20150310Compliance Filing 2014.pdf

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An IDAOORP Comparry
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LISA D. NORDSTROi'I
Lead Counsel
I nordstrcm @idahopower. com
March 10,2015
iiii i..r-T\
UTILITIES CC
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-12-09
Compliance Filing - Boardman Power Plant Annual Review (2014)
Dear Ms. Jewel!:
Pursuant to ldaho Public Utilities Commission Order No. 32549 in Case No.
IPC-E-12-09, ldaho Power Company hereby submits an origina! and four (4) copies
of its Boardman Power Plant Annual Review for the year ending 2014.
lf you have any questions regarding this filing, please contact Courtney Waites at
208-388-5 612 or cwaites@ idahooower. com.
Sincerely,
X** 0fr^ur,r*
Yir"'o. NordstromL
LDN:kkt
Enclosures
?$151*&3 I
BOARDMAN POWER PLANT ANNUAL
FOR THE YEAR ENDING 2014
March 10,2015
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!. INTRODUCTION
Pursuant to the Idaho 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 2014. The purpose of this report is to provide the
Commission with (1) an updated levelized revenue requirement calculation along with a
description of actual investments made during the prior calendar year and rationale for
any change in the forecast of investments to be made in the future, (2) a description of
and adjustment for the benefits associated with the Asset Purchase Agreement ("APA")
with Portland General Electric ("PGE"), and (3) a revenue collection worksheet that
tracks the over- or under-collection of the previous yeads revenue. 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
hr 28
Page 1 of8
February 2012, the Commission issued Order No. 32457 authorizing the Company to
establish a balancing account to track the incremental costs and benefits associated
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 then current non-levelized 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 life and provides an
opportunity for 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 annual 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 Annua!
Review for the Year Ending 2012. 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. Similarly, on March 7,2014,
ldaho Power filed its Boardman Power Plant Annual Review for the Year Ending 2013
and did not request to adjust rates.
Page 2 of 8
III. THE LEVELIZED REVENUE REQUIREMENT CALCULATION
The revenue requirement calculation approved by Order No. 32457 includes
the retum associated with the Boardman capital 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
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 Nos. 32424 and 33149 (Case Nos. IPC-E-11-22 and IPC-E-
14-14). 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. ln 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 reserye balances through
May 31 , 2012. During the review of the Boardman Balancing Account for 2012, Idaho
Page 3 of 8
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
jurisdictiona! 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
PGE's Boardman shutdown plan with coal-fired operations ceasing on December 31,
2020, required investments have been made in emission controls at the plant resulting
from compliance with the Best Available Retrofit Technology ll (BART ll) standards in
addition to normal maintenance repairs required to keep the plant operational. ldaho
Power has completed all anticipated emission controls upgrades and expects routine
capital expenditures for repairs throughout the plant's remaining !ife.
The levelized revenue requirement associated with incremental investments
at Boardman is approximately $800,000 on an ldaho jurisdictional basis. This yeads
update to the revenue requirement on incremental investments includes actual capital
investments made from January 1,2014, through December 31,2014, Iess the net-
book-value of plant-in-service reductions associated with the sale of a portion of certain
facilities at Boardman to PGE pursuant to the APA between the parties. The APA
provided for the conveyance and sale from ldaho Power to PGE of a partial interest in
certain Boardman components and common facilities necessary or convenient to the
operation of PGE's Carty Generation Station, collectively refened to as "Shared
Page 4 of 8
Facilities". The revenue requirement on incremental investments also includes an
update to the Boardman capital expenditures forecast for 2015 through 2020. Total
capital additions for 2014 were approximately $2.8 million. This includes nearly $3.2
million in capital additions, less $356,145 associated with the net-book-value of the
Shared Facilities sold to PGE.
The largest portion of the capital investments made in 2014, approximately
$2.6 million, came from investments for sulfur dioxide controls, upgrading to a dry
sorbent injection technology. These investments were referenced in the review of the
Boardman Balancing Account for 2013 because the project was near completion and
was a significant investment in Construction Work in Progress. Another investment of
approximately $160,000 was for fire protection equipment while remaining dollars were
for routine maintenance items and minor tools and equipment. The difference between
forecasted 2014 investments and actual 2014 investments was less than $150,000.
The capital additions forecast for 2015 through 2020 did not change
significantly from last yea/s Boardman Balancing Account review. An overall decrease
of approximately $400,000 in forecasted plant additions in 2015 through 2017 is
expected with no change from 2018 through 2020. The majority of the decrease is in
2015 and is a result of a determination that some routine maintenance items would not
be needed.
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
by Black & Veatch for PGE. Because a new study has not been performed since
approval 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
Page 5 of 8
total included in the levelized revenue requirement calculation is approximately
$505,000 on an Idaho 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
$3,694,723$ 800,459
Decommissionino and salvaoe costs $ 505.053
Updated levelized revenue requirement $5,000,235
With the approva! 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
Ievelized revenue requirement and the current levelized revenue requirement amount
for Boardman is a negative $174,559 ($5,000,235 - $5,174,794 = ($t74,559)). 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.
The purchase price associated with the aforementioned APA with PGE for the
purchase of Shared Facilities at Boardman was $620,205, resulting in a gain of
$264,060 on a total system basis. ldaho Power views the Boardman Balancing Account
as the appropriate mechanism for recording the gain and has computed the annua!
credit to customers by converting the gain into an annuity or level payment stream over
the remaining life of the plant, or six years. The ldaho jurisdictional portion of this
levelized annua! payment is $50,712 and is an offset to the annua! revenue requirement
impact to customers, as shown on Attachment No. 1. Attachment No. 2 is a copy of the
Page 6 of 8
final accounting entries associated with the conveyance of the property interests at
Boardman.
IV. THE TRACKING OF REVENUE GOLLECTIONS
AND REVENUE REQUIREMENTS
ln Case No. IPC-E-12-09, 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 incrementa! annual revenue requirement of $1,525,501 effective June 1,
2012, and ldaho Power adjusted base rates accordingly using forecasted annual sales
of 13,172,433 megawatt-hours. Attachment No. 3 details the tracking of the monthly
deviations between the forecasted revenue collections and actual revenue collections.
From January 1, 2014, through December 31, 2014, actual revenue collections were
slightly higher than forecasted revenue collections, resulting in a 2014 true-up of
approximately negative $43,000. !n an attempt to smooth adjustments to customers'
rates, the Company will spread the true-up of the deviation of the revenue collections
over the remaining life of Boardman (i.e., the remaining six years), resulting in a single-
year true-up of approximately negative $7,000. Applying this amount to the single-year
true-ups for 2012 and 2013 produces a total deviation of revenue collections of
approximately negative $24,000.
As stated previously, the deviation between the updated levelized revenue
requirement and the existing levelized revenue requirement is a negative $174,559
creating a true-up of negative $450,945 since establishment of the Boardman Balancing
Account on June 1, 2012. Smoothing the adjustment to the annual revenue
Page 7 of 8
requirements by spreading the deviation over the remaining six years of Boardman's
life, results in a true-up of approximately negative $75,000. Attachment No. 4 details
these quantifications.
Attachment No. 1 presents a summary of the updated levelized revenue
requirement calculation as compared to the original Boardman levelized revenue
requirement used to establish current base rates along with other tracking adjustments.
As can be seen on Attachment No. 1, the net change in the annual revenue requirement
associated with the updated levelized revenue requirement calculation is negative
$174,559. The levelized gain associated with the sale of the Shared Facilities to PGE is
negative $50,712. The true-up of prior years' revenue collections is negative $23,514.
And finally, the true-up of the prior years' levelized revenue requirements is negative
$75,157. The sum of each of these categories suggests the updated annual revenue
requirement for Boardman is $323,943 below the level currently reflected in base rates.
V. RECOMMENDATION
Because the difference in the annual revenue requirement of a negative
$323,943 is quite small as a percentage of ldaho Power's ldaho jurisdictiona! 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 to customers. ldaho Power will continue to annually review the
Boardman Balancing Account and update the Boardman levelized revenue requirement.
Page 8 of 8
BEFORE THE
IDAHO PUBLIG UTILITIES COMMISSION
cAsE NO. IPC-E-I2-09
IDAHO POWER GOMPANY
ATTACHMENT NO. 1
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-12-09
IDAHO POWER COMPANY
ATTACHMENT NO.2
Account
1 08000 - Accum Prov F/Depr-EPIS
101000- Electric Plant in Service
Record retirement of electric plant sold.
102000 - Eleclric Plant Purchsd or Sold
1 08000 - Accum Prov F/Depr-EPIS
Transfer cost of assets sold.
1 08000 - Accum Prov F/Depr-EPIS
102000 - Plant Purchsd or Sold
Transfer accumulated depreciation on assets sold.
131201 - Cash
1 02000 - Electric Plant Purchased or Sold
Reoord cash received for electric plant sold.
102000 - Electric Plant Purchased or Sold
182493- Boardman balancing account (lD)
182494- Boardman balancing account (OR)
Record cash received for electric plant sold.
IDAHO POWER COMPANY
FINAL JOURNAL ENTRIES
Boardman Asset Purchase Agrcement
Debit Gredit
2,281,702
2,281,702
2,281,702
2,281,702
1,925,557
1,925,557
620,205
620,205
264,060
252,560
11,500
BEFORE THE
IDAHO PUBLIC UTILITIES GOMMISSION
GASE NO. IPC.E.12.O9
IDAHO POWER COMPANY
ATTAGHMENT NO.3
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IDAHO PUBLIG UTILITIES GOMMISSION
cAsE NO. IPC-E-12-09
IDAHO POWER COMPANY
ATTACHMENT NO.4
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