idaho Power and the IRPAC share the Staff's concerns regarding
resource evaluation. Idaho Power and the IRPAC examined many different types of
supply-side resources and demand-side programs as part of the planning process. For
example, on page 50 of the 2004 IRP, Figures 13 and 14 list respectively the 30-year
nominallevelized fixed costs and the 30-year nominallevelized costs of production for
various resources and programs. The figures show the expected costs as well as the
relative ranking of different resources and programs with respect to costs.
Idaho Power and the IRPAC used the projected resource costs and risks
associated with each resource to analyze many different resource portfolios and
RESPONSE OF IDAHO POW~R COMPANY TO FILED COMMENTS, Page 6
presented a comparison of 11 resource portfolios in Table 12 on page 62 of the IRP.
Chapter 5 of the 2004 IRP contains the referenced figures and tables as well as a
narrative explaining the relative merits of the various resources and the characteristics
of the various resource portfolios.
Idaho Power and the IRPAC performed the comparative resource analysis
when developing the resource portfolios. The preferred resource portfolio developed in
the 2004 RP is the result of Idaho Power and the RP AC comparing different types of
resources , renewable and conventional , comparing different generation characteristics
and comparing resources with different on-line dates. The resource mix included in the
preferred resource portfolio and the resulting near-term and ten-year action plans are
based on the comparative resource analysis developed in Chapter 5 of the IRP.
As Idaho Power works through the near-term action plan outlined in
Chapter 8 of the IRP, Idaho Power will compare the bids received through the various
RFP processes as well as compare the bids with the resource costs described in
Chapter 5 of the IRP. The calculated 30-year nominallevelized fixed and production
costs presented in the IRP will be weighed against the proposed resource costs
received through the RFP process to be sure they are reasonable and consistent with
the resource costs presented in the IRP.
Pacific Northwest Transmission Upgrades
Staff's comments also noted that the 2004 IRP did not address
transmission upgrades to the Pacific Northwest in the same detail they were addressed
in the 2002 IRP. Idaho Power acknowledges that it would have been helpful if the
estimated costs , and accompanying discussion , concerning transmission upgrades to
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 7
the Pacific Northwest interconnections would have been included in the 2004 IRP
they were in the 2002 IRP. However, the desired information is contained on Page 37
of the 2002 RP report and is still applicable today. Transmission capability is an
important part of Idaho Power s resource planning and , to the extent allowed by the
FERC Standards of Conduct, a discussion of transmission capability will be included in
the 2006 IRP.
To address this oversight , Idaho Power requests that the following
discussion on transmission capability be included in the 2004 RP by reference:
The existing transmission system between Idaho Power and the Pacific
Northwest has been largely optimized. No upgrades can be identified which will result
in significant improvements in capacity for relatively small investments. Any significant
increases in transmission capacity will require the construction of a new transmission
interconnection that could be between 170 to 400 miles in length. Analyses of a range
of transmission alternatives for additional Pacific Northwest transmission connections
including substation additions , show construction costs of approximately $400 000 to
$700 000 per mile and incremental transmission costs between $45 and $90/kW per
year.
The projected Pacific Northwest transmission upgrade costs are
approximately 500 percent higher than Idaho Power s embedded transmission costs.
Assuming a 50 percent annual load factor (typical for transmission interconnections)
and further assuming that all available transmission capacity is subscribed, construction
of new transmission lines results in 10 to 20 mills/kWh added to Pacific Northwest
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 8
purchased power prices. If some of the transmission capacity is unsubscribed, then the
estimated transmission upgrade cost "adders" would be higher.
Building additional transmission capacity to the Pacific Northwest would
provide improved access to any available capacity and energy from the Pacific
Northwest. However, the total cost of employing a strategy to build a new
interconnection to the Pacific Northwest to alleviate resource deficiencies, is the cost of
the transmission upgrades , plus the capacity and energy charges for the purchased
power. While surplus power prices in the Pacific Northwest can be low at times, firm
power purchase prices during the summer when Idaho Power s capacity and energy
shortfalls primarily occur, usually reflect the cost of natural gas fired generation.
New generating resource additions in the Pacific Northwest are expected
to utilize coal, natural gas , or possibly wind , since no new large hydro-power projects
are anticipated. If new natural gas-fired projects are to be built to serve loads in
southwest Idaho, there are two obvious options; build or acquire additional natural gas
pipeline capacity from the Pacific Northwest to southwest Idaho and locate the
generator near the load in southwest Idaho, or locate the generator near the existing
natural gas pipelines in the Pacific Northwest, acquire pipeline capacity and then build
additional electric transmission line capacity to southwest Idaho. Studies indicate that
over the lifetime of the projects, it is less expensive to build the natural gas pipeline
capacity and locate the generator at the load.
In the case of coal-fired generation, the costs are nearly equal whether the
generator is located at the mine-mouth with additional electric transmission
construction , or the generator is located near the load and coal transportation costs are
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 9
incurred. Since there are no significant coal resources located in the Pacific Northwest
siting a coal plant to serve southwestern Idaho loads , would incur both coal
transportation costs and electric transmission upgrade costs. Siting a coal-fired
resource in other regions can result in the project being subjected to one economic
penalty or both. Wind projects are site specific and it is unlikely that a wind resource
located in the Pacific Northwest could overcome the economic burden of the significant
transmission upgrade costs , when compared to wind projects located in areas that are
closer to the load which do not require extensive transmission improvements.
Transmission upgrades across the Borah West path located west of
American Falls, Idaho, are estimated to cost about $15/kW per year. It is Idaho Power
intention to consider transmission upgrade costs when comparing all potential resource
additions, regardless of their geographic location.
Leadore Area Wind Project
In addition to the above-noted areas of concern identified by Staff, Idaho
Power also believes it is appropriate to comment on the Leadore area wind project
proposed by Capital Enterprises Inc.
Mr. Warren Chapman , of Capital Enterprises , Inc., has offered to sell
Idaho Power development rights for a potential wind project near Leadore, Idaho , which
his company is in the initial stages of developing. Mr. Chapman would like for Idaho
Power, or its associates to construct, own and operate the Leadore area wind project.
To this end , Mr. Chapman has offered to sell 1 000/0 of his interest in Capital Enterprises
Inc. to Idaho Power for $350 000.
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page 10
The 2004 RP includes the addition of 350 MW of wind-powered
generation to Idaho Power s resource portfolio. Idaho Power plans to acquire the wind-
powered generation through a competitive solicitation process. A number of wind
developers have expressed an interest in Idaho Power s forthcoming wind RFP , and
Idaho Power hopes for a robust process with multiple competitive proposals.
Idaho Power has an open mind regarding the merits of the Leadore area
wind project and welcomes Capital Enterprise s participation in the RFP process.
However, given the current level of interest in the forthcoming RFP and Idaho Power
responsibility to demonstrate the prudence of its decisions to the IPUC, Idaho Power
has no intention to develop a wind project outside of the upcoming competitive
solicitation process.
CONCLUSION
Idaho Power views the IRP as a valuable planning activity - one in which
at least as far as energy resources go , Idaho Power implements projects that have
positive long-run implications for our society. Idaho Power views the integrated
resource planning process as work-in-process, always striving to improve the process
and the associated analysis. It is incumbent upon Idaho Power, as well as the next
IRPAC, to consider and address many of the issues that Staff and others have identified
in their comments in its future IRPs , beginning with the 2006 IRP.
DATED this 23rd day of December, 2004.
~~~
BARTON L. KLINE
Attorney for Idaho Power Company
RESPONSE OF IDAHO POWER COMPANY TO FILED COMMENTS, Page
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 24th day of December, 2004, I served a
true and correct copy of the above and foregoing RESPONSE OF IDAHO POWER
COMPANY TO FILED COMMENTS 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
472 W. Washington Street
O. Box 83720
Boise, I D 83720-0074
Hand Delivered
S. Mail
Overnight Mail
FAX
William M. Eddie
Advocates for the West
O. Box 1612
Boise , ID 83701
Hand Delivered
S. Mail
Overnight Mail
FAX
Leesa Nayudu
Origination Regional Director-West
Sempra Energy Resources
HQ14D
101 Ash St.
San Diego, CA 92101-3017
Hand Delivered
S. Mail
Overnight Mail
FAX
Warren P. Chapman
Capital Enterprises , Inc.
2356 Beryl Avenue
Twin Falls, ID 83301
Hand Delivered
S. Mail
Overnight Mail
FAX
CERTI FICA TE OF SERVICE , Page