20041129Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY'S REQUEST.
FOR AN ACCOUNTING ORDER TO RECOVER)
CLOUD SEEDING PROGRAM EXPENSES FOR
THE WINTER OF 2004 - 2005.
CASE NO. IPC-04-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 29622 on
November 3 2004, submits the following comments.
BACKGROUND
On October 21 , 2004, Idaho Power Company filed an Application for an accounting
order to allow recovery of its cloud seeding program costs for the winter of 2004-2005. The
Application states that the Company has operated a cloud seeding program for a number of years
and that the Commission did not allow recovery of its expenses in the Company s recent general
rate case. The Company filed with its Application additional information that it asserts
demonstrates scientifically measured benefits of the Company s cloud seeding program during
the winter of2003-2004. Noting that the Company has funded two years of cloud seeding
STAFF COMMENTS NOVEMBER 24, 2004
without any cost recovery, the Application states Idaho Power would like to be able to recover its
costs associated with continuing its program during the winter of 2004-2005.
Idaho Power is not asking the Commission to defer expenditures associated with the
cloud seeding program on a long-term basis, but is requesting only that the Commission
authorize the Company to defer the expenses associated with the program during the upcoming
winter. The Company estimates those costs to be approximately $950 000 on a total company
basis, which the Company proposes to capture "on the same ninety percent-ten percent
(90%/10%) ratio by which other power supply expenses are shared between customers and
shareholders in the PCA." Idaho Power included with its Application prefiled direct testimony
to provide additional information on the results of its cloud seeding program.
ST AFF REVIEW
The Company is beginning the third and final year of a pilot program to study the effects
of cloud seeding in a portion of the Payette River drainage. The Company is encouraged by the
results of the first two years. In the final year of the pilot the Company hopes to show a third
consecutive year of benefits that exceed costs and to quantify the relative cost effectiveness of
ground based versus airplane based cloud seeding. Also, based on results from more sampling
and more timely sampling the Company plans to refine the proj ect design and configuration and
make it more effective.
In his testimony, Mr. Riley, has summarized the two methods that the Company is using
to study and quantify the effects of cloud seeding. At the risk of greatly over simplifying the
processes, the Staff describes them as follows. The first method is a statistical method that Mr.
Riley calls the target-control method. It has been used to study the effects of cloud seeding in
other areas of the country for more than 50 years. The method relies on a mathematical formula
developed using regression techniques that relates precipitation at measuring sites outside the
cloud seeding study area to precipitation inside the study area before cloud seeding began.
Basically, the formula is, when X inches of precipitation occur outside the study area, Y inches
are expected to occur within the study area. Once cloud seeding begins, any actual precipitation
amounts that differ from the predicted amount, Y, are assumed to be caused by cloud seeding.
Mr. Riley calls the second method the trace-chemistry method The method uses very
sophisticated chemical analysis and snow pack density analysis to identify precipitation
contributions from cloud seeding in layers of the snow profile. Snow profile samples are taken
STAFF COMMENTS NOVEMBER 24, 2004
at locations throughout the cloud seeding study area. The samples are taken in a cylindrical tube
then each tube is divided into many smaller samples 2 centimeters thick. Each of the small
samples are studied and the results are accumulated to obtain final results. From each small
sample two basic pieces of information are obtained - adjusted concentration of silver iodide and
the relative density of the sample compared to unseeded snow. These two variables are used in
an empirical equation to calculate the increase in precipitation due to cloud seeding.
Silver Iodide is the chemical agent used to seed clouds. It provides a nucleus around
which precipitation, in this case an ice crystal or snowflake, can form. Silver iodide
concentrations are measured in parts per trillion and measured concentrations require adjustment
to remove background levels that naturally occur and amounts that are washed out of the air in
the snowfall without forming snow flake nuclei.
The relative density of the snow in each sample, seeded to unseeded, is important because
seeded snow is more dense. Therefore, the relative density of each sample provides information
concerning the amount of precipitation in the sample that comes from ice crystals with a silver
iodide nucleus versus precipitation that would have occurred naturally without cloud seeding.
Once these two variables are quantified, the empirical formula allows the calculation of the
increase in precipitation due to cloud seeding.
Idaho Power s cloud seeding program includes two other chemical agents that are
identified in the chemical analysis of the samples. These chemicals are discharged from ground
based or airplane based emitters respectively. Their presence in samples allows the Company
determine the portions of increased precipitation caused by cloud seeding that were caused by
the two different seeding methods, ground based or airplane based. Airplane based cloud
seeding is more expensive than ground based cloud seeding. Knowing the contribution that each
method makes to the final result and the costs of seeding by method will allow the Company to
determine whether each method is cost effective.
The estimate of the value of the increased precipitation, whether derived from the target -
control method or trace chemistry method, continues with a computer model that determines the
quantity of increased precipitation that reaches the Hells Canyon complex and the timing of the
increased runoff. Generation amounts are then calculated and the value of the additional
generation is established based on average market prices. At this point, power related benefits
and costs are known and the cost effectiveness of the program can be determined.
ST AFF COMMENTS NOVEMBER 24, 2004
The Company states in its filing that it has seeded clouds during the previous two winters.
During the winter of 2002-2003 the Company seeded clouds between February 1 , 2003 and April
2003. The seeding produced an estimated 110 000 Acre-Feet of increased runoff which is
valued at $1.6 to $1.8 million. During the winter of 2003 - 2004 the Company seeded clouds
between November 1 2003 and April 21 , 2004. These seedings produced approximately 68 000
Acre-Feet of additional precipitation in the watershed. The associated additional generation is
valued at $1.4 million. In both years estimated benefits exceeded costs. Also in both years, the
PCA shared the benefits 90/10 between customers and shareholders while shareholders bore
100% of the costs.
ST AFF RECOMMENDATIONS
In its recent general rate case the Company requested that cloud seeding costs be included
in its base rates. The Staff did not support the Company in that request. In its final Order the
Commission denied the Company s request. This Application is substantially different than the
request included in the Company s general rate case. First, the Company s request in this case is
to include the variable costs of cloud seeding in the PCA, or in a PCA like manner, for a single
year. This treatment captures the benefits and costs of cloud seeding and shares them equitably
while the Company completes the final year of evaluation of the cloud seeding program. The
second difference between this request and the general rate case request is that information on
the 2003 - 2004 cloud seeding year is now available. That information shows the program was
cost effective for the second year, which lends additional credibility to the concept that cloud
seeding is cost effective for Idaho Power and its ratepayers.
Both Utah and Nevada have state-sponsored cloud seeding programs. The Utah Division
of Water Resources, along with other entities, has been involved in cloud seeding operations
designed to increase winter precipitation in the state. The studies that the state of Utah has done
indicate that cloud seeding programs increase precipitation, in general, by 14 to 20%. This
compares to Idaho Power cloud seeding results showing an increase in precipitation of 5 - 16%.
The state has also done an economic analysis of the program and the analysis shows that the
benefits from the extra precipitation outweigh the costs of the cloud seeding program.
In Nevada, the Desert Research Institute, a nonprofit research campus of the University
and Community College System of Nevada, runs the cloud seeding program. The purpose of the
program in Nevada is to increase snow pack, increase the spring runoff and water supplies to the
STAFF COMMENTS NOVEMBER 24, 2004
local municipalities, and increase the runoff for recreational lakes. The state of Nevada began
intermittently funding cloud seeding programs in the late 1970's and has been funding them
continuously since 1984. The state of Nevada notes that benefits vary with the seasonal
frequency of suitable weather opportunities. The state s research has shown that cloud seeding
does increase the precipitation rate given the right weather conditions.
Staff believes it is appropriate to include cost effective cloud seeding expenses as power
supply expenses. Due to the nature of cloud seeding, it is more appropriate to account for these
expenses in the PCA. Because the PCA is designed to recover weather-related power supply
expenses, including cloud seeding expenses in the PCA is appropriate, as the cloud seeding
expenses will vary with the weather.
The accounting methodology that Idaho Power proposes seems appropriate. Staff
proposes that detailed sub-accounts be established specifically for the cloud seeding expenses.
This detail is needed to properly audit these accounts during the regular PCA review period and
to continue evaluating the cost effectiveness of the program.
Based on a search of cloud seeding literature and a review of the Company s program
Staff believes the program to be promising and recommends PCA treatment of the variable costs
of the program for the winter of2004-2005. This allows the PCA to share the benefits and costs
of cloud seeding between ratepayers and shareholders. It also aligns the interests of both groups
because they win or lose together. Following this year the Company will have three years of
cloud seeding data and results that will be available to assist in a recommendation concerning
long-term ratemaking treatment.
Respectfully submitted this lLf day of November 2004
~:",,::::.~
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Keith Hessing
Kathy Stockton
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ST AFF COMMENTS NOVEMBER 24, 2004
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF NOVEMBER 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-04-, BY MAILING A COpy THEREOF POSTAGE PREPAID TO THE
FOLLOWING:
BARTON L KLINE
MONICA MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
MAGGIE BRILZ
DIRECTOR, PRICING
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
CERTIFICATE OF SERVICE