20130701Application.pdf

7!tDll0NPO1;ER=
An IDACORP Company
LISA D. NORDSTROM
Lead Gounsel
! [e-mail]
June 28,2013
VIA HAND DELIVERY
Jean D. Jewel!, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
LDN:csb
Enclosures
Sincerely,
d*^-A 4^r-L,"*-
Lisa D. Nordstrbm
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
NEW CASE
Re: Case No. IPC-E-13-16
Investment in Selective Catalytic Reduction Controls for Jim Bridger Units 3
and 4 - ldaho Power Company's Application and Direct Testimony
Dear Ms. Jewel!:
Enclosed forfiling in the above matterare an originaland seven (7) copies of ldaho
Power Company's Application.
ln addition, enclosed are nine (9) copies of the Direct Testimony of Lisa A. Grow,
Tom Harvey, and Michael J. Youngblood filed in support of the Application. One copy of
each witnesses'testimony has been designated as the "Reporter's Copy." ln addition, a
disk containing a Word version of the aforementioned testimony is enclosed for the
Reporter.
Also enclosed in separate envelopes are an original and seven (7) copies of
confidential Attachment 1 to ldaho Power Company's Application and nine (9) copies
each of confidential page 9 to the Direct Testimony of Lisa A. Grow, confidential Exhibit
No. 5 to the Direct Testimony of Tom Harvey, and confidential Exhibit No. 7 to the Direct
Testimony of Michael J. Youngblood. Because confidential information is included in the
initial filing, a Protective Agreement has also been enclosed for execution by the ldaho
Public Utilities Commission Staff and intervening parties. Please handle the confidential
information in accordance with the Protective Agreement.
If you have any questions regarding the enclosed documents orthis matter, please
do not hesitate to contact me.
LISA D. NORDSTROM (lSB No. s733)
JENNIFER REINHARDT-TESSMER (lSB No. 7432)
ldaho Power Company
1221West Idaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I no rd strom @ idahopower. co m
irei n hardt@ id aho power. com
Attorneys for ldaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE INVESTMENT
IN SELECTIVE CATALYTIC REDUCTION
CONTROLS ON JIM BRIDGER UNITS 3
AND 4.
; -;:,.. :.
,tlr!1 t!: I n')
,- -, ..rt-.,, i 11 'J
l:'
: r-i'ii l'i , :_,
Fii lr: 02
:
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. !PC-E-13-16
APPL!CATION
COMES NOW, ldaho Power Company ("ldaho Powe/' or "Company") and, in
accordance with ldaho Code SS 61-526 through 528, 61-541, and RP 112, hereby
applies to the ldaho Public Utilities Commission ("Commission") for a Certificate of
Public Convenience and Necessity ("CPCN") authorizing investment in Selective
Catalytic Reduction ("SCR") controls in Jim Bridger Units 3 and 4 ("Project") and
inclusion of the Project in ldaho Powe/s rate base once the SCR controls are installed
and operational. This Application is based on the following:
APPLICATION - 1
I. INTRODUCTION
1. ldaho Power is a corporation incorporated under the laws of the state of
Idaho. ldaho Power is engaged in the business of generating, purchasing, transmitting,
and distributing electric energy and providing retail electric service in the states of ldaho
and Oregon. ldaho Power's principal offices are situated in Boise, Idaho, and its
address is 1221 West ldaho Street, Boise, ldaho, 83702. Copies of ldaho Powe/s
Articles of lncorporation and Certificates of Convenience and Public Necessity are on
file with the Commission.
2. The Company's resource portfolio is among the most diverse in the nation.
The Company leverages its hydro, coal, and natural gas resources to provide
dependable "baseload" energy to customers, along with purchased renewable
resources and a robust set of energy efficiency programs. ldaho Power's current
resource portfolio consists of a diverse mix of low-cost generation types totaling nearly
3,600 megawatts ("MW") of nameplate capacity.
3. ldaho Power owns one-third of the Jim Bridger coal-fired power plant ("Jim
Bridger Plant") located near Rock Springs, Wyoming. Confidential Attachment 1 is a
map detailing the location of Project construction at the Jim Bridger Plant. PacifiCorp
has two-thirds ownership and is the operator of the Jim Bridger Plant. The Jim Bridger
Plant consists of four generating units and is adjacent to the co-owned Jim Bridger Coa!
Company Mine, which supplies approximately six million tons per year of sub-
bituminous coal to the plant. Also, the Jim Bridger Plant currently employs
approximately 350 personnel.
APPLICATION - 2
4. As explained in the direct testimony of Lisa A. Grow, Senior Vice
President of Power Supply, filed contemporaneously with this Application, the Jim
Bridger Plant is the workhorse of ldaho Power's thermal fleet. After adjustment for
scheduled maintenance periods and estimated forced outages, the annual energy
generating capability of ldaho Power's share of the Jim Bridger Plant is approximately
625 average megawatts. Of ldaho Power's entire thermal generation fleet, it has the
lowest dispatch cost and the lowest installed cost of nameplate capacity to operate.
The Jim Bridger Plant not only provides highly valuable capacity during periods of peak
demand, but also low cost and dispatchable baseload energy.
II. PROJECT DESCRIPTION
5. ldaho Power requests that the Commission issue a CPCN authorizing
ldaho Power to invest in and construct SCR systems and associated ancillary
equipment for Jim Bridger Units 3 and 4. Each SCR system would be comprised of two
separate universa! reactors, with multiple catalyst levels; inlet and outlet ductwork; a
shared ammonia reagent system; an economizer upgrade; structural reinforcement of
the boiler and flue gas path ductwork and equipment; and extension of the existing plant
distributed control system. An induced draft fan upgrade and an associated auxiliary
power system variable frequency drive insertion are required on Unit 4 only.
6. These emission contro! investments in SCR systems and associated
ancillary equipment will result in the reduction of Nitrogen Oxide ("NO,,") emissions in
compliance with existing state and proposed federa! emission requirements. Mr. Tom
Harvey, Joint Projects Manager, describes these emissions requirements in greater
detail in his direct testimony that accompanies this Application.
APPLICATION - 3
7. The BART Appeal Settlement Agreement with the state of Wyoming and
the Wyoming Regional Haze State lmplementation Plan ("Wyoming Regional Haze
SIP') require the installation of SCR on Unit 3 by the end of 2015 and on Unit 4 by the
end of 2016. On May 23, 2013, the United States Environmental Protection Agency
('EPA") recommended approval of the Wyoming Regional Haze SIP for installation of
SCR on Jim Bridger Units 3 and 4 in 2015 and 2016, respectively, as outlined in the
Wyoming Regiona! Haze SlP. The EPA has indicated it will sign a notice of final
rulemaking on November 21, 2013, making these emission reduction requirements at
Jim Bridger Units 3 and 4 federally enforceable as well. lf the environmenta! upgrades
are not installed within the time frame given by the state of Wyoming or the EPA, ldaho
Power would be forced to stop generating from these units.
8. In August 2012, PacifiCorp filed a CPCN with the Wyoming Public Service
Commission ("Wyoming Commission") to construct two SCR systems on Units 3 and 4
of the Jim Bridger Plant as well as a "voluntary request for approval of resource decision
to construct SCR systems on Jim Bridger Units 3 and 4 with the Public Service
Commission of Utah ("Utah Commission"). On May 10,2013, the Utah Commission
issued its final report and order in Docket No. 12-035-92 approving the SCRs. On May
29, 2013, the Wyoming Commission approved a CPCN for the SCRs in Docket No.
20000-418-EA-12 (Record No. 13314). These Orders can be found as Attachment Nos.
2 and 3, respectively, to this Application.
I!I. COST.EFFECTIVE ANALYSES
9. To determine the economic viability of installing the Jim Bridger Plant
SCRs, ldaho Power prepared the Coal Unit Environmental lnvestment Analysis ("Coa!
APPLICATION - 4
Study"), which is included in two parts as confidential Exhibit No. 5 (SAIC's static
forecast unit generation analysis) and Exhibit No. 6 (ldaho Power's dynamic total
portfolio analysis) to Mr. Harvey's direct testimony. The Coal Study analyzed the SCR
investment at Jim Bridger Units 3 and 4 as part of a larger analysis conducted for all
four units at the Jim Bridger Plant and the two units at the North Valmy plant.
10. The methodology used in the Coal Study examined future investments
required or reasonably anticipated for environmental compliance for the existing coal
units. Those investments were then compared to the costs of two alternatives: (1)
replace such units with combined-cycle combustion turbines or (2) convert the existing
coal-fired units to natural gas. For the complete evaluation, ldaho Power used a
combination of third-party analysis, input from the operating partners of each coal plant,
and a final economic dispatch analysis conducted by the Company to assure a
complete and fair assessment of the alternatives.
11. As outlined in Mr. Harvey's testimony, the Coal Study supports upgrading
Jim Bridger Units 3 and 4 with emissions control equipment to allow ongoing coal-fueled
energy production from this plant through the Coal Study period as the least-cost, least
risk outcome for customers. The planning case (planning case carbon/planning case
natura! gas) results indicate that the cumulative net present value power costs
associated with the upgrade option is $254 million less than the next least-cost
compliance alternative for Unit 3, and $237 million less than the next Ieast-cost
compliance altemative for Unit 4. Figure 4: Total Portfolio Costs, on page 16 of Exhibit
6 summarizes the results from the analysis.
APPLICATION - 5
IV. CONSISTENT WITH THE INTEGRATED RESOURCE PLAN
12. Constructed in the 1970s, the Jim Bridger Plant is an existing baseload
generating resource reflected in the Company's 2011 lntegrated Resource Plan ("!RP')
that was accepted for filing by the Commission in Order No. 32425. The Jim Bridger
PIant is currently included as production plant in the Company's rate base. The direct
testimony of Michael J. Youngblood, Manager of Regulatory Projects, filed
contemporaneously with this Application describes the portfolio analysis of coal-fired
generation alternatives developed for the Company's 2013 !RP. The 2013 IRP has
been filed in Case No. IPC-E-13-15 and can be found as Attachment 4 to this
Application.
13. As part of the development of the Company's 2013 lRP, the Company
included four resource planning portfolios that explored options for reducing the amount
of coal-fired generation in ldaho Power's generation portfolio. The options to reduce the
reliance on coal included replacement with natural gas-fired generation, increased
demand-side measures including demand response, changing the fuel at the North
Valmy plant to natural gas, and the Boardman to Hemingway transmission line. Two of
the evaluated portfolios specifically ceased coal-fired operations at the Company's Jim
Bridger and North Valmy coal plants (the Boardman coal plant ceases coal-fired
operations at year-end 2O2O in all resource portfolios). Because those two portfolios
ranked as the two highest cost resource portfolios of the nine portfolios analylzed, the
Company's preferred portfolio includes continued operations at the Jim Bridger and
North Valmy coal plants.
APPLICATION - 6
V. COMMITMENT ESTIMATE
14. As Mr. Youngblood describes in his direct testimony, the total cost of the
Project before Allowance for Funds Used During Construction ("AFUDC") is
$353,843,886. ldaho Power's share of that amount, the "Project Cost," is one-third, or
$117,947,962, comprised of a $57,649,113 investment in Jim Bridger Unit 3 and a
$60,298,849 investment in Jim Bridger Unit 4, before AFUDC. Confidential Exhibit No.
7 to Mr. Youngblood's direct testimony shows the budget projections by year for Jim
Bridger Units 3 and 4.
15. Because of the scope of the Project, the extended period of time it takes
to plan, permit, engineer, procure, and construct SCR systems, and the uncertainty of
the EPA's final ruling approving the portion of the Wyoming Regional Haze SIP that
addresses the SCRs at Jim Bridger Units 3 and 4, a Limited Notice to Proceed ("LNTP")
contract was signed with the successful Engineering, Procurement, and Construction
("EPC") bidder on May 31,2013. The Company and PacifiCorp determined this to be a
prudent approach that allows for consideration of this Application while waiting for final
approval of the SIP by the EPA.
16. Based on the EPC contract, actual costs incurred in the development
phase, and the forecast estimate of the work to be completed, ldaho Power is able to
make a reliable estimate of the tota! capital cost of the Project. As it has done in prior
CPCN applications, Idaho Power has termed this estimate a "Commitment Estimate."
The Commitment Estimate is a good faith estimate of ldaho Powe/s total capital cost,
including AFUDC, and additional costs the Company anticipates it wlll incur but cannot
quantify with precision at this time. ldaho Power's total Commitment Estimate for its
APPLICATION - 7
one-third portion of the Project is $129,837,393, which includes $11,889,431 in AFUDC.
Of this amount, $62,923,527 is the Commitment Estimate for Jim Bridger Unit 3 and
$66,913,866 is the Commitment Estimate for Jim Bridger Unit 4. The largest portions of
the Commitment Estimate are the costs included under the EPC contract.
17. Using the system investment stated above, the Company performed a
high-level jurisdictional revenue requirement analysis. Based upon the current
jurisdictional split between ldaho and Oregon, the ldaho jurisdictional addition to
production plant would be approximately $60.2 million for investments at Jim Bridger
Unit 3 and approximately $64.0 million for investment at Jim Bridger Unit 4. At the
Company's current authorized rate of return, the additional annual revenue requirement
for SCR investments in Jim Bridger Unit 3 and Jim Bridger Unit 4 would be
approximately $9.1 million and $9.7 million, respectively.
VI. REQUEST FOR A CPCN AND BINDING RATEMAKING TREATMENT
18. ldaho Power requests the Commission issue a CPCN and authorize
binding ratemaking treatment under ldaho Code S 61-541 for the SCR investment
because of the magnitude of the investment and the uncertainty surrounding coal-fired
generation in today's political and social environment. Even though ldaho Power does
not believe it is required to do so by ldaho Code S 61-526, the Company requests a
CPCN so that a public process is initiated to provide the Company, Commission, and
interested parties a regulatory forum to fully vet these contested issues. The direct
testimony of Ms. Grow explains recent social, political, and regulatory events that
prompted the Company to make this filing.
APPLICATION - 8
19. Pursuant to ldaho Code S 61-541, the Company requests that the
Commission provide ldaho Power with authorization and a binding commitment to
provide rate base treatment for the Company's capital investment in SCRs at Jim
Bridger Units 3 and 4 in the amount of $129,837,393. Of that amount, $62,923,527 for
the investment in Jim Bridger Unit 3 would be closed-to-plant and authorized for cost
recovery on or after Janu ary 1 , 2016, and $66,913,866 for the investment in Jim Bridger
Unit 4 would be closed-to-plant and authorized for cost recovery on or after January 1,
2017. lf binding ratemaking is approved for the Tota! Commitment Estimate of
$129,837,393, the Company could be assured that amounts incurred up to the
Commitment Estimate amount would be determined to be prudent. Should the cost of
the Project be less than the Commitment Estimate, the savings would directly benefit
the customer through a lower amount in rate base. On the other hand, should the
Project come in over the Commitment Estimate, ldaho Power would have to
demonstrate to the Commission that amounts above the Commitment Estimate were
prudently incurred and should be recovered in rates. A discussion of the evidence
demonstrating the need for these ratemaking proposals, as well as the Company's
proposal for ratemaking commitments, is found in the direct testimonies of Ms. Grow
and Mr. Youngblood.
20. ldaho Power intends to fund capital expenditures and costs associated
with the Project with a combination of (1) cash available from ldaho Power's operations;
(2) ldaho Power's short-term borrowings, as authorized by Commission Order No.
32343; (3) the potential issuance of long-term indebtedness by ldaho Power pursuant to
APPLICATION - 9
Commission Order No. 32786; and/or (4) potential capital contributions from IDACORP,
lnc., which may result in part from equity issuances by IDACORP, lnc.
21. The return on equity the Company expects to earn on the Project
investment is the authorized rate in effect at the time the Project is placed in service.
Idaho Power wil! depreciate the investments over the remaining life of the Jim Bridger
Plant in accordance with the Commission-approved depreciation rates in effect at the
time the investment is closed-to-plant. The Company's current depreciation rates were
approved in Case No. IPC-E-12-08, Order No. 32559.
22. The LNTP concept described above was used to reduce the risk and
upfront costs of a Full Notice to Proceed ("FNTP") until the final ruling from the EPA is
released, and to ensure the EPC Contractor can meet the deadlines for installation as
per the Wyoming Regional Haze SlP. A provision in the LNTP states that December 1,
2013, which is defined as the FNTP Date, is the deadline by which the FNTP must be
issued in order for the EPC contractor to attain the project completion guarantee dates
without requiring a contract change. ldaho Power and PacifiCorp have agreed that as
long as the FNTP is issued on or before December 1, 2013, neither the EPC contract
price nor the project guarantee dates will be adjusted. The Company is requesting the
Commission issue an order approving the CPCN request by November 29, 2013, so
that the Company will be able to approve PacifiCorp's execution of the FNTP by
December 1,2013.
23. ln order for the Company to move forward with timely installation of the
SCR investments that allow Jim Bridger Units 3 and 4 to lawfully continue operating, it is
important for the Company to receive a CPCN from the Commission which includes the
APPLICATION - 1O
ratemaking assurances and provisions described above. In today's uncertain political
environment, the Company believes that this level of regulatory assurance is necessary
and warranted. As a result, the installation and operation dates of the Project are
directly related to the issuance of a CPCN, including the necessary cost-recovery and
ratemaking commitments.
24. In order to streamline review of this Application, the direct testimonies of
Ms. Grow, Mr. Harvey, and Mr. Youngblood have been filed contemporaneously with
this Application. The Company will make available exhibits, workpapers, and other
documentation supporting the Commitment Estimate. That documentation, as we!! as
some of the other documents the Company intends to provide for review, contains
information that the Company, PacifiCorp, and bidders deem to be trade secrets.
Consequently, the Company will request that Commission Staff and any lntervenors
sign a standard Protective Agreement prior to reviewing these materials.
VII. CONCLUSION
25. As supported by the comprehensive analyses presented in this case, the
investment in the Jim Bridger SCRs represents the lowest cost and least risk option of
serving future customer demands. The SCR investment will allow the Jim Bridger Plant,
the Company's lowest cost thermal generation resource, to continue providing
customers with reliable energy and will maintain the Company's diverse portfolio of
generation resources.
26. ldaho Power respectfully requests that the Commission issue its order
approving a CPCN no later than November 29,2013, finding that:
APPLICATION - 11
(1) The installation of SRC systems planned for Jim Bridger Units 3
and 4 is consistent with ldaho Powe/s resource plans and is an approprlate investment
to assure the ongoing operation of the Jim Bridger Plant to reliably serve its customers.
(2) Existing Wyoming and anticipated federal regulations require the
installation of SCR systems for Jim Bridger Units 3 and 4 by December 31, 2015, and
December 31, 2016, respectively.
(3) The approved total Commitment Estimate for the Project, including
$11,889,431 in AFUDC, is $129,837,393, which includes a Commitment Estimate for
Jim Bridger Unit 3 of $62,923,527 and a Commitment Estimate for Jim Bridger Unit 4 of
$66,913,866.
(4) Pursuant to ldaho Code S 61-541, the Commission provides ldaho
Power with authorization and a binding commitment to provide rate base treatment for
the Company's capital investment in SCR controls at Jim Bridger Units 3 and 4 and
related facilities up to the amount of the $129,837,393 Commitment Estimate at such
time the plant is placed into operation. Retai! customers will receive the ful! benefit of
the Project being completed under the Total Commitment Estimate, while the Company
will have the opportunity to justify any costs above the Total Commitment Estimate as
prudently incuned for recovery.
Respectfully submitted this 28th day of June 2013.
. NORDST
APPLICATION - 12
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-I3-16
IDAHO POWER COMPANY
ATTACHMENT 1
MAP OF PROJEGT
ATTACHMENT 1
IS CONFIDENTIAL AND
WI LL BE PROVI DED TO
THE APPROPRIATE
PARTIES
UPON REAUEST AND
EXECUTION OF THE
PROTEGTIVE
AGREEMENT
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC.E.I3.16
IDAHO POWER GOMPANY
ATTACHMENT 2
UTAH ORDER
- BEFORE THE PUBLIC SERVICE COMMISSION OF I.TTAH -
ln the Matter of the Voluntary Request of
Rocky Mountain Power for Approval of
Resource Decision to Construct Selective
Catalytic Reduction Systems on Jim Bridger
Units 3 and4
pocKET NO. 12-035-92
REDACTED
REPORT AND ORDER
ISSUED: May 10.2013
SHORT TITLE
Rocky Mountain Power
Resource Decision Jim Bridger Units 3 and 4.
SYNOPSIS
The Commission approves the Company's voluntary request for approval of a
resource decision to construct selective catalytic reduction systems on Jim Bridger Units 3 and 4.
pocKET NO. 12-035-92
-ii-
TABLE OF CONTENTS
APPEARANCES........ ................... iii
I. PROCEDURAL HISTORY
II. SIERRA CLUB'S MOTION
I
5
A. Sierra Club's Position .......... 5
B. Company's Position.. ........... 6
C. Division's Position.. .............7
D. UAE's Position ....................8
E. Office's Position .................. 8
F. WRA's Position ...................9
G. Discussion, Findings, and Ruling on Sierra Club's Motion ......... 9
III. PARTIES' POSITIONS ......11
A. Company ......... 11
B. Division ........... 16
C. Off,rce .............. 18
D. WRA ............... 19
E. Sierra C1ub.......... ...............21
rv. DlscussroN, FINDINGS, AND CONCLUSTONS.27
pocKET NO. 12-035-92
-iii-
APPEARANCES
D. Matthew Moscon, Esq. For PacifiCorp, dba Rocky Mountain Power
Stoel Rives LLP
Daniel E. Solander, Esq. rr rr
Rocky Mountain Power
Justin C. Jetter, Esq. " Utah Division of Public Utilities
Utah Attorney General's Office
Jerrold S. Jensen, Esq. " Utah Office of Consumer Services
Utah Attorney General's Office
Steven S. Michel, Esq. " Westem Resource Advocates
Western Resource Advocates
Rob Dubuc, Esq. rr I'
Western Resource Advocates
Travis Ritchie, Esq. " Sierra Club
Sierra Club Environmental Law Program
DOCKET NO. 12-035-92
-l-
L PROCEDURAL HISTORY
Pursuant to Utah Administrative Code ("UAC") R746-440-I(2), Rocky Mountain
Power, a division of PacifiCorp ("Company"), filed, on August 10,2012, with the Public Service
Commission of Utah ("Commission"), a notice of its intent to file a voluntary request for
approval of its resource decision to construct two major projects to reduce emissions. Pursuant
to Utah Code Ann. ("UCA") S 54-17-402, on August 24,2012, the Company filed with the
Commission a voluntary request for approval of its resource decision ("Application") to
construct selective catalytic reduction ("SCR") systems on Units 3 and 4 of the Jim Bridger coal-
fired steam electric plant ("Bridger" or "Bridger Plant") located in Sweetwater County,
Wyoming. The proposed SCR investments at Bridger Units 3 and 4 are referred to in this order
as the "Bridger SCR Project" or "Project".
On September 6,2012, the Utah Division of Public Utilities ("Division") frled
comments recommending the Commission notice a scheduling conference in the maffer as soon
as practicable. A duly-noticed scheduling conference was held on September 19,2012, and on
September 24,z}l2,the Commission issued its scheduling order and notice of hearing.l
Between September 11,2012, and November20,2012, the following parties were
granted intervention in this docket: Western Resource Advocates ("WRA"1; Holcim,Inc.,
' UCe 5 54-17-402(6) provides the Commission 180 days to approve or disapprove a voluntary request for approval
of a resource decision, starting with the day on which the request is filed. In this case, the 180 day time period
expired on February 20,2013. The statute also authorizes the Commission to extend the time for issuing a decision,
if the Commission determines additional time to analyze the resource decision is warranted and is in the public
interest. Based parties' comments at the scheduling conference and the absence of any objection, the Commission
determined in its September 24,2012, scheduling order and notice of hearing it would serve the public interest to
extend the statutory time period for reaching a decision in this matter by up to 30 days. Subsequortly, in context of
its oral ruling in the February 6,2013, pre-hearing conference, the Commission further extended the date of its hnal
decision in this case to mid-May 2013.
pocKET NO. 12-035-92
.|
Kennecott Utah CopperLLC, Kimberly-Clark Corp., Praxair, Inc., Proctor & Gamble,Inc.,
Tesoro Refining and Marketing Co., and Western Zirconium, collectively referred to as Utah
lndustrial Energy Users ("UIEC"); Utah Association of Energy Users ("UAE"); and Sierra Club.
On November 30,2012, the Division, Office of Consumer Services ("Office"),
and WRA filed direct testimony. On December 3,2012, WRA filed errata to the direct
testimony of Nancy L. Kelly. Also on December 3,2012, Sierra Club filed its direct testimony.
On January 4,2013, Sierra Club filed a motion requesting a stay or continuance of
this proceeding until such time as the U.S. Environmental Protection Agency ("EPA") issues its
final Best Available Reffofit Technology ("BART") determination for the Bridger Plant ("Sierra
Club's Motion'). Also on January 4,2013, the Company filed a motion requesting an amended
procedural schedule and referencing its preparation of a response to Sierra Club's Motion and
citing a need to prevent disadvantageous overlap in testimony filing dates between this docket
and the Company's concurrent proceeding in Wyoming in which it was seeking a certificate of
public convenience and necessity for the Project ("WY CPCN").2
On January 7 , 2013 , the Company filed a memorandum opposing the Sierra
Club's Motion. On January 8,2013, the Commission issued an order amending the procedural
schedule and providing notice of a scheduling conference to be held on January 16,2013.
Following the duly-noticed scheduling conference, on January 17,2013, the Commission issued
its notice of amended hearing date, seffing March 7 , 2013, as the tentative hearing date for this
matter pending the Commission's ruling on Sierra Club's Motion. On January 18, 2013, UAE
2 Filed on December 21,2012, in Wyoming Docket No. 20000-418-EA-12, Record No. 13314.
DOCKET NO. 12-035-92
-3-
filed a memorandum stating its partial support of Sierra Club's Motion and recommending the
Commission not issue a final order in this matter until after the parties had been given an
opportunity to review the EPA's proposed BART determination to be issued March 29,2013,
("EPA March Re-proposal") and to submit to the Commission any pertinent additional
information or request for further proceedings. On January 29,2013, the Commission provided
notice it would conduct a pre-hearing conference to hear argument on Sierra Club's Motion.
On January 31,2013, the Company filed its Notice of Relevant Action in a
Related Proceeding asking the Commission to take notice of the January 17,2013, decision of
the Public Service Commission of Wyoming denying Sierra Club's motion for continuance or
stay of its review of the Company's WY CPCN until such time as the EPA issues its final BART
determination for the Bridger Plant.
On February 4,2013, both the Division and Office filed comments in response to
Sierra Club's Motion. On February 6,2013, a duly-noticed pre-hearing conference was held
during which the Commission issued an oral ruling denying Sierra Club's Motion. The
Commission also maintained the procedural schedule as announced in prior orders, and approved
the suggestion by parties for additional comments on the EPA March Re-proposal to be received
prior to the Commission's issuance of the final order in this proceeding. The Commission stated
dates for additional comments would be determined at the conclusion of the March 7 hearing.
Section II of this Order contains the rationale for denying Sierra Club's motion.
Also on February 6,2013, the Office filed errata to the direct testimony of
Randall J. Falkenberg, and the Company filed a copy of the Order Denying Motion for a Stay or
-4-
Continuance Pending Final EPA Action, issued by the Public Service Commission of Wyoming
on February 4,2013.
On February 11,2013, the Company and the Offrce filed rebuttal testimony. On
February 26,2013, the Company filed errata to the rebuttal testimony of Cindy A. Crane. On
February 28,2013, the Company, Division, Office, and WRA filed surrebuttal testimony. On
March 1,2013, Sierra Club filed surrebuttal testimony. On March 6,2013, the Company filed
additional supportive exhibits as well as the replacement surrebuttal testimony of Chad A. Teply.
On March 7,2013, the Commission held a duly-noticed hearing to examine the
Company's Application. At the hearing, the Commission provided further procedural guidance
to the parties regarding the filing of post-hearing briefs on the Application, and comments on the
pending EPA March Re-proposal. Specifically, the Commission set March 27,2013, as the due
date for briefs on legal issues and the merits of the Application. Further, the Commission set
April 5, 2013, as the due date for initial comments, and April 19,2013, as the due date for reply
comments on the pending EPA March Re-proposal. The Commission noted the extended
timelines and indicated it would issue a final order in this case by mid May. The Commission
also directed the Company to file any communication it receives regarding the EPA March Re-
proposal as soon as possible.
On March 27 , 2013, the Company filed a copy of the March 25 , 2013 , stipulation
between the EPA and other litigants, extending the deadline for the EPA March Re-proposal
from March 29,2013, to May 23,2013, and extending the deadline for the EPA to issue a notice
of final rulemaking on the Wyoming Regional Haze State Implementation Plan ("Wyoming
DOCKET NO. 12-035-92
-5-
SIP") from September 27 , 2013 , to November 2l , 2013 . On March 27 , 2013 , the Company,
Division, WRA, and Sierra Club filed post-hearing briefs on the Application. On March 28,
2013, the Company filed its replacement post-hearing brief. On April 5,20t3, the Company,
Division, Office, and Sierra Club filed initial comments addressing the extension of the EPA re-
proposal deadline. On April 19,20t3, the Company and the Office filed reply comments and
Sierra Club filed notice it would not file a reply brief on the EPA re-proposal deadline.
II. SIERRA CLUB'S MOTION
Sierra Club's Motion requests a stay or continuance of this proceeding pending a
final BART determination by the EPA, which, at the time, was not expected until September 27,
2013, andwhich concerns the Company's Bridger SCR Project.3
The Company, the Division, WRA, and to some degree UAE and the Office,
opposed Sierra Club's Motion.a
A. Sierra Club's Position
Sierra Club argues a stay is necessary because it is premature to proceed with this
docket since, without an EPA final BART determination, the required emission limits and
relevant compliance deadlines for the project are unknown.s Sierra Club also argues a stay will
provide certainty, which will benefit the Company6 and notes commissions in other jurisdictions
3 See Sierra Club Motion for a Stay or Continuance Pending Final EPA Action, filed January 4,2013.a See Company's Memorandum in Opposition to Sierra Club's Motion for a Stay or Continuance Pending Final
Action, filed January 7,2013;' Division's Memorandum in Response to Sierra Club's Motion for Stay or
Continuance Pending Final Action, filed February 4,2013; Memorandum of UAE Users in Partial Support of
Motion for Continuance, filed January 18, 2013; Memorandum from the Office, to the Commission, filed February
4,2013: and Transcript ofPre-Hearing Conference at 17, lines 8-25, and at 18, lines l-10, dated February 6,2013.
'g Sierra Club Motion for a Stay or Continuance Pending Final EPA Action at 3.6 See id. at 7
DOCKET NO. 12-035-92
-6-
have entered stays in similar actions.T Sierra Club states the Wyoming Departrnent of
Environmental Quality ("WDEQ') deadlines are not firm as the Company states, but
acknowledges they are binding.s
B. Company's Position
The Company states it entered into a settlement agreement, in November 2010,
with the WDEQ in Docket No. l0-281 (the "BART Settlement Agreement") before the
Wyoming Environmental Quality Council ("EQC") addressing Wyoming's BART permit for the
Bridger facility. To achieve the required nitrogen oxides ("NOx") ernission limits, the Company
contends the BART Settlement Agreement is enforced through an order issued by the EQC, and
requires the Company to install SCR systems or altemative add-on NOx control systems on Unit
3 by the end of 2015 and by the end of 2016 for Unit 4. The Company states the EQC maintains
jurisdiction over the BART Settlement Agreement and that the EQC's order is enforceable in
district court under the Wyoming Administrative Procedure Act.
The Company argues its EQC imposed deadline for completing the SCR systems
at the Bridger Plant is unaffected by the EPA's delayed action.e The Company argues Sierra
Club's Motion should be denied because the WDEQ has not amended the deadlines under which
the Company is obligated to install the SCR systems or otherwise meet associated unit-specific
emissions limits at the Bridger Plant.l0 The Company further argues Sierra Club's Motion
7 See id. at 8.
8 See Transcript of Pre-Hearing Conferance, February 6,2013, at 8, lines 3-9.e See Company's Memorandum in Opposition to Sierra Club's Motion for a Stay or Continuance Pending Final
Action at 2.
ro See id. at 6.
DOCKET NO. 12-035-92
-7 -
should be denied because the EPA ruling is not expected to materially impact the Project.ll
According to the Company, the EPA ruling will only address emission limits; it will not address
the technologt standard.t2 The Company adds, even if emission limits are lowered, the
Company can accommodate those new limits in its ongoing contract negotiations and project
design.l3 The Company argues a stay could have negative consequences for its customers
through increased costs due to a condensed construction schedule.la Finally, at the pre-hearing
conference, the Company agreed there is merit to UAE's proposal to allow parties reasonable
time to file comments on the EPA March Re-proposal after the March 7 heaing and before the
Commission issues its final order in this case, which the Company states it needs by mid May in
order to avoid increased construction cost.ls
C. Division's Position
The Division recommends the Commission not wait for a final EPA ruling.'6 The
Division further notes, "[W]DEQ requirements are known and must be implemented by specific
dates. Therefore[,] waiting for a final EPA rule is likely to result in higher costs."l7 At the pre-
hearing conference, the Division agreed with the Company's suggestion the Commission should
rr See id. at 7.
12 See id.t3 Assuming the new limits are "appropriately established and reasonably achievable with SCR technology at the
Jim Bridger Facility[.]" Id.ta See id. at 8.rs See Transcript of Pre-Hearing Conference, February 6,2013, at 12, lines 18-25 and at 13, lines 1-17.
16 See Division's Memorandum in Response to Sierra Club's Motion for Stay or Continuance Pending Final Action
at 3.
17 Id. at 4.
DOCKET NO. 12-035-92
-8-
maintain the current schedule but provide parties an opportunity to file comments on the EPA
March Re-proposal.ls
D. UAE's Position
UAE states, in part, it lacks information to determine or challenge the accuracy of
the Company's claim that it has no option but to proceed with the Bridger SCR Project this
spring, and therefore, UAE does not support a long-term stay.te UAE recommends the
Commission wait to issue a final order until after the EPA's proposed BART determination is
issued on March 29,2013, to allow parties an opportunity to submit supplemental information or
request further Commission proceedings afterwards.2o
E. Office's Position
The Office supports UAE's recommendation to wait to issue an order until the
EPA issues its proposed ruling on March 29,2013.21 According to the Offico, ". . .the Company
has not yet provided adequate analysis to support its request. Unless and until the Company
provides such supporting evidence, whether the EPA has issued its determination or not, the
Commission will not have adequate support to determine that the request is in the public
interest."22
r8 See Transcript of Pre-Hearing Conference, February 6,2013, at 15, lines l2-18.
le See Memorandum of UAE Users in Partial Support of Motion for Continuance at
20 ld. at2.2r See Memorandum from the Office, to the Commission at 2.
" rd.
t.
pocKET NO. 12-035-92
-9-
F. WRA's Position
WRA stated at hearing it does not support Sierra Club's Motion. WRA
recommends proceeding with the schedule as it currently exists, including the scheduled hearings
and Commission decision on the Application.'3 WRA argues parties can file a motion for
consideration of any facts which emerge from the EPA March Re-proposal, if and when that
occrrrs.2o
G. Discussion, Findings, and Ruling on Sierra Club's Motion
As noted above, at the February 6,2013, pre-hearing conference, we issued an
oral ruling denying Sierra Club's Motion. We found the BART Settlement Agreement, which
controls the Company's actions in Wyoming, provides specific implementation limits and dates
with which the Company must comply under Wyoming law. To ignore the Wyoming deadlines
while an EPA ruling is pending for an uncertain duration could, as the Company argues, result in
compressed construction schedules and additional cost to the Company and its ratepayers.
We also found the cost of the Project is not expected to appreciably increase from
the costs represented in the Company's Application should the EPA impose the more aggressive
emission limit of 0.05 lbsiIVIMBtu, and that the Company is already discussing this possibility
with its potential contractors.2s Therefore, the EPA ruling is unlikely to increase the projected
costs from those the Company presents.
23 See Transcript of Pre-Hearing Conference at 17-18, dated February 6,2013.
'o Id. atl7, lines 24-25,and at 18, lines 1-6.
25 See Transcript of Pre-Hearing Conference, February 6,2013, at25-28.
DOCKET NO. l2-03s-92
-10-
Weighing these factors both for and against a stay, and considering ratepayer
interests, the Commission denied Sierra Club's Motion and maintained the existing schedule for
the continued filing of testimony and the scheduled hearing date of March 7.
However, we also found merit in UAE's proposal and concluded it reasonable to
allow parties to file comments on the EPA March Re-proposal prior to our issuing the final order
in this case. We concluded we could consider such comments and still issue this order before the
mid-May deadline by which the Company testifies it must sign construction contracts in order to
meet the Wyoming deadlines without paying higher project-related costs. Most parties
supported this approach.
To accommodate the post-hearing comments, we stated in our February 6,2013,
oral ruling we would set dates for the receipt of comments on the EPA's March Re-proposal at
the conclusion of the March 7 , 2013 , hearing. To accommodate this extended comment period
we determined it to be in the public interest to further extend the date for a final decision in this
case, beyond the 180-day statutory deadline, to mid-May 2013.
We noted at the time of the pre-hearing conference, there was no guarantee the
EPA would complete its rulemaking process before September 27 ,2013. lndeed, the deadline
has now been further delayed. Additionally, the Wyoming SIP requirements have since been
reaffirmed by the WDEQ.26
26 As noted in the March 7,2013 hearing, the WDEQ has reaffirmed its January 4,2}l3,decision declining to
extend the BART Settlement Agreement deadlines applicable to the Bridger Plant. See Transcript of Hearing at
129, linesl0-2l,datedMarch7,2013;id.at13l, linesl-ll. SeealsoRMPSupplemental ExhibitCSW-SSRat2,
filed March 6,2013, (stating ". . .the DEQ[] continues to stand by its January 4,2013 decision declining to extend
the Settlement Agreement deadlines applicable to Jim Bridger Units 3 and 4.").
pocKET NO. 12-035-92
- 11-
III. PARTIES' POSITIONS
A. Company
The Company requests the Commission issue an order approving the Company's
resource decision to construct the Project. The Company testifies the basis for seeking this
approval is three-fold:
First, Bridger Units 3 and 4 are critical components of the Company's generation
fleet that serves Utah customers. The Company argues the baseload capacity and energy
produced by the units are needed to provide adequate, safe, efficient, and reliable service to Utah
customers.
Second, the Company states the Project is necessary to comply with Wyoming's
applicable regional haze rules and with the EPA's proposed approval of the Wyoming SIP
requiring immediate actions identified as BART. Specifrcally, the Company argues its BART
permit for Bridger constitutes a legalty binding settlement agreement between the Company and
the WDEQ which requires the Company to install SCR or alternative add-on NOx control
systems, and meet NOx emission limits of 0.07 pounds per million British therrnal units
("lb/MMBtu"), on Unit 3 by 2015 and Unit 4by 2016. The Wyoming SIP also includes these
requirements. Because of the nature of these requirements, the Company asserts non-compliance
is not an option; only the means of compliance are options.
Third, the Company concludes construction of the Project, estimated to cost
-
for the Company's share, together with the continued operation of Bridger Units
3 and 4 is the least-cost, risk-adjusted compliance strategy among a number of competing
pocKET NO. 12-035-92
-t2-
alternatives. To arrive at this conclusion, the Company first considered the cost effectiveness of
alternative compliance technologies by measuring capital cost on a cost per ton of pollutant
removed, as part of Wyoming's BART determination process. Second, the Company compared
the difference in the present value of the revenue requirement ("PVRR") of two system optimizer
("SO") model simulations to evaluate costs with and without the Project.
In the first simulation, the SO model assumes compliance is achieved through the
Bridger SCR Project and continued operation of Bridger Units 3 and 4. In the second simulation,
the Bridger SCR Project is not made and the SO model selects among other options to achieve
compliance. Other options include early retirement of Bridger Units 3 and 4 and replacement of
this power through other means, or conversion of the units to natural gas. The Company testifies
the SO model selects natural gas conversion for Bridger Units 3 and 4 in the second simulation
under a range of natural gas and carbon dioxide ("COz") price assumptions. The Company
provides the difference in the PVRR of the two simulations, expressed as PVRR(d), to show how
favorable or unfavorable the Bridger SCR Project is in comparison to the next best alternative
which is natural gas conversion under various alternative natural gas and CO2 price assumptions.
The Company's initial results favor SCR investment in the base case and under
four of the six alternative natural gas and CO2 price cases. The Company's base case results
favor the Project uv I PVRR(d).
In its rebuttal testimony, the Company provides updated analysis to respond, in
part, to parties' criticisms its initial analysis relied on outdated or erroneous data. Specifically,
the Company corrected various modeling errors and updated its natural gas price assumptions to
DOCKET NO. 12-035-92
-13-
its more recent September 2012 Offrcial Forward Price Curve ("OFPC"), and updated its COz
price assumptions. The updated base case also updates coal costs, load forecasts, and mine
capital and reclamation costs.
The Company argues the updated results continue to support SCR investment; its
updatedbasecaseanalysisyieldsaPVRR(d)EfavorabletotheBridgerUnits3
and 4 SCR investments as compared to the natural gas conversion alternative. According to the
Company, six of the nine cases modeled in its updated analysis produce a PVRR(d) favorable to
SCR investment. The Company argues updated PVRR(d) results are unfavorable to SCR
investrnent only in cases that assume low natural gas prices, and asserts levelized natural gas
prices would have to decrease by 15 percent from updated base case levels to reach a breakeven
PVRR(d).
In addition, the Company provides two PVRR(d) sensitivity cases in its rebuttal
testimony in response to parties' concerns regarding Energy Gateway transmission assumptions
and early unit retirement and resource replacement altematives. To address the concem its initial
analysis excluded consideration of avoiding or delaying Energy Gateway transmission
investment, in one sensitivity case the Company removes Energy Gateway West and South
segments and all incremental wind resources located in Wyoming. The Company states this
sensitivity case improves the economics of the Project in comparison to the updated base case.
In another sensitivity case, the Company forces the early retirement of Bridger Units 3 and 4. In
this case, the SO simulation adds a combined cycle combustion turbine in20l7, and yields a
PVRR(d) of I in favor of the Project.
DOCKET NO. 12-035-92
-14-
Finally, should the EPA mandate a lower 0.05 lbs/\tlMBtu NOx emission limit,
the Company argues all associated incremental cost implications could fit within the direct
estimated SCR investrnent costs The Company indicates the project scope
capital cost modification to achieve 0.05 lbs/NIMBtu for Bridger Units 3 and 4 ranges between
-
to
-.
Moreover, the company testifies these costs are contained in
the direct costs estimated and aralyzed for the SCR systems as part of the Company's
Application. Further, the Company argues increased operation and maintenance costs associated
with meeting a 0.05 lbs/IVIMBtu requirement would have negligible impact on the Company's
PVRR(d) results.2T Therefore, the Company argues it has positioned the Project to meet this
more stringent potential requirement.
The Company notes emission-reduction projects such as the Bridger SCR Project
are complicated, time consuming, and must be coordinated with other projects and planned
maintenance outages to ensure service is not compromised and costs are minimized. Delaying
commencement of the Project past mid May may cause the Company to miss the opportunity to
carry out Project construction during planned outage windows for Units 3 and 4. Doing so
would require deferring the planned outage.28 According to the Company, the tikely result
would be failure to comply with the Wyoming SIP deadlines or increased Project-related costs,
in part due to seasonal power replacement costs, or both. In sum, unless the Bridger SCR Project
is carried out according to the Company's proposed schedule, the Company contends it risks
noncompliance with required environmental regulations and higher Project costs.
2? See Conf,rdential Transcript of Hearing, March 7, 2013, at 51, line 3 and at 74,\ine25.
28 fu Direct Testimony, Chad A. Teply, at 31, lines 686-697.
DOCKET NO. 12-035-92
_15_
Given the time-sensitive nature of commencing and completing the Project, the
Company states it has already begun the competitive procurement process for engineering,
procurement, and construction ("EPC") contracts. The Company testifies it intends to sign EPC
contracts in mid-May 2013. Further, the Company provides additional supporting exhibits,
specifically, correspondence with the WDEQ in which the WDEQ again confirms the 2015 and
2016 compliance deadlines for each unit specified in the Application.
The Company contends the decision to implement the Bridger SCR Project
constitutes a'oresource decision" this Commission should review under UCA $ 54-17-402. The
Company argues the significant cost involved in the Project, the uncertainty of future regulation
of thermal generation emissions, and the likelihood of differing public opinion regarding the
least-cost, least-risk options, make this an appropriate resource decision to review. Further,
considering the Company's Application in advance of construction will allow the Commission
an opportunity to evaluate the Project contemporaneously with the decision to construct.
Additionally, any necessary changes to the decision can be economically undertaken.
Regarding the change in expected dates for the EPA to issue re-proposed or final
rulemaking on the Wyoming SIP, the Company takes the position the EPA has deferred its
decision on several previous occasions, and there is no guarantee it will not do so again. The
Company argues the Project is much too important, time-sensitive, and resource-intense for the
Commission to defer action pending the EPA's uncertain timetable. Based on the best
information available as of today, the Company contends it cannot delay the Project to await
further EPA action. To ignore the Wyoming deadlines while an EPA proposal is pending could,
l6-
according to the Company, result in condensed construction times and additional costs. If the
Company delays the start of its efforts to comply with the Wyoming deadlines until the fall of
20l3,theCompanyestimatesadditionalcostsofftoIpercent,or
between !
B. Division
pocKET NO. t2-035-92
-
und I dollars, could result.2e
The Division conditionally supports the Company's Application. At hearing, the
Division stated that the Company's selected technology is appropriate and its estimated pricing is
reasonable.30 In its brief addressing the EPA March Re-proposal, the Division recommends
approval of the resource decision with the following conditions:
l. The Company's fully executed EPC contract must be reviewed by the Commission to
ensure the final costs negotiated (including escalation, if any) in the EPC contract are
aligned with the costs currently filed in the Application.
2. Ratepayer protections must be included in the signed EPC contract or in the alternative,
through other Company commitments. Specifically, ratepayers should be held exempt
from any non-compliance costs imposed by Wyoming or the EPA due to the Company or
contractor's failure to meet the December 31,2015, and December 31,2016, emission
limit deadlines, or other later deadlines as may be included in the EPA's re-proposal.
2e See Transcript of Hearing, March 7, 2013, at 82, lines 24-25;83,lines l-3; and 84, lines 3-5 (testimony of
Company witness, Chad Teply, responding to Chairman Clark's question about "the cost consequences to the
Company or to the rate pa[yers] of the Company of delaying until . . . fall of this year...").
30 See Transcript of Hearing, March 7,2013, at l7l, lines 23-25; and 172, lines 14 (testimony of Division witness
Mark W. Crisp, responding to Mr. Michel's question about "what your recommendation would be for the
Commission if it were to grant approval. . .").
pocKET NO. 12-035-92
Any deviation between the SCR costs included in this case and the costs included in a
future general rate case or major plant addition case should be explained by the
Company. Such explanations should be provided with the Company's general rate case
or major plant addition application.
The Commission should approve the decision to construct the SCR systems, not pre-
approve whatever costs may be incurred under the SCR systems project. Actual SCR
system costs or forecasted SCR system costs proposed to be included in a future general
rate case or major plant addition case test year should be open for prudence review. For
example, should imprudent Company actions during construction result in an increase in
costs for a given component of the project, such costs should not be recovered from
ratepayers regardless of whether the total project costs are less than or more than the
costs included in this case.
In its brief, the Division supports the Company's Application but states approval
is not absolute. It argues UCA 54-17-403 provides 'othe commission may disallow some or all
costs incurred . . . if the . . . utility's actions in implementing an approved resource decision are
not prudent because of new information or changed circumstances. . . ." Additionally, the
Division argues the Company retains the duty to prudently implement the resource decision. In
the Division's view, doing so may require deviation from the approved resource decision if
circumstances diverge from those upon which approval was granted.
The Division states further that implementation of the resource decision is more
than simply the construction of the Project. It also includes the choice to continue with
3.
4.
pocKET NO. 12-035-92
-18-
implementation in light of new or changed circumstances as the project progresses. The choice
to continue with implementation is partially a planning issue when changed circumstances
demand a change in course of action possibly requiring termination of implementation.
In its comments on the change in the deadline for the EPA re-proposal, the
Division continues to support conditional approval of the Company's Application and states the
EPA's inaction on the anticipated date does not warrant disapproval of the Application.
C. Office
The Office recommends the Commission deny the Company's Application. The
Office maintains, ". . . the benefits to be derived from the resource must be clear or pre-approval
must be denied."3l The Office asserts denial of "pre-approval" still allows the Company the
opportunity to request recovery of Project costs in a general rate case, which is a more traditional
means of cost recorery.3' The Offrce is satisfied the record relating to its modeling issues is
sufficiently developed to enable the Commission to reach a reasoned conclusion on the
Application.
The Office contends due to the high level of uncertainty related to future EPA
action it is not possible for the Commission to determine if the Company is pursuing the least-
cost option for compliance. Further, the Office believes this uncertainty also makes it impossible
for the Commission to determine now the Company's Application for pre-approval is in the
public interest.
3r Direct Testimony of Cheryl Murray, at 3, lines 52-53.
32 While some parties use the term "pre-approval" in characterizing the Application, the statute authorizes the
Commission to "approve all or part of a resource decision..." See UCA Q 54-17-402 (emphasis added). Nothing in
this order is intended to supplant or waive the cost recovery provisions set forth in UCA $ 54-17-403.
DOCKET NO. 12-035-92
-19-
The Office argues approval of the resource decision should only be granted if the
Bridger SCR Project is clearly demonstrated to provide ratepayer benefits as the least-cost option
for compliance with the EPA's regional haze implementation plan requirements. Further, the
Office argues that due to the uncertainty associated with the delay in the EPA's re-proposed
rulemaking, the Commission cannot determine the Company's proposal is a preferred course of
action and therefore should not approve the Company's Application.
D. WRA
WRA agrees with the Office that for the sktute governing the voluntary request
for approval of a resource decision to be used appropriately, "preapproval must be based on a
clear demonstration of benefits."33 Otherwise the regulatory bargain is strained. WRA contends
the Company is in effect requesting the Commission to make determinations that it is not best
suited to make.
WRA states, given that the Company's analysis in this case is not clear-cut, has
undergone extensive revisions, and is extremely sensitive to modeling assumptions, and given
that certain critical pieces of information are still in flux, it appears that customer interests are
best protected by denying the current voluntary request for pre-approval. WRA asserts several
errors in the Company's analysis which WRA claims cause the case for SCRs to be overstated:
1. The capacity of the Bridger Units 3 and 4 is overstated and forecast unit availability does
not conform to history.
33 Surrebuttal Testimony, Nancy Kelly, at 79,\ine377.
DOCKET NO. 12-035-92
-20 -
2. Mine reclamation is assumed to begin in the gas conversion case prior to the date when
SCRs would be installed.
3. The potential for avoided or delayed transmission is not incorporated into the analysis.
4. The Company's COz price forecasts are unreasonably low, do not provide a reasonable
range of values, and are inconsistent with past modeling efforts.
5. If the EPA requires higher reductions of NOx than included in the Company's retrofit
plans, capacity could be further reduced and operation and maintenance costs over the
life of the facility could be increased.
WRA also believes the Company is undervaluing the monetary and environmental
benefits of the water used at Bridger Units 3 and 4. Although these benefits are difficult to
quantify, WRA believes they are not zero, and should be considered by the Commission in this
proceeding. While the annual cost of water is not likely to affect the Company's strategy for
reducing pollution at the Bridger Plant, the monetary value of the water rights in addition to the
environmental value of leaving the water in stream should weigh in the Commission's decision.
WRA testifies the revisions made by the Company in its rebuttal testimony
weaken the economic case for the Project and underscore the sensitivity of the results to the
underlying assumptions. WRA states the estimated benefit in the Company's base case declined
significantly to the point to where the decline is larger than the remaining benefit. Three
modeling updates contribute to the significant decline in the estimated benefit of the Project in
the base case. Two of the three assumption updates are primarily responsible for the reduction in
the estimated benefit of the Project, and demonstrate just how sensitive the results are to changes
DOCKET NO. 12-035-92
-21-
in modeling assumptions. The update to the OFPC, coal cash cost, and mine capital costs are the
primary sources of the decline in the estimated benefit.
WRA, through its legal counsel, also introduced at hearing an agreement between
the EPA, Public Service Company of New Mexico, and the state of New Mexico regarding the
installation of selective non-catalytic reduction technology on the San Juan Generation Station's
("SJGS") Units 1 and 4 and the retirement of SJGS Units 2 and 3. WRA questions whether a
similar approach would be applicable to Bridger units and whether the parties had enough time
to investigate this option in the analysis. No WRA witness offered testimony regarding this
option.
WRA concludes the Commission does not have the information it would need to
deterrrine SCR is the least-cost outcome adjusted for risk and uncertainty. WRA recommends
the Commission reject the Company's Application. WRA notes the Company has requested pre-
approval of the costs of the Project under UCA $ 54-17-402. The statute allows a utility to seek
pre-approval of a resource acquisition decision before expending the funds. However, in WRA's
view, the request is voluntary and denial of the voluntary request by the Commission does not
restrain the Company's future actions.
E. Sierra Club
Sierra Club contends the Company's proposed Project is an unstable solution
which is ultimately not in the public interest because the Company's analysis in support of the
Project is inconclusive and deficient. According to Sierra Club, Commission pre-approval of the
Project would create a substantial risk for ratepayers and would remove the incentive for the
l
pocKET NO. 12-035-92
-22 -
Company to continue to scrutinize lower cost altematives to the installation of SCR retrofits at
the Bridger Plant. Sierra Club asserts the following four concerns regarding the Company's
analysis:
l. The Company's coal remediation analysis biases the choice to retrofit Bridger Units 3
and 4 with SCR.
2. The Company's analysis does not show how the alternative of potential retirement of
Bridger Units 3 and 4 would alleviate transmission build out requirements and would
avoid components of the Company's proposed Energy Gateway West transmission
project.
3. The Company's revised rebuttal analysis reducing forecasted CO2 compliance costs is
unsupported and the Company's supposition of a positive relationship between natural
gas and CO2 compliance costs is unfounded.
4. The Company failed to explore the opportunity to defer the costs of SCR until a federal
mandate is in place.
Sierra Club contends the Company's analysis which compares the cost impact of
retiring Bridger Units 3 and 4 as a compliance alternative to the Company's preferred SCR
retrofit is biased by excessive costs the Company assumes would occur with the closure (or
partial closure) and subsequent remediation of the adjacent Jim Bridger coal mine.3a
Sierra Club asserts the Company's surface mine remediation plan, under an
assumed two or three unit retirement option, accelerates the remediation process faster than
3o The Company has two-thirds interest in the Jim Bridger Mine under its affiliate, Bridger Coal Company.
DOCKET NO. 12-035-92
-23 -
Wyoming regulatory requirements dictate. As a result, according to Sierra Club, the net present
value of the Company's Bridger coal mine remediation sinking fund withdrawals is overstated,
thus making the costs of Bridger unit retirement unfavorable in comparison to the SCR retrofit
option. Additionally, Sierra Club argues the Company's retirement analysis fails to properly
account for underground coal mine remediation costs, further biasing the analysis in favor of the
SCR retrofit option.
Sierra Club also claims the Company provides little evidence it will be forced to
shut down surface mining operations due to its inability to sell coal, assuming potential
retirement of Bridger Units 3 and 4. Sierra Club asserts the Company has not issued solicitations
to sell coal to other parties and has not determined if there is a domestic market for this coal.
Sierra Club argues the Company did not adequately consider the opportunity to
avoid transmission expenses by retiring some of the Bridger units and replacing them with
generation resources closer to load centers or with demand side management options. Sierra
Club states if one or more units at Bridger are retired in the next few years, several hundred
megawatts of capacity would be opened on existing transmission lines connecting Bridger to the
Company's Populus substation near Downey, Idaho. According to Sierra Club, this would allow
the Company to defer expenditures on the proposed development of additional transmission lines
connecting these two points, as included in the Company's Energy Gateway West transmission
development plan. As an alternative, Sierra Club argues if potential replacement generation and
capacity were developed and sited closer to Utah or Oregon load centers, the Company may be
able to relieve other transmission constraints.
pocKET NO. 12-035-92
-24 -
Sierra Club contends the Company's sensitivity case which removes certain
segments of planned Energy Gateway transmission is inadequate because it fails to examine the
opportunity to avoid transmission investments on the segment of Energy Gateway West
connecting the Bridger Plant to Utah and Oregon load centers. Sierra Club concludes the
Company has not demonstrated the links in the proposed Energy Gateway West transmission
project westward of the Bridger plant are unavoidable and argues the Company therefore denies
ratepayers the opportunity to avoid unnecessary transmission infrastructure development costs,
thereby biasing the Company's analysis against a potential unit retirement decision.
In its dfuect testimony, Sierra Club argues the Company's CO2 price forecasts are
unreasonably low, further biasing the analysis. Sierra Club claims it reviewed over 60 CO2 price
forecasts from approximately 25 publicly available IRP and utility planning dockets filed since
2009 and determined the Company's COz forecast used in the SCR analysis is lower than similar
forecasts used by other utilities and industry groups. For example, Sierra Club claims the
Company's high CO2 forecast is closer to what some other utilities and parties consider a mid-
range forecast.
Sierra Club contends the Company's choice of what the Sierra Club considers to
be a very low base CO2 price forecast suggests the Company is "casting particularly long odds
on any form of climate regulation or legislation relative to its counterparts."35 Sierra Club argues
this is an "outlier position" that is neither prudent nor safe, and exposes ratepayers to significant
risk.
35 See Sierra Club, Rebuttal Testimony of Jeremy Fisher, at.23.
DOCKET NO. 12-035-92
ln its surrebuttal testimony, Sierra Club addresses the Company's assertion of a
positive natural gas and CO2 price relationship. Sierra Club does not necessarily reject the direct
relationship between natural gas and CO2 prices, and agrees there may be some coal-to-gas
switching with low COz and gas prices in the short term. In the long run, however, Sierra Club
argues that continuously rising CO2 prices may incent power providers to choose not to build gas
generation resources because such resources would also be subject to payment of COz prices.
Under such conditions, according to Sierra Club, power providers may opt to develop other low
emissions sources such as renewable or even nuclear energy.
Sierra Club states the net interaction between gas prices and COz prices involves a
complex interplay of factors potentially leading to numerous outcomes. Sierra Club contends the
Company's assumed natural gas CO2 price relationship is unfounded and is overemphasized,
thereby biasing the analysis regarding reasonable generation replacement portfolios.
Sierra Club also asserts it is not necessary for the Company to meet the
requirement for the proposed SCR retrofit until 2018. Sierra Club claims there is no reason for
the Company to move forward with construction of the proposed project right now. Sierra Club
contends the EPA's December 2012 extension delaying a final determination prevents the
Commission and other parties from considering the additional economic impacts that could result
once the final rule is made. With final determination, according to Sierra Club, all four Bridger
Units now become subject to BART, an outcome affecting the entire plant, not just Units 3 and
4. Compliance with the EPA's final determination could include potential acceleration of
installation of SCR on Bridger Units I and 2, increased capital and operational costs necessary to
pocKET NO. 12-035-92
_26 _
meet potentially more aggressive emissions limits, or the impact of installing SCR on all four
Jim Bridger units within a five-yearwindow.
According to Sierra Club, if the final promulgation of the EPA's final
determination takes place on September 27 , 2013 , the new compliance deadline for the
installation and operation of BART would occur no earlier than September 27,2018, giving the
Company nearly three additional years to complete the installation of BART emissions controls
or to implement another altemative. Additionally, Sierra Club contends the BART Settlement
Agreement can be modified if the final determination results in changed circumstances.
Therefore, Sierra Club argues the Company should, for the benefit of its ratepayers, seek to
amend the BART Settlement Agreement (and the EQC order) and delay the Project.
Sierra Club argues the Company is requesting pre-approval to proceed with a
massive capital project to comply with federal law before the specific federal requirement is
finalized. It contends Wyoming's proposed 201512016 compliance dates will be irrelevant if the
EPA disapproves the proposed Wyoming SIP. Further, given the most recent extension of the
EPA's proposed rule, Sierra Club argues that neither the Company nor the Commission will
know what the actual compliance emission limits and dates will be until after the Company
proposes to begin construction of the Project. Sierra Club notes without knowing the final
environmental requirements for the Bridger facility, the Commission cannot deterrnine at this
time whether the proposed resource decision is prudent, and therefore the Commission must
deny the Company's Application.
pocKET NO. l2-035-92
_27 _
IV. DISCUSSION, FINDINGS, AND CONCLUSIONS
This is the first voluntary request for approval of a resource decision filed with the
Commission pursuant to UCA g 54-17-402 and UAC R746-440-1. Under UCA $ 54-17-402,the
Commission has the authority to hear voluntary requests to approve all or part of a proposed
resource decision by a public utility before the utility implements the resource decision.
Resource decisions include those relating to "an energy utility's acquisition, management, or
operation of energy production, processing, transmission, or distribution facilities or processes . .
. ." UCA $ 54-17-401(2Xa).
When considering a voluntary request to approve a resource decision, UCA $ 54-
l7-402(3)(b) requires the Commission to determine whether the decision:
(b) is in the public interest, taking into consideration:
(i) whether it will most likely result in the acquisition, production, and delivery of
utility services at the lowest reasonable cost to the retail customers of an energy
utility located in this state;(iD long-term and short-term impacts;(iii) risk;(iv) reliability;(v) financial impacts on the energy utility; and(vi) other factors determined by the commission to be relevant.
In the event the Commission approves a resource decision under this statute, UCA
5 54-17-402(7) requires the Commission to include in its order:
(a) findings as to the approved projected costs ofa resource decision; and(b) the basis upon which the [projected costs] are made.
Three of the seven intervening parties in this case, the Office, WRA, and Sierra
Club, recommend the Commission deny the Company's request for approval of its Application.
pocKET NO. 12-035-92
-28 -
To some extent, these parties argue it is impossible to determine whether the Project is least cost
because the EPA has yet to issue its final rulemaking regarding the Wyoming SIP and therefore
it is unknown when the Company must comply, and what the Company must do in order to
comply, with EPA's final rulemaking. The Offrce argues too much uncertainty exists for the
Commission to determine the Company's Application is in the public interest. Essentially, these
parties place little weight, if any, on the Wyoming process and the determinations made therein.
The Company and Division, on the other hand, place substantial weight on the legally binding
Wyoming requirements. Based on the record in this case, we agree with the Company and
Division that the Wyoming SIP requirements warrant our consideration now of the
reasonableness of the Company's resource decision.
The Company filed correspondence from the WDEQ, dated March6,20l3,
stating the Company is required to meet the Wyoming SIP, including the emissions limits and
deadlines for Bridger Units 3 and 4. Further, as noted by the Company in its April 19,20L3,
reply briet should the EPA issue a federal implementation plan ("FIP"), the State of Wyoming
may take various steps to cure and implement the SIP, rather than implement the FIP.36 It is
uncontroverted that Wyoming law currently requires the reduction of NOx emissions at Bridger
Units 3 and 4 by 2015 and 2016, respectively.
It is also undisputed the proposed SCR technology is a compliant technology to
meet the Wyoming emission limit of 0.07 lbs/\rtMBtu, as well as the more stringent limit of 0.05
36 See Rocky Mountain Power Reply Comments Relating to EPA Action, dated April 19, 2013, at 3.
DOCKET NO. 12-035-92
_29 _
lbs/]vlMBtu, should the EPA impose the more stringent limit as it has done elsewhere.3' The
Company's unrebuffed testimony states this more stringent emissions limit can be achieved
within the scope of Project costs presented in the Application. No party provides evidence the
EPA has unilaterally imposed any more stringent requirement on an electric utility to satisfr
regional haze requirements. Thus, in considering the current mandates of the Wyoming SIP, we
conclude it is reasonable at this juncture to presume the EPA will issue a final rulemaking
requiring technologies and emission limits consistent with the mandates underlying the
Application.
Further, the EPA is now expected to issue its notice of re-proposed rulemaking on
May 23,2013. Should the EPA re-propose a solution that is outside the presumed mandates,
UCA $ 54-17-404 provides a process for the Company to request Commission review and
determination of whether to proceed with implementation of the approved resource decision.
Moreover, UCA $ 54-17-403(2) places on the Company the burden to respond prudently to new
information and changed circumstances or risk the Commission finding the Company's
responsive actions to be imprudent and inconsistent with the public interest. Clearly, the
Company is now aware the EPA may issue its notice of re-proposed rulemaking within weeks of
this order. Therefore, we conclude while it is appropriate for the Company to begin to
implement its resource decision now, it must do so in a manner that preserves its flexibility to
respond appropriately to final EPA action that is outside the bounds of the assumptions on which
its Application rests.
37 See Transcript of Pre-Hearing Conference, February 6,2013, at 26, lines 6-15; See also Matt Croft Surrebuttal
Testimony at 4-6, lines 54-117.
pocKET NO. 12-035-92
-30-
WRA and Sierra Club further argue the Commission should deny the Company's
Application because the Company has failed to prove the Project is least cost. WRA and Sierra
Club contend the Company's economic analysis of alternative compliance strategies overstates
the cases supporting the Project, and therefore the Application should be denied.
Specifically, WRA and Sierra Club argue the Company does not properly account
for the costs of certain Energy Gateway transmission investment which, they claim, would be
avoided if Bridger Units 3 and 4 were retired. We find the Company's sensitivity case which
retires Bridger Units 3 and 4 and cancels certain Energy Gateway transmission investrnent, and
consequential wind resource investrnent, shows this alternative would be higher cost than the
Project. We are not persuaded by WRA or Sierra Club this sensitivity analysis is flawed because
it removes more of the Energy Gateway project than they consider appropriate for the scenario.
Based on the Company's testimony, we are neither persuaded the Company may cancel select
portions of transmission segments as suggested by WRA and Sierra Club; nor are we convinced
if it did, the savings would outweigh the higher cost of the required replacement power. We
conclude the evidence in this case does not support a conclusion that cost savings from avoiding
segments of Energy Gateway transmission outweigh the benefits of the Project.
WRA and Sierra Club both argue the Company's estimates for possible future
"taxes" on COz emissions are too low and thus overstate the advantages of the Project. The
Company counters its estimates are recent and consistent with its 2013 IRP. Further, the
Company testifies COz levelized costs for the period 2016 through 2030 would have to exceed
$30 per ton to achieve breakeven results between natural gas conversion and the Project. Based
pocKET NO. 12-035-92
- 31 -
on the Company's testimony, we are not persuaded reasonable COz cost adjustments would shift
the analysis in favor of natural gas conversion or retirement. Rather, we find the Company's
assumptions reasonably reflect the uncertainties of future CO2 compliance costs. Sierra Club
also questions the Company's assumption regarding the assumed positive relationship between
natural gas price and COz price. We agree with the Company, and the variety of forecasting
firms cited in testimony by the Company, such a trend is plausible if not likely and more likely
than the case in which the two prices are expected to be independent of one another.
Finally, both WRA and Sierra Club argue the Company's economic analysis
overstates mine closure and remediation costs in the event of unit retirement or conversion to
gas. WRA and Sierra Club question the timing of remediation costs in the various altematives
and argue the Company's assumptions inappropriately burden the natural gas conversion case.
We are persuaded by the Company response that it cannot alter mine reclamation without
considering mining operations plans. Sierra Club's analysis does not consider this fact.
Sierra Club also challenges the Company's assumption coal costs would increase
for Bridger Units 1 and 2 if Units 3 and 4 are converted to natural gas. Rather, Sierra Club
argues, the Company could continue to mine the coal as before and sell it to offset remediation
cost. However, Sierra Club provides no evidence the coal can be sold or shipped off the site.
The Company, on the other hand, provides evidence additional loading and rail infrastructure
would be required and the coal may be difficult to sell due to its composition. While WRA also
asserts the Company has assumed incorrect capacities and availabilities for Bridger Units 3 and
4, thus favoring the Project, WRA provides no indication of the impact of this alleged error.
DOCKET NO. l2-03s-92
-32 -
We are not persuaded by Sierra Club or WRA that further adjustments to address
the foregoing issues are reasonable or would cause the results of the Company's economic
analysis to swing in favor of natural gas conversion or early retirement. We note the Company's
economic analysis not only demonstrates the Project is favored in six of nine cases, but
substantially so. We find no compelling evidence, arguments, or analysis shifting the economics
to favor to an alternative strategy to comply with the Wyoming SIP requirements.
Finally, we acknowledge the Division's recommendation that our approval of the
Application include certain conditions (summarized in Section III. B., above). We conclude the
conditions we impose below appropriately address the Division's recommendation.
Based on the foregoing discussion and the evidence presented in this case, we
approve the Company's resource decision to construct SCR systems to achieve 0.07 lbs/lvlMBtu
limits at Bridger Unit 3 by 2015, and Unit 4by 2016, as described in the Application. We find
the Company has demonstrated the Bridger SCR Project is the least-cost means, adjusted for
risk, to meet the emissions limits for Bridger Units 3 and 4 established by the Wyoming emission
standards. We also find the Company's proposed timing for completing the Project will benefit
ratepayers by avoiding increased Project cost due to the requirements of a compressed
construction schedule and possible additional outages. Coordinating the timing of the Project
with the four-year maintenance schedules of the Bridger Plant also will manage costs and risks
associated with potential replacement power cost while the Project is implemented. Importantly,
this timing will also ensure the Project is completed in time to meet the Wyoming SIP deadlines.
pocKET NO. t2-035-92
-33-
We approve
-
as the reasonable projected cost of the resource
decision to implement SCR systems designed to meet the proposed NOx limit of 0.07
lbs/\rlMBtu. We base this finding on the Company's testimony that achieving 0.05 lbs/MMBtu
is expected to cost between I u.td
-
and that this amount is
containedwithintheestimatedProjectcostofffortheSCRsystems.
Accordingly, we have removed of the Project cost required to meet the 0.07
lbslt\4MBtu Nox emission limit from the requested
-
to reflect the Company's
testimony.
Approval of the
-
projected cost is conditioned upon our future
review of the frnal EPC contract(s) for the SCR systems. If the EPC contract(s) to achieve 0.07
lbslt\4MBtu NOx emission limits total less than this amount, the EPC amount shall replace the
-
as the approved projected costs ofthe resource decision required pursuant to
UCA $ 54-17-402(7)(a). Pursuant to UCA $ 54-17-403, any increase from this projected cost is
subject to Commission review as part of a rate hearing under UCA $ 54-7-12, except to the
extent the Commission issues an order under UCA $ 54-17-404.
We also approve I as the reasonable projected cost of the resource
decision to meet a NOx limit of 0.05 lbs/MMBtu. This projected cost is approved conditioned
on a final EPA rule specifying this lower limit. The projected cost to achieve a
limit of 0.05 lbs/MMBtu is also conditioned upon our future review of the final EPC contract(s)
for the SCR systems. If the EPC contract(s) to achieve 0.05 lbs/NIMBtu emission limits total
lessthanthisamount,theEPCcontracts(s)amountsha1lreplac"th"Easthe
pocKET NO. 12-035-92
-34-
approved projected cost ofthe resource decision required pursuant to UCA 5 54-17-402(7)(a).
And again, pursuant to UCA $ 54-17-403, any increase from this projected cost is subject to
Commission review as part of a rate hearing under UCA $ 54-7-12, except to the extent the
Commission issues an order under UCA $ 54-17-404.
V. ORDER
Pursuant to the foregoing discussion, findings and conclusions made herein, we
ORDER:
1. The Company's resource decision to construct SCR systems on Bridger Units 3
and 4 is approved.
2. The approved projected cost of the Project is conditioned upon
our review of the executed EPC contract(s) as discussed herein.
3.In the event the EPA issues a final rule imposing a 0.05 lbs/MMBtu NOx
emissions limit, the approved projected cost of the Project is
conditioned upon our review ofthe executed EPC contract(s) as discussed herein.
The Company shall file the executed EPC contract(s) for the Project as soon as
practicable.
In light of the current uncertainties pertaining to future EPA actions regarding the
Wyoming SIP and pursuant to UCA $ 54-17-403(2), the approval of resource
decision projected costs in this Order is conditioned on the Company acting
prudently when responding to potential new information and changed conditions.
5.
pocKET NO. 12-035-92
-35-
DATED at Salt Lake City, Utah, this 10th day of May,2013.
/s/ Ron Allen. Chairman
/s/ David R. Clark. Commissioner
/s/ Thad LeVar. Commissioner
Attest:
/s/ Gary L. Widerbure
Coommission Secretary
Notice of Opportunity for Agency Review or Rehearine
Pursuant to $$ 63G-4-301 and 54-7-15 of the Utah Code, an aggrieved party may
request agency review or rehearing of this Order by frling a written request with the Commission
within 30 days after the issuance of this Order. Responses to a request for agency review or
rehearing must be filed within 15 days of the frling of the request for review or rehearing. If the
Commission does not grant a request for review or rehearing within 20 days after the filing of the
request, it is deemed denied. Judicial review of the Commission's final agency action may be
obtained by filing a petition for review with the Utah Supreme Court within 30 days after final
agency action. Any petition for review must comply with the requirements of $$ 63G-4-401 and
63G-4-403 of the Utah Code and Utah Rules of Appellate Procedure.
pocKET NO. 12-035-92
-36-
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 30th day of May,2OI3, a ffue and correct copy
of the foregoing REDACTED REPORT AND ORDER was served upon the following as
indicated below:
By Electronic-Mail:
David L. Taylor ([e-mail])
Mark C. Moench ([e-mail])
Daniel E. Solander (daniel.solander@,pacificom.com)
Rocky Mountain Power
D. Matthew Moscon ([e-mail])
Mark E. Hindley ([e-mail])
Stoel Rives LLP
Steven S. Michel ([e-mail])
Nancy Kelly (nkelly@.westernresou )
Charles R. Dubuc (rdubuc@.westernresourc es. org)
Western Resource Advocates
William J. Evans ([e-mail])
Vicki M. Baldwin ([e-mail])
Elizabeth L. Silvestrini ([e-mail])
Parsons Behle &Latimer
Gary A. Dodge ([e-mail])
Hatch, James & Dodge
Kevin Higgins ([e-mail])
Neal Townsend ([e-mail])
Energy Strategies
Travis Ritchie ([e-mail])
Gloria Smith ([e-mail])
Sierra Club
By Hand-Delivery:
Division of Public Utilities
160 East 300 South, 4th Floor
Salt Lake city, utah 84111
Office of Consumer Services
160 East 300 South, 2'd Floor
Salt Lake city, utah 84111
Administrative Assistant
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-13-16
IDAHO POWER COMPANY
ATTACHMENT 3
WYOMING ORDER
BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING
IN THE MATTER OF THE APPLICATION OFROCKY MOUNTATN POWER FOR
APPROVAL OF A CERTIFICATE OF PUBLIC
CONIVENIENCE AND NECESSITY TO
CONSTRUCT SELECTIVE CATALYTIC
REDUCTION SYSTEMS ON JIM BRIDGER
UNITS 3 AND 4 LOCATED NEAR POINT OF
ROCKS, WYOMING
Docket No. 20000-4 I 8-EA- l2
(Record No. 133 l4)
APPEARANCES
For the Applicant Rocky Mountain Power (RMP or the Company):
PAUL HICKEY, Attomey at Law, Cheyenne, Wyoming.
For the Intervenor Office of Consumer Advocate (OCA):
IVAN H. WILLIAMS, Senior Counsel, Cheyenne, Wyoming.
For the Intervenor, Wyoming Industrial Energy Consumers (WIEC):
ROBERT M. POMEROY, Jr., and SARA K. RUNDELL
of Holland &Hart, Greenwood Village, Colorado.
For the Intervenor Siena Club:
TRAVIS RITCHIE, Attorney at Law, San Francisco, California.
ELLEN MEDLIN, Attorney at Law, San Francisco, California.
For the Intervenor Powder River Basin Resource Council (PRBRC):
SHANNON ANDERSON, Attorney at Law, Sheridan, Wyoming.
HEARD BEFORE
Chairman ALAN B. MINIER
Commissioner WILLIAM F. RUSSELL
STEVE MINK, Assistant Secretary
Presiding pursuant to a Special Order of the Commission
Hearing held March 26,2013
MEMORANDUM OPINION, FINDINGS AND ORDER GRANTING
APPLICATION FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY
(Issued May 29,2013)
This matter is before the Wyoming Public Service Commission (Commission) upon the
application (Application) of RMP seeking a Certificate of Public Convenience and Necessity
(CPCN) for the construction of selective catalyic reduction systems (SCR) on Jim Bridger Units
3 and 4 located near Point of Rocks, Wyoming; and the interventions of OCA, WIEC, Sierra
CIub and the PRBRC.
The Commission, having reviewed the Application, attached exhibits, and the evidence
adduced at the public hearing, its files regarding RMP, applicable Wyoming utility law, and
otherwise being fully advised in the premises, FINDS and CONCLUDES:
Introduction
l. On August 7,2012, RMP filed its Application with the Commission. PacifiCorp
provides retail electricity service as RMP in Wyoming, Utah, and ldaho, and as Pacific Power in
the states of Oregon, Washington, and California. RMP is a public utility as defined in W.S. $
37-l-l0l(a)(vi)(C), subject to the jurisdiction of the Commission under W.S. $ 37-2-112.
2. The Application, in compliance with the Stipulation and Agreement approved in
Docket No. 20000-384-ER-10 (the Stipulation), seeks an Order granting a CPCN to construct
two major environmental projects as provided in fll3b of the Stipulation. The projects would
add SCR systems to Units 3 and 4 of the Jim Bridger electric steam plant located in Sweetwater
County, Wyoming. (Application pp. l-2). RMP supported the Application with the written
testimony of Chad A. Teply, together with attachments CAT-l,l-l,l-2,1-3,2,2-1,2-3,3,3-1,
3-2,3-3,3-4,4,4-1,4-2,4-3,4-5,5,6,7 (Exhibit l) and the written testimony of Rick T. Link
together with attachments RTL l-7. (Exhibit 2.)
3. On August 13,2012, WIEC filed its Petition for Leove to Intervene (Petition).
The Petitioz was granted by Order issued October 9, 2012. WIEC is an unincorporated
association whose members are corporations duly authorized to transact business in Wyoming.
WIEC members are Wyoming ratepayers who operate facilities within the service territory of
RMP. (Stipulated Facts fl5.)
4. On August 27,2012, the Commission issued its Notice of Application containing
a protest deadline of September 27,2012. The notice was duly published in newspapers and
broadcast on radio stations in RMP's service territory. (Composite Exhibit A.)
5. On September 5,2013, PRBRC filed its Petitionfor Leove to Intervene. The
Petition was granted by an Order issued October 9, 2012. PRBRC is membership-based
organization headquartered in Sheridan, Wyoming. PRBRC members purchase utility services
from RMP. (Stipulated Facts tf6.)
6. On September 25,2012, Sierra Club filed its Petitionfor Leave to Intervene. The
Petition was granted by Order issued October 9,2012. Sierra Club is a national environmental
and conservation organization incorporated as a nonprofit public benefit corporation under the
laws of California. Sierra Club members purchase utility services from RMP. (Id. at\7.)
7. On September 24,2012, pursuant to W.S. $ 37-4-402(a)(i), the OCA intervened
in the case. The OCA is an independent division within the Commission, charged by statute with
representing the interests of Wyoming citizens and all classes of utility customers in matters
involving public utilities. (Id. atna.)
8. On October 30, 2012 the Commission issued its Order Setting Procedural
Schedule which set, inter alia, a public hearing commencing on March 4,2013. (1d. at !118.)
9. On December 21,2012, Sierra Club filed its Motionfor a Stay or Continuance
Pending Final EPA Action. Pursuant to action taken at its January 17,2013, open meeting, the
Commission entered its Order Denying Motion for a Stay or Continuance Pending Final EPA
Action on February 4,2013. (Idat\120-23.)
10. On January 31, 2013, the Commission entered its Order Vacating and Resetting
Hearing, which, inter alia, vacated the scheduled hearing date and reset the hearing for March
26,2013. Notice of the new hearing date was duly published in newspapers and broadcast on
radio. (Composite Exhibit A.)
I l. On February l, 2013, the intervenors pre-filed direct testimony together with the
following exhibits:
WIEC: confidential direct testimony of Randall J. Falkenberg and attachments RJF l-3
(Exhibit 100).
OCA: direct testimony of Leo H. Stander (Exhibit 201) and Bryce J. Freeman (Exhibit
202), Appendix A (Exhibit 202.1), Confidential OCA Data Request Response 3.16 (Exhibit
202.2), Confidential Continued Coal Operation to Gas (Exhibit 202.3), Confidential Continued
Coal Operation to Gas (Exhibit 202.4), Confidential Continued Coal Operation to Gas (Exhibit
202.5), Confidential Continued Coal Operation to Gas (Exhibit 202.6), Confidential Continued
Coal Operation to Gas CCCT (Exhibit 202.7), Confidential Continued Coal Operation to Gas
CCCT (Exhibit 202.8'), Confidential Continued Coal Operation to Gas CCCT (Exhibit 202.9),
Confidential Continued Coal Operation to Gas CCCT (Exhibit 202.9), Confidential Continued
Coal Operation to Gas CCCT (Exhibit 202.10), Confidential RMP Cost of Capital (Exhibit
202.11), Redacted Testimony of Bryce J. Freeman (Exhibit 203).
Sierra Club: direct testimony Jeremy Fisher (Exhibit 300), Jeremy Fisher Curriculum
Vitae (Exhibit 301), WIEC 14.3 CONF - PVRR Tables (Exhibit 302), Information Request
Responses WIEC l.l15 (Exhibit 303), Synapse 2012 Carbon Dioxide Price Forecast (Exhibit
304), CO2 Price Forecasts used by Various Utitities In Planning (Exhibit 305), CO2 Price
Forecast from PacifiCorp Synapse EEI (Exhibit 306), EEI Potential Impacts of Environmental
Regulation (Exhibit 307), EPzu Preliminary Analysis of Waxman-Markey (Exhibit 308),
Gateway West Transmission Line Project Overview Map (Exhibit 309), WECC Path Reports,
l0-Year Regional Transmission Plan (Exhibit 310), Gateway West Comprehensive Progress
Report (Exhibit 311), Gateway West Transmission Line Draft EIS Section I (Exhibit 312),
Attach WIEC 1.4 -l CONF (Exhibit 313), Attach WIEC 1.4 -2 CONF (Exhibit 314), Response
to WIEC 13.2 (Exhibit 315), Response to WIEC 13.4 (Exhibit 316), Response to WIEC 1.83
(Exhibit 317), GTM V 2.0 Method Assumptions (Exhibit 318), Response to WIEC 6.8 (Exhibit
319), Attach WIEC 14.3 CONF - Coal Adjustments (Exhibit 320a), Attach WIEC 14.3 CONF -
Mine Capital Adjustments (Exhibit 320b), Response to WIEC 8.25 (Exhibit32l), Delivered Cost
of Coal to PacifiCorp Plants CONF (Exhibit 322), CapBx_TransmissionOptions CONF (Exhibit
323), CapEx_TieCapaciry CONF (Exhibit 324), and Attach WIEC 1.22 -l CONF (Exhibit 325).
PRBRC did not pre-file any exhibits.
12. On March 4, 2013, RMP filed rebuttal testimony of Rick Link with attachments
RTL l-7 (Exhibit 2; the Company filed Link's direct and rebuttal testimony under the same
Exhibit number), rebuttal testimony of Cindy A. Crane (Exhibit 3), and rebuttal testimony of
Cathy S. Woollums with attachments CSW-IR-3R (Exhibit a). The OCA filed cross-answer
testimony of Bryce Freeman (Exhibit 204). WIEC filed non-confidential and confidential cross-
answer testimony of Randall Falkenberg together with attachments RJF 3-6 (Exhibits 102 and
103 respectively). Sierra Club filed cross-answer testimony of Jeremy Fisher (Exhibit 326),The
Brattle Group, "Potential Coal Plant Retirements: 2012 Update (Exhibit 327), UT 12-035-92
Response to Sierra Club Data Request 5.13(a) (Exhibit 328), and UT 12-035-92 Response to
Sierra Club Data Request 5.15(d) (Exhibit 329).
13. On March 5, 2013, RMP filed correspondence from Cathy S. Woollums,
MidAmerican Energy Holdings Company to Nancy E. Vehr and Steven A. Dietrich, Wyoming
Department of Environmental Quality, Air Quality Division (Exhibit 5).
14. On March 6,2013, RMP filed correspondence from Steven A. Dietrich, Wyoming
Department of Environmental Quality, Air Quality Division to Cathy S. Woollums,
MidAmerican Energy Holdings Company (Exhibit 6).
15. On March 19,2013, WIEC filed OCA Answers to WIEC's Fourth Set of Data
Requests (Exhibit 104), Letters to and from the Wyoming Department of Environmental Quality
(Exhibit 105) and rebuttal testimony of Chad Teply in Docket No.20000400-EA-ll (Exhibit
l 06).
16. On March 20,2013, PRBRC filed RMP's response to PRBRC data request 1.2
(Exhibit 400), EPA, Coal Combustion Residuals - Key Dffirences Between Subtitle C and
Subtille D Options (Exhibit 401) and Evan Lehmann and Tiffany Strecker, Utilities Prepare for
Carbon Rules on Operating Power Plant, E&E Publishing (Exhibit 402). Sierra Club filed
Excerpt of UT 12-035-92 Hearing Transcript (3-7-13), Pages l-7,29-127 CONF (Exhibit 330),
Excerpt of June 4,2012 EPA Proposed Rule, Sec. VII(A)(4),77 Fed. Reg. 33022-23,33053-54
(Exhibit 331), July 12,2012 Comments from PacifiCorp (Exhibit 332) and Oregon Final
Decision, Docket UE 246 (Exhibit 333). RMP filed Sierra Club Web Page, The Sierua ClubBeyondCoalCampal8n,@)(Exhibit7),Marchl,20l3articlefrom
Bloomberg by Mark Drajem, Sierra Club Says 142 Coal-Fired Plants Shut During Drive
(Exhibit 8), Synapse Energy Economics, Inc., Benefits of Beyond BAU, Human, Social, and
Environmental Damages Avoided through the Retirement of the US Coal Fleet, by Jeremy
Fisher, PhD; Rachel Wilson; Nicole Hughes; Matthew Wittenstein; Bruce Biewald, January 25,
201I (Exhibit 9), Sierra Club, Docket ID No. EPA-R08- OAR-20124026, comments on
EPA Proposed Approval, Disapproval, and Promulgation of Implementation Plans; State of
Wyoming; Regional Haze State Implementation Plan; Federal Implementation Plan for Regional
Haze (Exhibit 10), Synapse Energy Economics, Inc., Synopse 2008 CO2 Price Forecasts, dated
July 2008 (Exhibit I l), and Synapse Energy Economics, lnc., Synapse 2008 CO2 Price
Forecasts, dated July 2008 (Exhibit 12).
17. On March 21,2013, WIEC filed RMP responses to WIEC's 27rh set of data
requests (Exhibit I 07).
18. Pursuant to the orders of the Commission and due notice, the public hearing in
this matter was held on March 26-27,2013, in Cheyenne. Following the receipt of the parties'
post hearing briefs, the Commission held public deliberations pursuant to W.S. $ l6-4-403, on
April 10, 2013, and directed the preparation of an order consistent with its decision.
Summary of Decision
19. The Commission approves RMP's Application, as filed, for a CPCN to construct
selective catalytic reduction systems on Jim Bridger Units 3 and 4.
Contentions of the Parties and Resulting Issues
20. RMP contends the present and future public convenience and necessity require
installation of SCR systems at Jim Bridger Units 3 and 4. Extensive cost modeling with its
System Optimizer model has shown a present value revenue requirement which favors SCRs
over alternative investments, including conversion to natural gas. RMP urged prompt action
because a settlement agreement with the Wyoming Department of Environmental Quality (DEQ)
and subsequent Order from the Wyoming Environmental Quality Council (EQC) has established
compliance deadlines which can be met most economically by commencing the SCR projects in
the coming months. These state deadlines remain in effect even though there may be uncertainty
about pertinent regulatory decisions to be made by the United States Environmental Protection
Agency (EPA). Delays in commencing the projects are likely to increase costs to ratepayers and
may ultimately render the project critical path unachievable. In response to critiques of other
parties, RMP contended its Bridger surface coal mine cannot operate economically if Units 3 and
4 are closed. RMP also contended that the SCR project remains the economically superior
alternative even if its proposed Gateway West and South segments do not go forward.
21. WIEC's position at hearing was that it did not object to the issuance of a CPCN
for the SCRs, so long as several conditions were imposed on the Company at the time of the
Commission's approval. First, WIEC contended the Commission should expressly retain and
incorporate into its CPCN Order the ratepayer protections adopted in the Stipulation approved in
Docket No. 20000-384-EA-10. Second, WIEC requested that the Commission direct the
Company to perform more transparent and better documented analyses in future CPCN
proceedings. In future cases the Company should be required to file its most recently updated
long-term avoided cost GRID model together with calculations demonstrating the incremental
fixed costs of the competing alternatives, including any special adjustments. Lastly, WIEC
contended the Company should be directed to thoroughly analyze the interrelationship and
interdependence of extraordinary transmission expenditures with major generation expenditures
in all future CPCN applications for major generation or transmission investments.
22. Sierra Club contended that the Commission should deny RMP's application for a
CPCN as premature because the EPA has not yet issued its final decision on the Wyoming State
Implementation Plan and the environmental controls that will be required at the Bridger Plant.
Sierra Club asserted the Application should address all four units of the Bridger Plant after all of
the requirements of the federal Best Available Retrofit Technology ("BART") determinations
under the Regional Haze Rule are finally known. Lastly, Sierra Club asserted that the deadlines
associated with the Company's state obligations could change once the EPA takes final action,
with the possible result that no immediate action on the part of the Company would be required.
23. While PRBRC did not file or otherwise offer testimony, it did provide a summary
of contentions. PRBRC asserted that because the EPA had yet to issue a final decision on the
environmental controls that will be required at the Bridger Plant, RMP was proceeding unwisely
with the installation of SCR. PRBRC also stated that RMP had ignored long term liabilities at
the plant related to carbon costs and coal combustion waste remediation costs.
24. OCA supported RMP's decision to retrofit Bridger Units 3 and 4 with SCR in
order to comply with emission limits and permit requirements established under state law by
DEQ and EQC. OCA concluded that making the SCR investments and continuing to fire the
units with coal is the least cost alternative for Wyoming ratepayers.
Findings of Fact
25. At hearing it became clear that some of the parties' witnesses were confused
about the scope of the CPCN determination that would be made by the Commission.
Accordingly, we begin by describing the decision before us.
26. A Wyoming public utility must obtain a CPCN from the Commission before it
begins "construction of a line, plant or system." W.S. $ 37-2-205(a). The Commission is
authorized to grant or refuse a certificate after a hearing "involving the financial ability and good
faith of the applicant and the necessity for additional service in the community." W.S. 5 37-2-
205(c). By rule, the Commission has established requirements for information to support an
application for a CPCN. We find RMP met those filing requirements.
27. This proceeding goes beyond the normal application for a CPCN. RMP has been
upgrading and expanding its system for more than a decade. As a result of its investments, the
Company has been filing annual rate cases since 2003. WIEC and OCA have been consistent
participants in those rate cases. Both had developed a concem that the economic prudence of
alternative system improvements were not being reviewed until, in a general rate case, RMP
sought to include assets in rate base. Accordingly, they sought a mechanism to review
alternatives before millions of dollars of capital had already been committed.
28. In the face of prospective expenditures [i] on pollution control equipment for its
fleet of coal-fired plants and [ii] on system transmission assets crossing state boundaries, WIEC,
OCA, and PRBRC sought a settlement of RMP's 2010 general rate case that would provide for
pre-investment review of RMP's alternatives. For this purpose, they proposed to supplement
established CPCN procedures with innovative rate making methods authorized by W.S. S 37-l-
l2l.
29. In RMP's 2010 general rate case, the Commission approved the Stipulation,
including a stipulated ![3 which addressed those concerns. fl13 of the Stipulation has two
subparts. Subpart (a) addresses the Energy Gateway Transmission Project. Subpart (b)
addresses new environmental projects associated with its coal-fired power plants. These
pollution control projects were specifically listed, and are generally those with a total project cost
of more than $25 million.
30. '!fl3b of the Stipulation obligates RMP to file "one or more applications for a
CPCN under W.S. $ 37-2-205 in Wyoming seeking approval of the public convenience and
necessity of each project before the Company begins construction." The CPCN application must
include specified information (see Confidential Exhibit l, CAT 4) which goes beyond that
required by the Commission's Rules, including cost modeling information and an "estimate of
the cost to construct and operate" the proposed project. The express intent of the parties was "to
expand the historical CPCN analysis and the analysis historically done in rate cases." The
Commission is to determine "whether the proposed expenditures are reasonable and in the public
interest." Should the Commission grant a CPCN:
the Parties agree that they will not challenge the Company's prudence or recovery
of the costs associated with that facility in any future Wyoming rate case except to
the extent that (l) the cost of the environmental project exceeds the estimated
costs or (2) there is evidence of mismanagement. If such circumstances ever exist,
any challenge to the environmental project will be limited to the prudence of the
construction costs in excess of the estimated costs or the impact of the
mismanagement.
31. Nothing in '!ll3b of the Stipulation purports to affect the Commission's own
power to review the prudence of RMP's investment at the time of the general rate case, nor does
!ll3b purport to affect the rights of future intervenors who were not party to the settlement in the
2010 general rate case. In approving the Stipulation, the Commission did not grant any form of
preapproval or rate case guarantee. (fl!f86, 87, 128, Order of September 22, 201 I .) While lll3b
creates a review process similar to a prudency determination, prudence remains a subject for a
later rate case. If the Commission grants a CPCN, the effect is at most to limit the scope of the
participation of the settling parties in that later rate case.
32. Since the origins of '!ll3b of the Stipulation are in a rate case, it is likely that our
decision will be referenced in RMP's next general rate case. The Commission did so with
respect to the CPCN/fl13b filing which preceded this one. RMP filed a CPCN application for its
coal-fired Naughton Unit 3. After extensive exchange of discovery between the parties,
including updated information, the Company's present value analysis changed by about $400
million (Tr., pp. 213-214), prompting the Company to conclude that conversion to natural gas
would be preferable to installation of pollution controls. RMP withdrew its application- (Motion
to Withdrow, May 11,2012.) Details with ratemaking implications remained. These details
were addressed in !ll8 of a settlement stipulation settling RMP's 20ll general rate case in
DocketNo.20000-405-ER-ll and specifically addressed in fl45 and tf83 of the Memorandum
Opinion, Findings and Order Approving Stipulation issued on October 8, 2012, approving the
settlement.
33. When an evidentiary standard is not specifically stated in our statutes, an
applicant is bound by the "preponderance of the evidence" standard customarily used in civil
cases. Willadsen v. Christopulos, 1987 WY 5 at flI3, 731 P.zd ll8l, 1184 (Wyo. 1987). This
standard accordingly applies in a CPCN proceeding. We note that some of the witnesses who
appeared before us were mistaken with respect to our evidentiary standard, the standard for
determination in a CPCN proceeding, and the standard for determination under fl13b. For
example, the Sierra Club's expert, Jeremy Fisher, testified that:
Despite volumes of discovery and [a] significantly modified model, PacifiCorp
has not shown that these retrofits arc decisively in the interest of ratepayers and
certainly not to the extent that this Commission should advance any guarontee of
afull rate recovery to the company. (Tr., p. 269). (Emphasis supplied).
34. We will not consider the evidence in this case through the lens of a decisive
showing, and we reject the assumption that the result of this proceeding may be a preapproval or
a guarantee of recovery.
35. While we acknowledge the voluminous testimony from Company witnesses
describing the environmental project at issue, OCA's expert Leo Stander provided a helpful and
credible summary of how the project fits in its regulatory context. Stander is an engineer
employed by the EPA for thirty years. (Tr., pp. 314-315.) According to Stander, the Company
is required by law to install air pollution control devices to reduce emission of nitrogen oxides
produced during combustion. (Tr., p.316.) The device on Bridger Unit 3 must be in operation
by December 31,2015; the device on Bridger Unit 4 must be in operation by December 31,
2016. (Tr., p.316).
36. The underlying federal regulatory standards require states which have national
parks and federal wilderness areas to develop state implementation plans to make reasonable
progress toward remedying existing visibility impairment to these protected areas. (Tr., p. 317).
Wyoming has been working on its state implementation program for more than a decade. (Tr., p.
318). At this time, EPA has partially approved the state plan. (Tr., p. 318).
37. The controls on Bridger Units 3 and 4 stem from a determination that these units
must use BART as part of the State's plan. (Tr., pp. 318-319). The technology proposed in this
case, SCR, was chosen following a lengthy and complex process of analysis. (Tr., p.319).
Stander concluded that the State and the Company followed the guidelines for this process "to
the letter." (Tr., p. 319).
38. The State determined that SCRs would be required and issued a construction
permit on December 31,2009. (Tr., p.320). The Company suggested alternative, lower cost
measures, and appealed the permit. (Tr., pp. 320-321). This dispute was settled in November
2010. (Tr., p. 320). Stander concluded that "The State of Wyoming has done all the heavy
lifting with respect to negotiations...[for] Units 3 and 4, and it's not likely...that EPA will
change the requirements they made." (Tr., p. 323). He also notes that the existing 2015 and
2016 deadlines were originally five years from the date negotiations were concluded, a time
frame the State considered as expeditious as possible. (Tr., p.326).
39. Stander credibly explained that SCR is the best technology available for Bridger
Units 3 and 4, in the sense that there is no other superior technology to address nitrogen oxide
emissions. (Tr., pp. 331-332.) This supports the testimony of Chad Teply, who credibly
explained that should EPA insist on a more stringent control standard, the Company would still
meet the more stringent standard by use of the SCR technology. (Tr., pp. 63-65).
40. The two principal alternatives to installation of the SCR investments were
converting Bridger Units 3 and 4 to natural gas, or retiring them early and replacing their
capacity with alternative resource options. (Tr., pp. 136-137). The Company analyzed the
problem using its System Optimizer model. (Tr., p. 136). The model's output is a present-value
revenue requirement differential (PVRRD) which compares the selected alternatives. (Tr., p.
137). To compare two alternatives, the model is run twice, once with the SCR investments being
made, and once without. (Tr., p. 317). In the run without SCR investments, the model selects an
alternative to replace the existing generation resource. (Tr., p. 317). The results are then tested
by running the model again with a range of different market price assumptions. (Tr., p. 318).
41. Company witness Rick Link explained the result favored the SCR project, which
has substantial present-value benefits compared to the next best altemative, gas conversion. (Tr.,
p. 138). Early retirement was, by far, the least desirable option. (Tr., p. 140). Link further
found the benefits of the SCR investment prevailed over a range of different prices for natural
gas and carbon dioxide. (Tr., p. 138). The carbon dioxide price, expressed in dollars per ton, is a
surrogate for regulation of greenhouse gases; it is treated in the model as a direct cost of burning
tuel. (Tr., p. 178).
42. There is a transparency problem with the System Optimizer model. It is a
proprietary model, expensive to license and demanding to operate. (Tr., p. 348). WIEC's
witness Randall Falkenberg relied on another Company model, GRID, to determine whether the
Company's System Optimizer analysis fairly and accurately examined the costs and benefits of
the proposed investments. (Tr., pp. 214-215). Link had explained that System Optimizer and
GRID are both production cost models. (Tr., p. l7l). They are similar in trying to generate and
dispatch energy across the Company's system, on a least cost basis, to meet ongoing load
requirements across time. (Tr., p. l7l). System Optimizer selects new resource alternatives to
meet changing loads over time. (Tr., p. 7l). This feature helps explain why System Optimizer is
used to prepare the Company's integrated resource plan, a long-term planning document updated
every other year. (Tr., p. 135).
43. In contrast, GRID does not add new resources. The addition and location of new
resources is an input. (Tr., pp. l7l-172). The advantage of GRID is that it has more detailed
unit commitment and dispatch logic, providing greater granularity for hourly dispatch patterns.
(Tr., p. 172). For someone with Faulkenberg's expertise (Tr., pp. 213-214), the GRID model is
useful because it is "wellunderstood." (Tr., p.215).
44. The simple bottom line of Falkenberg's analysis is that his results ultimately
demonstrated close agreement with the Company's results. (Tr., p.216). The results of
Falkenberg's labors were impressive; his analysis generated many millions of dollars of changes
to the Company's initial results, some of which favored the SCRs, some of which did not. (Tr.,
pp.216,239). Nonetheless, Falkenberg's end result was within $6 million of the Company's end
result. (Tr., p.232).
45. Only the Company and Falkenberg pursed the complex tasks associated with cost
modeling. We accord their conclusions more weight than the remaining parties, who did not.
46. Bryce Freeman of the OCA undertook a "high-level analysis" of his own to reach
the conclusion that the SCRs are the most cost-effective alternative. (Tr., p. 335). His
conclusion relies in part on a literature survey; he found no indication that the Bridger units were
good candidates for retirement. (Tr., p. 336). He also reviewed the Company's analysis and was
persuaded that the System Optimizer model "is the appropriate model for the Commission to
base its decision on in this case." (Tr., p. 336). He favors the System Optimizer model's linkage
to the Company's integrated resource plan. (Tr., p. 336). Finally, he did a rough cost analysis of
his own that supports selection of the SCRs. (Tr., pp. 337-338). We find these views credible,
although not entitled to the weight of the cost modeling.
47. The Sierra Club's witness Jeremy Fisher raised four main points questioning the
adequacy of the Company's overall analysis. First, he contended that the Company had
inappropriately assigned the costs of closing the Bridger Coal Company's surface mine to all
options but installation of SCRs. (Tr., p. 270). In Fisher's view, this front-loads and compresses
mine remediation costs, thereby placing a disproportionate present value on near-remediation
when compared to remediation if Bridger's underground and surface mines are closed together at
the end of the useful life of the entire four-unit plant. (Tr., pp. 271,292). He is suspicious about
the difference between the extended period of mine closure at the end of the plant life and the
shorter closure period for Bridger Units 3 and 4 alone.
48. Fisher's first contention rests on uninvestigated assumptions about the Company's
control over the regulatory requirements governing mine closures (Tr., pp. 295-296), and about
the dimensions of the future closures, which will find the mine complex some 507o larger. (Tr.,
p.292). We find Fisher unpersuasive on this issue.
49. Fisher raised other arguments regarding coal mining and marketing, all of which
appear to have been addressed by RMP witness Cindy Crane (Tr., p. 120 et seq). Fisher
acknowledged that he would take her at her word on these subjects (Tr., p. 305), but hadn't seen
"decisive evidence" from the Company. He acknowledged the absence of his own specific
knowledge about such matters as rail transportation in southwestern Wyoming. (Tr., p. 306). As
we have already noted, decisive evidence is not the standard in this case, and in any event,
Crane's superior knowledge is persuasive.
50. Second, Fisher argues that the Company failed and refused to examine the
opportunity to avoid imminent transmission expenditures if Bridger Units 3 and 4 were retired.
(Tr., p. 271). Since the Jim Bridger site lies directly in the path of the proposed Gateway
Transmission system, Fisher believes the Company could "avoid massive capital expenditures
associated with building segments of this line." (Tr., p.271). He acknowledges that his view is
not supported by financial or production cost analysis of his own. (Tr., p. 309).
5l . Fisher glosses over the fact that the other parties have not ignored transmission.
Significantly, WIEC's Falkenberg analyzed the problem, and concluded "it would take
something like a six-year delay in the Gateway project in order to overcome the advantage of the
SCR over the combined cycle option." (Tr., p. 226). RMP's Link conducted a sensitivity
analysis removing all Gateway transmission investments other than those in southern Utah, and
found that 'the present value benefits that we calculated for our customers do not deteriorate in
any way." (Tr., p. 139). As already noted, we put more weight on the testimony of witnesses
who have actually done calculations, and do not find Fisher persuasive.
52. As important, fll3a of the 2010 RMP general rate case Stipulation specifically
provided for separate procedures to address the Gateway Project. We see no reason to rewrite
the bargain struck in that proceeding. Nothing in our statute or regulations would require the
Company to otherwise address the effects of or on Gateway in a CPCN application for the
project before us.
53. Third, Fisher asserts that RMP "underestimated the risk associated with
greenhouse gas regulation or legislation." (Tr., pp.27l-272). The Commission discussed the
practicalaspects of greenhouse gas prices at length with both Link (Tr., pp. 187-190) and Fisher.
(Tr., pp. 296-305). Fisher conceded that it was speculative to pick a specific date when there
will be substantial price for carbon dioxide. (Tr., pp. 304-305). The further in the future that
date is, the less adverse impact it will have on the analysis favoring SCR installation. (Tr., pp.
303-304). We also note that Link supported the probability that natural gas prices will rise over
time through the Company's reliance on a forward price curve, that is, by reference to market
transactions already occurring for future delivery of natural gas. (Tr., pp. 190-193). Rising
natural gas prices generally favor SCR installation.
54. Fourth, Fisher asserts that the Company biased its gas pricing by linking carbon
dioxide prices and natural gas prices. (Tr., p. 272). Fisher acknowledged that the linkage is
"entirely fair" "if we can conclusively show and if the evidence and the experts across the board
really do agree..." (Tr., p.288). Link testified that the Company relied on forecasts of the US
Department of Energy's Energy Information Administration that "clearly show, when they
assume a CO2 price signal is in place, demand for natural gas in the electric sector goes up, and
their price forecasts for natural gas underthose scenarios rise with it." (Tr., pp. 168-169). The
EIA is a credible source. Link also relied on a third-party forecasting source making a similar
assumption. (Tr., pp. 169). We find Link's rationale credible and reasonable; Fisher's insistence
on unanimity among forecasters is not, nor is his demand for a conclusive showing.
55. Taking into account the testimony of all the witnesses, we find that RMP has
carried its burdens of proof and persuasion to demonstrate that SCR installation is the most
preferable option.
56. Fisher (Tr., pp. 272-273), the Sierra Club and PRBRC raise a different objection
to our approval, namely, that the EPA has yet to make a final determination on the state
implementation plan. The general circumstance is employed to develop a variety of arguments
for delaying our decision
57. For example, Fisher suggests the EPA determination may mean a delay in
implementing the deadlines for Jim Bridger Units 3 and 4 established by state litigation. (Tr., p.
273). Stander, who has considerable experience within EPA, more credibly concludes thatokhen a state has made a decision on this, EPA is not likely to go back on that decision if it
meets [the standard of] as expeditiously as practicable." (Tr., p. 325). Cathy Woollums, who
can also claim considerable experience, likewise does not think that EPA will backtrack on the
controls currently required. (Tr., pp. 207-208). Elsewhere, the Sierra Club has stressed the
significance of a five-year time to meet standards (E.g., Tr., p. 256), yet Stander has explained
that the existing deadlines are already five years after reaching agreement. (Supra).
58. There are other potential EPA actions. One is to increase the stringency of the
nitrogen oxide emission standards. As already discussed, the SCRs are the ultimate technology
available for this purpose, and when installed they can be adjusted to achieve the more stringent
standards which are anticipated.
59. Another possibility is to accelerate the deadlines for installation of environmental
controls in Units I and 2. Here, Teply explained a practical concem. For both Bridger Units 3
and 4, the construction is scheduled for a spring outage. The spring outage reduces replacement
power costs for ratepayers, and allows a safer cushion of time to react to "initial operational
challenges." (Tr., pp. 88-89). Woollums went on to point out that if the deadlines for Units I
and 2 are accelerated, then it becomes even more important to proceed with Bridger Units 3 and
4, to avoid stresses including system reliability concems. (Tr., p. 208). As a practical matter, it
will be imperative to stagger the construction of the four units both to minimize costs to
ratepayers and maintain system integrity.
60. Although some interveners suggest that the acceleration of deadlines for Units I
and 2 should lead to submission of a four-unit analysis, we disagree. A four-unit analysis is not
required by our statute and Rules, or by the terms of fll3b of the Stipulation, which allow the
Company latitude to file "one or more applications for a CPCN....for each project before the
Company begins construction."
61. As a more general practical matter, Teply testified that the Company might be
able to reach the established deadlines with a delayed start and a compressed schedule, "but it
would not be at the most cost-effective means for the customer." (Tr., pp. 9l-95, at 95). We
find this testimony credible.
62. The Sierra Club's closing brief raises many more possibilities suggesting we
disregard or devalue the practical potential for increased ratepayer costs in favor of delay.
Woollums has persuasively testified that the EPA's pending decision does not "change the
company's compliance obligations to install controls at Bridger Units 3 and 4 by December 31,
2015 and 2016." The Wyoming DEQ's commitment to these deadlines was reiterated in a letter
dated March 6,2013. (RMP Exhibit 6). We are obliged to decide this matter on the record
before us. The existence of myriad possibilities is insufficient grounds to disregard the clear
terms of the settlement in reaching a decision on the CPCN. With this, it is inescapable that the
Company's course of action, taken in the context of increased ratepayer costs associated with
delay, is reasonable.
63. Like Section 204(e) of the Commission's Rules, !ll3b of the Stipulation requires
RMP to provide an estimate of the cost to construct the project. Estimated costs carry over into
the first exemption from the agreement not to challenge the Company's prudence or recovery if
the CPCN is granted.
64. There is only one capital cost estimate in the record. That estimate is stated in
Confidential Exhibit CAT l-2, attached to RMP Exhibit l, which is the pre-filed testimony of
Chad Teply. (Tr., pp. 69-70). The total figures for Bridger Units 3 and 4 are found on the first
and third pages of the exhibit. (Tr., p. 70). OCA's witness, Stander, who has extensive
regulatory experience with similar facilities, testified that the Company's "projected costs appear
to be reasonable." (Tr., pp. 321-322).
65. The Company does not propose to modiff its estimate even if EPA ultimately
decides to require a more stringent emission rate for nitrogen oxides. (Tr., pp. 65,73). This is so
despite additional costs associated with dropping from a .07 standard to a .05 standard. (Tr., p.
64). Teply explained that accommodating a more stringent emissions rate would be only one
piece of the overall project, which itself has not been fully scoped. (Tr., pp.7l-72). In its best
estimate of a fair overall project cost, the Company has treated the emissions rate as one
contingency among many. (Tr., pp. 72-73).
66. In its closing brief WIEC requests a substantial and specific dollar reduction to
the estimated costs in the event that the emissions standard is not reduced from .07 to .05. We
reject this request. First and foremost, WIEC did not identifu this issue in its final Updated
Summary of Contentions or its Summary of Remaining Issues. Neither RMP nor the
Commission itself was on notice that the details of the estimates were in dispute before the
evidence in the case was closed. There are factual assertions in the closing brief to which RMP
could have responded, and which the Commission could have explored. Fundamental fairness
requires that this request be foreclosed as untimely.
67. Second, no party produced a witness to testiff that the Company's method of
preparing a cost estimate was unreasonable or in any way contrary to customary practice. We
also agree with Teply's observation that the subsequent prudence review by the Commission acts
as a check on any tendency the Company might have to inflate its cost estimates in this
proceeding. (Tr., pp. I l3-l l4).
68. Overall, the establishment of a cost estimate is central to the bargain reflected in
lll3b of the Stipulation. We agree with Freeman's view that the cost estimate should be "put to
bed when we leave the CPCN proceeding so that we don't have to worry about it at a future
time." (Tr., p. 344). There can be no doubt that the quality of the estimate would improve as the
project progresses and firm contractual commitments are made, but the fairest reading of our
obligation underfll3b of the Stipulation is to make a present determination on the record before
us.
69. Jeffrey Larsen, Vice-President of Regulation and Government Affairs for
PacifiCorp and RMP, affirmed the Company's commitment to abide by the terms of fll3b of the
Stipulation, which include the right to challenge the Company's prudence or recovery of the costs
in a future Wyoming rate case o'to the extent that [i] the cost of the environmental project
exceeds the estimated costs or [ii] there is evidence of mismanagement." (Tr., pp. 351, 355).
70. In future CPCN applications under fll3b of the Stipulation, Larsen committed the
Company to file, along with its application, its most recently updated long-term avoided cost
model or the then-currently used model. (Tr., p. 356). In future CPCN applications under fll3b
of the Stipulation, Larsen further committed the Company to file, along with its application, and
insofar as gas conversion is an alternative to the prospective environmental investments, a
calculation showing incremental fixed costs for the gas conversion, including any special
adjustments for that option. (Tr., p. 357). These fixed cost inputs will be for a natural-gas-fired
resource altemative that is of similar size to the asset that would be retired and replaced. The
fixed cost inputs will pertain to the base case analysis. (Tr., pp. 357-358). We will direct the
Company to make these filings as initial discovery responses to be served on persons or entities
which were parties to the Stipulation, rather than part of the application. Interveners not party to
the Stipulation may request the same materials in discovery.
71. We find that the Company has carried its burdens of proof and persuasion with
respect to establishing a cost estimate. That is the estimate found in Confidential Exhibit CAT I -
2.
Principles of Law
72. Wyoming statutes and Wyoming Supreme Court decisions establish the basis of
and decisional parameters for our consideration of applications for certificates of public
convenience and necessity. Supra, !T26. W.S. 5 37-2-205(a) states, in part:
No public utility shall begin construction of a line, plant or system, or of any extension of
a line, plant or system without having first obtained from the commission a certificate
that the present or future public convenience and necessity require or will require such
construction. . . .
73. W.S. $ 37-2-205(c) states the criteria for the Commission's action on an
application:
Before any certificate may issue, under this section, a certified copy of its articles of
incorporation or charter, if the applicant be a corporation, shall be filed in the office of
the commission. The commission shall have power, after hearing involving the financial
ability and good faith of the applicant and the necessity of additional service in the
community, to issue said certificate, as prayedfor, or to refuse to issue the same, otto
issue to it for the construction of a portion only of the contemplated line, plant, or system,
or of a portion only, of the contemplated [ine, plant, system or extension thereof, or for
the partial exercise only of said right or privilege, and may attach to the exercise of the
rights granted by said certificate such terms and conditions as in its judgment the public
convenience and necessity may require. [Emphasis added.]
74. The Wyoming Supreme Court has described this as "the three-part standard by
which the PSC is to decide applications for certificates." ll'illiston Basin Interstate Pipeline Co.
v. Wyoming P9C,2000 WY 16, t]l0, 996 P.zd 663,667 (Wyo. 2000). The financial ability
standard may be met through evidence of "corporate frnancial records and the testimony of
corporate officers." (1d., nll, 996 P.2d at 668.) The good faith standard may be met by
reference to established definitions of good faith, including "an honest intention to abstain from
taking any unconscientious advantage of another, even through the forms or technicalities of law
together with an absence of all information or belief of facts which would render the transaction
unconscientious." (1d.,n13,996P.2d at 668.) The necessity of additional service may be met by
evidence that the proposed facility "was not duplicative and was in the best interest of the
community ." (1d., nl6, 996 P.2d at 669.)
75. Commission Rule $ 203(a) requires the filing of an application for "construction
of major utility facilities where a Certificate of Public Convenience and Necessity is required."
76. Commission Rule $ 204 sets out a list of the basic requirements for information to
be included in an application for a CPCN, which, in pertinent part, are:
(a) The name and address of the applicant;(b) The type of plant, property or facility proposed to be constructed;(c) A complete description of the facilities proposed to be constructed,
including preliminary engineering specifications in sufficient detail to properly
describe the principal systems and components; and final and complete engineering
specifications when they become available;(d) List the rates, if any, proposed to be charged for the service that will be
rendered because of the proposed construction;(e) State the estimated total cost of the proposed construction;(0 State the manner by which the proposed construction will be financed;(g) State the financial condition of the applicant;(h) State the estimated annual operating revenues and expenses that are
expected to accrue from the proposed construction;(i) State the estimated starting and completion date of the proposed
constructiont * * *
77. Our basic and overriding standard in this case is the public interest and the desires
of the utility are secondary to it. ln PacifiCorp v. Public Service Commission of Wyoming,2004
WY 164, 103 P.3d 862 (2004), the Wyoming Supreme Court, 2004 WY 164 at fl13, quoted with
favor Sinclair Oil Corp. v. Wyoming Public Service Comm'n,2003 WY 22, at fl9, 63 P.3d at 887
(Wyo.2003):
Speaking specifically of PSC, we have said that PSC is required to give paramount
consideration to the public interest in exercising its statutory powers to regulate and
supervise public utilities. The desires of the utility are secondary. [Citation omitted.]
78. W.S. S 37-2-l2l authorizes public utilities to initiate proceedings to employ
innovative ratemaking methods:
. . . Any public utility may apply to the commission for its consent to use innovative,
incentive or nontraditional rate making methods. In conducting any investigation and
holding any hearing in response thereto, the commission may consider and approve
proposals which include any rate, service regulation, rate setting concept, economic
development rate, service concept, nondiscriminatory revenue sharing or profit-sharing
form of regulation and policy, including policies for the encouragement of the
development of public utility infrastructure, services, facilities or plant within the state,
which can be shown by substantial evidence to support and be consistent with the public
interest.
79. The Wyoming Administrative Procedure Act, at W.S. $ 16-3-107, establishes
general procedures in Commission cases, including the giving of reasonable notice. In accord
are W.S. $$ 37-2-201,37-2-202, and 37-3-106. (See a/so, Commission Rule $$ 106 and I15.)
Conclusions of Law
80. RMP is a public utilify as defined by W.S. $ 37-l-l0l(a)(vi)(C). Under W.S. $
37-2-l12,the Commission has the general and exclusive jurisdiction to regulate RMP as a public
utility in Wyoming. The Commission has duly authorized RMP to provide retail electric public
utility service in its Wyoming service territory under CPCNs previously issued, and from time to
time amended, by the Commission.
81. The Company was obligated by the Stipulation approved in RMP's 2010 general
rate case to file a CPCN application that would comply with W.S. S 37-2-205(a) and our Rules.
Pursuant to the Stipulation the Company was also required to produce information beyond the
requirements of our Rules. Based on the record made by the parties, we conclude that the
Company has met the filing requirements of the Commission Rules and the Stipulation.
82. We conclude RMP has the financial ability to proceed with the successful
construction and operation of the proposed environmental upgrades based upon our Findings,
which are supported by evidence including corporate financial records and the testimony of
corporate officers.
83. We conclude that the good faith standard of W.S. S 37-2-205(c) is satisfied based
upon our findings that include disclosures required by the Commission's Rules, our favorable
assessment of the credibility of the witnesses appearing on behalf of the Company, as well as the
adjustments made by the Company based on the input of other parties.
84. We conclude there is need for additional service which warrants construction of
the proposed SCR upgrades to Bridger Units 3 and 4 based upon our findings, which are
supported by the testimony of the intervenors as well as the Application and testimony and
exhibits of RMP.
85. We conclude that: [i] the proposed expenditures are reasonable and in the public
interest, [ii] the present and future public convenience and necessity require the construction and
operation of SCR upgrades to Bridger Units 3 and 4, and [iii] a CPCN should be issued in this
case. RMP has carried its burdens of proof and persuasion. It is in the public interest that the
certificate be issued.
86. The showing necessary to sustain the issuance of the CPCN rests on the record,
including the specific matters addressed in our Findings. It does not and cannot rest on the
limited focus of the matters some parties have chosen to address.
87. Proper legal notice of this proceeding was given in accordance with the Wyoming
Administrative Procedure Act, W.S. S 37-2-203, and the Commission's Rules, especially Section
106 thereof. The public hearing was held and conducted pursuant to W.S. $$ l6-3-107,16-3-
108,37-2-203, and applicable sections of the Commission's Rules. The intervenor, OCA, was a
party to the case for all purposes.
88. Public deliberations were held in compliance with W.S. $ l6-4-403.
89. Based upon the record as discussed in the Findings of Fact, the Principles of Law,
and our Conclusions of Law; approval of the following is just and reasonable, supported by the
preponderance of the evidence and in the public interest:
a. The application of RMP for a CPCN to construct, operate and maintain the
SCR upgrades to Bridger Units 3 and 4, all as described more fully herein and in the application
and supporting documentation, should be granted;
b. That RMP should file with the Commission all construction reports
pursuant to Commission Rule S 229.
IT IS THEREFORE ORDERED:
l. The Application of Rocky Mountain Power for a Certificate of Public
Convenience and Necessity to construct selective catalytic reduction systems on Jim Bridger
Units 3 and 4 located near Point of Rocks, Wyoming, all as described more fully herein and in
the application and supporting documentation, is hereby granted;
2. Rocky Mountain Power shall comply with Section 229 of the Commission's
Rules regarding construction reports; and
3. Rocky Mountain Power will file all required permits when issued.
4. In future CPCN applications under fll3b of the Stipulation approved in Docket
No. 20000-384-ER-10, Rocky Mountain Power will comply with the filing requirements to
which Jeffrey Larsen has agreed, as set forth in ![70 of this Order.
5. This Order is effective immediately.
MADE and ENTERED at Cheyenne, Wyoming, on May 29,2013.
PUBLIC SERVICE COMMISSION OF WYOMTNG
ALAN B. MINIER, Chairman
WILLIAM F. RUSSELL, Commissioner
(SEAL)
Attest:
STEVE MINK, Assistant Secretary
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-I3-16
IDAHO POWER COMPANY
ATTACHMENT 4
2013 INTEGRATED RESOURCE PLAN