20140307Compliance Filing 2013.pdf

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An IDACORP Company
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LISA D. NORDSTROM
Lead Counse!
March 7,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-12-09
Compliance Filing - Boardman Power Plant Annual Review (2013)
Dear Ms. Jewell:
Pursuant to ldaho Public Utilities Commission Order No. 32549 in Case No.
IPC-E-12-09, ldaho Power Company hereby submits its Boardman Power Plant
Annual Review for the year ending 2013.
lf you have any questions regarding this filing, please contact Courtney Waites at
208-388-5 61 2 or [e-mail].
Sincerely,
X,*!fl"ur.-*,
Lisa D. Nordstrom
LDN:kkt
Enclosurecc: Service List
Greg Said
M File
Legal File
BOARDMAN POWER PLANT ANNUAL REVIEW
FOR THE YEAR ENDING 2013
March 7, 2014
I. INTRODUCTION
Pursuant to the ldaho Public Utilities Commission ("Commission") Order Nos.
32457 (Case No. IPC-E-11-18) and 32549 (Case No. IPC-E-12-09), ldaho Power
Company ("ldaho Powe/' or "Company") has completed its annual update to the
Boardman Power Plant ("Boardman") levelized revenue requirement and review of the
Boardman Balancing Account for 2013. The purpose of this report is to provide the
Commission with (1) an updated levelized revenue requirement calculation describing
actual investments made during the prior calendar year and rationale for any change in
the forecast of investments that will be made and (2) a revenue collection worksheet
that tracks the over- or under-collection of the previous yea/s collections. Because the
results of this annual review demonstrate that there is not a material difference between
associated revenue from current rates and the updated Boardman levelized revenue
requirement, and because any such differences are tracked within the Boardman
Balancing Account, the Company is not recommending a rate change as part of this
report.
II. BACKGROUND
On September 26, 2011, ldaho Power filed an application with the Commission
requesting an order (1) accepting the Company's accounting and cost recovery plan for
the early shutdown of Boardman and (2) allowing the Company to establish a balancing
account to track shutdown-related costs and benefits (Case No. IPC-E-11-18). ln
February 2012, the Commission issued Order No. 32457 authorizing the Company to
establish a balancing account to track the incrementa! costs and benefits associated
Page 1 of8
with the early shutdown of Boardman. ldaho Power will incur costs associated with (1)
a return on undepreciated capital investments at Boardman until its shutdown, (2) the
accelerated depreciation associated with Boardman investments, and (3)
decommissioning costs related to the Boardman shutdown. Under this approach, the
Company would replace the base rate revenue recovery associated with the Company's
existing investment in Boardman with a levelized revenue requirement that is tracked in
the Boardman Balancing Account. The Boardman Balancing Account smoothes
revenue requirement impacts of the early Boardman retirement over the remaining
years of the plant's Iife and allows full recovery of Boardman-related costs by Boardman
life end.
On February 15, 2012, ldaho Power requested authority to increase rates to
begin recovery of the levelized revenue requirement associated with Boardman (Case
No. IPC-E-12-09). The Commission issued Order No. 32549 on May 17, 2012,
authorizing implementation of the cost recovery approach approved in Order No. 32457
and increasing the Company's annua! revenue requirement by $1,525,501 effective
June 1,2012, to reflect the new levelized Boardman revenue requirement.
On March 12, 2013, ldaho Power filed its Boardman Power Plant Annual
Review for the Year Ending 20'12. The Company did not request to adjust rates at that
time and committed to continue to review the Boardman Balancing Account annually
and update the Boardman levelized revenue requirement.
III. THE LEVELIZED REVENUE REQUIREMENT CALCULATION
The revenue requirement calculation approved by Order No. 32457 includes
the return associated with Boardman capita! investments net of accumulated
depreciation forecasted through the remaining life of Boardman, the costs of
accelerating the depreciation of the Boardman plant items, and the decommissioning
Page 2 of 8
costs associated with the shutdown of Boardman. Each of these revenue requirement
components are subsequently "levelized" by calculating the present value of each of the
individual items and converting the values into an annuity or level payment stream from
customers over the remaining life of Boardman using a return on equity (.ROE') of 9.5
percent, as approved in Order No. 32457. The 9.5 percent ROE corresponds with the
ROE threshold for accelerated amortization of accumulated deferred investment tax
credits approved by Order No. 32424 (Case No. IPC-E-'11-22). The levelized revenue
requirement calculation can be separated into three components: (1) the revenue
requirement on existing investments as of May 31, 2012, prior to when the Boardman
Balancing Account was established; (2) the revenue requirement on incremental
investments after May 31, 2012, after the Boardman Balancing Account was
established; and (3) the revenue requirement associated with future decommissioning
and offsetting salvage costs.
Revenue Requirement on Existino lnvestments. The revenue requirement
component related to existing investments is based on the Boardman-related plant
balances in effect prior to the establishment of the Boardman Balancing Account or
existing investments at May 31 , 2012. !n Case No. IPC-E-12-09, the approved
accelerated depreciation expense was based on a net plant balance that included
actual plant values as of December 31, 2011 , and forecasted reserve balances through
May 31 , 2012. During the review of the Boardman Balancing Account for 2012, ldaho
Power updated the revenue requirement on existing investment components to include
actual plant balances as of May 31 ,2012. For actual Boardman investments as of May
31, 2012, the total levelized revenue requirement, including incremental depreciation
expense associated with the 2O2O shutdown, is approximately $3.7 million on an ldaho
Page 3 of 8
jurisdictional basis. This component of revenue requirement remains constant through
the remaining life of Boardman.
Revenue Requirement on lncremental lnvestments. The revenue
requirement component related to incremental investments captures all plant
investments made at Boardman after May 31 , 2012, or when the Boardman Balancing
Account was established. Although the Environmental Protection Agency has approved
Portland Genera! Electric's Boardman shutdown plan with coal-fired operations ceasing
on December 31 ,2020, required investments have been made in emissions controls at
the plant resulting from compliance with the Best Available Retrofit Technology ll
("BART II") standards in addition to normal maintenance repairs required to keep the
plant operational. ldaho Power has completed most of the emission controls upgrades
and expects routine capital expenditures for repairs throughout the plant's remaining
life.
This year's update to the revenue requirement on incremental investments
includes actual capital investments made from January 1, 2013, through December 31 ,
2013, and an update to the Boardman capital expenditures forecast for 2014 through
2020. The levelized return on the actual and forecasted incremental investments and
the associated depreciation expense is approximately $905,000 on an ldaho
jurisdictional basis.
The largest portion of the capital investments made in 2013, approximately
$500,000, came from investments for the replacement of obsolete and unsupported
variable frequency drives that are a part of the draft fans and an emergency repair to
cold reheat piping. Another investment of approximately $200,000 was related to the
expansion of the shop warehouse. The shop provides needed work space for
equipment repair and overhaul, and allows plant personnel to perform the necessary
Page 4 of 8
maintenance activities to ensure that the plant remains operational through the
remaining life of the plant. This expansion was referenced in the review of the
Boardman Balancing Account for 2012 because the project was near completion and
was a significant investment in Construction Work in Progress. An additional
investment of approximately $100,000 was made to upgrade the fire protection, fire
detection, and HVAC systems. The remaining dollars were for routine maintenance
items.
ldaho Powe/s levelized revenue requirement calculation approved in Case
No. IPC-E-12-09 included an estimated $2.61 million in plant investments at Boardman
in 2013; however, actual plant investments made at Boardman in 2013 totaled
approximately $1.3 million. The difference between forecasted 2013 investments and
actual 2013 investments is primarily driven by timing differences. Approximately $2.8
million of plant investments made in 2013 did not "close to plant" prior to December 31,
2013. The majority of these investments were for sulfur dioxide controls, upgrading to a
dry sorbent injection technology. As a result, this amount has been added to the capital
additions forecast for 2014.
The capita! additions forecast for 2014 through 2O2O did not change
significantly from last yea/s Boardman Balancing Account review. An overall decrease
of approximately $650,000 in forecasted plant additions in 2014 through 2016 is
expected with no change from 2016 through 2O2O. The decrease in 2014 is a result of
routine maintenance items that were not needed as wel! as a small project that was
moved to the 2015 forecast.
Revenue Requirement on Decommissionino and Salvaoe Costs. ldaho
Power estimated its share of the decommissioning and salvage costs by applying the
Company's 10 percent ownership percentage to the decommissioning study performed
Page 5 of 8
by Black & Veatch for Portland General Electric. Because a new study has not been
performed since approva! of the Company's levelized revenue requirement in Case No.
IPC-E-12-09, no updates have been made to the decommissioning costs and expected
salvage. The total included in the levelized revenue requirement calculation is
approximately $505,000 on an ldaho jurisdictional basis.
Attachment No. 1 details the derivation of the updated levelized revenue
requirement and the ldaho jurisdictional share of the revenue requirement. The
following is a summary of the ldaho jurisdictional levelized revenue requirement
computation based on the sum of the updated components:
Existing investments
I ncremental investments
$3,694,723$ 904,527
Decommissioninq and salvaqe costs $ 505.053
Updated levelized revenue requirement $5,104,302
With the approval of an incremental revenue requirement of $1,525,501,
Order No. 32549 increased the Boardman-related revenue requirement in base rates to
$5,174,794 on an ldaho jurisdictional basis. The difference between the updated
levelized revenue requirement and the current levelized revenue requirement amount
for Boardman is a negative $70,492 ($5,104,302 - $5,174,794 = ($70,492)). Based on
updated plant investment data, the Company's quantification of the levelized revenue
requirement associated with the early shutdown of Boardman is slightly less than
previously calculated.
IV. THE TRACKING OF REVENUE COLLECTIONS
ln Case No. IPC-E-12-O9, the Company proactively committed to tracking (1)
the monthly deviations between forecast revenue collection and actual revenue
collection and (2) deviations between existing levelized revenue requirement
calculations and updated levelized revenue requirement calculations. Order No. 32549
approved an incremental annual revenue requirement of $1,525,501 effective June 1,
Page 6 of 8
2012, and ldaho Power adjusted base rates accordingly using forecasted annual sales
of 13,172,433 megawatt-hours. Attachment No. 2 details the tracking of the monthly
deviations between the forecasted revenue collections and actual revenue collections.
From January 1, 2013, through December 31, 2013, actual revenue collections were
slightly higher than forecasted revenue collections, resulting in a 2013 true-up of
approximately $85,000.
As stated previously, the deviation between the updated levelized revenue
requirement and the existing levelized revenue requirement is a negative $70,492,
creating a true-up of $70,492 related to 2013. ln an attempt to smooth adjustments to
customers' rates, the Company will spread the true-up of both the deviations of the
levelized revenue requirement and deviations of revenue collections over the remaining
life of Boardman (i.e., the remaining seven years). This results in a single-year true-up
component of approximately $10,000 and $12,000, respectively. The 2013 single-year
true-up is added to the 2012 single year true-up resulting in a deviation of the levelized
revenue requirement of approximately $28,000 and a deviation of revenue collections of
approximately $16,000. Attachment No.3 details these quantifications. The total true-
up related to the tracking of monthly deviations between forecast and actual revenue
collection and the deviations between existing and updated levelized revenue
requirement calculations is approximately negative $44,000.
Attachment No. 1 includes a summary of the updated levelized revenue
requirement calculation including the true-up of prior years' revenue collection. The
change in the annua! revenue requirement associated with the updated Ievelized
revenue requirement calculation and the true-up of deviations associated with prior
years' collection is a decrease of $114,706.
Page 7 of 8
V. RECOMMENDATION
Because the difference in the annual revenue requirement of a negative
$114,706 is quite small as a percentage of ldaho Powe/s ldaho jurisdictional retail
revenues, and because any such differences are tracked through the Boardman
Balancing Account, the Company is not requesting to adjust base rates at this time.
lnstead, the Company recommends that the difference in the annual revenue
requirement associated with Boardman and any true-up recorded in the Boardman
Balancing Account remain in the balancing account to offset future positive differences
or for future refund. ldaho Power will continue to annually review the Boardman
Balancing Account and update the Boardman Ievelized revenue requirement.
Page 8 of 8
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-12-09
IDAHO POWER COMPANY
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 7th day of March 2014 I served a true and
correct copy of the BOARDMAN POWER PLANT ANNUAL REVIEW FOR THE YEAR
ENDING 2013 upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Karl T. Klein
Deputy Attomey General
ldaho Public Utilities Commission
47 2 W est Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-007 4
X Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email [e-mail]
CERTIFICATE OF SERVICE