20151019Reply Comments.pdf

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LISA D. NORDSTROM
Lead counsel lBAni0 Fl-i';;[e-mail] UTILITIE$ COMfu{lSSl0N
October 19,2015
VIA HAND DELIVERY
Jean D. Jewe!|, Secretary
Idaho Public Utilities Commission
47 2 W est Wash ington Street
Boise, ldaho 83702
Re: Case No. !PC-E-15-19
20lS lntegrated Resource Plan - ldaho Power Company's Reply Comments
Dear Ms. Jewell:
Enclosed for filing in the above matter please find an original and seven (7) copies
of ldaho Power Company's Reply Comments.
Very truly yours,
Lisa D. Nordstrom
LDN:csb
Enclosures
1221W. ldaho St. (83702)
PO. Box 70
Boise. lD 83707
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221\Nest ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
lnordstrom@ idahopower. com
Attorney for Idaho Power Company
IN THE MA]TER OF IDAHO POWER
COMPANY'S 201 5 INTEGRATED
RESOURCE PLAN
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-15-19
IDAHO POWER COMPANY'S
REPLY COMMENTS
ldaho Power Company ("ldaho Power" or "Company") respectfully submits the
following Reply Comments pursuant to Order No. 33381 in response to comments filed
by the ldaho Public Utilities Commission ("Commission" or "IPUC") Staff ("Staff'), the
Idaho Conservation League ("lCL"), Snake River Alliance ("SR,q"1, and Sierra Club on
October 5,2015. Their comments recommend, or do not object to, acknowledgement
of ldaho Power's 2015 Integrated Resource Plan ("lRP"). ln these Reply Comments,
ldaho Power clarifies or responds to several topics raised by the parties.
I. BACKGROUND
On June 30, 2015, ldaho Power applied to the Commission requesting that the
Company's 2015 IRP be accepted for filing. As required by Commission Order No.
IDAHO POWER COMPANY'S REPLY COMMENTS. 1
22299 and the Public Utility Commission of Oregon's ("OPUC') Order Nos. 89-507,
07-002,07-042, and 12-013, the Company prepares and files a biennial IRP with both
the IPUC and the OPUC setting forth how Idaho Power intends to serve the electric
requirements of its customers. ldaho Power's 2015 IRP addresses available supply-
side and demand-side resource options, planning period load forecasts, potential
resource portfolios, a risk analysis, and an action plan that details the steps the
Company plans to take to implement the 2015 lRP.
Idaho Power's resource planning process has four primary goals:
1. ldentify sufficient resources to reliably serve the growing demand
for energy within ldaho Power's service area throughout the 2O-year planning period.
2. Ensure the selected resource portfolio balances cost, risk, and
environmental concerns.
3. Give equal and balanced treatment to supply-side resources,
demand-side measures, and transmission resources.
4. Involve the public in the planning process in a meaningfulway.
The resource planning process does not necessarily result in the lowest cost
plan, or a plan with the least amount of risk, or even a plan with the least amount of
environmental impact. Rather, as stated above, the process strives to identify a
portfolio of supply-side, demand-side, and transmission resources which together
balance the impacts of cost, risk, and environmental concerns while enabling ldaho
Power to continue to meet its regulatory obligation to reliably serue customers' growing
demand for energy. While the assumptions and forecasts included throughout the
nearly one and a half year planning process reflect a snapshot in time, the process is
not static. ldaho Power files a new and updated lRP every two years, complete with
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
updated assumptions for costs and forecasts, advancements in technologies and
efficiencies, changes in environmental regulations and regulatory requirements, and a
new set of opportunities and challenges to be met.
As evidence of the ongoing IRP planning process and public involvement, ldaho
Power recently hosted public meetings with customers to discuss the 2015 IRP in
Boise, Twin Falls, and Pocatello, ldaho, as well as Ontario, Oregon. As noticed in press
releases and advertisements, these meetings began with a short presentation and were
followed by a question and answer period with the Company's subject matter experts.
ln addition, on October 1 , 2015, ldaho Power hosted a special meeting of the IRP
Advisory Council (.IRPAC") and gave the group an update of the Environmental
Protection Agency's final Clean Air Act Section 111(d) regulation, ldaho Power's
continued assessment of potential models for a community-shared solar project, and
the status of the Company's current solar integration study.
ldaho Power appreciates the number of comments received complimenting the
Company's efforts throughout the 2015 IRP planning process. Staff stated that it
supported the "variety of portfolios developed and modeled for this lRP, which included
a host of resource retirement and replacement scenarios, alternatives to Boardman to
Hemingway ("82H"), and expanded energy-efficiency and demand-response
resources." Staff Comments at 3. ICL commented that the 2015lRP contains a "robust
consideration of future coal plant operations, uses better data for future supply-side
options, and considers a range of compliance options for the Clean Air Act 111(d) rule"
and commended the Company for working "collaboratively with stakeholders and
thinking creatively about analytical inputs and methods." ICL Comments at 1. With
regard to coal unit analysis, ICL stated that ldaho Power developed "a methodology to
IDAHO POWER COMPANY'S REPLY COMMENTS.3
consider this issue that should be a best practice for utilities around the country." ICL
Comments at 2. For the performance and cost of solar power, ldaho Power "worked
with stakeholders to develop a robust method for assigning a peak capacity contribution
for solar." ld. at 3 (footnote omitted). The Sierra Club commented that the 2015lRP is
"the latest step along a path of continuous improvement in the Company's recent
resource planning activities" and that the "2015 iteration is the best IRP yet." Sierra
Club Comments at 1-2. The SRA commended Idaho Power for its IRPAC planning
process as being "increasingly transparent and accessible to the public." SRA
Comments at 1. ldaho Power appreciates all of these positive comments and intends to
continue these efforts in the ongoing development of future lRPs.
There were, however, some comments filed with the Commission that the
Company believes require a response in order to assist the Commission in its review of
the 2015 lRP. Specifically, there were a number of comments suggesting that the
preferred portfolio identified in the 2015 IRP planning process was not the "best"
scenario to be chosen and suggested a portfolio design that had an earlier termination
date for the North Valmy Unit 1 coal-fired generation plant. There were also comments
regarding how the Company chose to address the treatment and modeling of energy
efficiency in the 2015 planning process, the Company's assumptions for the costs of
solar photovoltaic resources, and the energy imbalance market. The Company
addresses these issues below to provide further explanation and clarification.
II. PREFERRED PORTFOLIO
A number of public comments were filed with the Commission suggesting that
resource portfolio P9 should be the Company's preferred portfolio and stated that it
would save the customers approximately $75 million over the preferred portfolio P6(b)
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
identified in the 2015 lRP. Resource portfolio P9 reflects the retirement of North Valmy
Unit 1 attheend of 2019, the addition of 60 megawatts ("MW") of demand response in
2021-2024 (above and beyond the 390 MW of summer demand response included as
an existing resource in all portfolios), 54 MW of reciprocating enginesin2024, the B2H
transmission line in2025, an additional 18 MWof reciprocating engines in 2031 and a
170 MW simple cycle combustion turbine in 2032. P9 also reflects the retirement of the
North Valmy Unit 2 in 2025. ln comparison, the preferred portfolio P6(b) identified in the
2015 IRP anticipates retirement of both North Valmy Units 1 and 2 in 2025, and the
addition of B2H in 2025 (prior to the retirement of the North Valmy units), includes 60
MW of additional demand response and 20 MW of ice-based therma! energy storage in
2030, and a 300 MW combined cycle combustion turbine in 2031.
Many of the public comments suggested the perception that the P9 portfolio was
"superio/'to the P6(b) portfolio based on a relative cost difference of $74.6 million in the
total net present value ("NPV") portfolio cost over the 2O-year study period. However,
the evaluation of cost alone is not enough. lt also is important to consider the near-term
impact to customer rates. The portfolio analysis between Pg and P6(b) compares the
coal-fired generation plant retirements and the associated cost differences by retiring
the North Valmy Units 1 and 2 earlier than their fully depreciated lives of 2031 and
2034, respectively. Accelerating the depreciation of the existing North Valmy plant
investment will require an immediate increase in customer rates during the shortened
recovery period. Using a December 31 ,2014, net book value, accelerating the end of
life to 2025 for North Valmy Units 1 and 2 would increase annual depreciation expense
by nearly $9.0 million, while an end of life for Valmy Unit 1 of 2019, as modeled in
portfolio P9, would increase annual depreciation expense by an additional $6 million,
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
totaling nearly $15 million of incremental expense. Moreover, with either a 2019 or
2025 retirement of Valmy, customer rates would need to be adjusted to include
incremental capital additions required to keep the plant operational during its remaining
life. This adjustment would require even more acceleration if North Valmy's closure was
in 2019 rather than 2025.
While the NPV of the total fixed and variable costs over the 20-year planning
period are approximately 1.6 percent lower for P9 as compared to P6(b), those cost
savings must also be balanced along with the qualitative risks discussed in the lRP. On
pages 125-130, the IRP explains these qualitative risks in qualifying the favorable
economics for portfolios with retirement of North Valmy Unit 1 as early as 2019. Among
the risks, the IRP notes the uncertainty related to the 320 MW (as of April 2015) of yet-
to-be-constructed Public Utility Regulatory Policies Act of 1978 ("PURPA") solar and the
effect of possible further project cancellations on capacity additions in the early 2O2Os.
This uncertainty remains relevant, even with the Commission's recent decision in Case
No. !PC-E-15-01 (Order No. 33357). As an illustration, with the complete removal of the
PURPA solar from the load and resource balance, capacity deficits with an earlier 2019
retirement of North Valmy Unit 1 are projected to reach approximately 140 MW in July
2O2O and grow to nearly 300 MW by 2023. By comparison, delaying the retirement of
North Valmy Unit 1 to 2025, including the complete removal of PURPA solar, results in
more manageable and moderate deficits (provided the availability of Valmy units exist)
of approximately 5 MW in 2020 and less than 160 MW through 2023.
!n addition, the qualitative risk analysis also considers the uncertainty related to
retirement planning for a jointly-owned power plant. 2015lRP at 125-130, 141-143. A
2019 North Valmy 1 shutdown date is not within the complete control of Idaho Power.
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
NV Energy, ldaho Power's co-owner and the operating partner of the North Valmy plant,
has not indicated that 2019 is an acceptable date to discontinue operations of North
Valmy Unit 1. Once an agreed upon retirement date between the parties is determined,
other actions are needed in order to facilitate the plant retirement, such as regulatory
approval of an accelerated depreciation life of an asset. ldaho Power and NV Energy
will continue to work toward synchronized depreciation dates and formalizing a mutually
agreed-upon retirement date.
As stated in the 2015 lRP, the goal of the qualitative risk analysis is to select a
portfolio likely to withstand unforeseen events. 2015 IRP al.125. ln addition to the risks
associated with the earlier retirement of a coal-fired generation unit, the qualitative
analysis included considerations for risks associated with long-term sustainability of the
Snake River Basin, the relicensing of the Hells Canyon Complex, eventual ramifications
of the final Clean Air Act Rule 1 11(d) ruling, regulatory risk of future resource additions
and removals and associated allowance for return on investment, resource commitment
risk of developing PURPA projects and the permitting of transmission lines, resource
adequacy of regional power supply, implementation of demand-side management
('DSM") programs, and the development of new technologies. ln performing that
analysis, along with the relative magnitude of the financial cost between portfolios and
the potential immediate impact on customer rates associated with an earlier North
Valmy retirement, ldaho Power's 2015 IRP identified portfolio P6(b) as the preferred
portfolio; the Company considers it to be preferred choice in balancing cost, risk, and
environmental concerns. 2015lRP at 130.
Given the uncertainty that exists with the assumptions included in all of the
resource portfolios analyzed as part of this IRP, the Company does not believe it would
IDAHO POWER COMPANY'S REPLY COMMENTS. T
be reasonable or prudent to retire an existing resource with known fixed costs resulting
in an immediate need for additional cost recovery from customers. The planned
retirement of both North Valmy units in 2025 is a lower risk option than a planned
retirement of the Valmy unit in 2019 that will contribute to near-term rate stability and
represents a reasonable glide path toward reduced coal generation on Idaho Power's
system.
III. ENERGY EFFICIENCY
Staff and ICL each expressed two areas of concern with the Company's
assessment of energy efficiency used in the 2015 IRP-the amount of "achievable"
potential and the modeling of energy efficiency in the lRP. For the 2015 lRP, ldaho
Power contracted with a third-party, Applied Energy Group ("AEG'), to conduct an
energy efficiency potential study that resulted in a forecast of energy savings over the
2}-year !RP planning period.
While Staff and lCL support the use of a third-party efficiency study that forecasts
the technical, cost-effective, and achievable energy efficiency potentials, Staff disagrees
with the screening for cost-effective energy efficiency based on a measure's Total
Resource Cost ("TRC"). Staff Comments at 4-5. Staff states that it believes ldaho
Power should have used the Utility Cost Test ("UCT') for screening cost-effectiveness in
its energy efficiency potential study. ld. However, it is only recently, on August 28,
2015, in Case No. !PC-E-15-6, that the Commission clarified that "the Company may
(but need not exclusively) emphasize the UCT." Order No. 33365 at 9-10. When the
Company contracted with AEG for the 2014 Energy Efficiency Potential Study, it
believed it was complying with prior Commission orders and used the TRC for
screening measures. ldaho Power was adhering to the Memorandum of Understanding
IDAHO POWER COMPANY'S REPLY COMMENTS - 8
signed by Staff and ldaho's investor-owned utilities in January of 2010 and Order No.
28894 by using the TRC for cost-effectiveness. Additionally, the OPUC directs program
administrators to use the TRC in determining cost-effectiveness of energy efficiency
programs. Order No. 94-590 at 14. Because the IRP addresses system-wide planning,
it would not be prudent to determine two levels of cost-effective energy efficiency
between ldaho and Oregon. More importantly, the IPUC has not precluded the use of
the TRC for determination of cost-effectiveness. The Company believes that in using
the TRC to determine cost-effectiveness, the 2014 Energy Efficiency Potential Study
identified an appropriate leve! of cost'effective energy efficiency and is compliant with
commission orders in Oregon and ldaho.
ICL disagrees with the level of energy efficiency used in setting the load and
resource balance. !n its Comments, lCL states that ldaho Power could identify the
amount of efficiency between the achievable and cost-effective (economic) level and
that is the amount of energy efficiency the Company should strive to acquire. ICL
Comments at 6.
Not all cost-effective energy efficiency is achievable. There is some level of
energy efficiency measures that, regardless if they are cost-effective, will not be
adopted by everyone. ldaho Power believes that the achievable potential as
determined by AEG is just that, achievable, or "the upper limit for cost-effective energy
efficiency savings."l There is no more "achievable" energy efficiency that is still cost-
effective. Additiona! energy efficiency potential is a dynamic metric. lf the cost of
acquiring a cost-effective resource increases, it can become no longer cost-effective.
In its Comments, ICL encourages ldaho Power to improve program design,
marketing, and customer engagement to go beyond the achievable energy efficiency
1 American Council for an Energy-Efficient Economy ("ACEEE"), August 2014 reporl, "Cracking
the TEAPOT: Technical, Economic, and Achievable Energy Efficiency Potential Studies," page 8.
IDAHO POWER COMPANY'S REPLY COMMENTS - 9 REPLACEMENT PAGE
potential. ICL Comments at 6. ldaho Power currently strives for continuous program
improvement in its program design and operation while keeping costs in check. The
Company does this through program evaluations and interaction with stakeholder
groups including the Energy Efficiency Advisory Group ('EEAG"). ldaho Power believes
that the 2014 Energy Efficiency Potential Study identifies an appropriate level of
achievable cost-effective energy, which is included in all of the 2015 IRP portfolios.
Both the Staff and ICL criticize ldaho Power for the method in which the
Company models energy efficiency in its IRP and suggest that the PacifiCorp method
more equally compares demand-side and supply-side resources. Staff Comments at 5;
ICL Comments at 6. The method in which PacifiCorp models DSM resource (and
supply-side resources) is different than how ldaho Power models portfolios for the lRP.
Idaho Power does not use the System Optimizer software used by PacifiCorp to model
resources. For demand-side resources, ldaho Power uses a third party to determine all
achievable energy efficiency potential based on the Northwest Power and Conservation
Counci!'s acquisition ramp rates and includes this Ievel of energy efficiency in every
portfolio prior to the acquisition of any supply-side resources. Staff Comments at 5-6.
Staff believes that the PacifiCorp method of modeling provides more equal treatment to
both supply-side and demand-side resources. ldaho Power believes that by committing
all achievable energy efficiency potential to every portfolio regardless of need, the
Company gives preferential treatment to energy efficiency over supply-side resources.
ln fact, the identification of the need for additional supply-side resources is not made
until after applying all cost-effective energy efficiency to the load and resource balance.
This method used by ldaho Power to model energy efficiency in the 2015 IRP is
IDAHO POWER COMPANY'S REPLY COMMENTS. 1O
consistent with ldaho policy and Commission orders requiring utilities to pursue all cost-
effective energy efficiency.
. lCL also recommends that ldaho Power work with the EEAG to develop a
multi-year implementation plan to identify specific strategies to acquire DSM resources.
ICL Comments at 6. ldaho Power believes that planning and reporting on DSM
activities is comprehensive and adequate. The Company uses the IRP for long-term
DSM planning, including the near-term action plan. ldaho Power regularly updates the
EEAG on current and future activities, including new potential DSM activities identified
by the Company. ldaho Power's demand-side management annual report filed with the
Commission in March of each year includes outlines of all of the activities the Company
is pursuing regarding DSM programs as well as strategies for the upcoming year. The
annual DSM Report identifies the Company's current and continued pursuit of cost-
effective energy efficiency activities. The Commission previously addressed a similar
ICL request in Case No. IPC-E-14-03 in which the Commission stated "that such a plan
would unnecessarily duplicate existing reporting. We note that the Company's annual
DSM report, in particular, already outline the Company's DSM program and strategies
for each upcoming year." Order No. 33047 at 7. ldaho Power believes a separate plan,
as requested by lCL, is not necessary and would just create additional administrative
burden.
IV. SOLAR COST ESTIMATE
Several comments express concern with the IRP's assumed costs for solar
photovoltaic ("PV") resources. The rapid evolution of these costs over recent years has
been the subject of frequent reporting by industry analysts, and continues to receive
considerable attention as part of the IRPAC meetings. Page 50 of the 2015 IRP, in the
IDAHO POWER COMPANY'S REPLY COMMENTS - 11
chapter titled Supply-Side Generation and Storage Resources, explains that "ldaho
Power used the 2017 forecast provided by Lazard of $1,250 per kW for PV with a
single-axis tracking system" in the IRP's portfolios.
To account for the decreasing cost trend seen in PV
resources over the past few years, the 2015 IRP assumes
solar PV costs remain fixed over the 2}-year planning
period. ln comparison, other resource costs are escalated at
2.2 percent over the same 20 years. Therefore, in rea!-dollar
terms, solar PV costs decline over the 20-year planning
period. ldaho Power will continue to closely follow the
decreasing price trend of solar PV as this technology
continues to become more cost competitive with more
trad itional resou rce alternatives.
2015lRP at 50.
The discussion in the IRP explains the Company's efforts to more accurately
account for declining project resource costs for solar PV. ln making these cost
projections, the Company relies on information from a third-party report on resource
costs. The Company also discussed the costs of solar PV resources, as well as other
resources, extensively with the IRPAC and public participants in the IRP process. The
Company anticipates the costs of solar PV will justifiably continue to receive
considerable attention during the development of the 2017 IRP to properly reflect
changes in the PV solar market.
V. ENERGY IMBALANCE MARKET
On page 10 of its Comments, the SRA requested the Commission direct ldaho
Power to supply additional information on its plans for possible participation in one of
the West's energy imbalance markets ("ElM"). On September 24,2015, ldaho Power
announced its withdrawal from Northwest Power Pool efforts to establish an EIM, and
correspondingly, its plans to study the costs and benefits associated with participation in
IDAHO POWER COMPANY'S REPLY COMMENTS.l2
the California ISO's EIM (Cal-lSO EIM). The Company anticipates making a fina!
decision on the Cal-lSO EIM in 2016.
The Company recognizes that Cal-lSO EIM benefits include the flexibility of 5- to
1S-minute dispatch transactions, which provides additional opportunities for system
balancing. While an understanding of these EIM benefits is increasingly critical in a
future with continued regional expansion of variable generation sources such as wind
and solar, it is less pertinent to IRP analysis focused fundamentally on the adequacy of
system resources. Thus, it is the Company's view that detailed analysis of EIM
participation is outside the scope of the lRP and that more limited reporting of high-level
EIM developments is appropriate for the 2017 lRP.
vr. coNcLusroN
Through the lRP Advisory Committee's collaborative process, ldaho Power
attempted to address stakeholder concerns as the IRP was formulated. No party
objects to acceptance of the 2015 lRP, which meets the reporting requirements set forth
in prior Commission orders. Therefore, ldaho Power respectfully requests that the
Commission approve its 2015 IRP.
Respectfully submitted this 19th day of October 2015.
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 13
GERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 19th day of October 2015 I served a true and
correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following
named parties by the method indicated below, and addressed to the following:
Gommission Staff
Karl T. Klein
Deputy Attorney General
ldaho Public Utilities Commission
47 2 W est Wash ington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
ldaho Conseryation League
Benjamin J. Otto
ldaho Conservation League
710 North 6th Street
Boise, ldaho 83702
Snake River Alliance
Ken Miller, Clean Energy Program
Director
Snake River Alliance
P.O. Box 1731
Boise, ldaho 83701
Sierra Club
Zack Waterman, Director
Sierra Club
503 West Franklin Street
Boise, ldaho 83702
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IDAHO POWER COMPANY'S REPLY COMMENTS - 14