20170518Comments.pdf

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LISAD. NORDSTROM
Lead Gounsel
I n ordstrom@idahooower. com
May 18,2017
VIA HAND DELIVERY
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-16-24
Recovery of Costs Associated with North Valmy Power Plant
ldaho Power Company's Comments in Support of Settlement Stipulation
Dear Ms. Hanian:
Enclosed forfiling in the above matter are an original and seven (7) copies of ldaho
Power Company's Comments in support of the Settlement Stipulation filed in this matter on
May 3, 2017.
Very truly yours,
Lisa D. Nordstrom
LDN/KKt
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 stro m @ida hopower. co m
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
FOR ELECTRIC SERVICE TO RECOVER
COSTS ASSOCIATED WITH THE NORTH
VALMY PLANT
_ 4 nta rr J l'i, tl: jJ
Attomey for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. |PC-E-16-24
IDAHO POWER COMPANY'S
COMMENTS IN SUPPORT OF
SETTLEMENT STI PULATION
ldaho Power Company ("ldaho Powe/' or "Company"), by and through its
undersigned attorney, 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.
I. BACKGROUND
ldaho Power is generally expected to file an updated depreciation study within
five years of the Company's previous depreciation study. Consequently, ldaho Power
simultaneously filed cases to revise its genera! plant-in-service depreciation rates in
Case No. IPC-E-16-23 and its deprecation rates specific to the North Valmy power plant
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1
("Valmy") in this docket effective June 1, 2017. The Company's most recent
depreciation update went into effect on June 1,2012, and reflected the continued plant
life for Valmy of 50 years for each unit, resulting in a retirement year of 2031for Unit 1
and 2035 for Unit 2, as established in Case No. IPC-E-08-06 (Order No. 30639).
Valmy is a coal-fired power plant that consists of two units and is Iocated near
Winnemucca, Nevada. Unit 1 went into service in 1981 and Unit 2 followed in 1985.
ldaho Power owns 50 percenl, or 284 megawatts ("MW") (generator nameplate rating),
of Valmy. NV Energy also has 50 percent ownership and is the operator of the Valmy
facility. ldaho Power and NV Energy work jointly to make decisions regarding any
environmental investment, plant retirement, or convercion. The plant is connected via a
single 345 kilovolt transmission line to the ldaho Power control area at the Midpoint
substation.
ln 2013, the Public Utilities Commission of Nevada ('PUCN') approved a 2025
end-of-life date for both Unit 1 and Unit 2 for NV Energy (Docket No. 13-06002,
Modified Final Order dated January 29,2014). Likewise, in its most recent depreciation
study filed with the PUCN on June 6,2016, NV Energy used the same end-of-life date
for both units (Docket No. 16-06008). Although no agreement has yet been reached
between ldaho Power and NV Energy to shutdown one or both units, the 2025 end-of-
life date cunently utilized by NV Energy provides an indication that Valmy will not be
operational beyond 2025.
ln recognition of these events and the 2025 Valmy closure date identified in
ldaho Powe/s 2015 lntegrated Resource PIan ("lRP") prefened portfolio that was
accepted for filing in Commission Order No. 33441 (Case No. IPG-E-15-19), ldaho
IDAHO POWER COMPANY'S COMMENTS !N SUPPORT OF SETTLEMENT STIPULATION - 2
Power filed an Application in this case on October 21, 2016, requesting Commission
authorization to accelerate the depreciation schedule for Valmy to: (1) allow the plant to
be fu!!y depreciated by December 31, 2025, (2) establish a balancing account to track
the incremental 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. ll
approved as originally filed, the result of this application would have been an overall
increase of 2.51 percent.
The Company concurently filed an application in Case No. IPC-E-16-23 asking
the Commission to adopt revised depreciation rates for its electric plant-in-service and
corespondingly adjust ldaho jurisdictional base rates, also with an effective date of
June 1, 2017. The result of that proposed adjustment would have been an overall
increase of 0.59 percent.
ln November 2016, the Commission issued a Notice of Application and set a
deadline for interventions. Order No. 33650. Subsequently, the Commission granted
petitions to intervene from the ldaho lnigation 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. 33660, 33671, 33672, 3367 4, and 33746.
The Parties met on February 2, 2017, and April 12,2017, for settlement
discussions related to Valmy. Based upon these settlement discussions, as a
compromise of the respective positions of the Parties, and for other considerations as set
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 3
out in the Settlement Stipulation the Parties were able to reach an agreement in principle.
Idaho Power filed the Settlement Stipulation signed by al! Parties and conesponding
motion to approve on May 3,2017.
II. SETTLEMENT STIPULATION
Idaho Power believes the terms of the agreement as set forth in the proposed
Settlement Stipulation represent a reasonable compromise of the respective positions. As
detailed further in the Settlement Stipulation, the Parties agree to:
. An increase in the ldaho jurisdictional revenue requirement of $13.3 million,
effective June 1, 2017, to recover costs associated with the accelerated
depreciation of existing investments for Unit 1 and Unit 2 at Valmy to be
amortized through 2028 with an assumed ldaho Power cessation of coal-
fired operations at Unit 1 at the end of 2019 and Unit 2 at the end of 2025.
The costs also include forecasted investments for Valmy from 2017 through
2019 for Unit 1, forecasted operation and maintenance ("O&M") cost
savings, and forecasted decommissioning costs for Unit 1 and Unit 2;
o Balancing accounts to track the incremental costs and benefits associated
with the accelerated Valmy end-of{ife date and regulatory accounts,
including regulatory assets, to facilitate compliance with Generally Accepted
Accounting Principles; and
. Provisions requiring future filings with the Commission that may result in
periodic adjustments to rates based upon prudence reviews of capital
expenditures, true-ups of actual capital expenditures and decommissioning
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION.4
costs to forecasted costs, true-ups of O&M expense savings, and plant
closure or joint ownership and operating agreement negotiations.
lf the 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 as set forth in Attachment 1 to the Settlement Stipulation.
Parties to the pending depreciation docket in Case No. IPC-E-16-23 agree or do
not object to the terms set forth in the settlement stipulation filed simultaneously in that
docket which would result in the new depreciation rates going into effect June 1, 2017,
with no associated change in retail rates.
III. IDAHO POWER'S SUPPORT FOR SETTLEMENT STIPULATION
ldaho Power recommends the Commission adopt the proposed Settlement
Stipulation for severa! reasons. First, it recognizes and incorporates recent ldaho
Power integrated resource planning efforts that will be submitted to the Gommission
next month in ldaho Power's 2017 lRP. Second, the Settlement Stipulation strikes a
reasonable balance between the Company's need for timely cost recovery associated
with the accelerated depreciation of Valmy while mitigating the rate impact to
customers. Finally, it outlines a process to review future Valmy-related expenditures
and adjust rates as necessary when each unit ceases operations.
A. Aliqnment with the 2017 lRP.
After the Company's initial filing and at the request of multiple parties, ldaho Power
performed a supplemental Valmy shutdown analysis. When last evaluated in the
Company's 2015 lRP, the Company's P9 portfolio identified the retirement of Valmy Unit
1 tn 2019 and retirement of Unit 2 in 2025 as the lowest cost and least risk on a
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 5
quantitative basis. However, severa! key factors created uncertainty that prompted the
Company to choose the higher cost P6(b) portfolio with retirement of both Valmy units in
2025, including: (1) consideration of Valmy and Jim Bridger coal unit early retirement,
(2) the Environmenta! Protection Agency's proposed Clean Air Act Section 111(d)
regulation, (3) 320 MW of solar projects contracted under the Public Utility Regulatory
Policies Act of 1978 that were as yet unbuilt, and (4) the timing of the Boardman to
Hemingway transmission line. These risks have largely diminished in the two years since
completion of the 2015lRP, and the Company's updated quantitative analysis continues to
reflect significant cost savings related to a 2019 Valmy Unit 1 shutdown with greater
assuran@ that it would not negatively impact system reliability. The Company has
quantified a present value reduction in revenue requirements over time of $33 million
associated with a 2019 Valmy Unit 1 shutdown date as compared to the 2015 IRP
assumption that Valmy Unit 1 would operate through 2025. As such, the Company has
incorporated the 2019 Valmy Unit 1 shutdown daie into its portfolio planning process
that will be reflected in the upcoming 2017 lRP.
As indicated in Section 11 of the Settlement Stipulation, the Parties agreed that
ldaho Power will use "prudent and commercially reasonable efforts" to amend the Valmy
ownership and operating agreement with co-owner NV Energy to permanently cease
buming coal in Unit 1 on or before December 31,2019, and in Unit 2 on or before
December 31,2025. As recently observed with natural gas and solar prices, integrated
resource planning factors can change significantly in just a few years; the Company
understands that it cannot unilaterally @ase participation in Valmy without regard to the
potential cost and reliability impacts such changes could pose to customers. If ldaho
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 6
Power cannot cease its participation in one or both Valmy units in a "prudent or
commercially reasonable" fashion because of its resour@ portfolio, market conditions, or
negotiations with NV Energy, the Company will so apprise the Commission and make
re@mmendations for the Commission's consideration. However, ldaho Power is
optimistic that it can achieve shutdown of the Valmy units as described in the Settlement
Stipulation.
B. Cost Recoverv that Mitiqates Generational lneouities and Rate lmoact
The annual levelized revenue requirement associated with the updated 2019 Unit
112025 Unit 2 scenario would increase to approximately $52 million as compared to the
Company's filed request of $28.5 million that reflected a 2025 shutdown date for both
units. ln recognition of the potential rate impact of the higher levelized revenue
requirement associated wlth a 2019 shutdown date for Unit 1, the Parties agreed to the
amortization of costs for both units beyond the 201912025 shutdown date to extend
through 2028 to lower the resulting rate impact from approximately 4.58 percent to 1.17
percent overall. Idaho Power believes this adjustment results in reasonable rcte impacts
for customers while stil! prcviding the Company with a reasonable opportunity to recover
its Valmy investments.
The Settlement Stipulation allows for recovery of costs associated with the
accelerated depreciation and decommissioning of Valmy through 2028 for ratemaking
purposes, and ldaho Power is cognizant of generational inequities that may exist when
cost recovery extends past a plant's operating life. However, with respect to Valmy,
generational inequities were introduced as early as 2008 when Order No. 30639 extended
the depreciable life for Valmy to 50 years frcm the 37-year life established in 2003 with
IDAHO POWER COMPANY'S COMMENTS !N SUPPORT OF SEfiLEMENT STIPULATION - 7
Order No. 29363 (IPC-E-03-07), a plant life that has now been determined to be
uneconomical. ldaho Power believes a cost recovery period through 2028 for ratemaking
purposes wil! mitigate the rate impact and will be a step towards better aligning the
recovery of Valmy's costs with those customers benefiting from the plant's operation.
The Parties also agreed to include cunent and future non-fuel O&M savings
reflecting the difference between costs included in base rates and actuaUforecasted costs
beginning June 1, 2017, until Valmy operation is no longer reflected in base rates.
Because the Settlement Stipulation includes forecasted O&M expenditures, the Parties
agree that those future expenditures should be trued-up to actual O&M savings.
C. Framework for Future Prudence Reviews.
Recognizing the challenges associated with reviewing expenses associated with
continued operations of Valmy past 2019, the Parties worked collaboratively to create an
agreement that will allow the Company the opportunity to recover costs associated with an
earlier end-of{ife for Unit 1 and provide for future prudence reviews and potential rate
adjustments associated with Unit 2 costs. Because the Settlement Stipulation includes
estimates of future capita!, decommissioning, and O&M expenditures as part of the
levelized revenue requirement, the Parties agree that those future expenditures should be
timely reviewed, updated, and trued-up to ensure that ldaho Power recovers no more and
no less than the revenue requirement related to its prudent expenditures to benefit
customers. Sections 13 (Unit Closure Prudence Reviews and Cost Recovery), 14 (Asset
Retirement Obligations), and 15 (True-up of Expenditures) of the Seftlement Stipulation
set forth a regulatory framework that will allow ldaho Power to recover its prudent
expenditures to operate and decommission the Valmy units.
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 8
tv. coNclustoN
As evidenced by the multiple requests made to revise the comment schedule, the
Parties invested significant time and effort to reach the agreement set forth in this
Settlement Stipulation. While the outcome is significantly different than the Company's
original request, ldaho Power believes that the proposed Settlement Stipulation is a
reasonable resolution of the complex issues presented in this docket and is in the public
interest. For all the reasons presented in these comments, ldaho Power urges the
Commission to adopt the Settlement 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
]DAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 18h day of May 2017 I served a true and conect
copy of IDAHO POWER COMPANY'S COMMENTS lN SUPPORT OF SETTLEMENT
STIPULATION upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Camille Christen
Deputy Attomey General
ldaho Public Utilities Commission
47 2 W est Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
Micron Technology, lnc.
Thorvald A. Nelson
Frederick J. Schmidt
Emanuel T. Cocian
Brian T. Hansen
HOLLAND & HART, LLP
6380 South Fiddlers Green Gircle, Suite 500
Greenwood Village, Colorado 80111
Pete Bennett
Micron Technology, lnc.
8000 South FederalWay
Boise, ldaho 83707
ldaho lrrigation Pumpers Association, lnc.
Eric L. Olsen
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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bhansen@holland hart.com
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kmtrease@hol land hart. com
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IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1O
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
United States Department of Energy and
Federal Executive Agencies
Steven Porter
Office of the General Counsel (GC-76)
The United States Department of Energy
1000 lndependence Avenue, SW (Room 6D-033)
Washington, D.C.20585
lndustrial Gustomers of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27h Street (83702)
P.O. Box 7218
Boise, ldaho 837OT
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
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Ki T Executive
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 11