20120215final_order_no_32457.pdf

Office of the Secretary
Service Date
February 15,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )COMPANY’S REQUEST FOR )CASE NO.IPC-E-l1-18
ACCEPTANCE OF ITS REGULATORY )PLAN REGARDING THE EARLY )SHUTDOWN OF THE BOARDMAN POWER )ORDER NO.32457
PLANT )
On September 26,2011,Idaho Power Company applied to the Commission for an
Order:(1)accepting the Company’s accounting and cost recovery plan for the early shutdown of
the Boardman Power Plant:and (2)allowing the Company to establish a balancing account to
track shutdown-related costs and benefits.On October 27,2011,the Commission issued a
Notice of Application/Modified Procedure setting a January 13.2012 comment deadline.See
Order No.32387.
On December 2,2011,the Company filed supporting testimony from its Senior
Manager of Cost of Service,Timothy Tatum.Staff reviewed the Company’s Application and
testimony and filed comments recommending that the Commission accept Idaho Power’s
proposal with certain qualifications.Staffs comments were the only comments in the case.
With this Order,the Commission approves Idaho Power’s Application.
THE APPLICATION
According to Idaho Power’s Application,Boardman is a single-generating unit,coal-
fired power plant in north-central Oregon.Idaho Power owns 10%(or 58.5 MW net dependable
capacity)of Boardman.which entitles Idaho Power to about 50 aMW.Application at 1.
Portland General Electric (“PGE”)owns 65%of Boardman and operates the plant.Id.
Idaho Power notes that Boardman is subject to the federal Clean Air Act,Oregon’s
Regional Haze Plan,and Oregon’s Utility Mercury Rule.These laws and rules require that
Boardman be fitted with various emissions controls by certain date.Id.at 2-4.According to
Idaho Power,PGE analyzed the various emissions control technologies and deadlines and
decided that closing Boardman in 2020 would strike ‘a good balance between the key risk
drivers of natural gas and CO2 prices,while maintaining system reliability at a relatively low
cost.”Id.at 4-6 (quoting PGE 2009 IRP Addendum,p.103).The Oregon Public Utility
Bank of America Leasing and Power Resources Cooperative own the remaining 15%and 10%,respectively.
ORDER NO.32457 1
Commission (OPUC)and the Environmental Protection Agency have accepted PGE’s 2020
closure plan.Id.at 10,16.
Idaho Power says PGE’s Boardman 2020 closure plan increases Idaho Power’s
revenue requirements for accelerated depreciation expense,additional plant investment related to
pollution controls,and decommissioning costs.id.at 16.The Company proposes to respond to
the 2020 closure by:(1)performing a depreciation study and asking for new depreciation rates
for all plant investment,including Boardman,to become effective June 1.2012:(2)establishing
a balancing account to track closure-related costs and benefits:and (3)asking the Commission,
in early 2012,to authorize the Company to increase customer rates to recover Boardman
decommissioning costs;the rates would take effect June 1,2012 (coincident with the
depreciation rate change).Id.at 10.
Idaho Power says it can calculate the incremental depreciation expense for current
investment based upon the shutdown tirneline;however,it does not yet know the specific level of
investment in capital additions,actual decommissioning costs,and potential salvage proceeds.
Idaho Power thus proposes creating a balancing account to allow the Company flexibility for the
timing and recovery of the incremental revenue requirement.The balancing account will help
the Company track revenues and expenses associated with the Boardman closure and ensure that
customers only pay for actual expenditures.Id.
Idaho Power says Accounting Standards Codification (ASC)980-360-3 5 indicates
that when Idaho Power abandons an operating asset,the Company must remove the asset’s cost
from plant-in-service,establish that cost as a regulatory asset,and recognize any disallowed
amount as a loss.Id.However,the Company believes closing Boardman involves a downward
adjustment to Boardman’s useful life rather than an abandonment of the plant.Boardman’s
useful life was adjusted in 2001 from an original end-of-life date of 2015 to 2020,and in 2008 to
an end-of-life date of 2030.The Company says that if it does not collect the Boardman-related
balances by the December 31,2020 end-of-life date,it may need to account for Boardman as an
abandonment,which would trigger impairment treatment under ASC 360.Id
Idaho Power estimated its revenue requirement using a 2012 test-year that included
impacts from:(a)the accelerated depreciation of Boardman plant accounts;and (b)increased
decommissioning costs.Id.The Company based incremental depreciation expense on expected,
December 31.2011 plant balances.It calculated decommissioning costs using its 10%share of
ORDER NO.32457
the costs,which is an approach PGE’s consultants (Black &Veatch)found reasonable.Id.at 9,
14-15.The Company’s Application preliminarily estimated a total system.$1.45 million
revenue deficiency and a $1.38 million revenue deficiency for Idaho.Id.at 15.Company
witness Taturn’s testimony respectively updates these numbers to $1.6 million and $1.5 million.
See Taturn Direct at 10-1 1.
STAFF COMMENTS AND RECOMMENDATIONS
Staff reviewed the Company’s Application and testimony and various Boardman
related administrative and civil proceedings.2 Based on this review,Staff recommended that the
Commission approve the Company’s proposed regulatory accounting and cost recovery plan and
balancing account.Staff Comments at 5-6.
Staff summarized the Company’s estimated,incremental revenue requirement impact
based on the Company’s share of cost as follows:
Revenue Accelerated Depreciation New Investment Net Decommissioning Total
Requirement Impact Existing Plant Pollution Controls Costs (minus salvage)
Total $36,167,344 $11,716,126 $5,917,900 $53,801,370
Levelized (annual)$4,147,050 j$125234O $499,363 $5,898,752
According to Staff,netting the levelized,total revenue requirement impact against the $4.3
million in Boardman-related revenue requirements currently in rate base yields an annual net
revenue system impact to Idaho Power customers of about $1.6 million.The impact to Idaho
customers (using the 95%Idaho jurisdictional allocation)is about $1.5 million.Id.at 5.This is
about a 0.172%overall increase based on a current overall revenue requirement of $870.0
million.Id.
Staff confirmed the Company must bear certain Boardman-related expenses.Staff
agrees that the Company should track these expenses through a balancing account,levelize
incremental revenue requirements across the plant’s remaining life for rate recovery purposes,
and ultimately initiate rate recovery proceedings.Id.at 6.Staff said levelizing costs will
stabilize rates and ensure that the customers who benefit from operating Boardman bear the
remaining costs.Id.Staff noted that the proposed balancing account and regular rate “true-ups”
will guarantee that the Company recovers its costs and earns its overall rate of return on
2 Staffs review included:(I)ODEQ proceedings to determine requirements for Boardman to comply with thefederalRegionalHazerulesandOregon’s Utility Mercury rule;(2)litigation between PGE,the Sierra Club,andotherinterestedpartiesregardingBoardmanthatresultedinaconsentdecree(U.S.District Court for the District ofOregon:Civil Case No.:3 :08-cv-0 1136-HA):and (3)Company testimony and information supplied in this case.
ORDER NO.32457 3
Boardman;nevertheless,Staff believes the advantages of customer rate stability and cost/benefit
matching outweigh concerns about allowing a guaranteed return.Id.at 7.
However,in light of the Company’s reduced recovery risk,Staff recommended that
the Commission require the Company to use a lower,9.5%return on equity (ROE)to calculate
the initial,levelized Boardman recovery amount.3 Staff said the Company’s future application to
recover accelerated Boardman depreciation costs should reflect this reduced risk.Further,the
Commission should adjust the ROE in each subsequent rate case using the ADITC trigger
calculation where the new “threshold would be 95%of the newly established ROE”.Id.(citing
Order No.32424 at 4).
Staff recommended that the Company tile annual reports detailing all costs booked to
the Boardman account.Staff also recommended that the Company’s application to recover
accelerated Boardman costs in rates include a sample report describing the information the
Company will submit to the Commission each year.Id.
FINDINGS A1D DISCUSSION
The Commission has jurisdiction over Idaho Power,an electric utility,and the issues
in this case under Title 61 of the Idaho Code and the Commission Rules of Procedure,IDAPA
31.01.01.000 et seq.
The Commission has reviewed the filings in this case,including the Company’s
Application,testimony,and Staffs comments.Based on that review,the Commission finds that
the Company’s Application presents a reasonable plan for responding to the 2020 closing of the
Boardman facility.
The Commission finds that it is appropriate for the Company to track Boardman
related costs and benefits through a balancing account,levelize incremental revenue
requirements,and initiate rate recovery proceedings.This will help stabilize customer rates and
increase the likelihood that the customers who benefit from Boardman’s continuing operation
will pay the associated costs.The Commission finds it reasonable to offset the Company’s
resulting,reduced recovery risk with a 9.5%ROE for purposes of calculating the initial,
levelized Boardman recovery amount,and to subsequently adjust the ROE using the ADITC
trigger calculation.The Commission also directs the Company to file annual reports detailing
This coincides with the 9.5°/b ROE the Commission adopted as the accumulated deferred investment tax credit(ADITC)trigger in Order No.32424,Case No.IPC-E-11-22.
ORDER NO.32457 4
amounts booked to the balancing account and to submit a sample report when it files for rate
recovery.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s regulatory accounting and
cost recovery plan for the early shutdown of Boardman.including the Company’s request to
establish a balancing account to track associated costs and benefits,is approved.
IT IS FURTHER ORDERED that the Company shall use a 9.5%ROE to calculate
the initial levelized Boardman recovery amount.The ROE shall thereafter adjust as discussed
above.
IT IS FURTHER ORDERED that the Company shall file annual reports detailing all
amounts booked to the Boardman account.The Company must file a sample report when it files
its request to recover accelerated Boardman costs in rates.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)may petition for reconsideration within twenty-one (21)days of the
service date of this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626 and 62-619.
ORDER NO.32457 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /5
day of February 2012.
L
PAUL KJELL DER,PRESIDENT
\/I
MACK A.REDFORDCOMMISSIONER
}4L J&ZL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
7 /1 7 1/5•t Jj
YeanD Jewell
Commission Secretary
O:IPCE-1 1-18kk2
ORDER NO.32457 6