20130405Petition.pdf

Peter J. Richardson ISB # 3195
Greg Adams ISB # 7454
RICHARDSON & O'LEARY PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
F .
L
Attorneys for Glanbia Foods, In.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER IDAHO POWER ) CASE NO. IPC-E-13-0
GLANBIA FOODS, INC. FOR )
APPROVAL OF AN ALLOWANCE ) GLANBIA FOODS, INC.'S PETITION
PURSUANT TO IDAHO POWER'S RULE ) FOR APPROVAL OF AN
H ) ALLOWANCE PURSUANT TO
IDAHO POWER'S RULE H
Pursuant to Rule 053 of the Rules of Procedure of the Idaho Public Utilities Commission
(the "Commission"), Glanbia Foods, Inc. ("Glanbia") by and through its attorney of record, Peter
Richardson, hereby requests the Commission approve an appropriate allowance for its planned
line extension on Idaho Power Company's ("Company") electrical system. In support thereof,
Glanbia says as follows:
BACKGROUND
Glanbia Foods, Inc.' is an Idaho Corporation with its headquarters located in Twin Falls,
Idaho with processing plants in Twin Falls, Gooding, Richfield and Blackfoot, Idaho and
operates a further plant in New Mexico as part of a joint venture. Glanbia is the leading
producer of American style cheese in the country and its Gooding plant is the largest barrel
'Glanbia is a combination of Irish words meaning "pure food." Glanbia Foods, Inc is part of the Irish headquartered
and publicly traded company Glanbia plc
1 —GLANBIA PETITION - IPC-E-13-
cheese operation in the world. The whey powder and lactose products that are produced in
Idaho service the needs of customers and other Glanbia divisions throughout the world. Glanbia
is one of Gooding County's largest employers and is the leading buyer of milk from local dairies.
Glanbia currently consumes approximately nine megawatts of power and energy with a very
consistent and high capacity factor; as such it is a very attractive customer for any electric utility
Glanbia is in the final stages of completing a study of a planned expansion that will, in addition
to adding employment and tax base to the county, consume an additional seven to ten megawatts
of power on a consistent high load factor basis. This expansion will further solidify the Gooding
Plant's position in the Glanbia family of companies thereby helping to assure its tenure and
stability for the long term.
THE PLANNED EXPANSION
In order to serve the planned additional load Idaho Power will have to upgrade its service
to the Glanbia plant. There are several options for doing so with the cost ranging between $6.3
million and $11.9 million. The options are more fully explained and documented in the attached
(Exhibit A) Large Load Feasibility Study prepared by Idaho Power on August 9, 2012. Glanbia
was taken by surprise at the magnitude of the costs and has been actively exploring any avenue
by which those costs can be reduced. The very viability of the expansion may be called into
question if the costs are not pared back. Thus, Glanbia asked Idaho Power to calculate an
Allowance pursuant to Tariff Schedule H.
THE APPLICABILITY OF RULE H
Idaho Power and Glanbia disagree as to the applicability of Rule H to this line extension
project. Rule H's preamble provides:
This rule applies to requests for electric service under schedules 1, 3, 4, 5, 7, 9, 19, 24, 45,
and 46 that require the installation, alteration, relocation, removal or attachment of
2 -GLANBIA PETITION - IPC-E-13-
Company-owned distribution facilities. ... This rule does not apply to transmission or
substation facilities, or to requests for electric service that are of a speculative nature.
Glanbia is a Schedule 19 customer and will remain a Schedule 19 customer after the proposed new
load is added. Section 1 of Rule H is the definition section. There is no definition as to what a
transmission or substation facility is. That is, there is no test for how a line extension must be
configured in order to be deemed a transmission or distribution line extension.
Section 7 of Rule H provides for specific allowance amounts for Residential Schedules 1,
3, 4 and 5. It also provides for specific allowance amounts for non-residential Schedules 7, 9 and
24. For the Large Power Service Schedule 19, Rule H provides no specific amount for the
allowance, deferring those calculations to a "Case-by-Case" determination. The reason Schedule
19 Allowances are determined on a case-by-case basis is best explained by Staff's Comments in
the 2008 Rule H docket:
Under the current Rule H, allowances for industrial (Schedule 19) customers are
determined on a case-by-case basis due to the wide diversity in both customer usage and
needed distribution facilities. Both Idaho Power and Staff propose to continue to determine
allowances for industrial customers on a case-by-case basis.2
Glanbia asked Dr. Reading, its expert in utility cost of service, to calculate the Allowance
for this project using exactly the method used by Staff when it calculated the generic allowances
for the residential and non-residential schedules. The results of his calculations are attached as
Exhibit B. As can be seen, Dr. Reading arrives at an allowance for Glanbia in the amount of
$2,318,000
VESTED INTEREST REQUEST
Many of the facilities that will be added, should this expansion prove economical, will be
available for use by potential future Idaho Power ratepayers. Although they are currently
dedicated solely to Glanbia's load, it is possible they will become useful for other system uses in
2 Staff Comments IPC-E-08-22, April 17, 2009 at p. 8.
3 —GLANBIA PETITION - IPC-E-13-
the future. In addition to those facilities that are solely dedicated to serving the Glanbia load, the
existing substation that serves Glanbia will no longer be used for that purpose. In other words
Glanbia will be allowing approximately ten megawatts of capacity in that substation to be used to
serve other customers. Glanbia should be compensated for the value of that newly freed-up
capacity. Glanbia reasonably requested that Idaho Power identify and monitor those facilities with
the goal of providing a vested interest refund to Glanbia of the proportional use of those facilities
by future third party ratepayers.
COST CONTROL AND TRANSPARENCY
Glanbia has not been able to obtain a commitment from Idaho Power that it will be allowed
to confirm that the material and work done on this almost ten million dollar upgrade will be
competitively and transparently bid. Nor has Glanbia been assured that it will be permitted to
audit the transactions engaged in by Idaho Power for this project. Glanbia asks the Commission to
require Idaho Power to (a) competitively bid the material and work on the upgrade (b) provide
audited records of the transaction and (c) allow Glanbia to be include in the design, engineering
and selection of contractors.
THE IDAHO POWER RESPONSE
Idaho Power has refused to entertain the concept of an allowance for the Glanbia project
despite Dr. Reading's assurances that he calculated the Glanbia allowance using the identical
methodology used by the Staff in calculating the generic allowances for the other classes. In
addition, Idaho Power has refused to entertain the concept of compensating Glanbia for the value
of the soon to be freed-up capacity in the existing substation that will no longer be used to serve
the Glanbia load. According to Mr. Darrel Anderson, Idaho Power's President and CFO:
Regarding your claim that Idaho Power has not made an effort to identify the "allowances"
Glanbia would be "entitled" to for the proposed expansion, Glanbia is once again confusing
4 -GLANBIA PETITION - IPC-E-13-
language contained in Rule H regarding distribution facilities and costs, with the
transmission and substation costs identified in the Facility Study. Again, Rule H
specifically states that it does not apply to transmission or substation facilities. Allowances
under Rule H are based on the cost of providing and installing Standard Terminal Facilities,
which are the overhead Terminal Facilities (transformer, meter, overhead service
conductor) most commonly installed for overhead single phase and three phase service. 3
As can be seen by Dr. Readings work in Exhibit B, he used precisely the facilities referenced by
Mr. Anderson in arriving at his calculations.
Without conceding the point that Dr. Reading's calculation is true to the Staff's
methodology for calculating an allowance for this Schedule 19 customer on a "case-by-case" basis,
Rule H does not define what a transmission or substation facility is. The line being upgraded to
serve Glanbia is a dead end line serving a single customer. It is unclear what Mr. Anderson was
relying on in his letter wherein he states that the upgrade to serve Glanbia is a Transmission
System upgrade. FERC/NERC 4 defines the distinction between transmission systems and
distribution systems by function, not size. The definition of a "Distribution Provider" in the
Glossary of Terms Used in NERC Reliability Standards is provided as:
Provides and operates the "wires" between the transmission system and the end-use
customer. For those end-use customers who are served at transmission voltages, the
Transmission Owner also serves as the Distribution Provider. Thus, the Distribution
Provider is not defined by a specific voltage, but rather as performing the Distribution
function at any voltage.5
While Mr. Anderson' assertion that the Glanbia upgrade is a Transmission System upgrade, it must
be viewed not in layman's terms, but rather pursuant to the definition that is technically and
actually used by the electric utility industry. The distinction between Distribution and
Transmission is made by the electric utility industry based on the function of the "wire" and not the
size of the wire.
Darrel Anderson December 13, 2012, letter to Jeff Williams, President and CEO of Glanbia. Attached as Exhibit
C.
"The Federal Energy Regulatory Commission and North American Electric Reliability Corporation
Glossary of Terms Used in NERC Reliability Standars February 11, 2013 at p. 23. Emphasis provided.
5 —GLANBIA PETITION - IPC-E-13-
In addition, Idaho Power has refused to entertain the possibility of creating a vested interest
account on those facilities that will, initially at least, solely dedicated to serving the Glanbia
facility.
PRAYER FOR RELIEF
Wherefore, Glanbia Foods, Inc. respectfully asks this Commission to issue its order
requiring Idaho Power to provide it with an allowance for its proposed line extension in the amount
of $2,318,000, or other such amount it determines is appropriately calculated pursuant to the
Commission's methodology underlying Rule H.
Furthermore, Glanbia Foods, Inc. respectfully asks this Commission to issue its order
requiring Idaho Power to provide it with a vested interest in upgraded facilities that are currently
solely being used to support the Glanbia facility, as well as the soon to be freed-up capacity in the
substation that is currently being used to serve the Glanbia load, and in the event these facilities
become useful for service to third parties, requiring those third parties to pay their proportional
share of the upgrade costs. Glanbia also requests the Commission require Idaho Power to
competitively bid the work and provide Glanbia with an audit of the same.
Glanbia stands ready to provide testimony and or additional legal briefing should the
Commission decide that further proceedings are required to decide the issues presented in this
docket.
DATED this 5th day of April, 2013.
RICHARDSON & O'LEARY PLLC
By: ovo~_
Peter J. Richardson, ISB #3195
Attorneys GLANBIA FOODS, INC.
6 -GLANBIA PETITION - IPC-E-13-
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 5th day of April, 2013, a true and correct copy of the
within and foregoing PETITION BY GLANBIA FOODS FOR APPROVAL OF AN
ALLOWANCE was served in the manner shown to:
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington (83702)
P0 Box 83720
Boise, ID 83720-0074
Lisa Nordstrom
Donovan Walker
Idaho Power Company
P0 Box 70
Boise, Idaho 83707-0070
[e-mail]
dwalker@idahopower. corn
Hand Delivery
U.S. Mail, postage pre-paid
Facsimile
Electronic Mail
X. Hand Delivery
U.S. Mail, postage pre-paid
Facsimile
X Electronic Mail
Nina Curtis
Administrative Assistant
7 -GLANBIA PETITION - IPC-E-13-
EXHIBIT A TO
GLANBIA PETITION
IPC-E-13-
Facility Study
For
GLANBIA FOODS
In
COODING, IDAHO
IDAHO POWER COMPANY
November 9th, 2012
Pagel
1:0 Introduction
Olanbia Foods (Glanbia) has contracted with Idaho Power Company (IPC) to prepare this Facility Study
Report (FSR) for the integration of an additional seven MW of power to their facility in (boding, Idaho.
This will bring Glanbia's total load to 19 MW. This FSR documents the upgrades to the IPC electrical
system required to meet this load request and is based upon the requirements outlined in a Large Load
Feasibility Study (dated August 9, 2012) produced by IPC.
2.0 Required Upgrades to the IPC Electrical System
In order to provide a total of 19 MW (nine MW existing, three MW planned, seven MW requested) to
the Glanbia facility, a new substation will need to be constructed at that location. A new ten mile long
138 kV transmission line will need to be constructed to bring power to this new substation. See the
attached line route map, substation single line diagram, and substation general location drawing. These
new upgrades to the IPC electrical system will be owned, operated and maintained by IPC and as such
are available to serve other customers.
3.0 Engineering Overviews
Substations: Design and construction of substation work will be carried out to IPC specification. The
substation will consist of a standard grounded, graveled, fenced yard. Equipment will rest on concrete
foundations with either aluminum or galvanized steel support structures. Standard IPC substation
equipment and apparatus will be used in order to have the ability to backup and quickly replace
equipment as well as for maintenance efficiency. Geotechnical and land surveys will be performed as
necessary to support design and construction. A three-leg dead-end structure will be installed for the
transmission line. Other equipment installed include air break switches 04 1 B and 042B for line
switching; 101X and 042X for an emergency mobile transformer connection; and 131X, 131Z, and 131L
for transformer protection and switching. The distribution feeder lines and breakers were requested
utilizing an open bus arrangement. This arrangement requires a control building to house the control
equipment, consisting of relay and communication panels, DC batteries, SCADA equipment, load
centers, and cabling.
Lines: Standard IPC design and construction will be utilized. Transmission structures will be wood
single pole structures with a single shield wire.
Line Right-of-Way (ROW): In order to avoid the high costs associated with relocating a transmission
line, IPC requires private ROW easements for these facilities. IPC will hire a licensed land surveyor to
create the legal descriptions and confirm ownership and title for the easement properties. IPC will
create the appropriate easement documents for the line route, and will negotiate with and secure these
easements from the property owners. The costs and time required to secure these easements can vary
widely depending upon the disposition of the property owners.
Page 2
Communication: A dedicated phone line will be the communication path for SCADA, system
protection and control.
Protection: For feeder protection, a standard two-feeder control and relaying panel will be equipped for
the Glanbia feeder (041A) and a future feeder. The panel will be installed in the building. The relaying
will consist of dual SEL-351A's and a shared SEL-501X. A complete control module will be installed
even though half of the equipment will not be used until another feeder is required.
Bus differential protection consists of a standard transformer/bus protection control and relaying panel
equipped to protect the 13 8/34.5kV transformer and the 34.5kV bus. The panel will be installed in the
building. The relaying will consist of dual SEL-587 relays with associated lockouts. One relay will
wrap the transformer. The other relay will wrap the transformer, both feeders, and the 34.5kV capacitor
bank's bus.
A standard shunt capacitor control and relaying panel will be equipped to protect the 138kV capacitor
bank. The panel will be installed in the building. The relaying will consist of dual SEL-421 relays. The
protection requires current inputs from two current transformers (preferably those from a substation
class breaker), a voltage input from a three-phase 138kV instrument transformer, and a voltage input
from the capacitor bank.
4.0 Regulations, Permitting, and Other Requirements
City Permitting: A Special Use Permit or Variance is required by the City of Gooding where the
proposed transmission line transitions through the city boundaries. IPC will be responsible for securing
this permit.
County Permitting: A Conditional Use Permit is required from Gooding County for the substation
portion of this project. IPC will be responsible for securing this permit.
5.0 Customer Requirements
Substation Property: (3lanbia will provide right-of-way easements for access to the transmission and
distribution lines across their property, to and from the IPC substation. Glanbia will donate and transfer
ownership of the property necessary for the substation to IPC. [PC will be supplying 34.5 kV power to
Glanbia out of the substation. The cost for all upgrades or modifications to IPC owned distribution
facilities beyond the point of delivery (metering point) will be added to Glanbia's Distribution Facilities
Investment (DFI) and will be subject to a monthly facility charge.
System Requirements: The proposed factory will need to stay within the power factor requirements set
by IPC. Glanbia will be responsible for this power factor correction.. The distribution of this reactive
compensation and single points of failure, that might disconnect large reactive compensation amounts or
large load values, concern IPC due to potential problems like nuisance tripping.
Page 3
Coordination: Glanbia shall coordinate with I?C personnel in all aspects associated with JPC facility
upgrades.
6.0 Estimated Costs
The following tables list cost estimates for the upgrades needed to accommodate the proposed project
based on the information available today. Note that this estimate does not include the cost of the
customer's equipment and facilities or costs associated with compensating for power factor. If the
power factor at the substation transformer requires compensation for power factor or harmonics, these
facilities will also be installed in the substation at the expense of Glanbia. This is discussed further in
the Power Factor Correction Options section below.
Glanbia's payments will not give Glanbia any ownership rights in the new substation and transmission
facilities. All ownership of these facilities will remain with IPC.
Glanbia New 138kV Line and Substation Estimated Costs
138/34.5 kV 30 WA Substation $2,407,205
Tax Gross Up $746,234
Contingency (20%) $630,688
Estimated Costs $3,784,127
138 kV Transmission Line $3,306,586
Tax Gross Up $1,025,042
Contingency (20%) $866,326
Estimated Costs $5,197,954
Combined Substation and Transmission Tap Estimated Cost $8,982,081
These cost estimates include scoping and design labor, materials, and installation labor costs, overheads,
contingency and tax-gross up. Please note that the ROW easement costs can vary widely depending
upon the property owners. The ROW costs in this estimate are based upon paying 50% of the estimated
value of the land. Allowance for Funds Used During Construction (AFUDC) are not included since this
project will be funded by Glanbia as it moves forward. These are estimated costs only and fmal charges
to the customer will be based on the actual construction costs incurred, including overheads and
tax-gross up. Please note that the overhead rate and tax gross-up percentages may vary during the year.
Reliability Options
As a result of the increased demand requested by Glanbia, the 138kV transmission system cannot
support their entire load in addition to existing customers' load during certain outages at peak loading
times during winter. There are two low-probability outage scenarios for which this can occur:
Page 4
Outage #1: Bus or breaker short circuit at the King substation (avg repair time = 10 hrs*) during high
loading levels. Frequency of outage is less than I in 10 years. This is an upper bound for impact to
Olanbia because there is a probability that the combined load will be within the still available line
capacity, not requiring load to be shed. High loading that would require load shedding if such an outage
occurs, exists for about 1.37% of the year. An optimistic lower bound for the occurrence of an outage
during this time (assuming independence of the two events) would be 1 in 730 years. We would expect
the actual experience to be more like the lower bound than the upper bound.
Outage #2: Increased outage duration due to a sustained short circuit on the 6.9 mile section of the
138kV transmission line between the King substation and the Topoms tap during high loading on the
138kV system. In this scenario, Glanbia would experience an outage until this section of transmission
line is sectionalized for repairs (average sectionalizing time = 30-60 mins*). After the sectionalizing
occurs, the present (3lanbia load level could be restored. However, with the additional load level,
restoration of Glanbia will create low voltage at Glanbia and for other customers fed from the 138 kV
transmission line during peak loading in winter. Glanbia could be partially restored, up to nine MW in
this scenario, until repairs are made (average repair time = 6.9 hrs*) or until other affected customer
loading drops to a level for which Glanbia could be completely restored. Frequency of outage is less
than 2 in 11.7 years. As in the case for outage I, this is an upper bound for the rate of events that affect
Glanbia. The optimistic lower bound is once per 427 years. Again, we expect the actual experience to
be closer to the lower bound.
One of the following options must be chosen in order to ensure reliability to customers is not adversely
impacted due to the requested load increase.
Option Description Cost**
I IPC automatically sheds entire Glanbia load $0
at proposed substation. This prevents the
shedding of residential customers on other
parts of the JPC 13 8k transmission system.
2 Glanbia sets up intelligence to receive signal Equipment funded, owned,
to trip non-critical load such that no more and maintained by Glanbia
than 9MW of critical load remains online
after receipt of this signal.
3 Install 20 M\TAr capacitor bank on the $831,400
13 8k side of proposed substation. This will
enable service to be maintained during
Outage #1 and will allow total load
restoration after the 138kV system is
sectionalized during Outage #2.
*All outage data is derived from electrical system equipment historical outage data. This data may or
may not reflect future performance.
**Cost estimates listed include 20% contingency, overheads and tax gross-up
Page 5
Power Factor Correction Options
Idaho Power has a design standard that requires all distribution substations to operate at unity power
factor at peak substation loading. With (ilanbia's current power factor of 92% and the unknown power
factor of the new equipment, IPC will require power factor correction. With the assumption that
Cilanbia's peak demand will be 19MW at a 90% power factor after the increase in load, the following
are options for correcting the power factor to unity.
One of the following options must be chosen:
Option Description Cost**
1 Install a single 9.0 MVAr 138kV capacitor bank on $714,400
the high side of the transformer at Glanbia.
2 Install 9.0 MVAr 34.5kV capacitor bank in two $991,700 (includes the cost of
4.5MVAr separately switchable sections at the harmonic do-tuning reactors)
proposed substation. Based on simulations,
harmonic dc-tuning reactors or other mitigation
measures are requited to provide IEEE-519
compliant service. This option will provide
increased substation transformer capacity for future
growth due to reactive power correction on the
transformer low side.
3 Glanbia corrects their power factor to unity within Equipment funded, owned,
the plant 1 and maintained by Glanbia
Cost estimates Listed include 20% contingency, overheads and tax gross-up
7.0 Estimated Timeline
The schedule for IPC facility upgrades depends on the completion of a signed agreement, funding, and
authorization to proceed.
The following table outlines the sequence of work as we envision the scoping, design, and construction
to take place for the construction of the initial substation and related lines without any of the available
options presented:
Glanbia Project Substation Schedule Estimate:
Signed Agreement with IPC for Construction of Substation 11/20/2012
Receive Construction Funding 11/25/2012
Project Scope Completed 12/19/2012
Design Kick Off 12/23/2012
Design Complete 6/23/2013
Pre-Construction Meeting 8/2/2013
Construction Start 8/18/2013
Test & Commission 2/14/2014
Project In-Service 2/24/2014
Final Construction Cost True-Up 4/30/2014
Page 6
This schedule is based on a signed agreement being completed by November 20, 2012 and receiving
funding by November 25, 2012. If these dates slip, the overall schedule will be changed to
accommodate additional time and these cost estimates may need to be updated. If any of the available
options are chosen, this schedule will need to be modified to take into account the additional work and
time required. Schedule dates are estimated milestones and are not guarantees. Weather, material
availability, ROW easement acquisition, and permitting restriction could adversely impact the schedule.
8.0 General Assumptions
System: The new IPC 138 kV line that will serve the proposed substation will have adequate capacity to
serve the project.
Lines: A new 138 kV line will extend the existing Toponis Tap of the King to Wood River 138 kV line
to provide the energy source for the new substation. The length of this extension will be approximately
10 miles. The new 34.5 kV overhead distribution line(s) will come from the substation. The length of
these distribution line(s) and financing will depend on the location of the substation and the metering
points. It is assumed that ROW easements for the transmission and distribution lines can be obtained in
a timeframe that does not impact the schedule. A Special Use Permit or Variance may be required for
the portion of transmission line extension that passes through the city limits of Gooding enroute to the
substation.
Substations: It is assumed that the new substation will be on property owned by Glanbia and the
required substation property will be given to IPC and ownership transferred to IPC at no cost. It is
assumed that the needed properties can be obtained in close proximity to the locations identified. A
Minor Land Division application must be approved prior to transferring ownership of the property to
Idaho Power and a Conditional Use Permit must be approved prior to construction of the substation.
9.0 Outside of IPC Control
There are numerous items outside the control of IPC which could impact the execution of the planned
work in this Facility Study. Any of these items could necessitate changes that could impact both cost
and schedule.
• Obtaining Permits, Imposed Restrictions/Requirements
• Obtaining Right-of-way
• Material Availability
• Weather
10.0 Conclusions / Next Step
The requested large load interconnection to IPC's system was investigated and the results of this work
indicate that the existing IPC system can be upgraded to support the 19 MW required. The next step in
the process to connect this large load would be to create a contract with IPC for the execution of the
work. Mike Pohanka can get this process started.
Page 7
Cost Breakdown for Glanbia
November 13, 2012
Station Estimate Line Estimate
Design Labor $106,902 $80,399
Const Labor $415,670 $929,602
Purchased Services $190,161 $0
Const Materials $1,290,745 $1,273,213
Const Equipment $58,368 $348,980
Right-of-Way $0 $200,000
Field Charges
Overheads (16.75%)
$2,061,846
$345,359
$2,832,194
$474,392
Subtotal w/OH $2,407,205 $3,306,586
Tax Gross-up (31%) $746,234 $1,025,042
Subtotal w/OH +TG $3,153,439 $4,331,628
Contingency (20%) $630,688 $866,326
Totals $3,784,127 $5,197,954
Combined $8,982,081
I
EXHIBIT B TO
GLANBIA PETITION
IPC-E-13-
Outline of Glanbia' s Calculation of Line Extension Allowance
The Idaho Public Utilities Commission Staff believes line extension rules should provide a new
customer an allowance (Company investment) that can be supported through the electric rates
paid by that customer. If the line extension costs exceed the allowance, then the new customer
would pay an up-front contribution for the difference rather than including the excess costs in
electric rates paid by all other customers.
Staff believes that the goal in setting allowance and refund amounts for distribution line
extensions should be to eliminate the impact on existing electric rates. More specifically,
Staff believes the line extension rules should provide a new customer allowance
(Company investment) that can be supported by electric rates paid by that customer over
time. If the line extension costs exceed the allowance, then the new customer would pay
an up-front contribution for the difference rather than including the excess costs in
electric rates paid by all customers. [Commission Staff Comments, IPC-E-08-22, April
17, 2009, p. 3.]
Also included in Staffs Comments in IPC-E-08-22 were calculations of net plant and allowable
investment by customer class. Included in Staffs calculation was an allowance for Large Power
Schedule 19 customers. [Ibid., Attachment 2.]
RIFT"W 1,11,77 ::•-ij;•.
Terminal
Distribution Facilities Total
Net Plant per kW $100 $11 $111
Allowable Investment per kW 109 $12 $122
$ Net plant figures are from the cost of service study accepted by the Commission in IPC-E0810.
The Commission stated in Order 30853 in the same IPC-E-08-22 case that large power service
customer's maximum allowance would be based on a 'Case-by-case' basis. [Idaho Public
Commission Order 30853, IPC-E-08-22, p. 10.] The Commission also supports Staffs position
that the customer pays for a certain portion of any line extension through their power bills.
1. Allowances. The capital cost of installing new generation and transmission plant has
always generally been recovered through rates paid by all customers. Indeed, fees
cannot be charged for new plant that cannot be attributed specifically to serving new
customers. However, in the case of distribution plant it is possible to associate
specific facilities with specific customers who use them. As a result, the costs of new
distribution plant have, throughout most of Idaho Power's history, been recovered in
two ways - partially through up-front capital contributions from new customers, and
partially through electric rates charged to all customers. The portion collected though
electric rates represent the investment in new facilities made by Idaho Power. It is
often referred to as an installation or constriction "allowance." [Ibid., pgs. 9-10.]
Idaho Power has stated they expect Glanbia to remain a Schedule 19P a not 19T customer, while
maintaining this is transmission, not a distribution extension, therefore Glanbia is not eligible for
any allowance under Rule H. The Commission does use the term 'distribution plant' however
follows it with the phrase in the same sentence that ". .. is possible to associate specific facilities
with specific customers who use them" [Ibid., p. 10., emphasis added] Clearly in this case the
line extension and substation facilities can be specifically associated with Glanbia.
The Commission Staff based their calculation of allowances on Idaho Power's most recent
general rate case cost of service and rate of return [IPC-E- 11-08]. Idaho Power's cost of service
allocations to Schedule 19 customers used to find rates for the class, and used in determining the
line extension allowance include the following 'distribution' categories taken from the cost of
service study:
Distribution
Substations - General
Lines - Primary Demand
Lines - Primary Customer
Line Trans - Primary Demand
Line Trans - Primary Cust
Line Trans - Second Direct
Line Trans - Second Customer
Lines - Secondary Demand
Lines - Secondary Customer
Services
Meters
[IPC-E-08-1 1, Idaho Power Exhibit No. 32-36, tab
Allocation to Classes]
The above cost of service allocation assignments, in part, make up the elements that are
contained in the rates Glanbia will be paying, as well as those used in the calculation of
allowances for line extensions for Schedule 19.
Staff, in finding the allowance for Schedule 19 customers used the Company's most recent
general rate case rate of return.
2. Rate of Return. The signing parties agreed that it would be just and reasonable to allow
the Company to earn a 7.86% rate of return on an authorized Idaho jurisdictional rate
base of $2,355,906,412. Id. at ¶ 6(c). [Order 32426,IPC-E-1 1-08, December 30,2011,
p.4..]
The following table replicates the rate of return and gross up used by Staff in their calculation of
allowance for Schedule 19. The return on common equity is imputed from the other known cost
of capital values.
2
IPC-E- 11-08; Order 32426; Overall Weighted Return 7.86%
Capital Structure & Debt Cost, Steven Keen Testiomoy
Return on Equity Calculated; Gross-up 1.642 Noe Testimony
Cost of Capital -
Captial Component
Capital
Structure
Component
Cost
Weighted
Cost
L-T Debt 51.176% 5.728% 2.931%
Preferred Equity 0.000%1 0.000%1 0.000%
Common Equity 48.824%1 10.100% 4.931%
Total 100.000%1 7.863%
Grossed-up Rate of Return
Tax Gross-up Factor
Weighted ROE* Tax Gross-up
L-T Debt
Preferred Equity
1.642
8.097%
2.931%
0.000%
11.028%
Glanbia has verified Staff calculations with in rounding error and accepts the allowable
investment per kW of $122.
Large Power (Schedule 19)
# Connected kW 323,964
Rate ofReturn 11.299%
Distribution Terminal
2008 Cost of Service Study Plant Facilities Total
Net Plant 32,535,698 3,543,388 36,079,086
Return on Net Plant 3,676,259 400,373 4,076,632
Depreciation Expense 1,200,533 156,281 1,356,814
Total 4,876,792 556,654 5,433,445
Distribution Terminal
Per kW Expenses Plant Facilities Total
Net Plant 100 11 111
Return on Net Plant 11 1 13
Depreciation Expense 4 0 4
Total 15 2 17
Allowable Investnnt $109 $12 $122
[Commission Staff workpapers, IPC-E-08-1 1]
Once the line extension and plant upgrades to the plant are completed Gambia expects a load of
16 MW. Therefore at $122 per kW the line extension allowance will be $1,952,000 (16000* 122).
EXHIBIT C TO
GLANBIA PETITION
IPC-E- 13-
Darrel T. Anderson
President and Chief Financial Officer i=
December 13, 2012
Mr. Jeff Williams
President and Chief Executive Officer
Glanbia Foods, Inc
1373 Fillmore Street
Twin Falls, Id, 83301-3380
Re: Glanbia Foods, Inc. Expansion Costs
Dear Mr. Williams:
We received your November 28, 2012 letter addressed to LaMont Keen in which you
express Glanbia's concern regarding Idaho Power Company's estimated costs for upgrading our
facilities to provide an additional seven megawatts (7 MW, a total of 19 MW) of power at your
Glanbia Foods facility in Gooding, Idaho. I write to address the two areas of concern you note.
Specifically, Glanbia contends that Idaho Power has failed to account for two discounts to the
upgrade costs---what Glanbia characterizes as "System Betterment" and "Allowances."
With regard to "System Betterment," or more accurately what the Idaho Public Utilities
Commission (ll'UC) refers to as "Company Betterment," Glanbia's concern may stem from a
misunderstanding or misinformation as to what is considered "Company Betterment" and when
it is applicable. First and foremost, Company Betterment, as defined in the Company's IPUC
approved Rule H (New Service Attachments and Distribution Line Installations or Alterations) is
applicable only to distribution facilities. It Is broadly defined as the installation of facilities or work
performed that is in excesro of that requested or required by the customer. Rule H specifically states
that it does not apply to transmission or substation facilities, both of which are the required
upgrades detailed in the Facility Study dated November 27, 2012, for (flanbia Foods' expansion
project.
Aside from the fact that Rule H is applicable only to distribution facilities, Glanbia
misconstrues Company Betterment to include what Glanbia characterizes as "available capacity"
at the substation currently used to serve (3lanbia's load. The Company does not anticipate the
load in this area to increase significantly in the near term and, consequently, any such capacity
would be associated with what the tPUC would consider to be a "stranded asset" which does not
provide the "value" (Ilanbia suggests. Any benefits associated with Cilanbia discontinuing its
use of those facilities, if they exist, would be reflected in future Schedule 19 rates.
Regarding your claim that Idaho Power has not made an effort to identify the
"allowances" (Ilanbia would be "entitled" to for the proposed expansion, Glanbia is once again
confusing language contained in Rule H regarding distribution facilities and costs, with the
transmission and substation costs identified in the Facility Study, Again, Rule H specifically
states that It does not apply to transmission or substation facilities. Allowances under Rule H are
based on the cost of providing and installing Standard Terminal Facilities, which are the
1221 W. Id,ho St (83702)
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I
Mr. Jeff Williams Page 2 of 2 December 13,2012
overhead Terminal Facilities (transformer, meter, overhead service conductor) most commonly
installed for overhead single phase and three phase service. There are no allowances arising
from the proposed expansion that Glanbia would be entitled to under Rule H. At Glanbia's
request and at the option of the Company, transformers and other facilities installed beyond the
Point of Delivery to provide primary or transmission service may be owned, operated, and
maintained by the Company in consideration of Glanbia paying a Facilities Charge to the
Company. This service is provided under the provisions set forth in Rule M, Facilities Charge
Service.
I hope I have provided you a clearer understanding of the two issues you identified, The
Company has provided you with the revised Facility Study Report for the integration of an
additional 7 MW of power at your Gooding facility. I appreciate your recognition of Idaho
Power's attractive retail rates as one of the considerations for your decision to expand your
facility in our service territory. We look forward to a continued good relations:hip with Glanbia.
Sincerely,
O T?
Darrel T. Anderson