20131115HellsCanyon AFUDC Status Report.pdf

SEffi*.
An IDACORP Company
November 15,2013
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 W esl Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-08-10 - Compliance Filing
2013 Hells Canyon Accumulated Funds Used During Construction
('AFUDC") Status Report
Dear Ms. Jewell:
ln Order No. 30722, the ldaho Public Utilities Commission ("Commission")
ordered ldaho Power Company ("Company") to file a status report for the relicensing of
the Hells Canyon facilities along with an update of the accumulation of AFUDC.
Therefore, enclosed for filing are an origina! and seven (7) copies of a status report
which details the Company's efforts to obtain the license and supports continued
collection of AFUDC in rates beyond December 31, 2010. The Company will continue
collection of AFUDC in rates going forward as authorized in Order No. 30722 unless it
receives a Commission order directing otherwise.
lf you have any questions regarding this filing, please contact Courtney Waites at
388-561 2 or [e-mail].
Very truly yours,
LISA D. NORDSTROM
Lead Counsel
LDN:csb
Enclosures
cc: Service List (w/encl.)
,>$,."-c z/C/d-w-
Lisa D. Nordstrom
1221 W. ldaho St. (83702)
P.O. Box 70
8oise, lD 83707
2013 HELLS CANYON ALLOWANCE FOR FUNDS USED
DURING GONSTRUGTION STATUS REPORT
I. PURPOSE OF STATUS REPORT
The He!!s Canyon Complex ("HCC"), comprised of the Brownlee, Oxbow, and
Hells Canyon dams, represents approximately 1,167 megawatts of nameplate
generation capacity. The HCC continues to be an important source of low cost, clean
electric energy for ldaho Power Company's ("ldaho Powe/' or "Company") customers.
With this in mind, ldaho Power considers the HCC relicensing project to be a viable,
cost-effective effort that will ultimately serve the best interests of customers.
ln Case No. IPC-E-08-10, ldaho Power's 2008 general rate case, the Company
included Construction Work in Progress ('CWlP") related to the Hells Canyon
relicensing as part of its revenue requirement. The Company did not request that the
Hells Canyon relicensing CWIP be included in rate base; instead, the Company
requested that ongoing financing costs, or Allowance for Funds Used During
Construction ("AFUDC'), associated with the Hells Canyon relicensing project be
allowed in rates. The ldaho Public Utilities Commission ("Commission") agreed with
ldaho Power and the Commission Staff that the He!!s Canyon relicensing project
presented unique circumstances and that it was in the public interest to include 2009
AFUDC levels in rates. Order No. 30722 at 14.
ln Order No. 30722, the Commission ordered ldaho Power to file a status report
with the Commission by November 15, 2009, regarding relicensing of the Hells Canyon
facilities, including the accumulation of AFUDC. lf the relicensing was not completed by
the aforementioned date, the report was to explain the Company's efforts to obtain the
license, with evidence supporting continued collection of AFUDC in rates beyond
December 31, 2009. While not required by Order No. 30722, the Company is filing its
2013 Hells Canyon AFUDC status report in recognition of the Commission's stated
desire to be updated on the Company's ongoing relicensing efforts.
I!. EFFORTS TO COMPLETE RELICENSING
A. Federal Enerqv Regulatorv Commission ("FERC") License Application.
ldaho Power filed a license application with FERC in July 2003, two years before
the original license for the HCC expired in 2005. Since 2005, ldaho Power has been
operating under annual licenses issued by FERC. The relicensing of the HCC is
complicated by its location on a river that borders ldaho and Oregon and is located
immediately above (1) critical habitat for anadromous and native fish (salmon and bull
trout) listed as "threatened" under the Endangered Species Act ("ESA"); (2) the federally
reserved Hells Canyon National Recreation Area; and (3) 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 ("BLM").
ldaho 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 ldaho 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-filing environmental review process. However,
at the time the alternative process became available, ldaho Power had committed
substantial resources to technical studies and analyses in support of the traditional
process. The traditional licensing process generally consists of three stages. The first
and second stages typically 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, ldaho Power began exploring
opportunities to incorporate ongoing consultation throughout the first and second stages
to provide for greater stakeholder involvement in the license application process.
Through this more collaborative process, ldaho Power hoped to engage interested
stakeholders on the development of studies and technical analyses 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,ldaho Power had held
in excess of 2OO meetings with stakeholders and completed more than 100 relicensing
studies at an approximate cost of $45 million. 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, 2OO3, FERC issued a notice accepting ldaho Powe/s final
application and soliciting motions to intervene and protests. Twenty-seven parties filed
formal motions to intervene in the relicensing proceeding (some also filed protests),
including four Native American tribes, as well as numerous federal and state resource
agencies and non-governmental organizations such as American Rivers, Columbia
River lnter-Triba! Fish Commission, American Whitewater, the Northwest Resource
lnformation Center, and ldaho Rivers United.
B. Federal Power Act ("FPA") and the National Environmental Policv Act of
1 969 ("NEPA") Proceedings.
Under the FPA, and other applicable laws, FERC must determine that a project,
as licensed, will be best adapted to a comprehensive plan for improving and developing
a watenruay. ln 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 NEPA complements the FPA process and is
intended to ensure that federal decision makers, and the public, have a firm
understanding of the environmenta! consequences of federal decisions so that actions
implemented adequately protect, restore, and enhance the environment.
Pursuant to the FPA and the NEPA, in the fall of 2003, FERC initiated a scoping
process, holding meetings throughout the region on an initial environmenta! 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. ldaho Power filed responses to these filings in April 2006.
Some of the filings by federal agencies, particularly the U.S. Forest Service
("USFS") and the BLM, contained mandatory conditions under Section 4(e) of the FPA.
Section 4(e) 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 and utilization of that
reservation." Section 4(e) is a conditioning as compared to a veto authority. ln other
words, the applicable resource agency (USFS or BLM) may not prevent FERC from
issuing the license, but 4 FERC issues a license, the resource agency's conditions must
be included in the license. ln 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. ldaho 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. ln May 2006, ldaho Power resolved its contests to the
mandatory conditions through favorable settlements with the USFS and BLM.
C. Environmental lmpact Statement.
On July 28, 2006, consistent with the requirements of NEPA, FERC staff issued
a draft Environmental lmpact Statement ("ElS") for the licensing of the HCC, which
reviewed and analyzed Idaho Power's 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 fina! EIS for the licensing of the HCC. This
final EIS contains FERC staffs recommended terms and conditions for the licensing of
the project and will be used by FERC in the development of final license conditions.
However, certain portions of the final EIS involve issues that may 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). ln addition, depending upon the final conditions in the water quality
certifications, FERC may decide that a supplement to the final EIS should be prepared
in accordance with NEPA guidelines. ldaho Power has reviewed the final EIS and
developed preliminary comments but does not anticipate filing the comments until the
processes progress to a point where their influence upon provisions of the final EIS can
be determined.
D. Clean Water Act Proceedinqs.
Because the HCC is located on the Snake River on the border between ldaho
and Oregon, ldaho 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 ldaho and Oregon
Departments of Environmental Quality ("DEQ") in conjunction with the filing of the final
license application with FERC in 2003.
Since 2003, Idaho Power has been working with the states in the development of
necessary information and proposed measures to ensure 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 we!! as the efficacy of proposed measures to address
those effects. When final proposals are developed and presented to the states for
approval, notice will 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 new license for the HCC without Section 401 certification,
or a waiver of that certification, from each state. Once the Section 401 certifications are
issued and filed with FERC, FERC will review the measures required by the
certifications in its Iicensing order and may comment on whether, in its view, there is a
need for such measures based on its NEPA analysis. But, regardless of FERC's views,
in accordance with judicial precedent, it will incorporate all Section 401 conditions in the
license without modification. 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, ldaho Power, with the
concurrence of the states, has withdrawn and re-filed its Section 401 applications
annually since 2003.
ldaho Power's most recent applications were filed with the ldaho and Oregon
DEQs on September 23, 2013. The applications contained proposed measures for
complying with applicable water quality standards related to dissolved oxygen and total
dissolved gas. Measures related to the applicable standard for temperature were
withheld, due to reasons explained below, and will be filed with the respective DEQs in
December 2013.
ln 2004, as part of the Snake River Hells Canyon Total Maximum Daily Load
process, the HCC was assigned a temperature load allocation related to the salmonid
spawning temperature standard criteria below the Hells Canyon dam. At that time, the
applicable salmonid spawning temperature criteria was 13"C. ln 2010, Idaho Power
filed petitions in ldaho and Oregon to change the 13'C criteria to 14.5"C, based on
support by peer-reviewed technical studies. ln 2012, Idaho changed the temperature
criteria and submitted the change to the Environmental Protection Agency ("EPA") for
approva!. Oregon deferred action on the Company's petition until the next triennial
review of its water quality standards. The EPA has yet to take action on the criteria
change approved by ldaho. The applicable salmonid spawning criteria remains 13'C as
the 14.5"C standard change cannot become effective without EPA approval. The
National Marine Fisheries Service ("NMFS") and the U.S. Fish and Wildlife Service
("USFWS") have advised the EPA that 14.5'C is protective of downstream aquatic
resources and that they do not oppose the proposed standard change from 13'C to
14.5"C.
Working with outside consultants, Freshwater Trust and River Design Group,
ldaho Power has developed a river restoration and water quality plan that will promote
the natural restoration of the Marsing reach of the Snake River above the HCC and
address the temperature standard below Hells Canyon dam in a manner that ldaho
Power believes would result in CWA Section 401 certification by the respective states,
provided that the applicable temperature standard is changed to 14.5"C. ln June 2013,
the Company informally presented a proposal to the Idaho and Oregon DEQs and
federal and state resource agencies to resolve the Section 401 certification temperature
issues, including the upstream river restoration plan. Although this proposal has been
under discussion with the DEQs and the resource agencies, in August 2013, ldaho
Power was advised that the Section 401 certification administrative process could not
be completed within the one-year requirement established by the CWA. This resulted in
the September 2013 withdrawal and re-filing of the applications for certification.
lf the 14.5'C standard change is not approved by the EPA, and promulgated by
Oregon, the only measure available to ldaho Power to address a 13'C temperature
standard below the HCC is the installation of a Temperature Control Structure ('TCS')
in Brownlee Reservoir to access coo! water from lower reservoir levels and pass it
downstream below the Hells Canyon dam. ldaho Power biologists do not believe that a
TCS in Brownlee is the most effective measure to protect salmonid spawning below the
Hells Canyon dam and are concerned that accessing and releasing cool, low level
Brownlee water downstream will result in the release of anoxic water with elevated
levels of toxics, including mercury, to the potential detriment of downstream and in-
reservoir aquatic resources and habitat. Idaho Power will continue to work with the
DEQs and resource agencies to resolve issues associated with Section 401 certification
for temperature. The December 2013 submittal to the ldaho and Oregon DEQs will be
a complete application that will include ldaho Powe/s proposed temperature mitigation
program.
E. Endanqered Species Act Consultation.
ln conjunction with the issuance of the final EIS, on September 13,2007, FERC
requested formal consultation under Section 7 of the ESA with the NMFS and the
USFWS regarding the effect of HCC relicensing on several aquatic and terrestrial
species listed as threatened under the ESA. However, because the "proposed action"
that FERC will include in any final license is not adequately defined until the water
quality measures to be implemented under the Section 401 certifications are identified,
FERC has been unable to move fonruard with formal consultations as required by the
ESA. As with Section 401 certification, FERC cannot issue a new license for the HCC
until formal consultation under the ESA is complete. These water quality certifications
together with the information in the final ElS, as supplemented by ldaho 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. Each agency
continues to gather and consider information relative to the effect of relicensing on ESA
listed species. ldaho Power continues to cooperate with NMFS and USFWS, as
FERC's designated non-federal representative, in the development of this information in
an effort to ensure that any ESA concerns are adequately addressed.
III. COMPLETION DATE
FERC is expected to issue a license order for the HCC after 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
10
consultations under the ESA. !n addition, if the foregoing certifications or consultations
result in modifications or additions to project structures or operations not previously
evaluated, FERC may conclude that a supplement to the final EIS should be prepared.
When final proposals are developed and presented to the states for approval, notice will
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, ldaho Power expects that a license could be
issued in 2019. However, due to the potential forfurtherdelay in the issuance of the
Section 401 certification and biological opinions, it is possible that a FERC license may
not be issued until sometime after 2019.
IV. CONTINUED AFUDC COLLECTION
Based upon the current status of the HCC relicensing efforts detailed in Sections
ll and lll of this report, ldaho 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 ($6,520,122 annually for the ldaho 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 still more than a year away from acquiring a license and continues to spend
money to relicense the HCC. As a result, the Company believes that it continues to be
appropriate to collect the AFUDC for the HCC relicensing project in rates until the
11
project is completed and included in rate base. The amount of current year AFUDC
anticipated to be accrued for the HCC relicensing project is approximately $12.9 million.
However, at this time, the Company is not requesting to adjust the amount currently
collected through rates.
Through September 30, 2013, ldaho Power has spent in excess of $138.2 million
($174.6 million less $36.4 million in pre-tax AFUDC estimated collections) in support of
the 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 will continue to accumulate to alarming levels . . . . The amount
of AFUDC included in rates now will reduce the total project costs that ultimately will be
included in rate base, thereby reducing future rate increases." Order No. 30722 at 14.
Beginning in February 2009, ldaho Power began recording the accrual of monthly
estimated revenue collections as determined in the Order for both the tax portion and
principal for AFUDC associated with the HCC relicensing. The monthly entries are
shaped based on the Company's forecasted ldaho monthly retail sales. The
amortization of these costs will commence once the HCC 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 will be recorded monthly until the HCC
relicensing costs are placed in-service and are as follows:
12
(1)
To record the monthly estimated revenue collection for both the tax and pre-tax
portion of the HCC relicensing AFUDC. This entry started in February 2009 and will
continue until the new license is received.
449108 Provision for Rate Refunds $XXXX
229105 Accumulated Provisions for Rate Refunds - Pre-Tax $XXXX
22910O Accumulated Provisions for Rate Refunds - Tax $XXXX
(2)
To record monthly interest.
431090 Other lnterest Expense $XXXX
229105 Accumulated Provision for Rate Refunds - Pre-Tax $XXXX
As of September 30, 2013, the accrued balances in the accounts associated with
the AFUDC costs are as follows:
229105 - Accumulated Provision Pre-Taxl
229100 - Accumulated Provision 2009 Tax
($36,379,640.57)
($19,567,750.1 1)
The accumulated provisions in both Accounts 229105 and 229106 will be
transferred to a regulatory liability account for subsequent amortization concurrent with
receiving a permanent license and the placing of the Hells Canyon relicensing project
in-service. Amortization of the total estimated AFUDC revenues accrued wi!! be over
the life of the permanent license once it is received.
V. CONCLUSION
The Company is filing this status report regarding relicensing of the Hells Canyon
facilities, including the accumulation of AFUDC, in compliance with Order No. 30722,
because the relicensing of the HCC has not yet occurred. ln this report, the Company
details its efforts to obtain the llcense and supports continued collection of AFUDC in
'The balance in Accounl2291OS also includes interest in the amount of $5,900 ,278.59.
13
rates. ldaho Power now estimates that the issuance of the license will be delayed until
2019 and the Company will continue to annually update the Commission until the
licensing process concludes.
14
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 1sth day of November 2013 I served a true and
correct copy of the 2013 HELLS CANYON ALLOWANCE FOR FUNDS USED DURING
CONSTRUCTION STATUS REPORT upon the following named parties by the method
indicated below, and addressed to the following:
Commission Staff
Weldon B. Stutzman
Neil Price
Deputy Attomeys General
ldaho Public Utilities Commission
47 2 W est Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Customers of Idaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
Ben Johnson Associates
6070 Hill Road
Boise, ldaho 83703
ldaho lrrigation Pumpers
Association, lnc.
Randall C. Budge
Eric L. Olsen
MCINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
201 East Center
P.O. Box 1391
Pocatello, ldaho 83204-1 391
Anthony Yanke!
Yankel & Associates, Inc.
29814 Lake Road
Bay Village, Ohio 44140
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Neil. price@puc. idaho.oov
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The Kroger Co.
Michael L. Kurtz
Kurt J. Boehm
BOEHM, KURTZ & LOWRY
36 East Seventh Street, Suite 1510
Cincinnati, Ohio 45202
Kevin Higgins
Energy Strategies, LLC
Parkside Towers
215 South State Street, Suite 200
Salt Lake City, Utah 84111
Micron Technology, lnc.
Michael C. Creamer
GIVENS PURSLEY, LLP
601 West Bannock Street
P.O. Box 2720
Boise, ldaho 83701 -2720
Dennis E. Peseau, Ph.D.
Utility Resources, lnc.
1500 Liberty Street SE, Suite 250
Salem, Oregon 97302
U.S. Department of Energy
Lot R. Cooke
Arthur Perry Bruder
Office of the General Counsel
United States Department of Energy
1000 lndependence Avenue SW
Washington, DC 20585
Dwight D. Etheridge
Exeter Associates, lnc.
10480 Little Patuxent Parkway, Suite 300
Columbia, Maryland 21044
Community Action Partnership
Association Of ldaho
Brad M. Purdy
Attorney at Law
2019 North 17th Street
Boise, ldaho 83702
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Snake River Alliance
Ken Miller
Snake River Alliance
P.O. Box 1731
Boise, ldaho 83701
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Christa Bearry, Legal Assistant
CERTIFICATE OF SERVICE - 3