20091116HellsCanyon AFUDC Status Report.pdf

LISA D. NORDSTROM
Senior Counsel
InordstromCfidahopower.com
[phone]
eslDA~POR(I
An IDACORP Company
November 13, 2009
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-10 - Compliance Filing
Hells Canyon AFUDC Status Report
Dear Ms. Jewell:
In Order No. 30722, the Commission ordered Idaho Power Company to file a
status report for the relicensing of the Hells Canyon facilities along with the
accumulation of AFUDC. Therefore, enclosed for filing are an original and four (4)
copies of a status report which describes the relicensing process along with evidence to
support collection of AFUDC in rates beyond December 31, 2009. The Company wil
continue collection of AFUDC in rates going forward as authorized in Order No. 30722
unless it receives a Commission order directing otherwise.
If you have any questions with regard to this report, please do not hesitate to
contact me at the above number.
Very truly yours,d~.i.'1~
Lisa D. Nordstrom
LDN:csb
Enclosure
cc: Service List
Ric Gale - w/encl. (via e-mail)
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise, ID 83702
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 13th day of November 2009 I served a
true and correct copy of the within and foregoing HELLS CANYON AFUDC
STATUS REPORT upon the following named parties by the method indicated
below, and addressed to the following:
Commission Staff
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Neil Price
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Industrial Customers of Idaho Power
Peter J. Richardson, Esq.
RICHARDSON & O'LEARY PLLC
515 North 2th Street
P.O. Box 7218
Boise, Idaho 83702
Dr. Don Reading
Ben Johnson Associates
6070 Hil Road
Boise, Idaho 83703
Idaho Irrigation Pumpers Association,
Inc.
Randall C. Budge
Eric L. Olsen
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391
201 East Center
Pocatello, Idaho 83204-1391
CERTIFICATE OF SERVICE-1
-- Hand Delivered
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Overnight Mail
FAX
-- Email Weldon.stutzmanCcpuc.idaho.gov
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U.S. Mail
Overnight Mail
FAX
-- Email Neil.priceCcpuc.idaho.gov
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FAX
-- Email peterCcrichardsonandolearv.com
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-- Email dreadingCamindspring.com
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-- Email rcbCcracinelaw.net
eloCcracinelaw. net
Anthony Yankel Hand Delivered
Yankel & Associates, Inc.--U.S. Mail
29814 Lake Road Overnight Mail
Bay Vilage, Ohio 44140 FAX--Email tonyCcyankel.net
Kroger Co. I Fred Meyer and Smiths Hand Delivered
Michael L. Kurt --U.S. Mail
Kurt J. Boehm Overnight Mail
BOEHM, KURTZ & LOWRY FAX
36 East Seventh Street, Suite 1510 --Email mkurtCcBKLlawfirm.com
Cincinnati, Ohio 45202 kboehmCaBKLlawfirm.com
The Kroger Co.Hand Delivered
Attn: Corporate Energy Manager (G09)--U.S. Mail
1014 Vine Street Overnight Mail
Cincinnati, Ohio 45202 FAX
Email
Kevin Higgins Hand Delivered
Energy Strategies, LLC --U.S. Mail
Parkside Towers Overnight Mail
215 South State Street, Suite 200 FAX
Salt Lake City, Utah 84111 --Email khigginsCcenergystrat.com
Micron Technology Hand Delivered
Conley Ward --U.S. Mail
Michael C. Creamer Overnight Mail
GIVENS PURSLEY, LLP FAX
601 West Bannock Street --Email cewCagivenspursley.com
P.O. Box 2720 mccCcgivenspursley.com
Boise, Idaho 83701-2720
Dennis E. Peseau, Ph.D.Hand Delivered
Utility Resources, Inc.--U.S. Mail
1500 Liberty Street SE, Suite 250 Overnight Mail
Salem, Oregon 97302 FAX--Email dennvtempCayahoo.com
CERTIFICATE OF SERVICE - 2
Department of Energy
Lot R. Cooke
Arthur Perry Bruder
Offce of the General Counsel
United States Department of Energy
1000 Independence Avenue SW
Washington, DC 20585
Routing Symbol GC-76
Dwight D. Etheridge
Exeter Associates, Inc.
5565 Sterrett Place, Suite 310
Columbia, MD 21044
Community Action Partnership
Association Of Idaho
Brad M. Purdy
Attorney at Law
2019 North 17th Street
Boise, Idaho 83702
Snake River Allance
Ken Miler
Snake River Allance
P.O. Box 1731
Boise, Idaho 83701
CERTIFICATE OF SERVICE - 3
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U.S. Mail
-- Overnight Mail
FAX
-- Email Lot.CookeCchg.doe.gov
Arth u r. BruderCchg. doe. gov
Hand Delivered
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-- Email detheridgeCaexeterassociates.com
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¿l f) en ~Lisa D. Nordstr~
HELLS CANYON AFUDC STATUS REPORT
I. PURPOSE OF STATUS REPORT
In Case No. IPC-E-08-10, Idaho Power Company's ("Idaho Powet' or
"Company") last general rate case, the Company included construction work in progress
("CWIP") for the Hells Canyon relicensing as part of its revenue requirement. The
Company did not request that the Hells Canyon CWIP be included in rate base; instead,
the Company requested that the financing costs of accumulated funds used during
construction ("AFUDC") be allowed in rates as they occurred in 2009. The Commission
agreed with Idaho Power and the Commission Staff that the Hells Canyon project
presented unique circumstances and that it was in the public interest to include the
AFUDC in rates. Order No. 30722 at 14.
In Order No. 30722, the Commission ordered Idaho Power to file a status report
with the Commission by November 15, 2009, regarding relicensing of the Hells Canyon
facilties, including the accumulation of AFUDC. If the relicensing is not complete by
that date, the report should explain the Company's efforts to obtain the license, with
evidence supporting continued collection of AFUDC in rates beyond December 31,
2009.
II. EFFORTS TO COMPLETE RELICENSING
A. FERC LICENSE APPLICATION
Idaho Power filed a license application with the Federal Energy Regulatory
Commission ("FERC") in July 2003, two years before the original license for the Hells
Canyon Complex ("HCC") expired in 2005. Since 2005, IPC has been operating under
1
annual licenses issued by the FERC. The relicensing of the HCC is complicated by its
location on a border river (Oregon/Idaho), immediately above (i) critical habitat for
anadromous and native fish (salmon and bull trout) listed as "threatened" under the
Endangered Species Act ("ESA"), (ii) the federally reserved Hells Canyon National
Recreation Area, and (iii) a seventy-mile stretch of the Snake River designated as "wild
and scenic" under the Wild and Scenic Rivers Act. The project also potentially affects
two National Forests as well as federal lands managed by the Bureau of Land
Management.
Idaho Power filed the HCC license application with FERC under the "traditional
licensing process." FERC has now implemented two other licensing processes, the
"alternative licensing process" and the "integrated licensing process." The latter
process became the default process for obtaining a license in 2005, but was not
available in 2003 when Idaho Power filed its license application. The alternative
process was promulgated by FERC in 1997 and provides for pre-filing consultation with
interested agencies combined with a pre-filng environmental review process. However,
at the time the alternative process became available, Idaho Power had committed
substantial resources to technical studies and analysis in support of the traditional
process. The traditional licensing process generally consists of three stages. The first
and second stages generally involve pre-filing consultation and completion of studies
and preparation of a draft license application. Anticipating that there would be
widespread interest in the relicensing of the HCC, in the 1990s Idaho Power began
exploring opportunities to incorporate ongoing consultation throughout the first and
second stages to provide for greater stakeholder involvement in the license application
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process. Through this more collaborative process, Idaho Power hoped to engage
interested stakeholders on the development of studies and technical analysis that would
address stakeholder concerns and strike an appropriate balance between project
operations and the protection, mitigation, and enhancement of resource values.
By the time the final license application was filed in 2003, Idaho Power had held
in excess of 200 meetings with stakeholders and completed more than 100 relicensing
studies at an approximate cost of $45 millon. The final license application, and the
technical and environmental studies that support it, is in excess of 35,000 pages and
provides a complete and comprehensive analysis of potential project impacts on the
environment and natural resources affected by the project. The filing of the final
application in July 2003 initiated the third stage under the traditional licensing process -
FERC consideration of project effects and the development of proposed license terms
and conditions.
On December 3, 2003, FERC issued a notice accepting Idaho Powets final
application and soliciting motions to intervene and protests. Twenty-seven parties filed
formal motions to intervene (some also filed protests) in the relicensing proceeding,
including four Native American Indian tribes, as well as numerous federal and state
resource agencies and non-governmental organizations such as American Rivers,
Columbia River Inter-Tribal Fish Commission, American Whitewater, the Northwest
Resource Information Center, and Idaho Rivers United.
B. FPA AND NEPA PROCEEDINGS
Under the Federal Power Act ("FPA"), and other applicable laws, FERC must
determine that a project, as licensed, wil be best adapted to a comprehensive plan for
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improving and developing a waterway. In addition to the power and developmental
purposes for which licenses are issued, FERC must give equal consideration to the
purposes of energy conservation; the protection of, mitigation of damage to, and
enhancement of fish and wildlife; the protection of recreational opportunities; and the
preservation of other aspects of environmental quality. The National Environmental
Policy Act of 1969 ("NEPA") complements the FPA process and is intended to ensure
that federal decision-makers, and the public, have a firm understanding of the
environmental consequences of federal decisions so that actions implemented
adequately protect, restore, and enhance the environment.
Pursuant to the FPA and NEPA, in the fall of 2003, FERC initiated a scoping
process, holding meetings throughout the region on an initial environmental scoping
document prepared by FERC staff. FERC received oral and written responses to this
initial scoping document and in November 2004 issued a second scoping document.
On the basis of the information received from this scoping process, in October 2005,
FERC issued a notice that the project was ready for environmental review and set a 90-
day period for the filing of comments, terms, prescriptions, and recommendations.
Fifteen parties filed comments, terms, prescriptions, and recommendations in response
to the FERC notice. Idaho Power filed responses to these filings in April 2006.
Some of the filngs by federal agencies, particularly the U.S. Forest Service and
Bureau of Land Management ("BLM"), contained mandatory conditions under Section
4(e) of the FPA. Section 4(e) generally provides that FERC must include in a license for
a project within a federal reservation (such as a national forest or BLM lands) such
conditions as the applicable agency considers "necessary for the. adequate protection
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and utilization of that reservation." Section 4(e) is a conditioning as compared to a veto
authority. In other words, the applicable resource agency (USFS or BLM) may not
prevent FERC from issuing the license, but .i FERC issues a license, the resource
agency's conditions must be included in the license. In Section 241 of the Energy
Policy Act of 2005 ("EPAct"), Congress provided license applicants with a right to an
evidentiary hearing on contested mandatory conditions before an administrative law
judge. Prior to the enactment of the EPAct, there was limited opportunity to challenge
the factual basis of mandatory conditions. Idaho Power contested several of the
mandatory conditions and became the first hydroelectric license applicant to take
advantage of the evidentiary hearing process created by EPAct. Idaho Power resolved
its contests to the mandatory conditions through favorable settlements with the USFS
and BLM in May of 2006.
C. ENVIRONMENTAL IMPACT STATEMENT
On July 28, 2006, consistent with the requirements of NEPA, FERC staff issued
a draft environmental impact statement ("EIS") for the licensing of the HCC, which
reviewed and analyzed Idaho Powets proposed operations and mitigation measures
together with the comments, terms, prescriptions, and recommendations previously
received. Various parties, including Idaho Power, filed comments to the draft EIS and
on August 31, 2007, FERC staff issued a final EIS for the licensing of the HCC. This
final EIS contains FERC staffs recommended terms and conditions for the licensing of
the project and wil be used by the Commission in the development of final license
conditions. Idaho Power has reviewed the final EIS and is developing comments for
filng with the FERC. Certain portions of the final EIS, however, involve issues that may
5
be influenced by the water quality certifications for the project under Section 401 of the
Clean Water Act ("CWA") and the formal consultations under the ESA, which remain
unresolved (see below). Idaho Power anticipates filing comments to the final EIS when
these processes progress to a point where their influence upon provisions of the final
EIS can be determined.
D. CLEAN WATER ACT PROCEEDINGS
Because the HCC is located on the Snake River on the border between Idaho
and Oregon, Idaho Power has filed Water Quality Certification Applications, required
under Section 401 of the CWA, with the states of Idaho and Oregon requesting that
each state certify that any discharges from the project comply with applicable state
water quality standards. These applications were filed with the respective states in
conjunction with the filing of the final license application with the FERC in 2003. Since
2003, Idaho Power has been working with the states in the development of necessary
information and proposed measures to insure that any discharge from the project will
comply with applicable standards relating to dissolved oxygen, total dissolved gas,
temperature, and other water quality standards. This work has included the completion
of technical studies and modeling to determine the effects of project operations on water
quality as well as the efficacy of proposed measures to address those effects. When
final proposals are developed and presented to the states for approval, notice wil be
given to interested parties with an opportunity to comment on the proposals. The states
wil then render a decision on the Section 401 applications, including any measures to
be included in the project license to address water quality impacts. FERC cannot issue
a license for the HCC until the states have issued water quality certifications under
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Section 401 of the CWA. Under applicable provisions of the CWA, the states have one
year to issue a decision on a Section 401 application. Due to the complexities involved
and the need for additional technical analysis, Idaho Power, with the concurrence of the
states, has withdrawn and re-filed its Section 401 applications annually since 2003. The
states are processing the current applications with an expectation of issuing water
quality certifications by the spring of 2010.
E. ENDANGERED SPECIES ACT CONSULTATION
In conjunction with the issuance of the finaL. EIS, on September 13, 2007, the
FERC requested formal consultation under the ESA with the National Marine Fisheries
Service ("NMFS") and the U.S. Fish and Wildlife Service ("USFWS") regarding the effect
of HCC relicensing on several aquatic and terrestrial species listed as threatened under
the ESA. However, to date, neither NMFS nor USFWS have initiated formal
consultation with FERC. Each agency continues to gather and consider information
relative to the effect of relicensing on ESA listed species. Idaho Power continues to
cooperate with NMFS and USFWS in the development of this information in an effort to
address any ESA concerns. NMFS and USFWS are not expected to initiate formal
consultation with FERC until the proposed water quality measures are final and the
Section 401 water quality certification process complete. These water quality
certifications together with the information in the final EIS, as supplemented by Idaho
Power, should provide NMFS and USFWS with sufficient information to complete ESA
consultation, develop biological opinions, and make appropriate recommendations to
FERC for measures to be included in the project license to address ESA issues.
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II. COMPLETION DATE
The FERC is expected to issue a license order for the HCC upon completion of
the Section 401 certification and the ESA consultation processes. As mentioned above,
certain provisions of the final EIS involve issues that may be influenced by the water
quality certifications for the project under Section 401 of the CWA and the formal
consultations under the ESA. When final proposals are developed and presented to the
states for approval, notice wil be given to interested parties with an opportunity to
comment on the proposals. The states will then render a decision on the Section 401
applications, including any measures to be included in the project license to address
water quality impacts. FERC cannot issue a license for the HCC until the states have
issued water quality certifications under Section 401 of the CWA.
Under the most optimistic scenario, Idaho Power expects that a license could be
issued by spring 2011. However, due to the potential for contests to the Section 401
certification and biological opinions, it is probable that a FERC license may not be
issued until 2012.
IV. CONTINUED AFUDC COLLECTION
Based upon the current status of the HCC relicensing efforts detailed in Sections
II and II of this report, Idaho Power believes that it is reasonable and appropriate to
continue collecting AFUDC in rates for the HCC relicensing project in the amount of
$6,815,472 ($6,477,352 for the Idaho jurisdiction) pre-tax as authorized by Order No.
30722. Continued collection in rates remains consistent with the Commission's stated
rationale for authorizing such collection in Order No. 30722. Idaho Power is stil more
than a year away from acquiring a license and continues to spend money to relicense
8
the Hells Canyon Complex. As a result, the Company believes that it wil continue to be
appropriate to collect the AFUDC for the HCC relicensing project in rates until the
project is completed and included in rate base. The AFUDC amount for the HCC
relicensing project is expected to be approximately $8.9 millon in 2010; however, the
Company is not requesting at this time to adjust the amount currently collected through
rates.
As of September 30, 2009, Idaho Power has spent in excess of $109 milion
($114 millon less $5 milion in pre-tax AFUDC estimated collections) in support of Hells
Canyon relicensing. As the Commission previously explained, ". . . the lengthy duration
of the project, and an as yet unknown completion date, mean that AFUDC is already
significant and wil continue to accumulate to alarming levels . . .. The amount of
AFUDC included in rates now wil reduce the total project costs that ultimately wil be
included in rate base, thereby reducing future rate increases." Order No. 30722 at 14.
As it has since February 2009, Idaho Power is currently recording the accrual of
monthly estimated revenue collections for both the tax portion and principal for the 2009
AFUDC associated with the Hells Canyon Complex relicensing. These monthly
estimates are based on the Idaho monthly retail sales included in the 2008 Idaho
general rate case. The amortization of these costs wil commence once the Hells
Canyon Complex relicensing costs are placed in-service.
The Company is also recording monthly interest on the accrued pre-tax balance
for the AFUDC associated with the Hells Canyon relicensing. The interest is calculated
using the monthly AFUDC rate. The entries wil be recorded monthly until the Hells
Canyon Complex relicensing costs are placed in-service and are as follows:
9
(1 )
To record the monthly estimated revenue collection for both the tax and pre-tax
portion of the Hells Canyon Complex relicensing AFUDC. This entry started in February
2009 and continues through January 2010.
449108 Provision for Rate Refunds $XX
229105 Accumulated Provisions for Rate Refunds - Pre-Tax $XX
229106 Accumulated Provisions for Rate Refunds - Tax $XX
(2)
To record monthly interest.
431090 Other Interest Expense $XX
229105 Accumulated Provision for Rate Refunds - Pre-Tax $XX
As of September 30, 2009, the balances in the accounts associated with the
AFUDC costs are as follows:
229105 - Accumulated Provision Pre-Tax1
229106 - Accumulated Provision 2009 Tax
(4,543,820.42)
(2,863,998.09)
The accumulated provisions in both Accounts 229105 and 229106 wil be
transferred to a regulatory liabilty account once the provision has been fully provided for
annually. Amortization of the total estimated AFUDC revenues accrued wil be over the
life of the permanent license once it is received.
1 The balance in Account 229105 also includes interest in the amount of $82,764.19.
10