20131115Post Hearing Brief.pdf

Benjamin I. Otto (ISB No. 8292)
710 N 6'h Street
Boise,ID 83701
Ph: [phone] x12
Fax [phone]
[e-mail]
Attorney for the Idaho Conservation league
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
rN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR A
CERTIFICATE OF PUBLIC
CONIVIENCE AND NECESSITY FOR
THE INVESTMENT IN SELECTIVE
CATALYTIC REDUCTION CONTROLS
ON JIM BRIDGER UNITS 3 AND 4.
) cASE NO. rPC-E-13-16
IDAHO CONSERVATION LEAGUE'S
PPOST HEARING BRIEF
The Idaho Conservation League (ICL) submits this brief in support of our
recommendation - deny binding ratemaking treatment under Idaho Code 561-541. At the close
the technical hearing, Commissioner Smith expressed interest in two primary aspects of I.C. 561-
541; what the code requires, and how conservatively the Commission should exercise the
discretion afforded by the statue. ICL recommends the Commission conservatively exercise their
discretion by holding Idaho utilities to the highest standards of planning, and requiring a
demonstration of the direct benefits accruing to the public before awarding any binding
ratemaking treatment. High quality planning coupled with a clear and convincing showing in a
Certificate of Public Convenience and Necessity hearing allows the Commission to meet the duty
imposed by I.C. 561-541(4) to "maintain a fair, just and reasonable balance of interests between
the requesting utility and the utility's ratepayers" when awarding binding ratemaking treatment.
The Commission should cautiously exercise the discretion in I.C. 56l-541
The binding ratemaking treatment statue is a relatively new addition to Idaho Code and
has only been applied once before, for Idaho Power's Langley Gulch Plant. Order No. 30892.
IPC-E-13-15
ICL POST HEARING BRIEF
November 15,2013
Before the binding ratemaking treatment statute, Idaho's utilities were able to secure sufficient
financing to construct large dams, enormous coal plants, long-distance transmission lines, and
other capital projects. The traditional Certificate of Public Convenience and Necessity process
was sufficient then, and remains sufficient today for the vast majority of utility capital projects.
While the traditional CPCN process typically provides sufficient regulatory assurance,
sometimes extreme conditions require unique solutions. In 2009, when the statute was passed
and the Commission applied it to Langley Gulch, capital and financial markets were in deep
turmoil. Order No 30892 at 37 - 39. By contrast, the record in this case does not demonstrate
capital market turmoil and Idaho Power has not argued that binding ratemaking treatment is
necessary to reasonably finance the Jim Bridger project.
The Binding Ratemaking Treatment Code, I.C. 56l-541.
The binding ratemaking treatment code preforms several functions. Along with
procedural requirements,r the code covers three primary areas. First, the code establishes basic
evidentiary requirements for utilities to provide. I.C. 561-541(2)(a). Second, the code points to
specific factors the Commission shall consider when deciding to "accept, deny, or modifr a
proposed ratemaking treatment." I.C. 561-541(4). Finally, the code allows the Commission to
impose a future rate increase today by determining he prudency of project costs, I.C. 561-
541(2)(b)(iii), and binding future Commissions to this decision. I.C. 561-541( )(c). Idaho
Power's application fails to meet two of the evidentiary requirements. For three of the factors the
record does not support granting ratemaking treatment. Because of these failures, the
Commission should not grant an effective future rate increase by determining the prudence of
the Bridger project costs.
I For example, subsection (3) requires a public hearing. Because the Commission has completed the procedural
requirements of the code ICL will not address these sections.
IPC-E-13-15
ICL POST HEARING BRIEF 2
November 15,2013
Evidentiary standards
To qualifr for consideration of binding ratemaking treatment I.C. 561-54t(2)(a) requires
utilities to:
describe the need for the proposed facility, how the public utility addresses the risks
associated with the proposed facility, the proposed date of the lease or purchase or
commencement of construction, the public utility's proposal for cost recovery, and any
proposed ratemaking treatments to be applied to the proposed facility.
Idaho Power's application and testimony in this case fails to meet two of these factors.
While the application and testimony state that Idaho Power needs to continue operation of
Bridger, the testimony also shows Idaho Power did not adequately consider alternative ways to
meet this need. Mr. Harvey's rebuttal testimony states: "at the time the state of Wyoming
decided to require SCRs at the Jim Bridger Units 3 and 4, it would not have been reasonable to
consider the shutdown of the |im Bridger plant[.]" Harvey Rebuttal at p 11 ln7 - 12. While the
record is not clear, Mr. Harvey also testified these Wyoming decisions occurred sometime before
2010. Harvey Direct at p 10 - 11. The Commission should be skeptical of utilities determining
"need" by refusing to consider alternatives.
Idaho Power's application and testimony state clearly the Company considers the Bridger
project risky, particularly the "uncertainty surrounding coal-fired generation in today's political
and social environment." See e.g. Grow Direct at p 15. While uncertainty is a form of risk,
political uncertainty is a far different beast than economic uncertainty. In the face of economic
uncertainty, binding ratemaking treatment may reduce risks by assuring capital markets a utility
will recover capital investments. But nothing in the record establishes that binding ratemaking
treatment can reduce "political and social" risk beyond what a traditional CPCN provides. The
Commission should reject using binding ratemaking treatment to address social risk.
rPC-E-13-15
ICL POST HEARING BRIEF
November 15,2013
Factors the Commission must consider
The Binding ratemaking treatment code sets forth specific factors the Commission shall
consider before accepting, denying, or modifring the requested treatment. I.C. 561-5a1(a)(a).
(i) The public utility has in effect a commission-accepted integrated resource plan;
(ii) The services and operations resulting from the facility are in the public interest and
will not be detrimental to the provision of adequate and reliable electric service;
(iii) The public utility has demonstrated that it has considered other sources for long-
term electric supply or transmission;
(iv) The addition of the facility is reasonable when compared to energF efficienry,
demand-side management and other feasible alternative sources of supply or
transmission; and
(v) The public utility participates in a regional transmission planning process.
The record in this case demonstrates that three of these factors cut towards denying, not
granting, binding ratemaking treatment. First, Idaho Power's currently accepted Integrated
Resource Plan is from 2011. While the 2011 plan mentions that Pacificorp agreed to install SCRs
at Bridger units 3 and 4 in 2015 and 2016 respectively, the plan does not analyze whether this is a
prudent decision for Idaho Power. Idaho Power 2011 IRP at 20. Idaho Power's 2013 IRP is not
yet accepted by the Commission. This stands in stark contrast to the prior use of binding
ratemaking for Langley Gulch where Idaho Power had consistently identified a need for the
resource in several IRP cycles. Order No. 30892 at21,38. Before providing binding ratemaking
treatment, the Commission should continue to require a consistent showing the Company
considered the need for the project compared to an array of alternative resources through several
IRP cycles.
IPC-E-13-15
ICL POST HEARING BRIEF 4
November 15,2013
Second, the record demonstrates ldaho Power only considered a narrow range of other
sources as an alternative to Bridger - in short natural gas, or more natural gas. By contrast, in the
Langley Gulch situation several IRP cycles had examined both different options for new resources
as well as different interactions with existing resources. Before granting binding ratemaking
treatment the Commission should require a more rigorous evaluation of alternatives than Idaho
Power presents in this case.
Third, the record demonstrates Idaho Power inadequately considered the roll of energy
efficiency, demand side management and other feasible alternative sources to offset some or all of
the Bridger output. The only IRP to analyze the Bridger project did not allow for additional,
identified, and cost effective energy efficiency as a resource in alternative portfolios. Idaho Power
Attachment 4, Idaho Power 2013 IRP, at93 - 96. The IRP load and resource balance used to
compare Bridger to other resources assumed 400 MW of Demand Responses would not be
available, when Idaho Power elected to suspend the programs.'And the 2013 IRP shows a
substantial amount of excess energy throughout the planning period, but did not allow some of
the excess position to absorb the loss of some or all of Bridger, say unit 4 for instance. ICL
Exhibit 301. Before granting binding ratemaking treatment, the Commission should require
utilities to demonstrate how additional, identified, cost-effective demand side savings, and other
existing resources, cannot offset some or all of the proposed project.
Determining prudency today is an ffictive rate increase for customers
When read as a whole, the binding ratemaking treatment statute allows the Commission
to approve an effective rate increase today that customers will begin paylng in the future. After a
public hearing, the Commission "shall issue an order that addresses the proposed ratemaking
' ICL did acquiesce to this elective suspension contingent upon a process and timeline for reviewing the programs.
ICL participated in this review, supports the outcome, and specifically supports the workshop process used to
address that issue. See ICL Comments in IPC-E-13-14.
IPC-E-13-15 November 15,2013
ICL POST HEARING BRIEF 5
treatments." I.C. 561-541(4). The proposed treatments include determining "the maximum
costs the commission will include in rates . . . without the public utility having the burden of
moving forward with additional evidence of the prudence and reasonableness of such costs." I.C.
561-541(2)(b)(iii). Idaho Power requests the Commission "provide base rate treatment" for
$129,837,393 to be collected "at such time the plant is placed in operation." Idaho Power
Application at 12. While any rate increase will occur when the project is completed, under the
binding ratemaking treatment code the Commission can determine the prudency of these costs
today and foreclose further review.
The Commission should decline to rule on the prudency of the Bridger costs based on the
record in this case. First, as described above, Idaho Power's application and testimony failed to
meet two evidentiary requirements, and three of the factors for the Commission to consider cut
against granting binding treatment. Second, absent a compelling public benefit to early
determination, the Commission should maintain the flexibility to determine prudency at the
traditional time - when costs are moved into rate base. In the Langley Gulch case, the record
supported binding ratemaking treatment would address Idaho Power's need to raise funds in a
tumultuous capital market environment. Order No. 30892 at37 - 39. Commission assurances in
this case may swage the Company's concerns, but the record in this case simply does not
demonstrate a benefit to the public from binding ratemaking treatment. Without a
corresponding public benefit, granting binding ratemaking treatment does not " maintain afair,
just and reasonable balance of interests between the requesting utility and the utility s
ratepayers.' I.C. 561-541 (4).
DATED this 15th day of November 2013,
Benjamin I. Otto
Attorney for the Idaho Conservation League
rPC-E-13-15
ICL POST HEARING BRIEF
November 15,2013
CERTIFICATE OF SERVICE
I hereby certifr that on this 15th day of November 2013, I delivered true and correct
copies of the foregoing POST-HEARING BRIEF OF THE IDAHO CONSERVATION LEAGUE
to the following persons via the method of service noted:
Hand Delivery
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
427W. Washington St.
Boise,lD 83702-5983
Electronic delivery only
Lisa D. Nordstrom
Jennifer Reinhardt-Tessmer
Idaho Power Company
P.O. Box 70
Boise,Idaho 83707
lnordstrom@idahopower. com
[e-mail]
Dean J. Miller
McDevitt & Miller, LLP
P.O. Box 2564
Boise,ID 83701
j oe@mcdevitt- miller. com
Ken Miller
Clean Energy Program Director
Snake River Alliance
Box 1731
Boise,ID 83701
kmiller@snakeriveralliance. org
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N. 27th Street
Boise,ID 83702
peter@richardsonandoleary. com
greg@richardsonandoleary. com
Dr. Don Reading
6070 Hill Road
Boise,Idaho 83703
[e-mail]
IPC-E-13-15
ICL POST HEARING BRIEF
Benjamin J. Otto
November 15,2013