HomeMy WebLinkAbout20170317Compliance Filing 2016.pdfKTM;l.:1':lVil)An TDACORP Companv
LISA D. NORDSTROM
Lead Counsel
I nordstrom@idahopower.com
March 17,2017
VIA HAND DELIVERY
Diane Hanian, Secretary
Idaho Public Utilities Commission
47 2 W est Washington Street
Boise, Idaho 83702
Case No. IPC-E-12-09
Compliance Filing - Boardman Power Plant Annual Review (2016)
Dear Ms. Hanian
Pursuant to ldaho Public Utilities Commission Order No. 32549 in Case No.
IPC-E-12-O9,ldaho Power Company hereby submits an original and four (4) copies of
its Boardman Power Plant Annual Review for the year ending 2016. !n addition, five (5)
copies of a disk containing electronic files of the attachments and workpapers are also
enclosed.
lf you have any questions regarding this filing, please contact Courtney Waites
at (208) 388-5612 or cwaites@idahopower.com.
Sincerely,
Lisa
LDN:kkt
Enclosures
cc: Service List
Re
BOARDMAN POWER PLANT ANNUAL REVIEW
FOR THE YEAR ENDING 2016
March 17,2017
I. INTRODUCTION
Pursuant to ldaho Public Utilities Commission ("Commission") Order Nos. 32457
(Case No. IPC-E-11-18) and 32549 (Case No. IPC-E-12-O9), 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 2016. 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 and (2) a revenue collection
worksheet that tracks the over or under collection of the previous yea/s revenue. While
the results of this annual review demonstrate that there is a difference between
associated revenue from cunent rates and the updated Boardman levelized revenue
requirement, 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 incremental costs and benefits associated
Page 1 of9
with the early shutdown of Boardman. ldaho Power will incur costs associated with (1)
a retum on undepreciated capital investments at Boardman unti! 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 cunent 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 Annual 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, ldaho Power filed its Boardman
Power Plant Annual Review for the years ending 2013, 2014, and 2015 and did not
request to adjust rates.
Page 2 of 9
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 retum 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
Page 3 of 9
actual plant values as of December 31,2011, and forecasted reserve balances through
May 31 ,2012. During the review of the Boardman Balancing Account tor 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 levellzed revenue requirement, including incremental depreciation
expense associated with the 2020 shutdown, is approximately $3.7 million on an ldaho
jurisdictional basis. This component of revenue requirement will remain constant
through the remaining life of Boadman.
Revenue Requirement on lncremental lnvestments. The revenue requirement
component related to incrementa! investments captures all plant investments made at
Boardman after May 31 , 2012, or when the Boardman Balancing Account was
established. The Environmental Protection Agency has approved Portland General
Electric Company's ('PGE") Boardman shutdown plan with coal-fired operations
ceasing on December 31 , 2020, and required investments were made in emission
controls at the plant as a result of compliance with the Best Available Retrofit
Technology !l (BART l!) standards in addition to normal maintenance repairs required to
keep the plant operationa!. ldaho Power has completed all anticipated emission
controls upgrades and expects routine capital expenditures for repairs throughout the
plant's remaining Iife.
The levelized revenue requirement associated with incremental investments at
Boardman is approximately $733,000 on an Idaho jurisdictional basis. This yea/s
update includes actual capital investments made from January 1, 2016, through
December 31, 2016, and includes an update to the Boardman capital expenditures
Page 4 of 9
forecast for 2017 through 2020. Total capital additions lor 2016 were approximately
$287,000, which was lower than the forecasted 2016 amount of $377,000. The
majority of the capital investments made in 2016 were associated with routine upgrades
or replacements of items required for the continued operation of the plant, including a
refurbished pulverizer gear box, vehicles, the runoff associated with the we!! and storm
water structure, and a variable frequency drive for the dumper motors. The capital
additions forecast for 2017 through 2020 decreased by approximately $500,000
primarily due to the removal of capital costs associated with the expansion of the ash
handling and disposal area. lt was determined the project was an operation and
maintenance expense rather than capita! activity.
Revenue Requirement on Decommissionino and Salvaoe Costs. ldaho Powe/s
initial estimate of the decommissioning and salvage costs was determined by applying
the Company's 10 percent ownership percentage to the decommissioning study
performed by Black & Veatch for PGE and completed in 2011. \n2015, PGE contracted
with CH2M Hill to prepare a decommissioning, demolition, and final closure plan for
Boardman. The focus of the new plan was to provide planning guidance, rather than
detailed cost estimates. Although the plan did not provide updated cost estimates,
through the work with CH2M Hill, PGE identified three decommissioning cost elements
that could be updated: (1) the elimination of Carty reservoir removal costs as the site
will remain, (2) transmission assets that will not need to be removed, and (3) the Tower
Road extension costs will no longer be incuned. The update to the decommissioning
costs and expected salvage resulted in a decrease of approximately $714,000 in ldaho
Page 5 of 9
Powe/s share of the costs, or an updated levelized revenue requirement calculation of
approximately $446,000 on an ldaho jurisdictional basis.
Attachment 1 details the derivation of the updated levelized revenue requirement
and the Idaho jurisdictiona! 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 $3,694,723
lncremental investments $ 733,006
Decommissionino and salvaqe costs $ 445.875
Updated levelized revenue requirement $4,873,604
With the approva! of an incrementa! 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 cunent levelized revenue requirement amount
for Boardman is negative $301,190 ($+,423,604 - $5,174,794 = ($30t,190)). Based on
updated plant investment data, the Company's quantification of the levelized revenue
requirement associated with the early shutdown of Boardman is less than previously
calculated.
ln 2014, ldaho Power and PGE entered into an Asset Purchase Agreement
('APA") for the conveyance and sale 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 Facilities." The purchase
price associated with the APA 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
computed the annual credit to customers by converting the gain into an annuity or level
Page 6 of 9
payment stream over the remaining life of the plant at the time the APA was executed,
or six years. The ldaho jurisdictional portion of this levelized annua! payment is $50,712
and is an offset to the annual revenue requirement impact to customers, as shown on
Attachment 1.
IV. THE TRACKING OF REVENUE COLLECTIONS
AND REVENUE REQUIREMENTS
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, 2012, and
ldaho Power adjusted base rates accordingly using forecasted annual sales of
13,172,433 megawatt-hours. Attachment 2 details the tracking of the monthly
deviations between the forecasted revenue collections and actual revenue collections.
From January 1, 2016, through December 31, 2016, actual revenue collections were
slightly higher than forecasted revenue collections, resulting in a 2016 true-up of
approximately negative $26,000. ln addition, ldaho Power corrected the 2013 true-up
calculation; the Company identified a data entry eror in the Idaho jurisdictional sales
input for August 2013. ln 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 four years), resulting in a single-year
true-up of approximately negative $6,500 for 2016. Applying this amount to the single-
year true-ups for 2012, the revised 2013, 2014, and 2015 produces a total deviation of
revenue collections of approximately negative $38,000.
Page 7 of 9
As stated previously, the deviation between the updated levelized revenue
requirement and the existing levelized revenue requirement is negative $301,190,
creating a true-up of negative $868,631 since establishment of the Boardman Balancing
Account on June 1, 2012. Smoothing the adjustment to the annual revenue
requirements by spreading the deviation over the remaining four years of Boardman's
life results in a true-up of approximately negative $345,000. Attachment 3 details these
quantifications.
Attachment 1 presents a summary of the updated levelized revenue requirement
calculation as compared to the origina! Boardman levelized revenue requirement used
to establish cunent base rates along with other tracking adjustments. As can be seen
on Attachment 1, the net change in the annual revenue requirement associated with the
updated levelized revenue requirement calculation is negative $301,190. The levelized
revenue requirement impact of the 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
$38,402. And finally, the true-up of the prior years' levelized revenue requirements is
negative $345,114. The sum of each of these categories suggests the updated annual
revenue requirement for Boardman is $735,417 below the level cunently reflected in
base rates.
V. RECOMMENDATION
While the results of this annual review demonstrate that there is a difference in
the annual revenue requirement of negative $735,417, 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
Page 8 of 9
in the annual revenue requirement associated with Boadman 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 Ievelized
revenue requirement until the plant has ceased operations and through completion of
decommissioning activities.
Page 9 of 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 17h day of March 2017 I served a true and
conect copy of IDAHO POWER COMPANY'S BOARDMAN POWER PLANT ANNUAL
REVIEW FOR THE YEAR ENDING 2016 upon the following named parties by the
method indicated below, and addressed to the following:
Gommission Staff
KarlT. Klein
Deputy Attomey General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
X Hand Delivered
_U.S. Mail
_Ovemight Mail
_FAXX Email Karl.Klein@puc.idaho.sov
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