20060502Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOV AN E. WALKER
DATE:MAY 2, 2006
SUBJECT:IDAHO POWER'S APPLICATION FOR A CERTIFICATION OF PUBLIC
CONVENIENCE AND NECESSITY FOR THE EV ANDER ANDREWS
POWER PLANT - CASE NO. IPC-06-
On April 14, 2006 , Idaho Power Company filed an Application with the Commission
seeking an Order granting the Company a Certificate of Public Convenience and Necessity for
the construction of the Evander Andrews Power Plant. The Application also requests that the
Order note that the Company can expect to rate base the prudent capital costs for the project and
recover prudent fuel costs in the Company s Power Cost Adjustment (PCA) mechanism. The
Company requests that its Application "be processed expeditiously" by Modified Procedure in
order to purchase certain equipment at competitive prices.
THE APPLICATION
The Company requests that it be issued a Certificate of Public Convenience and
Necessity for the construction of the Evander Andrews Power Plant. According to the
Application the plant will be constructed by Siemens Power Generation, Inc., the same entity
that provided labor, materials, equipment, engineered and constructed the' Company s Bennett
Mountain Power Plant. Application at 2. The plant would consist of a new Siemens-
Westinghouse simple cycle, natural gas-fired combustion turbine rated at 170 MW, along with
the typical plant facilities and equipment. Id. at 3. The Project would be located at the existing,
40 acre Evander Andrews Power Complex north of Mountain Home. Id. The Evander Andrews
Power Complex is currently the home of two 45 MW gas-fired generators built by Idaho Power
in 2001. Id. The plant is currently scheduled to be available to meet peak loads in the summer
of2008. Id.
DECISION MEMORANDUM
According to the Application the Project would be interconnected with the
Company s 230 kV transmission system which is located approximately seven miles from the
Evander Andrews site. Id. The Company states that there is sufficient capacity in the existing
16-inch lateral gas line running from the Williams Northwest Pipeline to the site to meet the
requirements of the existing and new facility. Id. The Application also states that substantial
water supply capacity and priority water rights exist for both the existing and new facilities from
a deep well on the Evander Andrews premises, and that the Project will comply with all
appropriate air and water quality standards. Id.
The Application, and accompanying testimony of Gregory W. Said, states that
construction of this plant is consistent with the Company s 2004 Integrated Resource Plan (IRP).
Application at 3-4. According to the filed testimony, the Company initiated a Request for
Proposals (RFP). Consistent with the recommendations of the 2004 IRP, the peaking resource
RFP requested proposals for an 80 MW - 200 MW turnkey electric generation resource located
within the Company s service territory that would meet anticipated peak energy demands. Said
Direct at 10. The Company received 31 proposals from 9 companies that offered generation
units ranging in size between 71 MW and 170 MW. Id. The RFP evaluation team selected
Siemens as the preferred bidder based upon the predetermined price and non-price criteria
developed for this RFP. Id. at 12.
The Application and testimony also note other strategies the Company has employed
for satisfying the incremental resource needs identified in the 2004 IRP. Application at 4; Said
Direct at 5-8. These efforts include: additional demand-side measures, an RFP for
approximately 100 MW of wind-powered generation, and an RFP for 100 MW of geothermal
energy. Application at 4.
The Company states that it has a "Commitment Estimate" of $60 million for the
Project. Application at 5. The Commitment Estimate is a good faith estimate of the Project'
total capital cost based upon a negotiated Agreement for Engineering, Procurement and
Construction with Siemens Power Generation, Inc., as well as certain additional costs the
Company knows it will incur but cannot quantify with precision at this time, such as sales taxes
allowances for funds used during construction (AFUDC), cost of Idaho Power oversight of the
Project, and the cost of capitalized start-up fuel. Application at 4-5. The Commitment Estimate
does not include the approximately $22.8 million estimated cost of constructing transmission and
DECISION MEMORANDUM
substation facilities required to interconnect the Project with the Company s transmission
system. Application at 5. The Company proposes to procure and install the Project for the
Commitment Estimate, subject to adjustment, and to rate base only the amount actually incurred
up to the Commitment Estimate. Id.
The Application states that the Company owns firm fuel transportation rights
sufficient to supply the new plant, and that management of the fuel supply will be done by Idaho
Power personnel possibly in conjunction with a third party such as IGI Resources, Inc.
Application at 6. The Company request that the Commission allow it to include the cost of fuel
fuel storage, and fuel transportation for recovery through the existing PCA mechanism. Id.
Along with the Application, the Company filed the direct testimony of Gregory W.
Said and a map showing the location of the Evander Andrews Power Complex.
ST AFF RECOMMENDATION
Staff has read the Company s Application and recommends that the Commission
issue a Notice of Application and set an Intervention Deadline of May 18 , 2006, for interested
parties to petition for intervention.
CO MMISSI ON D ECISI 0 N
Does the Commission wish to issue a Notice of Application for the Company
filing? Does the Commission wish to set an Intervention Deadline of May 18 , 2006? Anything
else?
DONOVAN E. WALKER
DECISION MEMORANDUM