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HomeMy WebLinkAbout20171122HellsCanyon AFUDC Status Report.pdf3Effi*. LISA D. NORDSTROM Lead Counsel lnordstrom@idahopower.com November 22,2017 LDN:kkt Enclosures RECEIVED ?0ll H0Y 22 PH h: 02 ' i T I Jrif*loiHh?*l8 u' o* -<-t&.7&"/-atrezt-t VIA HAND DELIVERY Diane Hanian, Secretary ldaho Public Utilities Commission 472 West Washington Street Boise, ldaho 83702 Response to Order No. 30722 (Case No. IPC-E-08-10) 2017 Hells Canyon Allowance for Funds Used During Construction ("AFUDC") Status Report Dear Ms. Hanian 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 on the accumulation of AFUDC by November 15,2009. The Company has continued to file annual updates, and therefore, enclosed for filing are an original and seven (7) copies of the 2017 status report. This report details the Company's efforts to obtain the license, supporting continued collection of AFUDC in rates. ldaho Power now estimates that the issuance of the license will be delayed until at least 2021 due to the unresolved issues related to water quality certifications in accordance with $ 401 of the Clean Water Act. The Company has spent in excess of $189.5 million in support of the Hells Canyon relicensing ($ZOS.O million less $79.5 million in pre-tax AFUDC estimated collections) and 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 Senior Regulatory Analyst Courtney Waites at 388-5612 or cwaites@idahopower.com. Very truly yours, RE An IDACORP Company P.O. Box 70 (83707) 1221 W. ldaho St. Boise, lD 83702 Lisa D. Nordstrom 2017 HELLS CANYON ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION STATUS REPORT I. PURPOSE OF STATUS REPORT The Hells Canyon Complex ('HCC"), comprised of the Brownlee, Oxbow, and Hells Canyon dams, represents approximately 1,167 megawatts of nameplate generation capacity. The HCC is an important source of low cost, clean electric energy for ldaho Power Company's ("ldaho Power" 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 costs as part of its revenue requirement. The Company did not request that the Hells Canyon relicensing CWIP balance be included in rate base; instead, the Company requested that ongoing financing costs, orAllowance 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 Hells 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. ln addition, the Commission stated that if the relicensing is not complete by the aforementioned date, the report should explain 1 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 2017 Hells Canyon AFUDC status report in recognition of the Commission's stated desire to be updated on the Company's ongoing relicensing efforts. Because Idaho Power provided an even greater level of detail of relicensing activity and AFUDC accumulation in its request for a prudence determination of HCC relicensing costs through 2015 in Case No. IPC-E-16-32, the 2017 Hells Canyon AFUDC status report will detail the Company's efforts to relicense the HCC since December 31,2015. II. 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. On December 3, 2003, FERC issued a notice accepting Idaho Power's fina! application and soliciting motions to intervene and protests. Twenty-seven parties fited formal motions to intervene in the relicensing proceeding (some also filed protests), including four Native American tribes, as well as numerous federaland state resource agencies and non-governmentalorganizations such as American Rivers, Columbia River lnter-Tribal Fish Commission, American Whitewater, the Northwest Resource Information Center, and ldaho Rivers United. Since 2005, ldaho Power has been operating under annual licenses issued by FERC. Because it forms the border between ldaho and Oregon, the HCC is subject to the jurisdiction of both states. FERC is expected to issue a 40 to 50 year-term license order for the HCC after completion of three remaining regulatory processes: (1) the yet to be issued S 401 water quality certifications from both ldaho and Oregon, (2) Endangered Species Act ('ESA") 2 consultation, and (3) the National Environmental Policy Act of 1969 ('NEPA'). ldaho Power must receive the $ 401 water quality certifications in accordance with the Clean Water Act ("CWA") before FERC will initiate ESA consultation. B. Clean Water Act Proceedinqs ldaho Power continues working with both the states of ldaho and Oregon to identify measures that will provide reasonable assurance that discharges from the HCC will adequately address applicable water quality standards. ln the 2016 S 401 water quality certification application process, Oregon required ldaho Power to comply with fish passage and reintroduction conditions. ldaho's water quality certification, however, specifically forbids ldaho Power from reintroducing fish into ldaho's waters. On November 30, 2016, ldaho Powerfiled a petition with FERC requesting that FERC resolve the conflict between Oregon's and ldaho's conditions and declare that the Federal Power Act ("FPA") pre-empts the Oregon state law. In January 2017, FERC issued an order denying ldaho Power's petition, stating that the petition for declaratory order was premature, cannot realistically be considered separately from the issue of the states' certification authority under the $ 401 of the CWA, and raises issues that are beyond FERC's authority to decide. ln light of FERC's order, ldaho Power has diligently worked with both states to achieve resolution of this issue. ldaho Power continues to work with ldaho and Oregon in the development of measures to provide reasonable assurance that any discharges from the HCC will comply with applicable state water quality standards so that appropriate water quality certifications can be issued for the project, and continues to cooperate with the U.S. Fish and Wildlife Service ("USFWS"), the National Marine Fisheries Service ("NMFS"), and 3 FERC in an effort to address ESA concerns. ldaho Power has begun the process for construction of new aerated runners at the Brownlee project, which is part of the HCC. The first of four units was installed in 2016 and ldaho Power plans to install one unit in each year from 2017 through 2019. Other measures that have been proposed or considered have included modification of spillways at all three dams in the HCC to address total dissolved gas issues, and upstream watershed improvements or the installation of a temperature control structure to address water temperatures during a small portion of the yeat. C. Environmental lmpact Statement On July 28,2006, consistent with the requirements of NEPA, FERC staff issued a draft environmental impact statement ("ElS") for the relicensing of the HCC, which reviewed and analyzed ldaho Power's proposed operations and mitigation measures together with the comments, terms, prescriptions, and recommendations previously received. Various parties, including ldaho Power, filed comments to the draft EIS and on August 31,2007, FERC staff issued a final EIS for the relicensing of the HCC. This final EIS contains FERC staff's recommended terms and conditions for the relicensing 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 S 401 of the 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 does not anticipate filing 4 comments until the processes progress to a point where their influence upon provisions of the final EIS can be determined. D. Endangered Species Act Consultation ln conjunction with the issuance of the final ElS, on September 13,2007, FERC requested formalconsultation under Section 7 of the ESAwith 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 underthe S 401 water quality certifications are identified, FERC has been unable to move forward with formal consultations as required by the ESA. As with S 401 water quality certifications, 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. II!. COMPLETION DATE FERC is expected to issue a permanent license order for the HCC after completion of the S 401 water quality certification and the ESA consultation processes. As mentioned 5 above, certain provisions of the final EIS involve issues that may be influenced by the water quality certifications for the project under S 401 of the CWA and the formal consultations under the ESA. ln 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 S 401 applications, including any measures to be included in the project license to address water quality impacts. FERC cannot issue a permanent license for the HCC until the states have issued water quality certifications under S 401 of the CWA. Under the most optimistic scenario, ldaho Power expects that a permanent license could be issued in 2021. However, due to the potential for further delay in the issuance of the S 401 certification and biological opinions, it is possible that a FERC license may not be issued until sometime after 2021. 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 pre-tax as authorized by Order No. 30722 and $6,520,122 annually for the ldaho jurisdiction, as authorized by Order No. 32426. Continued collection in rates remains consistent with the Commission's stated rationale for authorizing such collection in Order No. 30722. ldaho Power is still more than a year away from acquiring a 6 permanent license and continues to spend money to relicense the HCC. As a result, the Company believes that it will 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 amount of current year AFUDC anticipated to be accrued for the HCC relicensing project is approximately $19.6 million. However, at this time, the Company is not requesting to adjust the amount currently collected through customer rates. Through September 30, 2017, ldaho Power has spent in excess of $189.5 million in support of the Hells Canyon relicensing ($269.0 million less $79.5 million in pre-tax AFUDC estimated collections). 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 normalized monthly retail sales revenues included in Order No. 32426. 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. 7 (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 229106 Accumulated Provisions for Rate Refunds - Tax 229105 - Accumulated Provision Pre-Tax1 229106 - Accumulated Provision 2009 Tax (2) To record monthly interest. 431090 Other lnterest Expense $XXXX 229105 Accumulated Provision for Rate Refunds - Pre-Tax $xxxx As of September 30,2017, the accrued balances in the accounts associated with the AFUDC costs are as follows: $xxxx $XXXX ($79,483,766.40) ($36,31 1,422.36) 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 will 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 response to Order No. 30722, because the relicensing of the HCC has not occurred. ln this report, the Company details its 1 The balance in Account229105 also includes interest in the amount of $22,923,916. 8 efforts to obtain the license, supporting continued collection of AFUDC in rates. ldaho Power now estimates that the issuance of the license will be delayed until at least 2021 and the Company will continue to annually update the Commission until the licensing process concludes. 9