20100311Comments.pdf

Jean D. Jewell, Secreta
Idaho Public Utilities Commission
PO Box 83720
Boise, Idaho 83720-0074
W. MARCUS W. NYE
RANDALL C. BUDGE
JOHN A. BAILEY, JR.
JOHN R. GOODELL
JOHN B. INGELSTROM
DANIEL C. GREEN
BRENT O. ROCHE
KIRK B. HADLEY
FRED J. LEWIS
ERIC L. OLSEN
CONRAD J. AIKEN
RICHARD A. HEARN, M.D.
LANE V. ERICKSON
FREDERICK J. HAHN, III
DAVID E. ALEXANDER
PATRICK N. GEORGE
SCOTT J. SMITH
JOSHUA D. JOHNSON
STEPHEN J. MUHONEN
CANDICE M. MCHUGH
CAROL TIPPI VOLYN
BRENT L. WHITING
JONATHON S. BYINGTON
DAVE BAGLEY
THOMAS J. BUDGE
JONATHAN M. VOLYN
MARK A. SHAFFER
JASON E. FLAIG
LAW OFFICES OF
RACINE OLSON NYE BUDGE Be BAILEY
CHARTERED
201 EAST CENTER STREET
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POCATELLO, IDAHO 83204-1391
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March 10,2010
LOUIS F. RACINE (1917-2008)
WILLIAM D. OLSON, OF COUNSELNi:..i:::~-
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Re: Case No. IPC-E-IO-OI
Dear Ms. Jewell:
Enclosed for filing in the captioned matter, please find the original and seven (7) copies of
Idaho Irrigation Pumpers Association, Inc. 's Comments in the above matter.
ELO:nj
Enclosures
cc: Service List
Sincerely,
ERIC L. OLSEN
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Eric L. Olsen, ISB #4811
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: [phone]
Ft 'El\/
zato MAR I i MilO: 15
Attorneys for Intervenor
Idaho Irrgation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
ESTABLISH ITS BASE LEVEL FOR NET
POWER SUPPLY EXPENSE FOR 2010
)
)
)
)
)
CASE NO. IPC-E-1O-01
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S COMMENTS
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC. ("IIPA"), by and
through its attorneys, hereby respectfully submits the following comments with regard to
Idaho Power Company's ("IPC") proposed establishment of a new base level of Net
Power Supply Expense ("NPSE").
BACKGROUND
On Januar 13, 2010, in Order No. 30978, the Commission approved a Settlement
Stipulation (the "Stipulation") which included a moratorium on rate case filings by IPC
and certain other ratemakng provisions. The Stipulation included a provision which
addresses setting the base level for NPSE. Paragraph 7.1 of the Stipulation reads as
follows:
7.1. Setting the Base Level for Net Power Supply Expense. Prior to implementing
the June 1, 2010, PCA and effective with the coincident PCA rate change, the
Company wil file with the Commission a request to change the base level for net
power supply expenses to be used prospectively for both base rates and PCA
IDAHO IRRGATION PUMPERS ASSOCIATION, INC. 'S
COMMENTS-l
calculations. The Paries wil thereafter make a good-faith effort to reach
agreement on the maximum change of the base level for net power supply
expenses and submit any agreement to the Commission for approval.
The lIP A was a party to the Stipulation.
The LIP A recognzes that this case has been put on a fast tract, due to the terms of
the Stipulation. However, being put on a fast track does not mean that Idaho Power is
given a blan check to increase rates by any amount it chooses. The Stipulation
specifically stated that the paries of this case would "make a good-faith effort to reach
agreement on the maximum change of the base level of net power supply expenses and
submit any agreement to the Commssion" (emphasis added). Although there has been
an effort to address some of the concerns of the paries, it is clear that no tre agreement
has been reached.
Ths case is important because the rate impact that is being proposed (with very
minimal review) is huge. As filed, the rate increase to the Idaho Jursdiction would be
$74.8 milion per year. By contrast, after going though a full hearng in IPC's last
general rate case (IPC-E-08-10), IPC was granted an increase in Idaho of only $27.0
milion. In this case, IPC is requesting an increase of approximately 3 times that of its
last, fully litigated, rate case. Furher, this increase is being requested in a time of severe
financial conditions that are impacting all customer classes across IPC's whole service
tertory.
Finally, although this case looks a lot like a PCA fiing, it is not. The PCA fiings
have been set up by the Commission to be processed ver quickly under Modified
Procedure. The PCA has a condensed timeframe because, in par, the PCA filing is little
more than a pass-through of prudently incurred costs and projections of futue costs that
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS-2
IPC wil incur to serve its customers. However, the prudence of those costs and the
projections of future costs are based upon modeled results that are derved from the
Company's base NPSE that typically gets extensively reviewed during a general rate
case. This is not a PCA case, but effectively a rate case that is designed to increase rates
in Idaho by $74.8 milion per year. The normal use of Modified Procedure for a PCA
cases looses all reasonableness when the foundation for those cases-the base NPSE-is
also processed on Modified Procedure where there is no unversal agreement to the
values, procedures, and data being used.
ISSUES RAISED BY OTHERS
The lIP A is aware of concers that have been raised by other parties to the base
NPSE proposed by IPC. Although lIP A does not plan to take an active role with respect
to each of these issues raised by others, we strongly support the proposition that these
expenses should be excluded from the base NPSE, until such time as they are
appropriately resolved (either by unanimous agreement of all of the parties or through
Commission Order after a full hearng of the issues).
The source of these issues is testimony of the Oregon Commission Staff in a
similar IPC base NPSE case in Oregon (UE 214). The Oregon Staff has raised the
following issues with respect to Idaho Power's NPSE filing: (1) the coal costs for
Bridger; (2) load growth and the size of system load; (3) Hoku contract load adjustment;
(4) PURPA projects that are not online; (5) hydro adjustments in the power cost model;
and (6) water rights rental with Shoshone-Banock trbe. On a total Company basis, the
Oregon Staff is proposing an adjustment/reduction of $15,584,261 associated with just
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS-3
the cost of coal at Bridgerl. Although the Oregon Staff did not quantify the impact of
their other five adjustments, it would not be unreasonable to assume that these
adjustments could amount to more than an $10,000,000 reductions in the NPSE. Without
unanimous agreement among the parties in this case, a similar adjustment of at least
$26,000,000 should be made here, given the Modified Procedure posture of ths case.
IIPAISSUES
To a large extent, IPC bases it NPSE upon a large aray of black box calculations
in what is known as the AURORA modeL. Such black box calculations always raise a
degree of concer. Simply put, if you know what data goes into a model, but you do not
know how all of the data interacts withn the model, there is always a level of suspicion
with respect to the validity of the data that comes out of the modeL. When the model
produces counterintuitive results or results that are not found in actual operations, then all
doubt regarding the validity of the model is removed, and it is replaced by the simple
knowledge that the model is inaccurate/bias.
LIP A's preliminary review in this case of the results of the modeled NPSE
produces both counterintuitive results and results that do not conform to actual operation.
It is inappropriate to pass off the results of a model that requests an approximate $75
milion rate increase to customers as being "accurate enough" without giving the paries a
chance to fuher test the validity of the assumptions and results in a tre hearng setting.
Operation of Bennett Mountain
One example ofthe counterintuitive results of the output of the AURORA model
run in Company Exhibit 1 is the operation of the Benett Mountain facility. The
i See page 2 of
the testimony of Oregon Staff witness Dougherty in Docket DE 214.
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS-4
Company's model uses 81 different water year conditions in its modeling in order to
produce an "average" result. The AURORA model did not have Bennett Mountain
produce 1 Mw during each January, Februar, March, April, May, and June of any of
those 81 years (486 months in total). Thus, AURORA strongly suggests that there is no
reason, under any conditions, when Bennett Mountain should be operated durng the first
six months of any year. In preparation for filing these comments the LIP A looked at a
very small window of actual generation data. Specifically, some of the generation for the
first six months of2008 was reviewed. Contrar to what AURORA predicted for each of
81 water years between 1928 and 2008, the actual output from Bennett Mountain for the
first six months of 2008 was as follows:
Januar
Februar
March
April
May
June
14,961 Mwh
6,743 Mwh
2,252Mwh
2,617 Mwh
-0-
2,395 Mwh
In other words, under actual conditions in 2008, Bennett Mountain produced over
28,000 Mwh during the first six months ofthe year, when AURORA predicted 0 Mwh.
Even if2008 was an extremely odd year, one would have expected the conditions that
actually occurred should have been somewhat reflected in AURORA. However, 2008
was not that odd of a year. 2008 had less than average water, but there were 19 years of
the 81 years modeled that had calendar year hydro generation worse than that listed for
20082. Weare not talking here about some minor discrepancies, but the fact that
2 According to Company Exhibit 1, the following calenda years had less hydro generation than 2008:
1930,1931,1932,1933,1934,1935,1937,1961,1977, 1988, 1990, 1991, 1992, 1994,2002,2003,2004,
2005, and 2007.
IDAHO IRRGATION PUMERS ASSOCIATION, INC.'S
COMMENTS-5
AURORA did not once (under 81 different conditions) for each of the first six months of
the year pick up on an activity (generation) that was not out of the ordinar in 2008.
Ths is important because IPC's gas fired units would not be operating (or should
not be operating) if they were not cheaper than the next required source of supply to meet
the target load. In other words, if the gas units are dispatched, it should result in lower
NPSE than if they are not operated to meet the load.
Operation of Danski
The actual operation of Danskin compared to the AURORA results is no
different. The total monthly modeled generation from Danskin for the first six months of
all 81 years added together was:
Januar
Februar
March
April
May
June
38.5 Mwh
OAMwh
45.9Mwh
62.7Mwh
-0-
109.9Mwh
257AMwh
AURORA predicted a total of257A Mwh of Danskin generation over 486 months
(6 x 81 = 486). By contrast, Danskin actually generated 35,533 Mwh during the first six
months of 2008.
Logic Errors
There are logic problems with AURORA as well, as can be seen from reviewing
page 56 of Company Exhibit 1 which is the AURORA output for 1982. The AURORA
output for June of that year has Valmy generating 93% of its June average (126,643/
136,320 = 0.93) and hydro generation being flush at 141 % of its June average (1,269,385
/ 900,259 = 1041). Basically, hydro generation is modeled to be above its average level
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS-6
by 369,126 Mwh or three times the entire monthly generation at Valmy. According to
AURORA, there would be 509,146 Mwh of surplus sale at $21.48 per Mwh. However,
in AURORA, Valmy is priced at and operated at $30.73 per Mwh-$9.55 per Mwh more
than the price that Idaho Power is sellng its excess power. In the model, Valmy is
operated at a cost that is 50% more than the power is worth, even though the Company is
selling off four times as much power as Valmy even generates. For June 1982,
AURORA inappropriately raises the "modeled" cost of power by $1,209,441 (126,643
Mwh x $9.55 = $1,209,441). IIPA has not searched for other patent logic errors in the
AURORA model like this one. However, just because ths error does not appear in many
monthly statistics, it does not mean that the error is not occurrng on an hourly, daily or
weekly basis in the model due to the likelihood of its being masked by monthly totals.
DSM Programs
A less quantifiable concern is the treatment within the AURORA model of the
recent advances that IPC and the customers have made with respect to demand
curailment DSM programs. Compared to just a couple of years ago, great strdes have
been made with respect to the Residential Cool Keeper program, the Irgation Peak
Rewards program, and the Commercial Demand Response program. These programs are
designed to signficantly reduce the Company's peak load and thus reduce the use of the
highest cost resources on the system. It appears that AURORA is unable to model these
improvements in cost reduction. In a recent data response in Case No. IPC-E-09-03
(Langley Gulch), the following response was received from the Company regarding an
LIP A data request:
Request No.8: Exhibit 47 in Case No. IPC-E-08-10 lists the average (and under
IDAHO IRRGATION PUMPERS ASSOCIATION, INC. 'S
COMMENTS-7
.
separate anual water conditions), the monthly cost and generation by varous
categories of supply for the Company's overall power costs. Please answer the
following:
a. What level of irrgation load management was specifically assumed in
the Normalized 2008 data? (Emphasis in original)
Response to Request No.8:
a. The Company's normalized power supply expenses for ratemaking
purposes are modeled within AURORA using monthly average loads
in megawatts and hourly load shapes within months based on historical
information that includes test year impacts from past programs. This
methodology used for ratemakng is different than the methodology
used for the Integrated Resource Plan. The IRP identifies futue peak
hour deficiencies based upon forecasts of peak hour loads, while the
test year methodology does not. The IRP is used for planing
puroses, while the test year is not. (Emphasis added)
By not addressing the new load patterns and system cost reductions that are associated
with these new and expanding programs, AURORA is biasing the model results toward
higher costs.
Wholesale Transactions
The wholesale market has been known to operate in a maner different than
anything modeled in AURORA. Durng the last couple of years, there have been times
when Idaho Power has purchased power, and the Seller paid Idaho Power to take the
power-the purchase was made at a negative price. By the same token, there were times
when Idaho Power sold power and had to pay someone to take it. These are rare, but real
events. AURORA does not have the capacity, or at least the input data, that would model
such transactions on even a rare basis.
RECOMMENDATIONS
The Commission canot expect the AURORA model to be perfect. However, it
should expect the AURORA model to take into account general conditions that are
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS-8
known, measurable and occur on IPC's system. It does not satisfactorily do that. Should
the Commission allow the Company's full requested $74.8 milion increase in base rates
to go into effect and just allow the tre-up in the PCA to address the shortcomings of the
AURORA model? The ratepayers would say-NO. Why should the ratepayers pay too
much for "uncontested" model erors and then be refuded only 95% of the difference
though the PCA?
The LIP A proposes that since AURORA canot adequately model many of the
lower cost aspects ofIdaho Power's base NPSE, that the base NPSE should be set lower
than that proposed by the model and then let the Company pick up 95% of any shortfall
in the PCA. Given the minimum of a $26 milion challenge by the Oregon Staff to the
Company's proposed base NPSE, and the obvious discrepancies and counter-intuitive
AURORA model results, lIP A recommends that the Commission authorize an increase
no greater than $35 milion and hold any fuer increases until after there has been a full
evidentiar review of the many issues that suround Idaho Power's requested base NPSE.
In conclusion, LIP A has concerns about the prudency of Idaho Power's modeled base
NPSE that have not been resolved in the compressed time frame of this case. The LIP A
requests pursuant to Rule of Procedure 203 that the Commission order that a hearng,
workshop, or some other forum be convened to allow the lIP A and other interested
paries more time to review the prudency ofIPC's modeled power costs. In making this
request, the lIP A is not seeking to delay or postpone implementation of a level of the
NPSE that it believes may be prudent ($35 milion). Rather, the LIP A wants to continue
to have a forum to review the power costs included in the AURORA modeL.
IDAHO IRRGATION PUMERS ASSOCIATION, INC.'S
COMMENTS-9
&
DATED this 11th day of March, 2010.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By
S N, Attorney for
Idaho I' tOn Pumpers
Association, Inc.
IDAHO IRRGATION PUMERS ASSOCIATION, INC.'S
COMMENTS - 10
. .
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 11 th day of March, 2010, I sered a tre,
correct and complete copy of the foregoing document, to each of the following, via the
method so indicated:
Jean D. Jewell, Secretar
Idaho Public Utilities Commission
P.O. Box 83720
472 W. Washington Street
Boise, Idaho 83720-0074
j jewell(ßuc.state.id. us
(_ x ~ Via Hand Deliver
Baron L. Kline
Lisa D. Nordstrom
Idaho Power Company
P.O. Box 70
Boise, Idaho 83720-0070
bkline(iidahopower.com
lnordstrom(iidahopower.com
(_x~ Via E-Mail
(_x~ Via U.S. Mail/Postage Prepaid
Gregory W. Said
Idaho Power Company
P.O. Box 70
Boise, Idaho 83720-0070
swright(iidahopower.com
gsaid(iidahopower.com
(_x~ Via E-Mail
Lx~ Via U.S. Mail/Postage Prepaid
Dr. Don Reading
6070 Hil Road
Boise, ID 83703
dreading(imindspring.com
Lx~ Via E-Mail
(_x~ ViaU.S. Mail/Postage Prepaid
Peter J. Richardson
Gregory Adams
Richardson & O'Lear
515 N. 17th Street
P.O. Box 7218
Boise, ID 83702
peter(irichardsonandolear.com
greg(irichardsonandoleary.com
(_x~ Via E-Mail
(_x~ Via U.S. Mail/Postage Prepaid
~~ERICLO SEN
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S
COMMENTS - 11