20131011Direct K. Miller.pdf

(208) 343-7s00
(m8) 336-6912 (Fax)
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McDevitt & Mifler LLPi' :- ::
Lauverc ?t:j{][T I I pi,t lr sg
42) West Bannock Street - . l
P.O. Box ?,5il-83701 ''1..' ', : -- . ' Chas. F. McDevitt
Boise,Idaho 83702 DeanJ. (oe) Millet
Celeste IC Millet
October 11,2013
Yia lfaad Delivery
JeanJewell, Secretary
Idaho Public Utilities Commission
472W.I7ashington St.
Boise,Idaho 83720
Re: IPC-E-13-16
Snake RivetAlliance
Dear Ms.Jewell:
Enclosed fot filing ate ^n original and nine (9) copies of the Direct Testimony of Ken Miller for
Snake River Alliance. A copy of the Ditect Testimony has been designated as the "Reporter's
copy-"
In addition, a disk containing MS Wotd versions of the Dfuect Testimony is endosed for the
Reporter.
If you have my questions, please do not hesitate to coflact me.
Kindly rehrrn a stamped copy.
Very Truly Yours,
fltdcDevitt & Miller LLP
UAU/L
DeanJ. Miller
DJM/hh
Encl.
ORIGINAL
Dean J. Miller (ISB No. 1968)
MoDEWIT & MILLER LLP
420 West Bannock Steet
P.O. Box 2564-83701
Boise, D 83702
Tel: [phone]
Fax: [phone]
j oe@mcdevitt-miller. com
Attorneyfor Snake River Alliance.
i,'! ']. r: oI.t L, *_u
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAIIO POWER
COMPAI\IYIS APPLICATION FOR A
CERTIFICATE OF PUBLIC
CONYENIENCE AI\D NECESSITY
FOR THE II\IVESTMENT IN
SELECTIYE CATALYTIC
REDUCTION CONTROLS ON JIM
BRIDGER T]NITS 3 AIID 4
Case No.IPC-E-13-16
DIRECT TESTIMONY OF KEN MILLER
ON BEHALF OF THE SNAKE RIVER ALLIANCE
October ll,20l3
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Introduction and Background
Please state your name and business address.
My name is Ken Miller and my business address is 223 N. 6m Street, Boise,
Idaho.
By whom are you employed and in what capacity?
I am employed by the Snake River Alliance as its Clean Energy Program
Director.
Please describe your educational background.
I graduated from Kansas State University in 1917 with bachelor degrees in
journalism and in political science. I have also attended multiple extended
education programs in the joumalism and energy fields.
Please describe your professional work experience.
I worked as a journalist from 1977-2002 at newspapers and news services in
Oklahoma, Washington, D.C., Kansas, Nevada, Hawaii and Idaho. My
assignments in my journalism career ranged from covering state, local and
federal govemment affairs, including Congress and national politics. As the
national energy and environment correspondent for Gannett News Service in
Washington, D.C., my assignment included the U.S. Environmental Protection
Agency and the Department of Energy. Upon leaving joumalism to work in the
nonprofit community, I worked from 2002-2004 as Education and Outreach
Coordinator and Public Policy Coordinator for the Winter Wildlands Alliance in
Boise and from 2004-2005 as a nonprofit grant writer for Idaho Public
Television and other entities. I was hired in 2005 as the first Idaho Energy
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Advocate for the Seattle-based NW Energy Coalition, and in May 2007 my
position was shifted from the Coalition to one of its Idaho members, the Snake
River Alliance, where I became the Alliance's first Energy Program Director
and where I am currently employed. I have served as Idaho Caucus Chair for the
NW Energy Coalition and also served on the NWEC Executive Board and as
NWEC Board Chair from 2008-2010. In that capacity, I worked with Coalition
staff, Board members, and NWEC members in the Pacific Northwest on state,
regional, and national energy policy issues in which the NW Energy Coalition
and its members are involved, including in Idaho. I have served on the Idaho
state wind, geothermal, and solar PV working groups; I participated in the
development of the 2007 and2012Idaho Energy Plans; and I have presented
two papers on utility coal plant issues to the Westem Energy Policy Research
Conference. tn my capacity with the Alliance and with the NW Energy
Coalition, I regularly attend energy conferences and workshops in Idaho, the
Northwest, and nationally.
Please describe your experience in working with Idaho electric utilities and
before the Idaho Public Utilities Commission.
I have served on the Idaho Power Integrated Resource Plan Advisory Council
and the Idaho Power Magic Valley Electrical Plan Community Action
Committee and other Idaho Power planning initiatives. As Clean Energy
Program Director, I have represented the Snake River Alliance in electric utility
dockets before the Idaho PUC, and I have participated in and provided
comments to the Idaho PUC on a variety of regulatory matters on behalf of the
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Snake River Alliance
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NW Energy Coalition and the Snake River Alliance for the past nine years,
beginning in2004.In addition, the Snake River Alliance successfully partnered
with Idaho Power and local planning entities to conduct workshops on how
local governments can improve their energy efficiency and reduce their energy
consumption.
Please describe what experience, if any, you have had regarding Idaho Power
and the operation of its coal fleet.
Aside from my participation in the past five Idaho Power Integrated Resource
Plans, I have met on multiple occasions with Idaho Power representatives to
discuss the company's coal plant operations. I have prepared multiple reports
for the Snake River Alliance, including its September 2011 report, "Idaho's
Dangerous Dalliance with King Coal"; its August 2012report, "Kicking Idaho's
Coal Habit, Charting a Cleaner Energy Future," and its September 2013 white
paper, "Putting Down a Coal Plant: Retiring a Utility Asset," which we
presented at the 2013 Western Energy Policy Research Conference in
September 2013.
Have you also participated in cases before the Commission involving setting
rates for electric utilities?
Yes. I represented the Alliance in cases IPC-E-11-08 (Application of Idaho
Power Company for Authority to lncrease Its Rates and Charges for Electric
Service in Idaho) and IPC-09-30 (Application of Idaho Power Company for an
Accounting Order to Amortize Additional Accumulated Deferral Income Tax
Credits and an Order Approving a Rate Case Moratorium). The Alliance
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participated in all discussions in both cases. We signed the settlement agreement
in the first, and declined to sign the agreement in the second. I have also
represented the Alliance in Idaho Cost Adjustments, Efficiency TariffRider
Adjustments, the treatment of Renewable Energy Credits and Sulfur Dioxide
Emissions Allowances, and other dockets before the Commission.
Interest of Snake River Alliance
On whose behalf are you testifuing?
I am testiffing on behalf of the Snake River Alliance and its members, most of
whom are customers of Idaho Power.
Please describe the Snake River Alliance's interest in this case.
The Snake River Alliance was formed 34 years ago to monitor cleanup efforts
at what is now known as the U.S. Department of Energy's Idaho National
Laboratory. Six years ago, with my arrival at the Alliance, the Alliance became
Idaho's first public advocacy organization to address energy issues on a full-
time basis. As an environmental advocate, the Alliance promotes clean energy
resources such as energy efficiency and other demand-side resources and
renewable energy development while also working to reduce utility reliance on
traditional fossil fuel supply-side resources. The Alliance recoflrmended to the
Commission in March 2013 ("SRA Additional Comments" in Idaho Power's
20l l IRP Case IPC-E-I1-11) that significant generation asset inveshnents such
as those contemplated in this docket be subject to a Certificate of Public
Convenience and Necessity (CPCN) process so that the proposed investments
would be subject to greater public review and comment.
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Snake River Alliance
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The issues presented in this case warrant the full Commission and public review
thata CPCN proceeding provides.
Summary of Testimony and Recommendations
Please summarize your testimony in this case.
The Alliance's testimony will discuss concems about the thoroughness of Idaho
Power's "Coal Unit Environmental lnvestment Analysis" and its conclusions.
Our testimony will also address Idaho Power witness Harvey's Redacted
Exhibit 5A, "Coal Environmental Compliance Upgrade Investment Evaluation,"
(Coal Study), which Idaho Power filed in redacted form subsequent to a Snake
River Alliance request to Idaho Power. Our testimony will also address our
concerns that the known future investments planned by Idaho Power and its coal
plant partners are not included in this CPCN case to more accurately reflect the
overall costs of the Company's planned coal plant investments as outlined in
both of the above-mentioned analyses. And we intend to address the issue of the
financial and other risks these investments pose to Idaho Power customers in a
time of extraordinary regulatory uncertainty, and whether this investment is
premature in light of the uncertainty regarding the state of Wyoming's State
Implementation Plan (SIP).
Please summarize your recommendations to the Commission in this case.
The following analysis demonstrates it is prernature to shift the risks associated
with the proposed investments to ratepayers at this time. Accordingly, the
Alliance recommends that the Commission not issue a CPCN.
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Altematively, if the Commission feels constrained by the circumstances to issue
a CPCN, it should be issued subject to the conditions that:
. The Commission makes no finding that the proposed investments are
prudent for ratemaking purposes;
. The Commission does not make anybinding ratemaking commitments
pursuant to Idaho Code $61-549.
Is the Alliance suggesting that the Commission enter an order prohibiting Idaho
Power from making the proposed investments?
No. The Alliance is suggesting it is premature to shift the risks of proposed
investments to ratepayers. Rather, the Company's management should evaluate
options and make investment decisions subject to the traditional understanding
those decisions will later be reviewed for prudence.
Does the Alliance object to the installation of pollution controls on coal-fired
power plants?
As a general proposition, the Alliance obviously supports measures that reduce
the toxic effects of goal-filed electric generation. As discussed below, however,
the answer is not so simple in this case.
The Alliance's General Concerns About Coal
Why does the Alliance believe that extending the life of the Jim Bridger coal
plant and that Idaho Power's continued reliance on coal is not in the best
interests of its customers?
There are a variety of reasons, beginning with the known impacts coal
combustion are having on the climate. Those impacts are now widely accepted
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Snake River Alliance
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by the scientific community, as well as the electric utility sector, and axe the
primary reason many utilities are retiring coal plants before the end of their
useful lives and replacing those coal plants with other supply side and demand
side resources. Similarly, coal combustion presents undeniable risks to human
health both in the communities in which they are located but also regionally and
globally. tn addition, as a fuel source for power generation, coal faces the
highest amount of risk from future environmental regulations that, if not yet
promulgated, are anticipated by the electricity sector. There are also legitimate
questions about both the environmental and economic sustainability of coal as a
fuel source. Finally, it is presumed that carbon emissions will eventually be
regulated in one form or another, and that such regulations, along with existing
regulations on other coal plant emissions and waste, may make operation of
utility coal plants uneconomic when compared to other demand-side and
supply-side resources. Committing Idaho Power customers to another
generation of coal plant operations in light of the current uncertain regulatory
climate is not a defensible planning decision, nor is it the least cost/least risk
option to meet expected future load growth. Committing ratepayers to
responsibility for a $130 million investment in such an evolving regulatory
environment poses undue risks to utility customers.
Tip of the Iceberg
Can you explain your concerns about Idaho Power's decision to not analyze
expected future health and environmental regulations as part of this case?
Miller, Di 7
Snake River Alliance
A.While Idaho Power appropriately employs a carbon "adder" in its IRP process,
it does not address the fundamental issue of how future carbon regulations may
impact continued coal plant operations. It is now established by federal court
decisions that carbon dioxide (CO2) is subject to regulation as a pollutant under
the Clean Air Act. It is also clear that the current presidential administration
intends to regulate carbon from new and existing power plants. On Septernber
20,2013, EPA issued proposed New Source Performance Standard regulations
for Greenhouse Gas (GHG) emissions from new coal plants and stated it would
issue proposed rules by June of 2014 for existing coal-fired power plants.
Furthermore, according to the utility trade group the Edison Electric
Institute,(http://www3.eei.org/meetines/Meetine%20Documents/2009-06-
22_GCC IntlElecPartnership-CCStimelineFlNAl03 I 809.pdfl, the technology
to "capture" and "sequester" CO2 emissions from generating units on the scale
of a utility coal plant has not been deployed, and will not be for a number of
years. That further exposes utilities and their customers to additional unknown
risks from carbon restraints beginning as soon as 2015. Failure to consider the
probability of CO2 controls in the not-too-distant future raises serious questions
about the prudency of making an investment of this magnitude at this time.
Can you explain the Alliance's concems about the incremental fashion in which
these environmental controls are taking place?
The Alliance has long been concemed about the piecemeal basis in which
Idaho Power is moving forward with these retrofits, and we expressed those
concerns to the Commission in March 2013, after Idaho Power filed its 2011
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IRP Update, which included Idaho Power's assessment of its coal fleet to
determine the economics of deciding whether to make anti-pollution upgrades
or to replace one or more plants with natural gas generation. Specifically, the
Alliance told the Commission: "These investments are intended to prolong the
life of particular power plants, but their impact is also to add significantly to the
balance of the assets' debt that must be retired well beyond the original,
expected life of the plants as initially approved by the ldaho Public Utilities
Commission" (IPC-E-11-11). The Alliance also told the Commission that, once
investments such as these are committed to, further investments to meet new but
unknown regulatory requirements will be more difficult to resist and that this
build-and-retrofit model common to extending the life of coal-fired power
plants is analogous to the "Company Store" model. Once ratepayers are hit
with the initial sticker shock of coal plant investments such as those
contemplated in this application, they are drawn into a pattern of repeated
additional investments in the name of economics but which can be
unnecessarily onerous compared to other alternatives. Given the magnifude of
the investments sought by Idaho Power here, there is a risk that approval of
these invesffnents will place utility customers on an irreversible course toward
future investments of unknown size, as Idaho Power clearly intends to extend
the life of these coal plants as long as possible.
What are other impacts of making these improvements incrementallfl
Taken together, as the Alliance cautioned the Commission in the above-
referenced mernorandum in IPC-E- I 1- I 1 , they can amount to a de facto
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development of new supply-side energy resources that, if not for their
incremental nature, would otherwise be subject to CPCN review. Unless such
investnents are thoroughly scrutinizedby utility regulators, once new
investments in an existing generation asset such as a coal plant are in place and
sunk into rates, these repeated upgrades will almost always compare favorably
to the ovemight costs of new, low-risk resources or even market purchases.
Cumulatively, however, there is a risk that the aggregate amount of such
retrofits may make coal plant's un-economic rate-based costs when compared to
other resources.
Shortcomings of the Coal Study and Related Analysis
In your opinion, does the Coal Study, Redacted Exhibit 5Al, provide sufficient
analysis to justiff shifting the risks of the proposed investments to ratepayers?
No. The Coal Study appears to be a highJevel preliminary planning document,
not a conclusive basis for investrnent decisions.
Can you identify parts of the Coal Study that lead to that conclusion?
Yes.
r At Pg. 3 of Exhibit 5A', the Coal Study states: "To the extent that
statements, information and opinions provided by the client or others
have been used in the preparation of this report, SAIC has relied upon
the same to be accurate, and for which no assurances are intended and
no representations or warranties are made. SAIC makes no certification
and gives no assurances except as explicitly set forth in this report."
' The Alliance appreciates IPCo's cooperation in providing a non-confidential version of Exhibit 5. See
Letter of Lisa Nordstrum to Jean Jewell, September 2'7,2013.
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At Pg. 7 of Exhibit 5A, the Coal Study states: "At this stage of the
decision process, SAIC felt that due to the uncertainties involved in the
future environmental regulations, capital expenditures, and fuel
forecasts, a planning level study was the most appropriate approach.
This study examined the likely ranges of costs involved with the relevant
options identified for each unit, based on a simplified analysis of the
costs of generation for each of those options."
At Pg. 8 of Exhibit 5A, the Coal Study states: "Nothing contained in this
Report is intended to indicate conditions with respect to safety or to
security regarding the proposed upgrades or to conformance with
agreements, codes, permits, rules, or regulations of any party having
jurisdiction with respect to the construction, operation, and maintenance
of the Jim Bridger and North Valmy plants, which matters are outside
the scope and purposes of this Report."
At Pg. 10 of Exhibit 5A, the Coal Study states: "Other proposed or
potential environmental regulations that could impact IPC's coal-fired
generating plants include the Clean Water Act Section l6(b) regulations,
Coal Combustion Residuals ("CCR") environmental regulations, and
carbon legislation/regulation. Such proposed or potential regulations
could require additional capital expenditures and an increase in the
Fixed and Variable Operation and Maintenance ("O&M") costs of
affected generating units. Compliance with these environmental
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regulatory changes could also impact the efficiency or heat rate of
affected units."
. At Pg. t 1 of Exhibit 5,A., the Coal Study states: "In addition to the SCR
and mercury control costs, certain other environmental retrofit costs
have been identified for the plant site, including costs for landfill
closures, catalyst replacements, and new pond construction for solid
waste disposal. SAIC did not perform any plant site visits as part of this
study, and as such, SAIC does not have enough information to address
the adequacy of these costs."
' At Pgs.36-37 of Exhibit 5,A., the Coal Study states: "IPC should
consider conducting additional detailed analysis to evaluate the most
promising alternatives considered in this preliminary study. Such
studies should consider both annual and cumulative projected present
value power costs, production costing simulation with and without the
various proposed altemative conversions/retirement scenarios and
sensitivity cases and review of the O&M expenses under scenarios and
sensitivity cases where a major shift in the operation of generation
resources might be expected."
In addition the CPCN Application and the Coal Study omit an analysis
of expected regulations on new Clean Water Act requirements for existing coal-
fired power plants; coal combustion residuals (CCR,
www. epa. gov/co alashrul e) ; National Ambient Air Quality Standards (NAAQ S,
http ://www. epa. eov/ttr/naaqsA for particulate matter (soot, PM2. 5 ) ; and
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t Mercury and Air Toxic Standards (MATS,
2 http://www.epa.eov/mats/actions.html). Exclusion of these known requirements,
3 when there is a high degree of confidence that they will take place, raises
4 additional questions about restricting this CPCN application to two SCRs at Jim
5 Bridger Units 3 and 4.
6 Q. In light of the disclaimers identified above, how would you characteize
7 Redacted Exhibit 5A?
8 A. In my opinion, Redacted Exhibit 5,A. is a planning document, similar to what
9 might be found in a utility Integrated Resource Plan.
l0 a. Has the Commission recently commented on the weight to be given to utility
11 plaruring documents?
12 A. Yes. The Commission recently reviewed Rocky Mountain Power's 2013
13 Integrated Resource Plan, Case No. PAC-E-I3-05. In Order No. 32890, the
14 Commission said:
15 "An IRP is a utility planning document that incorporates many
16 assumptions and projections at a specific point in time. It is the ongoing
l7 planning process that we acknowledge, not the conclusions or results.
18 The commission offers no opinion or ruling regarding the prudency of
19 the Company's selection of its preferred resource portfolio".
20 a. Does inclusion of only the emission control upgrades at Jim Bridger Units 3 and
21 4 understate the cost of likely environmental compliance measures?
22 A. Yes. The Company's Application recognizes, as discussed above, the uncertain
23 nature of the regulatory environment in this case as well as the uncertainty of
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possible future regulations affecting all of Idaho Power's coal plants. If the
Company were to include the expected requirements for additional regulations,
the cost of compliance with those regulations would be far greater than the $130
million in costs attributed to the currently proposed investments.
Can you provide an example of the uncertainties involving this proposed
investment?
The Company's Application at Pg. 7 states: "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 and4, a Limited Notice to Proceed (LNTP)
contract was signed with the successful Engineering, Procurement and
Construction (EPC) bidder on May 31,2013." And on Pg. 8: "Idaho Power
requests the Commission issue a CPCN and authorize binding ratemaking
treatment under Idaho Code $ 6l-541for the SCR investment because of the
magnitude of the investment and the uncertainty surrounding coal-fired
generation in today's political and social environment." On this current
trajectory, Idaho Power could secure the needed $130 million for these SCRs
before its environmental obligations are more clearly understood.
You stated that, in addition to the Coal Environmental Compliance Upgrade
Investment Evaluation (Coal Study), Redacted Exhibit 5,A', Idaho Power
prepared a "Coal Unit Environmental Investment Analysis For The Jim Bridger
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Snake River Alliance
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I and North Valmy Coal-Fired Power Plants" that was submitted to the
2 Commission as part of Idaho Power's 201I IRP Update (IRP Coal Study).
3 Why is the IRP Coal Studyrelevant to this proceeding?
4 A. The IRP Coal Study reflects IPCo's methodological approach to analysis of
5 coal-based resources.
6 Q. What are your concerns about that studfl
7 L. The IRP Coal Study submitted with Idaho Power's 2011 IRP Update contains
8 an overarching flaw that we believe calls its conclusions into question. It
9 examined three options for Idaho Power's coal plants: upgrade existing plants to
10 comply with state and federal health and environment regulations; replace one
l1 or more units with a Combined Cycle Combustion Turbine (CCCT); and
12 converting one or more units to natural gas.
l3 a. Why does the Alliance believe such an analysis is insufficient?
14 A. The study as submitted appears to have omitted for analysis purposes other
15 possible replacement resources for retired coal plants, such as energy efficiency
t6 and renewable energy resources. As mentioned above, the analysis omits the
17 impact of a carbon regulatory regime, which if enacted would dramatically alter
l8 Idaho Power's resource stack.
19 a. Has the Commission recently been critical of planning methods that fail to
20 consider efficiency and renewables?
2l A. Yes. As noted above, the Commission recently reviewed Rocky Mountain
22 Power's 2013 IRP. In its Final Order, No. 32890 (Septernber ll,20l3),Pg.12,
23 the Commission said:
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"The Commission directs the Company to increase its efforts toward
achieving higher levels of cost-effective DSM. Instituting cost-
effective energy efficiency measures that reduce customer dernand
benefits everyone. Such measures can obviate the need for new
generation resources and thereby decrease the constant upward
pressure on energy pricing. Cost-effective reductions in customer
danand, particularly in peak hours and months, are almost always
preferable to the construction of a new natural gas plant or purchases
on the wholesale power market."
Has Idaho Power acknowledged the lack of certainty in accommodating future
environmental regulations in other public filings?
Yes. In its 2011 annual report to the U.S. Securities and Exchange Commission,
Idaho Power acknowledged that it "anticipates that a number of new and
impending EPA rulemakings and proceedings addressing, among other things,
ozone and fine particulate matter pollution, emissions, and disposal of coal
combustion residuals could result in substantially increased operating and
compliance costs in addition to the amounts set forth above, but Idaho Power is
unable to estimate those costs glven the uncertainty associated with pending
regulations." It appears from this filing that Idaho Power lacks sufficient
information needed to invest in coal plants with the intent of extending their
lives.
Did that SEC filing provide any additional reasons to question the prudency of
the investrnents proposed in this application?
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A.Idaho Power cautioned that "There are many legislative and rulemaking
initiatives pending at the federal and state level that are aimed at the reduction
of fossil fuel plant emissions. Idaho Power cannot predict the outcome of
pending or future legislative and rulemaking proposals, or the compliance costs
Idaho Power would incur in connection with that legislation. Future changes in
environmental laws or regulations governing emissions reduction may make
certain electric generating units (especially coal-fired units) uneconomical and
subject to shut-down, ffi&y require the adoption of new methodologies or
technologies that significantly increase costs or delay in-service dates, and may
raise uncertainty about the future viability of fossil fuel as an energy source for
new and existing electric generation facilities."
What is the purpose of SEC Annual Reports?
In part, the Report advises current and potential investors of risks faced by the
Company. Current and potential investors can then'ovote with their feet" in
deciding whether to take on those risks. Ratepayers, by contrast, do not have
that luxury.
Wyoming and EPA Regional Haze
Can you explain why the SCR installations at Jim Bridger are required by the
Environmental Protection Agency (EPA) and explain the State Implementation
Plan (SIP) process that impacts these coal units?
The federal Clean Air Act (CAA) requires each state to develop plans to meet
various air quality requirements, in this case the improvement of visibility
(CAA sections 110(a), 169(4) and 1698 referenced in the Federal Register,
Miller, Di 17
Snake River Alliance
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Vol. 78, No. 1 1 1, Monday, June 10, 2013,P. 3474l, "Approval, Disapproval
and Promulgation of Implementation Plans; State of Wyoming; Regional Haze
State Implementation Plan; Federal Implementation Plan for RegionalHaze").
In this instance, these air quality compliance plans are known as State
Implementation Plans (SIPs) and demonstrate how each state will meet
Regional Haze requirements to improve visibility in certain "Class 1" federal
lands such as national parks and wilderness areas.
Did the state of Wyoming complete a SIP?
Yes, on January 12,2011. On June 10, 2013, EPA approved portions of the
Wyoming SIP and disapproved other portions. As a result, under Section 110 of
the Clean Air Act, EPA proposed a Federal Implementation Plan (FIP) to
address what it viewed as the deficiencies in the state SIP. EPA intends to issue
a final rule in this case by Novernber 21, although the state of Wyoming has
indicated it strongly opposes EPA's action with regard to the FIP and the
implementation date of the finalrule is unknown.
This CPCN Application is incomplete when EPA has yet to finalize the
Wyoming Regional Haze SIP or FIP, particularly in light of ongoing efforts by
its majority partner, PacifiCorp, to attack EPA's requirernent that SCRs be
installed on Jim Bridger Units 3 and 4.
Are the SCRs proposed in Idaho Power's application in this case the optimum
method to comply with EPA's Regional Haze requirements?
Based on the pre-filed testimony in this case, that is difficult to determine.
Idaho Power's majority partner in the Jim Bridger enterprise, PacifiCorp, is
Miller, Di 18
Snake River Alliance
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currently actively engaged in a campaign ("Wyoming for Aftordable Power",
www.stopepawy.com) with other Wyoming utilities to attempt to fend offthe
federal EPA FIP, so it remains unknown what technologies may be required to
be installed at Jim Bridger 3 and 4. Idaho Power's current CPCN Application
before the Idaho Commission is prernature, particularly so long as its majority
partner (PacifiCorp) continues to wage an ongoing campaign against the federal
re-proposal in Wyoming.
Idaho Power is seeking binding ratemaking treatment to install
technology at Jim Bridger 3 and 4 while simultaneously its majority partner in
Wyoming (PacifiCorp) is attempting to undermine the required installation of
the same emissions upgrades for which Idaho Power is seeking ldaho PUC
CPCN approval. The two strategies appear to conflict with each other.
Did ldaho Power's coal plant analysis consider its requirement to comply with
mercury emission controls under the MATS rule?
Idaho Power states in Response to Request No. 4 by the Alliance that the SCR
additions at issue in this CPCN docket "will not satisff the requirements of the
MATS rule" and that it intends to recover such costs for future emissions
control investments in a future general rate case. The Alliance believes those
costs are known by Idaho Power and should be included in this docket.
Is Idaho Power required to comply with the MATS rule?
Yes, it is. Idaho Power states in its Response to Request No. 8 by the Alliance
that "a11 four units at the Jim Bridger power plant are required to comply with
the MATS rule," which took effect on April 12,2012, and which established a
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Snake River Alliance
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three-year compliance period. Idaho Power is aware of its obligations to comply
with the MATS rule, yet such compliance costs are omitted from this CPCN
application.
Failure to Pursue Alternatives
Could Idaho Power and its coal plant co-owners have negotiated with the EPA
and other regulators to reduce the scope of the required emission control
equipment in exchange for a commitment to decommission the plants earlier
than scheduled?
Idaho Power says it could not, but there is no evidence it attempted to do so.
According to Page 4 of the Coal Unit Environmental Investment Analysis that
was submitted with Idaho Power's 2011 IRP Update, in its "Compliance Timing
Alternatives" section, the Company indicates it "evaluated the economic
benefits of delaying coal unit investments required under the emerging
environmental regulations." The Company said that, as part of that evaluation, it
assumed it could negotiate with state and federal entities a five-year period
where no additional environmental controls are installed in exchange for
shutting the unit down at the end of the five-year period. Idaho Power then
referred to compliance timing alternatives as "strictly hypothetical" and that it
"may not have any basis under current regulations to negotiate this delay." The
Company added in that report on Pg. 4 that regulators 'have not offered any
such delay''but does not indicate whether Idaho Power or its co-owners
attempted to contact regulators on this issue.
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Snake River Alliance
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Was Idaho Power directed by a utility regulatory body in either Idaho or Oregon
to conduct such discussions with environmental regulators?
On May 21,2012, the Oregon PUC gave Idaho Power explicit directions to do
so in its Order 12-177 in Case No. LC 53, Idaho Power Company 2011
lntegrated Resource Plan: "[n its next IRP Update, Idaho Power will include an
Evaluation of Environmental Compliance Costs for Existing Coal-fired Plants.
The Evaluation will investigate whether there is flexibility in the emerging
environmental regulations that would allow the Company to avoid early
compliance costs by offering to shut down individual units prior to the end of
their useful lives. The Company will also conduct further plant specific analysis
to determine whether this tradeoff would be in the ratepayers' interest."
Did Idaho Power satisff this directive from the Oregon PUC?
Idaho Power indicates it did not contact the EPA on this matter. The analysis
submitted to the Idaho and Oregon PUCs as part of its 2011 IRP Update (IRP
Coal Study) states on Pg. 13 that "it is highly unlikely Idaho Power would have
the ability to negotiate altemative scenarios as described above." Our
conclusion is that Idaho Power assumed negotiations would not be fruitful, so it
did not contact EPA to attempt negotiations.
Idaho Power's Response to Discovery Request No. 3 submitted by the
Alliance states that "There were no communications between Idaho Power and
the Environmental Protection Agency, PacifiCorp or the state of Wyoming
regarding the delay of installation of environmental controls on any unit in
exchange for shutting that unit down." Furthermore, Idaho Power states in its
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Snake River Alliance
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Response to Discovery Request No. 6 by the Alliance that "Based on the
importance of the Jim Bridger power plant to the resource portfolio of
PacifiCorp and Idaho Power, Idaho Power analyzedbut did not discuss with any
state or federal agencies the possibility of avoiding the installation of required
ernission controls at Jim Bridger by delaying the compliance requirements in
exchange for shutting down the units."
Idaho Power's Coal Study, Redacted Exhibit 5A and its IRP Coal Study)
Update indicate that the Company must make its commitrnents to upgrade its
coal plants in Wyoming and in Nevada no later than the end of 2013. Is that a
realistic timeline?
No, it is not. As mentioned earlier, the timeline laid out on Pg. 33 of Idaho
Power's 2011 Integrated Resource Plan Update cannot be met. For one thing,
Idaho Power acknowledges its planning for these investments is mostly in the
hands of its power plant owner-partners - certainly that seems to be the case
with the Jim Bridger upgrades, according to Idaho Power's filings in Oregon.
What are Idaho Power's estimates for when it needs to commit to making
retrofits in the Jim Bridger and North Valmy coal plants?
According to the Near-Term Action Plan in Idaho Power's 2011 Integrated
Resource Plan Update, the Company states it must commit to installing a Dry
Sorbent lnjection system to comply with the Mercury and Air Toxics Standards
(MATS) regulations in North Valmy I no later than the third quarter of 2013.
Idaho Power also states in the same Update that it anticipates it will need to
commit to install SCR technology at Jim Bridger 3 by the second quarter of
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Snake River Alliance
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2013, which has passed. And it states that it anticipates having to commit to
making the same SCR investrnent at Jim Bridger 4 also by the second quarter of
2013. To date, the Idaho Commission has yet to review any of these anticipated
commitments to install emission-control equipment at any of its coal-fired
power plants, and given the uncertain regulatory environment confronting Idaho
Power's majority partner in the Jim Bridger plants in Wyoming, it is not likely
that such commitment can be made in2013. The situation with the North Valmy
plants in Nevada, now that NV Energy has announced plans to divest its coal
assets, is even more uncertain.
Do you agree with the statements in the direct testimonies of Idaho Power
witnesses Grow (Grow Di, Pg. 11) and Harvey (Harvey Di, Pg. 14) that:
"Unlawfully operating the units in violation of federal and state regulations is
not an option?
Of course. Neither the Alliance nor any other party in this case has suggested
Idaho Power operate any of its coal units in violation of state or federal law, but
that is beside the point in this case. It assumes Idaho Power has only two
options: violating the law or installing the upgrades it says are required. In fact,
as our testimony shows, there are more than two options, including retiring one
or more of the coal units and replacing that generation with supply side and
demand side resources, but that option does not appear to have been fully
analyzed, if it was analyzed at all, by Idaho Power or the contractor it secured to
prepare its analysis.
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Snake River Alliance
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Portfolio Diversity
At pages 5-7 of her testimony, Witness Grow discusses the Company's resource
portfolio and concludes that IPCo resources portfolio is among the most diverse
in the nation. @9.7,L.7-8). Do you agree with that analysis?
Ms. Grow's analysis is based on nameplate capacity of various generating
resources. From an environmental perspective, this is the wrong matrix.
Because pollutant emissions are a function of annual generation, not nameplate
capacity, annual generation by fuel type gives a better picture. According to
another Idaho Power Publication
(//www.idahopower.com/AboutUs/EnersySources/FuelMix/typical_fuelMix.cf
U), the Company's supplied energy mix in a tlpical year is:
Hydro: 5l%
Coal: 49%
Gas: 2.8%
Wind:2.8%
Biomass: .5%
Geothermal: .4Yo
Other: .8%
Viewed from this perspective, the Company's energy mix is not diverse
at all. Putting aside embedded hydropower, about 4Yo of anrntal energy comes
from environmentallybenign sources (wind, biomass and geothermal) and
almost half of its annual energy comes from a source (coal) with significant
environmental concerns and risks.
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Snake River Alliance
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Timing of Application
When did Idaho Power's co-owner of the Jim Bridger coal plant, PacifiCorp,
apply for approval of its SCR investments in Wyoming and Utah?
PacifiCorp filed its applications for approval of its SCR investments in
Wyoming and Utah in August 2012, approximately nine months prior to Idaho
Power's filing for the CPCN at the Idaho PUC.
Has ldaho Power signed any contracts associated with the SCR investments at
Jim Bridger 3 and 4?
Our understanding based on the direct testimony of Idaho Power witness
Harvey (Pgs. 14-15) is that Idaho Power entered into a contract for this
investment. According to Idaho Power witness Harvey, o'Because of the scope
of the project and the extended period of time it takes to plan, permit, engineer,
procure, and construct SCR systems, the uncertainty of the final ruling from the
EPA on approval of the portion of the of the Wyoming Regional Haze SIP that
addresses the SCRs at Jim Bridger Units 3 and4, and the fact that the Wyoming
Regional Haze SIP deadlines are legally binding, a Limited Notice to Proceed
(LNTP) was signed with the successful bidder on May 31,2013. The Company
and PacifiCorp determined this to be a prudent approach that allows for
consideration of the Company's Application for a CPCN while waiting for final
approval of the Wyoming Regional Haze SIP by the EPA."
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Snake River Alliance
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Assurance of Binding Ratemaking Treatment Not Required for Project
Financing
Does it appear that the Company requires an assurance of binding ratemaking
treatment trnder Idaho Code $61-541 in order to finance the proposed
investments?
No it does not. Company witness Youngblood states in his testimony at Pg. 6:
"Ongoing operation and maintenance of the plant, including the investment in
emission controls mandated by state or federal environmental regulations,
would not typically be an investment for which the Company would request a
CPCN."
Further, in response to Staff Production Request No. 18, the Company
stated: "Idaho Power expects to finance this project consistent with the
financing of its total construction program. The Company expects to finance its
capital requirements with a combination of internally generated funds and
externally financed capital. Idaho Power has not entered into any altemative
financing agreements and therefore has not developed a financing payment
schedule based on non-traditional financing schemes."
From these responses it does not appear that the Company needs an
assurance of ratemaking treatment to attract external financing.
How does this circumstance compare to circumstances in which the
Commission has provided a binding ratemaking commitment?
To our knowledge the only previous circumstance in which assurances under
Idaho Code $ 6l-541were provided was in connection with construction of the
Miller, Di 26
Snake River Alliance
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Langley Gulch generation station, Case No. IPC-E-09-03. There, the very large
invesbnent required coupled with uncertainty in capital markets argued in favor
of a binding assurance to athact outside financing.
a. Does this conclude your testimonf
A. Yes it does.
Miller, Di 27
Snake River Alliance
CERTTFICATE OF SERVICE
I hereby certiff that on rn" f[Ou, of October, 2[l3,lcaused to be served, via the
method(s) indicated below, true and correct copies ofthe foregoing document, upon:
Jean Jewell, Secretary Hand Delivered V
Idaho Public Utilities Commission U.S. Mail /J
Idaho Public Utilities Commission Fax
472 W, Washington (837 02)
P0 Box 83720
Boise,ID 83 720-0074
[e-mail]
Lisa D. Nordstrom
Idaho Power Company
47 2 W est Washington Street
P.O. Box 83720
Boise, D 83720-0074
[e-mail]
Kris Sasser
Deputy Attorney General
Fax .i
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l22l West Idaho Street (83702) Fax
P.O. Box 70
Boise,lD 83707
[e-mail]
Jennifer Re inhardt-Tessmer
Idaho Power Company
1221 West ldaho Street (83702) Fax
P.O. Box 70
Boise, D 83707
E-mail : jreinhardt@ idahopower.com
Benjamin J. Otto
Idaho Conservation League
710 N. Sixth Street (83702)
PO Box 844
Boise,ID 83701
[e-mail]
Peter J. Richardson
Gregory M. Adams
Richardson & Adams, PLLC
PO Box 7218
Boise,ID 83702
[e-mail]
gre [e-mail]
Dr. Don Reading
6070 Hill Road
Boise,Idaho 83703
dreadin g@mindsprin g.com
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