20161114notice_of_application_order_no_33650.pdf

Office of the Secretary
Service Date
November 14, 2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RA TES
FOR ELECTRIC SERVICE TO RECOVER
COSTS ASSOCIATED WITH THE NORTH
VALMYPLANT
-------------------
) CASE NO. IPC-E-16-24
)
) NOTICE OF APPLICATION
)
) NOTICEOF
) INTERVENTION DEADLINE
)
) ORDER NO. 33650
On October 21, 2016, Idaho Power Company filed an Application requesting
Commission authorization to "(l) accelerate the depreciation schedule for the North Valmy
power plant ("Valmy") to allow the plant to be fully 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 $28.50 million with an effective date of
June 1, 2017." Application at 1. The result is an overall increase of 2.51 percent. The Company
simultaneously filed this Application with an application in Case No. IPC-E-16-23 requesting
approval to adopt revised depreciation rates for its electric plant-in-service and to adjust Idaho
jurisdictional base rates to reflect the revised depreciation rates. The Company simultaneously
filed these Applications in order to facilitate a single rate change for customers and requested the
Commission issue Orders approving the Applications by April 1, 2017, so that the Company can
incorporate any rate impacts in its April 14, 2017 Power Cost Adjustment filing. Id. The
combined effect of both Applications is an overall increase of 3 .10 percent.
The Commission now issues the following Order providing notice of the Company's
Application and setting a deadline for interested persons to intervene as parties in the case.
NOTICE OF APPLICATION
YOU ARE HEREBY NOTIFIED that the Company's most recent Commission­
approved depreciation study, which went into effect on June 1, 2012, reflects retirement of the
units at the Valmy plant in 2031 for Unit 1 and 2035 for Unit 2. Id. at 2. Idaho Power co-owns
these units with NV Energy (each owns 50 percent) and NV Energy operates the plant. Id. at 3.
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ORDER NO. 33650 1
YOU ARE FURTHER NOTIFIED that the Company states that in preparing a new
depreciation study, which it filed concurrently to this Application in Case No. IPC-E-16-23, it
identified that significant changes had occurred with regard to the life of the Valmy plant, and
that these changes warranted the need for a specific review. Id. at 2.
YOU ARE FURTHER NOTIFIED that the Company explains that the Public
Utilities Commission of Nevada approved a 2025 end-of-life date for both units in 2013, and that
NV Energy used the same end-of-life date for both units in its most recent depreciation study
filed with that Commission (filed on June 6, 2016). Id.
YOU ARE FURTHER NOTIFIED that the Company states that the 2025 end-of-life
date used by NV Energy "provides an indication that the Valmy plant will not be operational
beyond 2025. Therefore, the Company believes it is appropriate to consider Valmy-related
issues concurrently with the comprehensive depreciation study filed in Case No. IPC-E-16-23."
Id. at 3.
YOU ARE FURTHER NOTIFIED that the Company explains the treatment of
Valmy in its 2013 Coal Unit Environmental Investment Analysis for the Jim Bridger and North
Valmy Coal-Fired Power Plants (2013 Coal Study), and in its two most recent Integrated
Resource Plans (IRP). Id. at 3-4.
• In the 2013 Coal Study, the Company used end-of-life dates of 2031 for
Unit 1 and 2035 for Unit 2 in analysis of future investments for
environmental compliance at the coal plants. Id. at 4. The Company
compared the investments to the costs of two alternatives: (1) replacing
the units with combined-cycle combustion turbine units or (2) converting
the existing coal units to natural gas. Id. The Company concluded that the
investments for environmental compliance at the existing coal units "was a
low-cost approach to retain a diversified portfolio of generation assets for
customers." Id.
• In its 2013 IRP, the Company included Valmy in its generation portfolio,
and the preferred resource portfolio included continued operations at
Valmy, in full environmental compliance, through the 2013-2032 planning
period. Id.
• In the 2015 IRP, the Company states that it "again analyzed a variety of
retirement dates for Valmy. Results consistently indicated favorable
economics associated with two significant resource actions: The
Boardman to Hemingway (B2H) transmission line and the early retirement
of Valmy." Id. The preferred portfolio for the 2015-2034 planning
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ORDER NO. 33650 2
horizon contained both B2H and early retirement of Valmy in 2025. Id
( emphasis added). The Company further states that the 2015 IRP called
for it to work with NV Energy in 2016 to synchronize depreciation dates
(which this Application requests to do) and determine if a date could be
established to cease coal-fired operations. Id at 4-5.
YOU ARE FURTHER NOTIFIED that the Company states that significant changes
in Valmy operations have occurred since 2010. Id at 5. Prices for off-system sales have
declined from an average of $22. 71 per MW in 2010 to an average of $8. 76 per MW year-to-date
in 2016. Id With this decline, the number of hours in which Valmy operates economically has
decreased-the dispatch cost is now typically higher than the market price. Id Instead of using
Valmy to generate off-system sales, Idaho Power has been relying on the plant to meet its peak
energy needs, which it states "preserves the balanced portfolio needed to reliably serve Idaho
Power customers during all types of system conditions." Id The Company explains that it relies
on Valmy to meet peak energy needs, for example, when extreme cold weather or extreme hot
weather occurs. Id The Company states that it will continue to rely on Valmy during similar
circumstances as load increases and until new resources are available during peak hours or can
provide additional transmission capacity. Id
YOU ARE FURTHER NOTIFIED that the Company indicates that the net present
value of the revenue requirement of a 2031/2034 retirement date is $103 million more than that
associated with a 2025 retirement date, and that the 2025 date "will strike a balance between
long-term revenue requirement savings and the immediate customer rate impact." Id at 6.
YOU ARE FURTHER NOTIFIED that the Company states that since its last general
rate case, it has invested approximately $70 million at Valmy to ensure the plant continues to
operate in a safe, efficient and reliable manner. Id Investments were necessary for
environmental compliance, the safe and economic operation of the plant, or for reliability
purposes. Id
YOU ARE FURTHER NOTIFIED that the Company states that accelerating the
depreciation of Valmy will (1) result in the appropriate matching of cost recovery with the
remaining operating life of the plant; and (2) mitigate future rate impacts associated with earlier
shutdown of the plant. Id at 7. The Company is requesting recovery of the levelized revenue
requirement, including the costs of accelerating the depreciation of Valmy, the return associated
with the Valmy capital investments net of accumulated depreciation forecasted through the
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NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33650 3
remaining life of the plant, and the decommissioning costs associated with a 2025 end-of-life.
Id. at 9. The Company proposes that a balancing account be established to track these costs, and
that it will replace the base rate revenue recovery associated with its existing investment in
Valmy with a levelized revenue requirement to be tracked in the balancing account. Id. at 8.
YOU ARE FURTHER NOTIFIED that the Idaho jurisdictional incremental annual
levelized revenue requirement that the Company is requesting to recover is $28,497,934. Id. at
10. The Company proposes that this be recovered from all customer classes through a uniform
percentage increase to all base rate components except the service charge. Id. The Company
states that this equates to an overall increase of 2.51 percent. Id. Attachment 1; Errata to
Application at 2.
YOU ARE FURTHER NOTIFIED that the Company states that the combined effect
of this Application and the update to the depreciation study filed in Case No. IPC-E-16-23 would
be an overall increase of 3 .10 percent. Application, Attachment 2. The Company has filed one
set of tariff sheets specifying the proposed rates following inclusion of both of the proposed
changes. Id. at 10. The Company asserts that filing individual tariff sheets with each
Application would be administratively complex and would not aid in the review of the proposed
adjustments. Id.
YOU ARE FURTHER NOTIFIED that with its Application, the Company includes
attachments showing a comparison of revenues under existing rates to revenues with the changes
proposed in this Application, and the revenues with the changes proposed in both this
Application and Case No. IPC-E-16-23. The Company also includes testimony from witnesses
Tom Harvey and Matt Larkin.
YOU ARE FURTHER NOTIFIED that the Company requests that this matter be
processed by Modified Procedure, stating that it believes a hearing is not necessary to consider
the issues presented; however, the Company indicates that if the Commission determines that a
technical hearing is required, it stands ready to present its testimony and support the Application.
Id. at 11.
YOU ARE FURTHER NOTIFIED that the Company states that the Application will
be brought to the attention of its customers by means of a press release and a customer notice
distributed in customers' bills over the current billing cycle. Id.
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33650 4
YOU ARE FURTHER NOTIFIED that with this Application, the Company
ultimately seeks an Order by April 1, 2017, authorizing the Company 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 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 $28,497,934 with an effective
date of June 1, 2017. Id. at 12.
YOU ARE FURTHER NOTIFIED that the Application and its exhibits have been
filed with the Commission and are available for public inspection during regular business hours
at the Commission offices. These documents are also available on the Commission's web site at
www.puc.idaho.gov. Click on the "File Room" tab at the top of the page, scroll down to
"Electric Cases" and click on the case numbers as shown on the front of this document.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission's jurisdiction under Title 61 of the Idaho Code. The Commission
may enter any final Order consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings m this matter will be
conducted pursuant to the Commission's Rules of Procedure, ID APA 31.01.01.000 et seq.
NOTICE OF INTERVENTION DEADLINE
YOU ARE FURTHER NOTIFIED that persons who wish to intervene in this matter
to obtain the rights of party (e.g., to file formal discovery, or present evidence or cross-examine
witnesses at a hearing) must file a Petition to Intervene with the Commission pursuant to the
Commission's Rules of Procedure 72 and 73, IDAPA 31.01.01.072 and .073. Persons who wish
to intervene as a party must file a Petition to Intervene no later than 21 days from the
service date of this Order. Such persons shall also provide the Commission Secretary with
their electronic mail address to facilitate further communications in this matter. After the
intervention deadline runs, the Commission Secretary shall issue a Notice of Parties that
identifies the parties and assigns exhibit numbers to each party in this proceeding. Once the
Notice of Parties has issued, Commission Staff shall informally confer with the Company and
any intervening parties about how to further process this case, and shall then report back to the
Commission on a proposed case schedule.
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33650 5
YOU ARE FURTHER NOTIFIED that persons who would like to present their views
without parties' rights of participation and cross-examination are not required to intervene but
may present their views by submitting written comments to the Commission.
YOU ARE FURTHER NOTIFIED that the following persons are designated as the
Company's representatives in this matter:
Lisa D. Nordstrom
Idaho Power Company
1221 West Idaho Street (83 702)
P.O. Box 70
Boise, ID 83 707
E-mail: lnordstrorr@ idahroewer.com
docket@ idahcp ewer.com
ORDER
Matt Larkin
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, ID 83 707
E-mail: [e-mail]
IT IS HEREBY ORDERED that persons desiring to intervene in this matter shall file
a Petition to Intervene no later than 21 days from the service date of this Order. Once the
deadline for Petition to Intervene has passed, the Commission Secretary shall prepare and issue a
Notice of Parties.
IT IS FURTHER ORDERED that, after the Notice of Parties has issued, Commission
Staff shall confer with the parties regarding a procedural schedule for this matter and shall report
the proposed schedule to the Commission.
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ORDER NO. 33650 6
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this / '-/,;-4,,
day of November 2016.
ERIC ANDERSON, COMMISSIONER
ATTEST:
J D. Jewell
:mmission Secretary
O:IPC-E-16-24_ cc
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33650 7