20180131Reply Comments.pdf

LISA D. NORDSTROM
Lead Counsel
I nordstrom@ida hopower.com
January 31,2018
VIA HAND DELIVERY
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Case No. IPC-E-16-32
Hells Canyon Complex Relicensing Costs Through 2015 - ldaho Power
Company's Reply Comments
Dear Ms. Hanian
Enclosed for filing in the above matter are an original and seven (7) copies of ldaho
Power Company's Reply Comments.
V,yours,
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An IDACORP Company
1221 W ldaho 5t. (83702)
P.O. Box 70
Boise, lD 83707
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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 rdstrom @ ida h opower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBL]C UTILITIES COMMISSION
RTC T IVED
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IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF HELLS CANYON
RELICENSING COSTS THROUGH 2015
AS PRUDENTLY INCURRED
CASE NO. tPC-E-16-32
IDAHO POWER COMPANY'S
REPLY COMMENTS
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Pursuant to ldaho Public Utilities Commission ("Commission") Order No. 33948,1
ldaho Power Company ("ldaho Power" or "Company") respectfully submits the following
Reply Comments in response to the Comments filed by the Commission Staff ("Staff')
and the lndustrial Customers of ldaho Power ("lCIP') concerning approval of a settlement
stipulation ("Settlement Stipulation") to recognize certain Hells Canyon Complex ("HCC")
relicensing expenditures as reasonably incurred.
ldaho Power appreciates Staffs Comments recommending that the Commission
find that $216,504,145 in expenditures were reasonably incurred, including $213,606,878
1 Case No. IPC-E-16-32, Notice of Settlement Stipulation, Notice of Modified Procedure (December
14,2017).
IDAHO POWER COMPANY'S REPLY COMMENTS. 1
of HCC relicensing costs and $2,897,267 related to Baker County settlement agreement
expenditures that are more appropriately classified as expenses and will be deferred in a
separate regulatory account for amortization to be determined in a future rate proceeding.
Staff conducted an extensive audit of the transactions at issue in this case, issuing
production requests, audit requests, and conducting multiple on-site audits at the
Company's headquarters. Staff invested significant time and effort reviewing and auditing
nearly three decades of HCC relicensing expenditure activities and supporting
documentation and recommends the Commission approve the Settlement Stipulation as
proposed.
!n these Reply Comments, the Company rebuts lClP's assertion that there is no
legal basis for ldaho Power's Application starting with reference to the Legislature's broad
delegation of authority to the Commission and procedural rules intended to be liberally
construed in order to secure just, speedy, and economical determination of all issues
presented to the Commission. ln light of the fact that the HCC expenditures are currently
used and useful for an existing plant in operation and given the Commission practice of
avoiding "hindsight" reviews, ldaho Power strongly opposes ICIP's recommendation that
the Commission make a determination "explicitly contingent"2 upon a future commission's
finding that a fully relicensed HCC is a prudent investment that is used and useful in the
provision of service to the Company's then-current customers. The $216,504,145 of HCC
expenditures covered by the Settlement Stipulation are reasonable investments based
upon information known at the time they were incurred; the Commission should recognize
them now as being prudently incurred for purposes of inclusion in rates at a future date.
2 lClP Comments at 5
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
I. IDAHO POWER'S RESPONSE
A. The Commission Has the Authoritv Approve ldaho Power's Application.
The Company's Application in this case requested an order designating
approximately $220.9 million in HCC relicensing expenditures as prudently incurred and
eligible for inclusion in customer rates at a later date.3 On page 3 of its Comments, lClP
argues "there is nothing in the ldaho Code permitting, or even addressing, the question
of a prudence review and further on page 4 that "ldaho Power has chosen to go
down a legally untenable road by asking for only a 'prudence' determination of its costs
with no immediate rate change and no binding future rate treatment."
The Commission's authority to review expenses for inclusion in rates is not limited
to the statute cited in the Company's Application nor does it limit the Commission's
determination of prudence or reasonableness solely to the instance when expenditures
are included in rates. ln 1913, the ldaho Legislature vested the Commission with broad
regulatory authority under The Public Utilities Law codified in Title 61 of the ldaho Code.
Specifically, ldaho Code S 61-501 states, "The public utilities commission is hereby
vested with power and jurisdiction to supervise and regulate every public utility in the state
and to do all things necessary to carry out the spirit and intent of the provisions of this
act." Further, Title 61 refersa to the Commission establishing rates that are reasonable,
a synonym for "prudence" or "prudent." ldaho Power requested the Commission
determine if the HCC relicensing expenditures at issue in this case are prudently incurred
(r.e., reasonable).
3 Application at 1.
a See ldaho Code $$ 61-301, 61-502, 61-503
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
B. The Leqal Basis for ldaho Power's Application.
While lClP argues that "[t]here is simply no legal basis for the Commission to take
action,"s ldaho Power's Application cited6 Rule of Procedure ("RP') 52 and ldaho Code
S 61-524, requesting an order designating the Company's HCC relicensing expenditures
as prudently incurred and eligible for inclusion in customer rates at a later date. RP
052.027 requires that applications "refer to the particular provisions of the statute, rule,
order, or other controlling law upon which they are based." As such, the Company cited
ldaho Code S 61-524 (System of accounts) as the basis for the Application. ldaho Code
S 61-524 states the Commission:
[M]ay also in its discretion prescribe the forms of accounts,
records and memoranda to be kept by such public utilities,
including the accounts, records and memoranda of the
movement of traffic as well as receipts and expenditures of
moneys, and any other forms, records and memoranda which
in the judgment of the commission may be necessary to catry
out any of the provisions of this act.
ldaho Power's reference to ldaho Code S 61-524 was not specific to the Commission's
broad regulatory authority but rather to the fact that the request would require the review
of nearly three decades worth of transactions and confirmation that the Company had
accounted for the expenses according to the Commission's prescribed "forms of
accounts" and that the "receipts and expenditures of moneys" was sufficient for the
Commission to determine the reasonableness of the HCC relicensing expenditures.
5lClP Comments at 3.
6 Application at 1.
7 TDAPA 31.01.01 .52.02
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
Although it considered doing so, ldaho Power did not cite ldaho Code $ 61-502 as
suggested8 by lClP to avoid confusion potentially created by a code section for
"Determination of rates"; ldaho Power is not seeking a rate change at this time. Because
ldaho Power's request in this case was for a prudence determination on investments
made in a plant that is already operational and currently used to provide utility service,
the Company likewise did not cite lo ldaho Code SS 61-541 (Binding ratemaking
treatments applicable when costs of a new electric generation facility are included in
rates) or 61-502A (Restriction on rates authorizing return on property not providing utility
service).
lClP argues the Commission should deny the Company's Application because
"there is nothing in the ldaho Code permitting, or even addressing, the question of a
prudence review However, in accordance with ldaho Code S 61-601, which
authorized adoption of Rules of Procedure, and under RP 13,10 the Commission has the
authority to liberally construe the Rules of Procedure to secure a 'Just, speedy and
economical determination of all issues presented." Further, even if ldaho Power's
Application has technical defects, RP 6611 would allow the "pleading to be amended or
corrected or any omission to be supplied." lf the Commission believes a technical defect
exists, ldaho Power requests the Commission consider this pleading as a motion to
augment the first sentence of its Application to include references to ldaho Code SS 61-
8 lclP Comments at 4. Although lClP described ldaho Code S 61-502 (Determination of rates) as
"inapplicable in that it only applies to property that is not currently used and useful in providing utility
service," this rationale is more appropriately applied to ldaho Code $ 61-502A (Restriction of rates
authorizing return on property not providing utility service).
s lClP Comments at 3
l0 tDAPA 31.01.01.13
11 TDAPA 31.01.01.66
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
501 (lnvestment of authority) and 61-503 (Power to investigate and fix rates and
regulations). However, RP 66 also provides that "defects that do not affect substantial
rights of the parties will be disregarded."
Finally, even absent reference to the "particular provisions of statute, rule, order or
other controlling law" upon which an application is based,12 the Commission still has the
authorityl3 to make a prudence determination on the Company's request. ldaho Power's
request in this case to have the Commission recognize its HCC relicensing expenditures
as reasonably or prudently incurred is well within the "spirit and intent of the provisions of
this act."1a The Commission can and should determine the reasonableness of these
expenditures now for recovery in future rates.
C. The HCC is Used and Useful.
lClP argues the Commission should deny the Settlement Stipulation in part "for a
speculative investment in a new license that has yet to provide service to ldaho Power's
ratepayers."ls Licensed in 1955, the HCC has been operational for more than 63 years
and can hardly be considered a "speculative investment." Without a doubt, the HCC is
currently used and useful. Even though the Company's S0-year license to operate the
HCC effective July 31, 1955, expired on July 31, 2005, ldaho Power has been operating
the HCC on one-year licenses while it awaits a long-term license. The licenses received
annually for the past 12 years allow ldaho Power to continue to provide a low cost, clean
energy source of more than 1 ,100 megawatts ("MW") of generating capacity. The costs
r2 TDAPA 31.01.01 .52.02.
13 ldaho Code $$ 61-501 (lnvestment of authority), 61-503 (Power to investigate and fix rates and
regulations), and 61-524 (System of accounts).
1a ldaho Code $ 61-501.
15 lClP Comments at 3.
IDAHO POWER COMPANY'S REPLY COMMENTS.6
ldaho Power has incurred over the past three decades are directly correlated to the
Company's efforts to license the HCC, both for an annual license as well as towards a
longterm license.
The Commission agrees that the HCC relicensing efforts are unlike a typical
construction project; the HCC will continue operating for the duration of the relicensing
process, providing customers a low cost, clean energy source. ln its order authorizing
inclusion of Allowance for Funds Used During Construction ("AFUDC") associated with
HCC relicensing expenditures in rates,16 the Commission explained the atypical
investment:
The unique circumstances include: (1) the project process
has already been under way for nearly ten years, and ldaho
Power has little control over the completion date; [and] (2) the
Company is able to use the generating facilities during the
relicensing process, and they currently provide a significant
amount of the Company's total generating capacity and
energy. . . .
The HCC has been operational throughout the relicensing process and is expected to
remain operational, providing customers the benefit of a plant that is used and useful
even during the relicensing process. ln other words, since the license expired in 2005
ldaho Power's customers have (and will continue to) directly benefit from relicensing
expenditures not presently recovered in rates.
D. A Prudence Findinq Should Not Be Contingent Upon Future Events.
1. Standard of Review.
lClP acknowledges it does "not oppose the concept of a prudence finding that is
EXPLICITLY contingent upon a future commission's finding that the end product (e.9.
16 ln the Matter of the Application of ldaho Power Company for Authority to lncrease its Rates and
Chargesfor Electric Service to its Customers in the State of ldaho, Case No. IPC-E-08-10, Order No. 30722
at13,14 (January 30, 2009).
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
fully relicensed HCC) is a prudent investment that is used and useful in the provision of
service to the then-current ratepayers . ."17 That is, the Commission should
[B]e explicit in that order that its prudence determination is
based only on assumptions that appear to be reasonable
today, and that should those assumptions prove to be false,
inaccurate or misplaced (for whatever reason and regardless
of fault) then today's prudence determination will be subject
to appropriate revision. 18
It would be both unreasonable and unfair to hold ldaho Power to such a standard.
lClP misstates the legal standard of review for utility expenditures. The standard by which
ldaho Power's HCC relicensing expenditures should be reviewed and a prudence
determination made is properly based on the Company's knowledge at the time the
expenses were incurred, not based upon a hindsight assessment as suggestedls by lClP.
As the Commission has previously noted, "ldaho law provides that a!! utility charges shall
be Just and reasonable,' both to the people and the corporation."2o Because investment
decisions that determine rate levels must themselves be reasonable, "if a particular
decision subsequently proves unnecessarily costly, the utility must be prepared to provide
that its judgment when made was reasonable, prudent, and based upon bona fide
considerations."2l
The Commission has long acknowledged that "in assessing the reasonableness
of the Company's deferred costs we consider whether the Company's decisions based
17 lClP Comments at 5 (emphasis in original).
18 lClP Comments at 4-5.
1s ld.
20 Re Washington Water Power Company, Case No. U-1008-185, Order No. 18679 (February 6,
1984)(citing ldaho Code S 61-301 and ldaho Power & Light Co. v. Blomqutsf (1914) 26 ldaho 222, 141 Pac
1 083).
21 /d. (use of the term "prudent" in original).
IDAHO POWER COMPANY'S REPLY COMMENTS - 8
on the information available at the time were reasonable when made and whether the
utility's attempt to control the costs were prudent."22 During the 2000-2001 energy crisis,
the Commission declined to look to the ultimate outcome of a prudently made decision
that nonetheless created "unfortunate results'-'[a]t would not be appropriate to . . .
assess the [c]ompany's decisions from the perspective of perfect hindsighl."zs
The Commission has made clear that "[w]e want Company management to plan
for power supply in advance and take prudent steps to have adequate, reliable supply
available."2a When confirming the prudence of the Company's decision making
concerning temporary mobile generation during the energy crisis of 2000-2001, the
Commission found that "the fact that months later it can be determined that other options
turned out to be lower cost does not invalidate the prudent decision made based on
information known at the time."25 Further, when assessing the reasonableness of the
Company's actions during the energy crisis, the Commission stated "ffie will not examine
the evidence using hindsight, but rather make our findings based upon the circumstances
at the time hedging decisions were made by the Company."26 Therefore, the
Commission's determination of reasonableness or prudence of the HCC relicensing
22 ln the Matter of the Submission of the Sfafus Report of Avista Corporation and Application for a
Continuation of a Power Cost Adjustment (PCA) Surcharge, Case No. AVU-E-02-6, Order No. 29130 at 14
(October 15,2002).
23 ld.
2a ln the Matter of the Application of ldaho Power Company for an Accounting Order Authorizing
ldaho Power to lnclude Power Supply Expenses Assocrated with Temporary Mobile Generation in the
Power Cost Adjustment, or in the Alternative, a Determination of Exempt Status for the Temporary
Generation, Case No. IPC-E-01-14, Order No. 28837 at 6 (September 6, 2001).
25 ld.
26 ln the Mafter of the ldaho Power Company Application for a Refundable Emergency Energy
Charge for the Recovery of Extraordinary Power Supply Expenses, Case No. IPC-E-01-7, Order No. 28852
at 8 (September 8, 2001).
IDAHO POWER COMPANY'S REPLY COMMENTS.9
expenditures should not be "merely contingent and subject to future commission revision,
adoption or rejection" as suggested by lClP.27
2, lnformation Known b .
As evidenced by its annual HCC relicensing reports,2s Idaho Power routinely
evaluated its relicensing efforts to ensure that they aligned with least cost planning
principles. Besides being the linchpin of the Company's low cost, carbon free
hydroelectric generation fleet, the relicensing investment is cost-effective now and
expected to remain cost-effective when a new long-term license is issued. !f the Federal
Energy Regulatory Commission does not issue a new license until2021, ldaho Power
estimates HCC relicensing costs to be between $350 million to $400 million.2s Assuming
total HCC relicensing costs of $400 million and 1,167 MW of generating capacity, ldaho
Power estimates the cost per kilowatt ("kW') is $358, far below that of a comparable
baseload generation resource. For instance, the $1,246 per kW capital-cost estimate3o
of a combined cycle combustion turbine identified in the 2017 lntegrated Resource Plan
is more than three times the currently anticipated cost of a fu!!y relicensed HCC. The
HCC is a cost-effective resource that has and is expected to continue to remain used and
useful throughout the relicensing process.
From a logistical perspective, ldaho Power requested a prudence determination
on the HCC relicensing expenditures incurred through December 31, 2015, because:
27 lClP Comments at 4
28 ldaho Power filed detailed Hells Canyon AFUDC status reports annually between 2009 and 2017
to inform the Commission of its HCC relicensing efforts and update the Commission on the accumulation
of AFUDC authorized by Order No. 30722 in Case No. IPC-E-08-10.
2s Tatum Testimony at 10.
30 2017 lRP, Appendix C: Technical Report at 73.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1O
(1) the transaction data file through year-end 2015 exceeds 186,000 rows of data, (2) the
Company's subject matter experts and key employees involved in relicensing efforts to
date were nearing retirement, and (3) handling the prudence determination outside of a
general rate case would allow Staff the opportunity to narrow its focus solely to the
extensive data associated with HCC relicensing costs. The broad audit of the
transactions and the age of the supporting documentation, as well as the Company's
current lnformation Retention Policy, required both ldaho Power and Staff to perform in-
depth research and use alternative accepted auditing practices for verification of the
prudent expenditures. Revisiting these same expenditures in the future would disregard
the considerable efforts invested in the audit to date and would be unnecessarily
exhaustive of both Staff and Company resources. ln addition, any hindsight assessment
would discourage utilities from seeking more frequent review and audit of long-term
capital investments for assets that are currently in service. The timing of the Company's
request is appropriate and should not be contingent on a future review.
il. coNcLUStoN
The HCC continues to provide a low cost, clean energy source of more than 1,100
MW of generating capacity. ldaho Power's request in this case is for a prudence
determination on investments made in plant that is already operational and currently used
to provide utility service. The Commission's authority to review expenses for inclusion in
rates is not limited to the statute cited in the Company's Application nor does it require
that a determination of prudence or reasonableness is made only when expenditures are
included in rates. As evidenced, the Company and Staff have invested significant time
and effort preparing and reviewing nearly three decades of HCC relicensing expenditure
activities and supporting documentation. The Company believes the proposed
IDAHO POWER COMPANY'S REPLY COMMENTS - 11
Settlement Stipulation is a reasonable resolution of the issues and is in the public interest.
For all the reasons presented in its initial and reply 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 31" day of January 2018.
LISA D ROM
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS. 12
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 31st day of January 2018 I served a true and
correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS 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 Customerc of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, Idaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
ldaho lrrigation Pumpers Association, !nc.
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
X Hand Delivered
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brandon. karpen@puc. idaho.qov
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,r.,Ntc
IDAHO POWER COMPANY'S REPLY COMMENTS - 13
Christa Bearry, Legal Assistant