20180105Comments.pdf

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An IDACORP CompanY
LISA D. NORDSTROM
Lead Counsel
[e-mail]
RECEIVED
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January 5,2018
VIA HAND DELIVERY
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re Case No. IPC-E-16-32
Hells Canyon Complex Relicensing Costs Through 2015
ldaho Power Company's Comments in Support of Settlement Stipulation
Dear Ms. Hanian
Enclosed for filing 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 December 8, 2017.
Very truly yours,
Lisa D. Nordstrom
LDN/KKI
Enclosures
LISA D. NORDSTROM (!SB No. 5733)
ldaho Power Company
1221\Nest ldaho Street (83702\
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
I n ord strom @ ida hopowe r. com
Attorney for ldaho Power Company
BEFORE THE !DAHO PUBLIC UTILITIES COMMISSION
RECE IVED
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lr,i ! ic puBLlciiliiiTt[5 cOMMlsstoN
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF HELLS CANYON
COMPLEX RELICENSING COSTS
THROUGH 2015 AS PRUDENTLY
INCURRED.
CASE NO. tPC-E-16-32
IDAHO POWER COMPANY'S
COMMENTS IN SUPPORT OF
SETTLEM ENT ST! PULATION
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ldaho Power Company's ("ldaho Power" or "Company") Hells Canyon Complex
("HCC") is the largest privately-owned hydroelectric generation facility in the United
States and is the linchpin of the Company's low cost, carbon-free hydroelectric
generation fleet. To preserve this resource, ldaho Power has diligently worked with
stakeholders for more than 20 years to secure a new longterm operating license from
the Federal Energy Regulatory Commission ("FERC'). The ldaho Public Utilities
Commission ("Commission") Staff audited more than 20 years of the Company's HCC
relicensing expenses incurred through 2015. lnformed by Staff's findings, the
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1
Stipulating Partiesl agree that the settlement stipulation submitted in this proceeding
("Settlement Stipulation") appropriately balances customer and Company interests while
facilitating continued regulatory oversight until FERC issues a new 40- to SO-year
license. ldaho Power, by and through its undersigned attorney, hereby submits to the
Commission these comments in the above-captioned proceeding. ldaho Power
supports the Settlement Stipulation and urges the Commission to adopt the Settlement
Stipulation, without modification. The Company's comments are organized as follows:
Section I - provides the procedural background in the case and summarizes the
Company's original filing;
Section ll - details the agreed upon terms of the Settlement Stipulation and how
it differs from ldaho Power's initial proposal; and
Section lll - provides the Company's support for the Settlement Stipulation.
I. BACKGROUND
On December 14,2016, ldaho Power Company filed an Application in this case
requesting an order designating ldaho Power's expenditures of $220,845,830 through
December 31, 2015, in HCC relicensing costs as prudently incurred and eligible for
inclusion in customer rates at a later date.
ln January 2017, the Commission issued an order providing notice of the
Application and setting a deadline for interventions. Order No. 33686. Subsequently,
the Commission granted Petitions to lntervene from the ldaho lrrigation Pumpers
Association, !nc. ("llPA"), the lndustrial Customers of ldaho Power, and the ldaho
1 The Settlement Stipulation was entered into by ldaho Power, Commission Staff, and llPA,
hereinafter referred to jointly as "Stipulating Parties."
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 2
Conservation League ("lCL") ("Parties"). Order Nos. 33701,33707, and 33716. On
June 19,2017, ICL filed a Notice of Withdrawal from the case.
ln the months leading up to settlement discussions, Commission Staff conducted
an extensive audit of the transactions at issue in this case. Commission Staff issued
and the Company responded to 35 production requests and 45 audit requests and
conducted multiple on-site audits at the Company's corporate headquarters.
Settlement discussions regarding the issues related to the Company's request
were held on October 11,2017, and October 26,2017. The Stipulating Parties were
able to reach an agreement in principle and ldaho Power filed the agreed upon
Settlement Stipulation and corresponding motion to approve the Settlement Stipulation
on December 8, 2017. On December 14, 2017, the Commission issued Order No.
33948 which provided Notice of Settlement Stipulation, Notice of Modified Procedure,
and established a January 5, 2018, comment deadline and a January 31, 2018, reply
comment deadline.
II. SETTLEMENT STIPULATION
The Stipulating Parties agree that a total of $216,504,145 in expenditures were
reasonably incurred and therefore should be eligible for inclusion in customer rates at a
later date. This Settlement Stipulation consists of $213,606,878 of HCC relicensing
costs and $2,897,267 related to Baker County settlement agreement expenditures that
are more appropriately classified as expense and will be deferred in a separate
regulatory account for amortization to be determined in a future rate proceeding.
As detailed further in the Settlement Stipulation, the Stipulating Parties agree
that:
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION .3
a
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 4
o Amounts Reasonablv lncurred $213,606,878 in HCC relicensing
settlementexpenditures and $2,897,267 related to Baker County
agreement expenditures, for a total of $216,504,145 in expenditures
incurred through December 31,2015, be accepted as reasonably incurred
and eligible for inclusion in customer rates at a later date, representing a
reasonable compromise of the positions in the case for the purpose of
settlement;
Baker Countv Requlatorv Asset and Accountinq Treatment. ldaho
Power's expenditures associated with the Baker County settlement
agreement included in the Company's request in this case should be
classified as a reasonably incurred operations and maintenance ("O&M')
expense and should be deferred for amortization at a later time.
Therefore, the Stipulating Parties support the establishment of a
regulatory asset for Baker County settlement agreement expenditures
incurred through December 31, 2017. The commencement of the
amortization period, length of the amortization period, and timing for
inclusion of the amortization in customer rates will also be determined in
that future rate proceeding. The Stipulating Parties agree that the
Company's activities associated with the Baker County settlement
agreement were unique in nature and were part of a broader settlement
compromise. Therefore, the accounting treatment agreed to by ldaho
Power shall not be indicative of the accounting treatment of costs
a
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associated with any future settlement agreement the Company may enter
into with other parties, if any;
Future Review of Post-2015 HCC Relicensino Expenses. To aid in future
reviews of the transaction data, ldaho Power will work with Commission
Staff and interested Parties to identify the detail requested to be contained
within a work order description to allow for the reporting of work orders by
project specific to HCC relicensing work. ln addition, ldaho Power will file
with the Commission a request for a prudence determination on HCC
relicensing expenditures incurred after December 31,2015, through a time
period specified by the Company in its filing, but not to exceed five years
from the Commission's approval of this Settlement Stipulation;
HCC Relicensino Document Retention. Upon Commission approval of
this Stipulation, ldaho Power will retain records currently in the Company's
possession associated with HCC relicensing, evidencing actual
expenditures and HCC relicensing purpose, and will continue to maintain
evidence of such future expenditures for the HCC relicensing project until
the expenditures are included in customer rates; and
Modification of ldaho Power's lnformation Retention Policy. The Company
will modify its information retention policy to provide for the retention (from
and after the date of implementation of such modified information retention
policy) of evidence of actual expenditures and purpose, either in physical
or electronic (e.9., imaged record) format, for future capital projects that
are expected to span more than five years, until such time as a prudence
o
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 5
determination of the expenditures has been made and the expenditures
are included in customer rates. The Company will notify Commission Staff
when a modified information retention policy is complete and make those
documents, like all Company policies, available for on-site audits.
III. IDAHO POWER'S SUPPORT FOR THE SETTLEMENT STIPULATION
ldaho Power recommends the Commission adopt the proposed Settlement
Stipulation for several reasons. First, the Settlement Stipulation represents a fair and
balanced outcome for both customers and shareowners that supports the Company's
efforts to preserve and operate an important source of low cost, carbon-free electric
energy for its customers. Second, it accepts that some reasonably incurred
expenditures are more appropriately classified as O&M expense. Finally, it
acknowledges verification of the Company's expenditures incurred over the past three
decades was challenging and sets forth a regulatory framework to ease future
transaction data reviews that is a reasonable compromise of the Stipulating Parties'
desires.
A. The Seftlement Stipulation Balances Customer and Gompanv lnterests.
ldaho Power has been involved in relicensing activities since the early 1990s,
incurring costs over the last several decades. The Company takes its responsibility of
prudently managing costs seriously and believes it is important to get the maximum
value for its customers. ldaho Power's relicensing activities provide evidence
supporting the conscientious work of employees and efforts made in managing HCC
relicensing costs. lf FERC does not issue a new license until 2021, the Company
estimates total HCC relicensing costs to be between $350 million to $400 million.
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION .6
However, ldaho Power expects the Company's efforts will be cost-effective, resulting in
a cost per kilowatt far below that of a Combined Cycle Combustion Turbine (the next
most cost-effective form of baseload generation).
To be eligible for recovery in customer rates, capital costs must be associated
with electric plant-in-service that is used and useful in the near term. Atypical to
investments the Company makes in other generation units, the HCC continues to
provide ldaho Power customers a low cost, clean energy source throughout the
relicensing process. The costs ldaho Power has incurred are directly correlated to the
Company's efforts to license the HCC for a temporary annual license, as well as a long-
term license. ldaho Power continues operating the HCC to the full extent, providing
customers the benefit of a resource that is used and useful even during the relicensing
process. For example, in 2016 the HCC provided 28.3 percent of ldaho Power's total
electricity generated to benefit its customers.
The Stipulating Parties agree that a total of $216,504,145 expenditures incurred
through December 31,2015, should be accepted as reasonably incurred and eligible for
inclusion in customer rates at a later date. Commission Order Nos. 30722 and 32426
authorized ldaho Power to collect $6,520,122 annually from the Company's ldaho
jurisdictional customers for recovery of Allowance for Funds Used During Construction
('AFUDC") associated with the HCC relicensing project, amounts included in the
$216,504,145 of reasonably incurred expenditures. As of December 31,2015, the
Company had already collected from customers a total of $58,834,892. Therefore,
when ldaho Power ultimately files a request to adjust customer rates to include recovery
of HCC relicensing costs deemed reasonably incurred, it will first be jurisdictionalized,
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 7
then will be net of amounts previously collected, resulting in a lower impact to customer
rates. In addition to the jurisdictionalizing and netting, the Settlement Stipulation
acknowledges that, with the long life of the HCC, the equivalence of a 40 to SO-year
license, the reasonably incurred HCC relicensing expenditures will result in a low cost,
carbon free energy source for customers.
B. Some HGC Relicensinq Expenditures are Reasonablv Incurred but More
Appropriately Glassified as O&M Expense.
ln an effort to manage future HCC license costs, protect ldaho Power's
operational flexibility of the HCC, and address concerns raised by Baker County,
Oregon, the Company entered into a settlement agreement with Baker County that
resolved HCC operational economic impact concerns and gained the county's support
of ldaho Power's relicensing efforts. As part of the agreement, ldaho Power provides
funding for recreational construction and maintenance projects. The Stipulating Parties
acknowledge that the Baker County settlement agreement expenditures were
reasonably incurred but more appropriately classified as an O&M expense and should
be deferred for amortization at a later time. The regulatory asset will include Baker
County settlement agreement expenditures incurred through December 31, 2015, and
reviewed in this proceeding, as well as those incurred from January 1,2016, through
December 3'1, 2017, which will be reviewed in a future proceeding. The regulatory
account will not accrue AFUDC or a carrying charge of any type. ln addition, any similar
Baker County settlement related expenditures incurred beyond December 31,2017, will
be considered O&M expense at the time in which they are incurred. Because the
expenditures were unique in nature and part of a broader settlement compromise, the
Settlement Stipulation acknowledges the accounting treatment agreed to by ldaho
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION .8
Power shall not be indicative of accounting treatment of costs associated with any future
settlement agreement the Company may enter into with other parties, if any.
C. Verification of ldaho Power's HCC Relicensino Expenditures was
Challensinq
ldaho Power began its relicensing efforts in 1991 in preparation for the filing of a
new license, resulting in expenditures spanning nearly three decades and a transaction
data file through year-end 2015 exceeding 186,000 rows of data. The expenses
incurred can be categorized as aesthetic, aquatic, archeological/cultural, recreation,
admin and legal, terrestrial/botanical, and wildlife and further segregated by labor,
purchased services, materials, accounting entries, overheads, and other expenses.
Commission Staff conducted an extensive audit of the transactions at issue in the case
issuing 35 production requests, 45 audit requests and conducting multiple on-site audits
at the Company's corporate headquarters. The age of the supporting documentation
and ldaho Power's current lnformation Retention Policy required both ldaho Power and
Commission Staff to perform in-depth research and use alternative accepted auditing
practices of the supporting documentation for verification of the prudent expenditures.
As a result, through a collaborative approach, the Stipulating Parties commit to
continuing to develop a regulatory framework to ease the review of future HCC
relicensing expenditure prudence determination requests as set forth in Section 9
(Annual Reporting of HCC Relicensing Expenditures), Section 10 (HCC Relicensing
Expenditures Reporting by Work Order Project), Section 11 (lnformation Retention
Policy), Section 12 (Future Prudence Requests), and Section 13 (Future HCC
Relicensing Activities) of the Settlement Stipulation.
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 9
rv. coNcLUSroN
As evidenced in these comments, the Stipulating Parties invested significant time
and effort preparing and reviewing nearly three decades of HCC relicensing expenditure
activities and supporting documentation. As a compromise of the respective positions
of the Stipulating Parties, 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 Stipulation submitted in this proceeding as filed, without modification,
and to issue an order authorizing the terms of the Settlement Stipulation.
DATED this Sth day of January, 2018.
4,
LISA D. NOR
Attorney for ldaho Company
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 1O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the Sth day of January 2018 I served a true and
correct copy of the 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
Brandon Karpen
Deputy Attorneys General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Customers of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
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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brandon. ka rpen@puc. idaho.qov
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rly T,Executive Assistant
IDAHO POWER COMPANY'S COMMENTS IN SUPPORT OF SETTLEMENT STIPULATION - 11