HomeMy WebLinkAbout20171122HellsCanyon AFUDC Status Report.pdf3Effi*.
LISA D. NORDSTROM
Lead Counsel
lnordstrom@idahopower.com
November 22,2017
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Enclosures
RECEIVED
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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
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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")
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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
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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
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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
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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
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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.
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(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.
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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.
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