20190320Compliance Filing 2018.pdf

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An IDACORP Company
LISA D. NORDSTROM
Lead Counse!
[e-mail]
March 20,2019
VIA HAND DELIVERY
Diane M. Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Case No. IPC-E-12-09
Compliance Filing - Boardman Power Plant Annual Review (2018)
Dear Ms. Hanian:
Pursuant to ldaho Public Utilities Commission Order No. 32549 in Case No.
IPC-E-12-09, ldaho Power Company hereby submits an original and four (4) copies of
tts Boardman Power Plant Annual Review report for the year ending 2018. !n addition,
five (5) copies of a disk containing electronic files of the attachments and workpapers
are also enclosed.
If you have any questions regarding this filing, please contact Senior Regulatory
Analyst Courtney Waites at [phone] or [e-mail].
Sincerely,
Re
Lisa D. Nordstrom
LDN:csb
Enclosures
cc: Service List
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
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BOARDMAN POWER PLANT ANNUAL REVIEW
FOR THE YEAR ENDING 2018
March 20, 2019
!. INTRODUCTION
Pursuant to ldaho Public Utilities Commission ("Commission") Order Nos. 32457
(Case No. IPC-E-11-18) and 32549 (Case No. !PC-E-12-09), ldaho Power Company
("ldaho Power" or "Company") has completed its annual update to the Boardman power
plant ("Boardman") levelized revenue requirement and review of the Boardman balancing
account for 2018. 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 year's revenue. While the results
of this annua! review demonstrate that there is a difference between associated revenue
from current 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 with
Page 1 of 9
the early shutdown of Boardman. ldaho Powerwill 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.
!PC-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 reflectthe new levelized Boardman revenue requirement. On March 12,2013,
ldaho Power filed its Boardman Power Plant Annual Review report 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. ldaho Power has filed ils Boardman Power Plant Annual Review
each year since then and has not requested to adjust rates.
Page 2 of 9
!II. THE LEVELIZED REVENUE REQUIREMENT CALCULATION
The revenue requirement calculation approved by Order No. 32457 includes the
return 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 a forecast of 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 95
percent of ldaho Power's ROE from its most recent rate case (Case No. IPC-E-11-08).
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.
A. Revenue Requirement on Existing 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 reserve balances
Page 3 of 9
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. ln 2018, ldaho Power corrected an
error in the calculation of the present value updating the total levelized revenue
requirement, including incremental depreciation expense associated with the 2020
shutdown, to approximately $3.9 million on an ldaho jurisdictional basis. This component
of revenue requirement did not change and will remain constant through the remaining
life of Boardman.
B. Revenue Requirement on lncremental Investments.
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. 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 !! standards in addition to normal maintenance repairs required to keep the
plant operational. ldaho Power has completed allanticipated emission controls upgrades
and expects routine capital expenditures for repairs throughout the plant's remaining life.
The levelized revenue requirement associated with incremental investments at
Boardman is approximately $766,000 on an ldaho jurisdictional basis. This year's update
includes actual capital investments made from January 1, 2018, through December 31,
2018, and includes an update to the Boardman capital expenditures forecast for 2019
and2020. Total capitaladditions for2018 were approximately $153,000, which was lower
Page 4 of 9
than the forecasted 2018 amount of $182,681. The majority of the capital investments
made in 2018 were associated with upgrades or replacements of items required for the
continued safe and reliable operation of the plant, including security improvements and
the replacement of: damaged rail sections, railties, a failed dry sorbent injection blower,
and miscellaneous pumps, valves, motors, and minortools. The capitaladditions forecast
for 2019 through 2020 increased by $27,000 to include amounts associated with
miscellaneous projects under $100,000, consistent with previous forecasts and actual
capital addition activities.
C. Revenue Requirement on Decommissioninq and Salvaqe Costs.
ldaho Power'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.
ln 2015, 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 Hil!, 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 incurred. The update to the
decommissioning costs and expected salvage resulted in a decrease of approximately
$714,000 in ldaho Power's share of the costs, which equates to a levelized revenue
requirement of approximately $446,000 on an ldaho jurisdictional basis.
Page 5 of 9
ln 2018, PGE issued a request for proposal seeking an Owner's Engineer to
complete design and permitting work in preparation for decommissioning activities in
2019, including capping the ash disposal area, demolishing structures at Boardman (i.e.,
coa! handling systems), remediating the coal yard, and other selective demolition work
across the site (i.e., support buildings, features supporting coa!, coal handling, and coal
ash handling). With the results, PGE anticipates completing an updated
decommissioning cost-estimate study later in 2019. Therefore, Idaho Power has not
updated the decommissioning and salvage cost estimate at this time.
Attachment 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 Idaho jurisdictional levelized revenue requirement computation based on the sum
of the updated components:
Existing investments $3,936,546
lncremental investments $ 766,396
Decommissionino and salvaqe costs $ 445,875
Updated levelized revenuerequirement $5,148,817
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
negative $25,977 ($5,'148,817 - $5,174,794 = ($25,977)). 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, Idaho Power and PGE entered into an Asset Purchase Agreement
(.APA") for the conveyance and sale of a partial interest in certain Boardman components
Page 6 of 9
and common facilities necessary or convenient to the operation of PGE's Carty
Generation Station, collectively referred 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. Idaho Power computed the annual
credit to customers by converting the gain into an annuity or level 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 annual payment is $50,712 and is an offset to the
annual revenue requirement impact to customers, as shown in Attachment 1.
D. RevenueReMeform.
ldaho Power's income tax expenses and deferred tax liabilities included in the
Boardman levelized revenue requirement amounts and included in customer rates were
calculated in accordance with the lnternal Revenue Code of 1986. The U.S. Tax Cuts
and Jobs Act ("Tax Act'), signed into law on December 22, 2017 , amends sections of the
1986 code, most notablythe reduction in thefederal corporate incometax ratefrom 35
percent to 21 percent. All changes to the Boardman levelized revenue requirement
resulting from provisions of the Tax Act were calculated and determined with Order No.
34071 in Case No. GNR-U-18-01, the Commission's investigation into the impact of
federal tax code revisions on utility costs and ratemaking, and reflected in revenue
requirement amounts approved in that case.
IV. THE TRACKING OF REVENUE COLLECTIONS
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 actua! revenue collection and
(2) deviations between existing levelized revenue requirement calculations and updated
Page 7 of 9
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, 2018, through
December 31, 2018, actual revenue collections were slightly higher than forecasted
revenue collections, resulting in a2018 true-up of approximately negative $87,000. 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 two years), resulting in a single-year true-up of approximately negative $43,000
tor 2018. Applying this amount to the single-year true-ups for each year since 2012, the
total deviation of revenue collections is approximately negative $136,000.
As stated previously, the deviation between the updated levelized revenue
requirement and the existing levelized revenue requirement is negative $25,977.
Smoothing the adjustment to the annual revenue requirements by spreading the deviation
over the remaining two years of Boardman's life results in a true-up of approximately
negative $85,000. Attachment 3 details these quantifications.
Attachment 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 in
Attachment 1, the net change in the annual revenue requirement associated with the
updated levelized revenue requirement calculation is negative $25,977. The levelized
revenue requirement impact of the gain associated with the sale of the Shared Facilities
Page 8 of 9
to PGE is negative $50,712. The true-up of prior years' revenue collections is negative
$135,719. Finally, the true-up of the prior years'Ievelized revenue requirements is
negative $85,508. The sum of each of these categories suggests the updated annual
revenue requirementfor Boardman is $297,916 belowthe levelcurrently reflected in base
rates.
V. RECOMMENDATION
The results of this annual review demonstrate that there is a difference in the
annual revenue requirement of negative $297,916, or a benefit to customers. 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 intends
to file a request with the Commission to update customer rates as the plant nears its end
of life, to ensure the appropriate matching of rate recovery with the useful life of the plant.
Page 9 of 9
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CASE NO. IPC-E-12-09
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CERTIFIGATE OF SERVICE
I HEREBY CERTIFY that on this 20th day of March 2019 I served a true and
correct copy of IDAHO POWER COMPANY'S BOARDMAN POWER PLANT ANNUAL
REVIEW FOR THE YEAR ENDING 2018 upon the following named parties by the
method indicated below, and addressed to the following:
Commission Staff
Karl T. Klein
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington Street (83702)
P.O. Box 83720
Boise, ldaho 83720-0074
X Hand Delivered_U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
CERTIFICATE OF SERVICE