20170518Comments.pdf

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LXBAD. NORDSTROilIld Gounsel toN
May 18, 2017
VIA HAND DELIVERY
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Strcet
Boise, ldaho 83702
Re: Caso No. IPGE-1623
Revised Depreciation Flates for Electric Plant-ln-SeMe
ldaho Power Company's Comments in Support of Settlement Stipulation
Dear Ms. Hanian:
Enclosed forfiling in the above matterarc an originaland seven (7) copies of ldaho
Power Gompanfs Comments in support of the Settlernent Stipulation filed in this matteron
May 3, 2017.
Very truly yours,
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Lisa D. Nordstmm
LDN/I&t
Enclosures
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I no rd strom@ id a ho oowe r. co m
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
DUE TO REVISED DEPRECIATION
RATES FOR ELECTRIC PLANT-IN.
SERVICE
CASE NO. |PC-E-16-23
IDAHO POWER COMPANY'S
COMMENTS IN SUPPORT OF
SETTLEMENT STI PULATION
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ldaho Power Company ("ldaho Powe/' or "Comp?Dy"), by and through its
undersigned attomey, hereby submits to the ldaho Public Utilities Commission
("Commission") these comments in the above-captioned proceeding. ldaho Power
supports the settlement stipulation submitted in this proceeding ("Settlement
Stipulation") and urges the Commission to adopt the Settlement Stipulation, without
modification, by June 1,2017. The Company's comments are organized as follows:
Section I - provides the procedural background in the case and summarizes the
Company's origina! fi ling;
Section ll - details how the depreciation parameters agreed to in the prcposed
Settlement Stipulation differ from Idaho Powe/s initial proposal; and
Section Ill - provides the Company's support for the Settlement Stipulation.
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1
I. BACKGROUND
ldaho Power updates its depreciation rates approximately every five years to
reflect changes in the appropriate net salvage percentages and remaining lives of
assets as circumstances change. Depreciation refers to the loss in service value not
restored by current maintenance, incuned in connection with the consumption or
prospective retirement of utility plant in the course of service from causes that can be
reasonably anticipated or contemplated, against which the Company is not protected by
insurance. Among the causes to be given consideration are wear and tear, decay,
action of the elements, obsolescence, changes in the art, changes in demand, and the
requirements of public authorities. Accordingly, the Company engaged Gannett
Fleming Valuation and Rate Consultants, LLC ("Gannett Fleming") to conduct a
depreciation study of its electric plant-in-service ("the Study") as of December 31 ,2015.
On October 21, 2016,ldaho Power filed an application in this case requesting the
Commission adopt revised depreciation rates for its electric plant-in-service and
conespondingly adjust ldaho jurisdictional base rates with an effective date of June 1,
2017. The Company proposed no change in depreciation related to the Boardman
power plant or the North Valmy power plant ("Valmy") in this proceeding, which are
addressed in Case Nos. IPC-E-12-09 and IPC-E-16-24, respectively. The Study
updates net salvage percentages and service life estimates for plant assets. The
resulting depreciation rates are based on the straight line, remaining life method for
production, transmission, distribution, and general plant accounts. As recommended by
and described in the testimony of Mr. John Spanos, the Company proposed an
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 2
adjustment to the book reserve of the general plant accounts to conect the mismatch of
the general plant book reserve ratio and avoid creating future disparities.
The revised depreciation rates proposed by the Company were based on the
results of the Study and would have resulted in an increase to annual depreciation
expense in ldaho of approximately $5.5 million and would have resulted in an increase
in the Company's ldaho jurisdictional revenue requirement of $6.7 million. The result of
that proposed adjustment would have been an increase of 0.59 percent from current
billed revenue.
The Company concurently filed an application in Case No. IPC-E-16-24 asking
the Commission to (1) accelerate the depreciation schedule for Valmy to allow the plant
to be fully depreciated by December 31 ,2025, (2) establish a balancing account to track
the incrementa! costs and benefits associated with the accelerated Valmy end-of-life
date, and (3) adjust customer rates to recover the associated incremental annual
levelized revenue requirement of $28.5 million with an effective date of June 1, 2017. lf
approved as originally filed, the result of that proposed adjustment would have been an
overall billed revenue increase of 2.51 percent.
ln November 2016, the Commission issued an order providing notice of the
application and setting a deadline for interventions. Order No. 33652. Subsequently,
the Commission granted petitions to lntervene from the ldaho lrrigation Pumpers
Association, lnc. ("llPA"), Micron Technology, lnc. ("Micron"), the ldaho Conservation
League ('lCL") and Siena Club, the U.S. Department of Energy and Federal Executive
Agencies ("DOE'), and the lndustrial Customers of ldaho Power ("lClP"), hereinafter
refened to as the "Parties." Order Nos. 33659, 33670, 33673, 33676, and 33710.
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION.3
The Parties met on February 2, 2017, and April 12, 2017, for settlement
discussions regarding rate issues related to the Company's depreciation rates for its
electric plant-in-service. The Parties were able to reach an agreement in principle and
ldaho Power filed the agreed upon Settlement Stipulation and conesponding motion to
approve on May 3,2017. The Settlement Stipulation was entered into by ldaho Power,
Commission Staff, llPA, Micron, DOE, and lClP, hereinafter refened to jointly as
"Stipulating Parties." While ICL and Sierra Club did not wish to join the Settlement
Stipulation, neither ICL nor Siena Club opposes it.
!I. SETTLEMENT STIPULATION
The Stipulating Parties agree that the Commission should adopt the depreciation
rates set forth in Attachment 1 to the Settlement Stipulation, effective June 1, 2017,
which would result in no associated change in retail rates. Attachment 2 to the
Settlement Stipulation shows the depreciation groups for which the Parties' analyses
produced differing results from the filed depreciation study and the final position agreed
to by the Stipulating Parties following settlement discussions.
The Parties agreed to: (1) 20 adjustments to ldaho Powe/s proposed curve life
combination for depreciable plant and changes in average service life or dispersion
curve (or both) for Federal Energy Regulatory Commission account categories in
Hydraulic Production Plant, Other Production Plant, Transmission Plant, and
Distribution Plant, (21 13 adjustments to ldaho Powefs proposed net salvage rates for
certain depreciable plant accounts, and (3) two adjustments to the amortization periods
of certain depreciable plant. The following details the changes in depreciation
parameters, as compared to the Company's initia! request:
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 4
Jim Bridoer Steam Production Plant
o Account 311.0 - Structures and lmprovements. The Parties agree that the
net salvage rate should be (9) instead of the proposed (10).
o Account 312.1- Boiler Plant Equipment - Scrubberc. The Parties agree that
the Company shall use a 70-S1 survivor curve with a net salvage of (5)
instead of the proposed 60-51 survivor curve with a net salvage of (10).
o Account 312.2 - Boiler Plant Equipment - Other. The Parties agree that the
net salvage rate should be (8) instead of the proposed (10).
o Account 312.3 - Boiler Plant Equipment - Rail Cars. The Parties agree that
the Company shall use a 35-R3 survivor curve with net salvage of 10 instead
of the proposed 30-R3 estimated survivor curve with zero net salvage.
o Account 315.0 - Accessory Electric Equipment. The Parties agree that the
net salvage rate should be (3) instead of the proposed (5).
o Account 316.0 - Miscellaneous Power Plant Equipment. The Parties agree
that the net salvage rate should be 2 instead of the proposed (2).
Hvdraulic Production Plant
o Account 331.0 - Structures and lmprovements. The Parties agree that the
Company sha!! use a 120-year survivor curye life instead of the proposed
1 1S-year survivor curve life.
o Account 332.1 and 332.2 - Reservoirs, Dams and Waterways. The Parties
agree that the Company shall use a 120-51.5 survivor curve instead of the
proposed 100-54 survivor curve.
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 5
o Account 333.0 - Water Wheels, Turbines, and Generators. The Parties
agree that the Company shall use a 100-R2.5 survivor curve instead of the
proposed 90-S2 survivor curve.
o Account 334.0 - Accessory Electric Equipment. The Parties agree that the
Company shall use a 65-year survivor curve life with a net salvage rate of
(10) instead of the proposed S4-year survivor curve life and net salvage of
(1s).
o Account 336.0 - Roads, Railroads, and Bridges. The Parties agree that the
Company shall use a 100-R3 survivor curve instead of the proposed 85-R4
survivor curve.
Other Production Plant
o Account 344.0 - Generators. The Parties agree that the Company shall use
a S0-year survivor curve life instead of the proposed 45-year survivor curve
life.
o Account 345.0 - Accessory Electric Equipment. The Parties agree that the
Company shall use a 55-year survivor curve life instead of the proposed 50-
year survivor curve life.
Transmission Plant
o Account 350.2 - Land Rights and Easements. The Parties agree that the
Company shall use a 1OO-year survivor curve life instead of the proposed 80-
year survivor curve Iife.
o Account 352.0 - Structures and lmprovements. The Parties agree that the
net salvage rate should be (33) instead of the proposed (35).
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 6
o Account 353.0 - Station Equipment. The Parties agree that the Company
shall use a S2-year survivor curve life instead of the proposed S0-year
survivor curve life.
o Account 354.0 - Towers and Fixtures. The Parties agree that the Company
shall use an 80-year survivor curve life instead of the proposed 7$-year
survivor curve Iife.
o Account 356.0 - Overhead Conductors and Devices. The Parties agree that
the Company shall use a 74-R1.5 survivor curye instead of the proposed 65-
R2 survivor curve.
Distribution Plant
o Account 361.0 - Structures and lmprovements. The Parties agree that the
Company shall use a 70-R3 survivor curye instead of the proposed 70-R2.5
survivor curve.
o Account 362.0 - Station Equipment. The Parties agree that the net salvage
rate should be (6) instead of the proposed (10).
o Account 364.0 - Poles, Towers, and Fixtures. The Parties agree that the
Company shall use a S8-year survivor curve life instead of the proposed 55-
year survivor curve Iife.
o Account 366.0 - Underground Conduit. The Parties agree that the Company
shall use a 65-year survivor curve life instead of the proposed 60-year
survivor curve life.
o Account 367.0 - Underground Conductors and Devices. The parties agree
that the net salvage rate should be (11) instead of the proposed (15).
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 7
o Account 368.0 - Line Transformers. The Parties agree that the net salvage
rate should be (7) instead of the proposed (10).
o Account 369.0 - Services. The Parties agree that the Company shall use a
S5-year survivor curve life instead of the prcposed S0-year survivor curve life.
o Account 370.0 - Meters. The Parties agree that the Company shall use a 30-
year survivor curve life instead of the proposed 27-year survivor curve life.
o Account 370.1 - Meters - AMI. The Parties agree that the Company shall
use an 18-R1.5 survivor curve with a net salvage rate of (5) instead of the
proposed 16-S1.5 survivor curve and net salvage of (10).
o Account 373.2 - Street Lighting and Signal Systems. The Parties agree that
the Company shall use a 40-year survivor curve life instead of the proposed
35-year survivor curve life.
General PIant
o Account 390.11 and 390.12 - Structures and lmprovements. The Parties
agree that the net salvage rate should be (3) instead of the proposed (10).
o Account 397.4 - Communication Equipment - Fiber Optic. The Parties agree
that the Company shall use a 1S-year amortization period instead of the
proposed 1 O-year amortization period.
Accounts Not Studied
o Account 303 - Miscellaneous lntangible Plant. The Parties agree to a 62-
month amortization period instead of the cunent 60-month amortization
period.
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 8
As explained in Section 13 of the Settlement Stipulation, the terms of the
agreement as set forth in the proposed Settlement Stipulation represent a comprcmise of
the differing deprcciation methodologies, theories, and opinions presented in this case,
and do not necessarily reflect an endorsement of the underlying rationale for each
adjustment by any of the Stipulating Parties.
The Parties in this matter that are also parties to the pending Valmy docket (Case
No. IPC-E-16-24) agree or do not object to the terms set forth in the settlement stipulation
filed simultaneously in that docket which includes: (1) a levelized ldaho jurisdictional
revenue increase of $13.3 effective June 1,2017, (2) a balancing account to track the
incremental costs and benefits associated with the accelerated Valmy endof-life date, (3)
regulatory accounts, including regulatory assets, to facilitate compliance with Generally
Accepted Accounting Principles, (4) a process to review the prudency of expenditures by
specified dates, and (5) plant closure negotiations. lf the Valmy settlement stipulation is
approved by the Commission, the amount al! ldaho customer classes pay for electric
service will increase by $13.3 million which equates to an overall increase of 1.17 percent.
III. IDAHO POWER'S SUPPORT FOR THE SETTLEMENT STIPULATION
ldaho Power supports the Settlement Stipulation in this case because it: (1)
implements depreciation rates that appropriately reflect the cost of the Company's
assets over time, (2) maintains consistency with previously approved depreciation rate
determination methodologies to achieve a reasonable level of stability in depreciation
expense and, in tum, customer rates, (3) achieves a result that has no negative
financial impact on the Company, and (4) maintains one set of depreciation records for
the Company's two retail state jurisdictions to minimize accounting costs and preserve
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 9
administrative efficiencies. The 35 depreciation parameter adjustments were the result
of a combination of: (1) changes agreed to as a matter of compromise, (2) changes that
better align the life and curve combinations, (3) changes that keep the parameters
within industry standards, (4) changes that are based on industry ranges, consultant
experience, and statistical data, and (5) changes that were made for settlement
purposes only.
ldaho Power believes the depreciation parameters agreed to in the Settlement
Stipulation represent a reasonable compromise of the differing depreciation
methodologies, theories, and opinions presented in this case, and results in
depreciation rates that will appropriately reflect the cost of the Company's assets over
time. ln addition to depreciation parameters that result in reasonable asset lives and
salvage percentages, the Stipulating Parties have agreed that the depreciation rates
resulting from the Settlement Stipulation will result in no retail rate change for
customers. Similarly, the Settlement Stipulation does not have a material negative
financial impact on the Company, striking a balance between customer and shareowner
interests. Finally, the Settlement Stipulation provides for the same depreciation rates in
both retail state jurisdictions resulting in lower depreciation system costs and
ad ministrative efficiencies.
tv. coNcLUSroN
The Company believes that the proposed Settlement Stipulation is a reasonable
resolution of the issues and is in the public interest. For all the reasons presented in
these comments, ldaho Power urges the Commission to adopt the Settlement
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1O
Stipulation submitted in this proceeding as filed, without modification, and to issue an
order authorizing the terms of the Settlement Stipulation effective June 1,2017.
DATED at Boise, ldaho, this 18h day of May 2017.
D
Attomey for ldaho Power Company
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION. 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 18h day of May 2017 I served a true and correct
copy of IDAHO POWER COMPANY'S COMMENTS !N SUPPORT OF SETTLEMENT
STIPULATION upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Daphne Huang
Deputy Attomey General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-007 4
Micron Technology, lnc.
Thorvald A. Nelson
Frederick J. Schmidt
EmanuelT. Cocian
Brian T. Hansen
HOLLAND & HART, LLP
6380 South Fiddlers Green Circle, Suite 500
Greenwood Village, Colorado 80111
Pete Bennett
Micron Technology, lnc.
8000 South FederalWay
Boise, ldaho 83707
ldaho Irrigation Pumpers Association, !nc.
Eric L. OIsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Avenue, Suite 100
P.O. Box 6119
Pocatello, ldaho 83205
Anthony Yankel
12700 Lake Avenue, Unit 2505
Lakewood, Ohio 44107
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fsch m idt@hol la nd hart.com
etcocian@holland hart.com
bhansen@hol landhart. com
klhall@ hollandhart.com
kmtrease@ holland hart.com
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 12
lndustrial Gustomers of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27h Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
United States Department of Energy and
Federal Executive Agencies
Steven Porter
Office of the General Gounsel (GC-76)
The United States Department of Energy
1000 lndependence Avenue, SW (Room 6D-033)
Washington, D.C.20585
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 North Sixth Street
P.O. Box 844
Boise, ldaho 83701
Sierra Glub
Travis Ritchie
Siena Club
2101 Webster Street, Suite 1300
Oakland, Califomia 94612
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l,/ '\--/1\u;.,.hil"/ ,/ot r4,
Kirn6edy Tow{, Executive Assishnt
IDAHO POWER COMPANY'S COMMENTS lN SUPPORT OF SETTLEMENT STIPULATION - 13