20120530Protest Comments.pdf

Eric L. Olsen ISB# 4811 RECEIVED
RACINE OLSON NYE BUDGE &
BAILEY, CHTD. 2012 MAY 30 PM 12: 22
P.O. Box 1391; 201 E. Center D,AJ4O PUBLR.
Pocatello, Idaho 83204-1391 UTLlic COMM1S3ON
Telephone: [phone]
Fax: [phone]
Attorneys for Idaho Irrigation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
DUE TO THE INCLUSION OF THE )
LANGLEY GULCH POWER PLANT )
INVESTMENT IN RATE BASE. )
CASE NO. IPC-E-12-14
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC. ("IIPA,") by and
through counsel, hereby respectfully submits, pursuant to Commission Rule 203, the
following protest/comments with regard to Idaho Power Company's ("IPC") request for a
7.18% increase in its base revenue in its Idaho jurisdiction due to the inclusion of the
Langley Gulch investment into rate base.
INTRODUCTION
IIPA requests that the Commission disallow the 7.18% increase at this time
because IPC's data and methodology used to justify the increase are based upon isolated
and outdated circumstances of how IPC is currently running the system and how it will
operate the system once Langley Gulch is in operation. IIPA respectfully requests a
hearing on the proposed increase that will include a full general rate case that will review
IDAHO IRRIGATION PUMPERS ASSOCIATION, iNC.'S
PROTEST/COMMENTS - 1
all of the new circumstances in which IPC finds itself with its existing generation
resources, and how it will operate after Langley Gulch is placed in service.
Alternatively, IIPA respectfully requests that no more than half of the Company's
proposed increase (3.59%) be authorized at this time and then have the Company file a
general rate case that would fully review the circumstances in which IPC finds itself with
its existing generation resources, and how it will operate after Langley Gulch is placed in
service. IIPA does not question that Langley Gulch will be an important and integral part
of the Company's generation mix, but respectfully requests a hearing that demonstrates
the new circumstances and the manner in which Langley Gulch benefits the system.
BACKGROUND
IPC's requested 7.18% increase relates solely to the addition of Langley Gulch to
rate base and operation and maintenance costs associated with the facility. Unlike a
normal general rate case, this case is simply a single item rate case. As Company witness
Tatum expresses on page 3 of his direct testimony:
The Company is asking the Commission to review the investments the
Company has made to develop and integrate the Langley Gulch power
plant "Langley" or "Project") into the Company's operation system and
approve an adjustment to the Company's rates to reflect those investments
and certain related expenses. This investment includes generation and
transmission investment, as well as labor and non-labor operations and
maintenance ("O&M") expenses."
IPC calculated that there was a $7.7 million net reduction in power supply
expense for the Idaho Jurisdiction, based upon "reevaluating the Company's currently
approved base level net power supply expense, which was based on a 2010 test period."
(Tatum testimony at page 10) The Commission typically determines the normal or
expected annual power supply costs for IPC in a general rate case and incorporates
IDAHO IRRIGATION PUMPERS ASSOCIATION, iNC.'S
PROTEST/COMMENTS -2
recovery of those costs in base rates. Actual power supply costs that vary from the
normal amount included in rates are captured each year though the Company's (PCA).
Under the PCA mechanism, in a poor water year the Commission requires the Company's
shareholders pay 5% of the costs that exceed power costs recovered though base rates to
provide incentive to the Company to make only prudent power cost decisions.
Conversely, in a good water year, the Commission requires Idaho Power to credit its
ratepayers with 95% of the below normal cost savings. Thus, miscalculations one way or
the other in the base level net power costs will result in the utility or the ratepayers losing
the ability to recover costs or savings to which they would otherwise be entitled.
According to the Company, currently authorized base level net power supply
expenses are based on a 2010 test year in the Case No. IPC-E-l0-0l. The result of the
addition of Langley Gulch (in isolation) to the Company's net power supply model
(based upon 2010 inputs), shows very little change in all generation resources, but a
decline during each month of purchase power levels as well as an increase each month in
sales for resale.'
DISCUSSION
A. The Commission should hold a full general rate case before allowing IPC to
collect the Langley Gulch investment.
IPC's requested 7.18% increase in a single item rate case is unprecedented.
Further, asking that such an increase be processed under Modified Procedure is also
unprecedented. IIPA does not contend Langley Gulch should not be allowed into rate
base. Rather, the addition of this type of a generation unit, in combination with other
The Company's Response to IIPA Request 2 lists the results of the Aurora model run from Case No. IPC-
E- 10-01, which can be compared to the Company's Response to ICIP Request 2 which lists the Aurora
Model run from Case No. IPC-E- 10-01, as only modified by the addition of Langley Gulch.
IDAHO IRRIGATION PUMPERS ASSOCIATION, 1NC.'S
PROTEST/COMMENTS -3
changes that have occurred during the last two years, warrants a complete review of all of
IPC's costs. It is inappropriate, as IPC contends, to simply include this unit in rates and
compare its impact to conditions that existed two years ago.
IIPA submits that a review of one cost item in isolation is bound to increase rates
more than a number of items taken together, as there are always some circumstances that
require rates to go up, while offsetting circumstances will lower rates. To focus only on
one very large increase and not look at other possible costs impacts will only bias rates
upwards.
The Commission has already recognized this concern in Order 30892 granting the
Langley Gulch Certificate of Public Convenience and Necessity ("CPCN"). At page 31
of that Order, the Commission stated:
When questioned at hearing as to the rate impact if Langley Gulch was approved,
Mr. Gale, the Company's policy witness responded as follows:
if you just simply lay that rate base and depreciation and such onto
our current rates, you get a number close to ... six or seven percent. If
you play it forward into 2012 and escalate the revenue and evaluate it
against other alternatives, it's diminished, I think, closer to three or four
percent, and then in comparison to alternatives, maybe nothing at all,
because you can't just view the rate impact in isolation. There's going
to be a set of costs under which you're operating at that point in time.
Gale, Tr. P. 220 (Emphasis added.)
Mr. Gale rightfully observed during the CPCN hearing that a 6-7% increase would be
needed if Langley Gulch costs (rate base, depreciation, O&M) were simply placed upon
existing rates. However, Mr. Gale contended that the rate increase would be closer to
half that (or less), if 2012 costs, circumstances and alternatives were incorporated. It is
inappropriate to accept a 7.18% increase in isolation, when the Company witness in the
CPCN hearing for Langley Gulch suggested that the rate increase would be much less if
IDAHO IRRIGATION PUMPERS ASSOCIATION, iNC.'S
PROTEST/COMMENTS -4
more recent information were taken into account. That necessary level of analysis just
cannot take place under Modified Procedure.
B. The Commission should hold an evidentiary hearing regarding the used and
usefulness of the Company's new resource mix before allowing the IPC to begin
collecting rates that include the cost of Langley Gulch.
IPC's use of only a 2010 Aurora model run with the addition of Langley Gulch
gives a very inaccurate view of how Langley Gulch and the rest of its resource mix will
operate now, and in the future. The conditions that exist today are completely different
than they were in 2010. Many of those conditions are expected to continue in the future
or only slowly change. Of course, Langley Gulch was introduced under the conditions
and circumstances that existed around 2008-2009. However, its impact and operation
may be completely different than originally expected when contemplated. The reduction
in natural gas prices has impacted Langley Gulch's operating advantages. According to
IPC's Aurora model, using 2012 natural gas cost data, Langley Gulch is now cheaper to
operate than any of Idaho Power's coal plants (Bridger, Valmy, and Boardman). Because
natural gas prices are so low, purchased power and sales-for-resale prices have dropped.
Unrelated to any of these changes, the IPC's loads are lower than in 2010 and there is far
more PURPA/wind power on the system.
In order to show the absurdity of not reviewing the impact of these changes to the
resource mix, the following table has been prepared:
I-
/I
I-
/I
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS -5
Valmy MWH
Aurora Output
Company
2010 Case
Company Company Plus
Base Case 2010 Case Plus Langley Gulch
Langley Gulch Today's Gas Prices
January 154,213 154,747 0
February 141,411 140,486 0
March 153,151 152,490 0
April 94,183 93,771 0
May 74,097 73,460 0
June 136,829 136,817 0
July 168,983 169,068 28,453
August 171,397 170,863 23,372
September 163,030 161,073 3,356
October 171,190 169,592 0
November 172,025 171,282 0
December 175,839 175,284 Q
Annual 1,776,348 1,768,934 55,181
As can be seen from the above table, the operation of Valmy was basically that of a base
load plant in the 2010 Aurora model run.2 There was basically no change in the
operation of Valmy when the Company used the 2010 Aurora model run and only
superimposed Langley Gulch as a new resource.3 However, taking that same 2010
Aurora model run with Langley Gulch superimposed, but changing the price of natural
gas to today's prices 4, results in Valmy only operating at 3% of the level previously
calculated.
The small amount of Valmy production that is listed for the three summer months
does not give credence to the future usefulness of this generation resource to Idaho
Power. The Aurora model run that produced these results, simply took into account the
2 Data taken from the Company's Response to IIPA Request 2.
Data taken from the Company's Response to ICIP Request 2.
Data taken from the Company's Response to IIPA Request 13 Attachment 1.
IDAHO IRRIGATION PUMPERS ASSOCIATION, iNC.'S
PROTEST/COMMENTS -6
Valmy Modeled
(Base Case)
2010
April
May
June
July
August
September
October
November
December
January
February
March
Annual
94,183
74,097
136,829
168,983
171,397
163,030
171,190
172,025
175,839
154,213
141,411
153.151
1,776,348
change in natural gas prices since 2010. Other changes since 2010 that are well
recognized, but not addressed in this model run include: (1) a decrease in customer load
and (2) a large increase in PURPA/wind generation. Offsetting this would be the
termination of the Montana PPL contract.
This phenomenon of not having Valmy used and useful is not simply a theoretical
construct for when Langley Gulch comes on line. Today, long before Langley Gulch
begins to operate, Valmy is not, and has not been, in use anywhere near the degree
suggested by the Company's 2010 Aurora model run (without Langley Gulch). In fact,
Idaho Power has not taken power from Valmy since Christmas day 2011. Prior to that,
Valmy had been running at approximately 50% of the levels shown in the 2010 Aurora
model run (without Langley Gulch) as demonstrated below:
Actual
Valmy
Operation
0 Apr-11
0 May-11
300 Jun-11
96,196 Jul-11
90,518 Aug-11
89,705 Sep-11
34,737 Oct-11
97,331 Nov-11
75,147 Dec-11
0 Jan-12
0 Feb-12
2 Mar-12
483,934
The question that must be asked and answered: Is Valmy used and useful? IIPA
recognizes that this is not a simple question. There are many aspects to determining if a
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS -7
facility is used and useful and the IIPA does not contend that the above tables contain the
complete answer to that question. However, the above tables raise sufficient concern that
a full investigation should be completed. Langley Gulch should not result in a 7.18% rate
increase without a review of its impact on the system under today's conditions and the
impact Langley Gulch has on IPC's entire resource stack.
CONCLUSION
IIPA protests Commission approval of IPC's request for a 7.18% increase in base
rates in the Idaho jurisdiction. IIPA respectfully requests that the Commission not
process this case under Modified Procedure. A rate case of this magnitude should be
processed as a full general rate case, where all of IPC's costs are reviewed, and not just
the impact on Valmy in isolation—based upon a two-year old Aurora model. When the
CPCN was issued, IPC witness (as well as the Commission) recognized that the resulting
rate impact was not 7% as it would appear if Langley Gulch were reviewed in isolation,
but "closer to three or four percent" if all 2012 costs were taken into account, and "maybe
nothing at all". A general rate case would take all cost changes into account and produce
a fair rate change for ratepayers.
In the alternative, IIPA respectfully requests the Commission issue an order
authorizing not more than half of the requested increase (3.59%) at this time, and then
require IPC to file a general rate case. In this manner, IPC will get an increase that is in
the mid-range of what was predicted (3-4%) for when the unit comes on line, and the
Commission will get a chance to take a much deeper look into the Company's 2012 costs
than what is possible under Modified Procedure.
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS -8
Dated this 30 th day of May, 2012.
RACINE OLSON NYE BUDGE &
BAILEY, CHARTERED
By:____
Eric L. OXsen,,Atiomey for
Idaho I on Pumpers
Association, Inc.
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS -9
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 30th day of May, 2012, I served a true, correct
and complete copy of the foregoing document, to each of the following, via the method
so indicated:
[J Via Hand Delivery Jean D. Jewell, Secretary
Idaho Public Utilities Commission
P.O. Box 83720
472 W. Washington Street
Boise, Idaho 83720-0074
E-mail:ijewellpuc.state.id.us
Lisa D. Nordstrom
Julia A. Hilton
Idaho Power Company
P.O. Box 70
Boise, Idaho 83720-0070
Email: [e-mail]
jhiltonidahopower.com
Matt Larkin
Gregory W. Said
Idaho Power Company
P.O. Box 70
Boise, Idaho 83720-0070
E-mail:[e-mail]
gsaididahopower.com
Donald L. Howell, II
Karl Klein
Deputy Attorneys General
Idaho Public Utilities Commission
472 W Washington (83702)
P.O. Box 83720
Boise, ID 83720-0074
E-mail:[e-mail]
karl.kleinpuc.idaho.gov
IDAHO IRRIGATION PUMPERS ASSOCIATION, 1NC.'S
PROTEST/COMMENTS - 10
Li Via E-Mail
[j Via E-Mail
L] Via E-Mail
Li Via E-Mail Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N 27th Street
P.O. Box 7218
Boise, ID 83702
Email: [e-mail]
greg2irichardsonandoleary.com
Don Reading
6070 Hill Road
Boise, ID 83703
E-mail:dreadingmindspring.com
Thorvald A. Nelson
Frederick J. Schmidt
Sara K. Rundell
Holland & Hart, LLP
6380 S Fiddlers Green Circle, Suite 500
Greenwood Village, CO 80111
E-mail:[e-mail]
[e-mail]
[e-mail]
[e-mail]
Richard E. Malmgren
Micron Technology, Inc.
800 South Federal Way
Boise, ID 83716
E-mail:remalmgren(micron.com
[J Via E-Mail
[J Via E-Mail
Li Via E-Mail
11AMW/Tv W-111 roe
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
PROTEST/COMMENTS - 11