20180209final_order_no_33983.pdf

Office of the Secretary
Service Date
Februarv 9.2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )CASE NO.IPC-E-17-11
COMPANY'S 2017 INTEGRATED )RESOURCE PLAN )ORDER NO.33983
On June 30,2017,Idaho Power Company (Idaho Power or Company)filed its 2017
Integrated Resource Plan (IRP).The IRP outlines and analyzes the Company's strategy for
meeting its customers'projected energy needs over the next 20 years.The Company files an
IRP every two years,and uses it to guide resource acquisitions.On July 31,2017,the
Commission issued a Notice of Filing and Notice of Intervention Deadline.See Order No.
33827.The followingparties intervened:(1)Idaho Irrigation Pumpers Association,Inc.;(2)the
Idaho Hydroelectric Power Producers Trust (Idahydro);(3)Industrial Customers of Idaho Power;
(4)Micron Technology,Inc.;(5)Sierra Club (Sierra);(6)STOP B2H (STOP);and (7)
Renewable Energy Coalition (REC).REC,Sierra,STOP,Staff filed timely written comments,
and the Company timely replied.Six members of the public,including the Idaho Conservation
League (ICL),also provided written comments.Having reviewed the record,we find that the
Company's 2017 IRP adequately addresses the subjects required by the Commission's prior
orders,and we acknowledge it.
THE IRP PROCESS
An IRP is a status report on the utility's ongoing,changing plans to adequately and
reliably serve its customers at the lowest system cost and least-risk over the next 20 years.The
report informs the Commission and the public about the utility's plans,and is similar to an
accounting balance sheet,e.g.,it is a "freeze frame"look at the utility's fluid,resource planning
process.See Order No.22299.The IRP is meant to demonstrate to the public that the Company
has prepared for,and considered,many scenarios through a reasonable planning process.The
Commission thus expects a utility to have vigorouslytested the IRP's assumptions to ensure the
IRP accurately reflects changing markets and customer demand.
The Company must update its IRP every two years and allow the public to participate
in its development.See id.and Order No.25260.The final biennial IRP must include the
subjects required by the Commission's prior orders,including Order Nos.22299 and 25260.In
summary,the final IRP should explain the Company's present load/resource position,expected
ORDER NO.33983 1
responses to possible future events,and the role of conservation in those responses.It also
should discuss
any flexibilities and analyses considered during comprehensive resource planning,
such as:(1)examination of load forecast uncertainties;(2)effects of known or
potential changes to existing resources;(3)consideration of demand-and supply-
side resource options;and (4)contingencies for upgrading,optioning and
acquiring resources at optimum times (considering cost,availability,lead time,
reliability,risk,etc.)as future events unfold.
Order No.22299.The IRP should separately address the Company's:
"Existing resource stack,"by identifying all existing power supply
resources;
"Load forecast,"by discussing expected 20-year load growth scenarios for
retail markets and for the federal wholesale market including
"requirements"customers,firm sales,and economy (spot)sales.This
section should be a synopsis of the utility's present load condition,
expectations,and level of confidence;and
"Additional resource menu,"by describing the utility'splan for meeting all
potential jurisdictional load over the 20-year planning period,referring to
expected costs,reliability,and risks inherent in credible future scenarios.
Id
If the Commission finds the IRP discusses these required subjects,then it will enter
an Order acknowledging that the Company filed the IRP.By acknowledging the IRP,the
Commission is acknowledging the Company's ongoing planning process,not the conclusions or
results reached through that process.
THE COMPANY'S 2017 IRP
A.Overview
Idaho Power's 2017 IRP guides its resource strategy over the next two years,and
provides insight into preferred,least-cost,least-risk resource procurements through 2036.
Generally,the Company's IRP addresses supply-side and demand-side resource options,
planning period load forecasts,potential resource portfolios,a risk analysis,and an action plan
that details how the Company intends to implement the 2017 IRP.The Company claimed its
2017 IRP informed its analysis of the continued viabilityof the Boardman to Hemingway (B2H)
transmission line resource,and the required selective catalytic reduction (SCR)investments at
Units 1 and 2 of the Jim Bridger coal-fired plant.The initial IRP filing consisted of four
ORDER NO.33983 2
documents:(1)the 2017 IRP;(2)Appendix A -Sales and Load Forecast;(3)Appendix B -
Demand-Side Management 2014 Annual Report;and (4)Appendix C -Technical Appendix.1
B.Stakeholder Involvement
The Company stated that it incorporated stakeholder and public input into its 2017
IRP by working with its Integrated Resource Plan Advisory Council (IRPAC).IRP Application
at 2.The Company stated that it held eight IRPAC meetings while developing the 2017 IRP,
including a workshop designed to explore the potential for distributed generation to defer grid
investment.Id.
C.IRP Goals and Assumptions
With the 2017 IRP,the Company attempted to:(1)identify sufficient resources to
reliably serve growing energy demands over the 20-year planning period (2017-2036);(2)ensure
the Company's preferred portfolio of resources balances cost,risk,and environmental concerns;
(3)give balanced treatment to supply-side resources and demand-side measures;and (4)involve
the public in the planning process.IRP at 1.
The Company stated that its 2017 IRP makes numerous assumptions about what will
occur during the 20-year planning period.IRP Application at 3.Specifically,it assumes that the
Company will continue to acquire resources sufficient to serve its retail customers in Idaho and
Oregon and to operate as a vertically integrated utility.Id.It expects to add about 222,000
customers,and that its average energy demand will increase by 0.9%per year its peak-hour
demand will increase by 1.4%per year.Id.It continues to assume 70th percentile water
conditions and 70th percentile average load for energy planning.Id.For peak-hour capacity
planning,the Company uses 90th percentile water conditions and 95th percentile peak-hour load.
Id.The Company plans to meet increased demand by combining demand-side measures with
additional Company-owned resources.Id.
D.IRP Methodology
The Company stated that it forecasted demand in its 2017 IRP by combining existing
generation resources,demand-side resources,and transmission import capacity with forecasted
customer demand to create a load and resource balance for energy and capacity over the planning
1Alongwith its Reply Comments,the Company included 2017 IRP Appendix D:B2H Supplement,which was
prepared as a filing in its IRP acknowledgment case before the Public Utility Commission of Oregon.The Company
explained this document "providescontext and details that support evaluating [B2HJ as a supply-side resource,
explores (qualitativelyand quantitatively)many of the ancillary benefits offeredby the transmission line,and
considers the risks and benefits of owninga transmission line connected to a market hub in contrast to direct
ownership of a traditional generation resource."2017 IRP Appendix D at 3.
R 0 33983 3
period.Id.It then analyzed energy-efficiency programs and demand-side management (DSM)
programs to revise energy and capacity deficits.Id.
The Company evaluated the costs and benefits of each resource type while
developing its 2017 IRP.Id.at 4.This analysis assumed the Company's preferred resource
portfolio would continue to include the B2H project.Id.
E.Preferred Resource Portfolio
The Company stated its goal with the 2017 IRP was to identify a preferred resource
portfolio that will enable the Company to reliably serve its customers over the 20-year planning
horizon.Id.at 5.The Company explained that the IRP's preferred resource portfolio assumes:
(1)the acquisition of the B2H transmission line,and (2)the early retirement of the Jim Bridger
Plant Unit 2 in 2028 and Unit 1 in 2032.Id.The portfolio contains no other resources actions
through the end of the 2020s,but adds 36-megawatt (MW)reciprocating engine resources in
2031 and in 2032,a 300 MW combined-cycle combustion turbine in 2033,and 54 MW
reciprocating engine resources in 2035 and 2036.Id.
F.Action Plan
The Company stated its action plan for the next two to four years includes:(1)
planning to enter the western Energy Imbalance Market in April 2018;(2)exiting coal-fired
operations of North Valmy Unit 1 by year-end 2019 and Unit 2 by 2025,and Jim Bridger Unit 2
by 2028 and Unit 1 by 2032;(3)continuing to permit and build B2H;(4)permitting and
planning associated with Gateway West;and (5)monitoring and assessing how Clean Air Act
(CAA)Section 111(d)litigation affects the preferred portfolio.Id.at 6-7.
The Company also stated it plans to investigate how solar photovoltaic (PV)
contributes to peak and loss-load probability analysis,pursue cost-effective energy efficiency,
and coordinate with Portland General Electric Company to cease coal-fired operations at
Boardman by the end of 2020.Id.at 7.
G.Response to Order No.33441
The Commission's Final Order in the Company's 2015 IRP case directed the
Company "to continue to use the IRPAC meetings and other outreach opportunities to further
explore issues raised in this [2015 IRP]case."See Order No.33441.The Commission
encouraged the Company to explore issues related to closing North Valmy,and incorporating
more energy efficiency into the IRP.Id.
ORDER NO.33983 4
In response,the Company's 2017 IRP stated that many risks of closing North Valmy,
which led the Company's 2015 IRP to include a higher-cost portfolio,have now largely
diminished.IRP Application at 9.As a result,the Company's updated quantitative analysis
showed the Company would save significant costs if North Valmy Unit I closes in 2019.Id.
This analysis led to a settlement in which North Valmy's co-owner,NV Energy,agreed to stop
burning coal at Unit 1 by December 31,2019,and Unit 2 by December 31,2025.The
Commission approvedthe settlement in Order No.33771.Id.at 9-10.
Order No.33441 also directed the Company to more effectively incorporate energy
efficiency into its IRP model.Id.at 10.In its 2017 IRP,the Company and its regional
counterparts discussed energy-efficiency modeling approaches.Id.The Company,its DSM
consultant,and its IRPAC also discussed energy-efficiency approaches,including that used in
the National Action Plan for Energy Efficiency (NAPEE)Guide for Conducting Energy
Efficiency Potential Studies.Id.at 10.The Company stated that the 2017 IRP's resource
portfolios treat energy efficiency under the NAPEE Guide as a committed resource,and include
energy efficiency before supply-side resources.Id.at 10.The Company maintained that its IRP
energy-efficiency target is not a ceiling,because cost-effectiveness measures (e.g.,natural gas
price)are dynamic,and the Company and Energy Efficiency Advisory Group's efforts to
implement them may cause energy efficiency to exceed the IRP target.Id.at 11.
THE COMMENTS
Staff,REC,Sierra,STOP,and six members of the public,includingthe ICL,provided
substantial commentary on Idaho Power's 2017 IRP.Some commenters lauded portions of the
2017 IRP.But many criticized it and suggested potential improvements for future IRPs.
More specifically,Staff recommended the Commission acknowledge the IRP,but
suggested improvements for future IRPs.Staff Comments at 14.REC did not recommend
whether the Commission should acknowledge the IRP,but argued the Commission should not
allow the Company to proceed under the IRP's natural gas price assumptions and forecasts.
REC Comments at 10-11.Sierra,on the other hand,stated the Commission should not
acknowledge the IRP,but should instead investigate and reassess the IRP's flawed analytical
structure related to the retirement of the Bridger units.Sierra Comments at 2-3.STOP also
urged the Commission not to acknowledge the 2017 IRP for several reasons,including the
Company's analysis and planning related to B2H.See e.g.STOP Comments at 21,29,and 33.
ORDER NO.33983 5
Other parties,including the Idaho Irrigation Pumpers Association,Idahydro,Industrial
Customers of Idaho Power,and Micron Technology,did not file comments.
In reply,Idaho Power reiterated that the Commission should acknowledge the 2017
IRP because "the Company's portfolio design,modeling,and assumptions are reasonable and
produce a preferred portfolio that is least-cost and least-risk."Idaho Power Reply Comments at
4.The Company maintained that it "intends to use the acknowledgment of B2H in the 2017 IRP
to support its application before Oregon's Energy Facility Siting Council ('EFSC')."Id.at 2.
While the Company recognized that parties had criticized B2H as the least-cost,least-risk
resource,the Company said it expects to begin preliminary construction activities before it files
the 2019 IRP,and that the 2017 IRP case will be the last one to address the B2H project before
preliminary construction activities begin.Id.
The parties'and customers'specific comments on these issues,along with Idaho
Power's replies,are summarized by issue below.
A.Portfolio Design and Selection
Public comments about portfolio design argued that the Company had not sufficiently
analyzed its additional,potential resources.The commenters were concerned the Company had
not explained how it arrived at single point estimates from a range of resource costs or how and
why it used a hand-selected set of alternate portfolios dominated by natural gas.
Staff argued that the portfolio modeling in the Company's 2017 IRP is less robust
than that in the 2015 IRP,because it assumed natural gas-fired generation,transmission,and
utility-scale solar to be least-cost.Staff Comments at 3.Staff maintained that portfolio design
should forecast a host of specific future scenarios around customer load,gas,hydroelectric,and
carbon variations and then strategically select portfolios that mitigate the largest and most likely
risks associated with each scenario.Id.at 12.Staff thought the Company's portfolio was
insufficientlydiverse,especially regarding natural gas pricing.Id.at 13.
ICL criticized the Company's resource modeling portfolio and argued that the
Company should have used "portfolio optimization"instead of manual selection.ICL
Comments at 13.Similarly,Sierra argued the Company's portfolio design is flawed because it
did not model capacity expansion.Id.at 3-4.
In response,Idaho Power agreed to model capacity expansion and select a more
diverse portfolio in its 2019 IRP,while continuing to maintain it had selected an appropriate
portfolio for the 2017 IRP because "it allowed for levelized,dollar-per-megawatt-hour ('MWh')
t i 33983 6
comparison of the most cost-competitive resources,while fulfilling the projected capacity
deficiencies."Id.at 5.
Sierra and ICL next argued that the Company's preferred portfolio (among others)
would violate the federal CAA because it did not include SCR installation.ICL Comments at
14;Sierra Club Comments at 7-8.In addition,Staff expressed concern about how much SCR
would cost ratepayers if it were built before replacement resources for Jim Bridger Units 1 and 2
came online.Staff Comments at 12.
Idaho Power replied that the parties have a "difference of opinion concerning
regulatory behavior"since it believes that it can negotiate alternative compliance settlement(s)
with the proper state and federal regulatory authorities that would allow continued operation
without the installation of SCR.Idaho Power Reply Comments at 12.
Staff and public commentary related to the Company's resource cost projection
assumptions prompted the Company to prepare a supplemental resource cost tipping analysis-
including analysis of solar and lithium-ion batteries-in its Reply Comments.Id.at 7-10.This
analysis led the Company to reconfirm its belief that B2H is the low-cost source of on-peak
capacity,even with potential steep declines in solar and storage cost.Nevertheless,the
Company said it "recognizes that the parties value greater diversity in the evaluation of
portfolios,and will continue to enhance its portfolio analysis in future IRPs."Id.at 10.
B.Supply-Side Resources
Public commenters suggested the Company had overestimated the costs of distributed
energy resources (DER)while underestimating those resources'benefits.For example,
commenters argued that,while solar costs are expected to decrease rapidly,Idaho Power has
projected the opposite to create a bias toward building B2H.Commenters argued that by
increasing DER,the Company would decrease its centralized capital expenditures and the need
to maintain and upgrade its transmission and distribution system.They further noted that lower
location based source-to-load loss was not valued and priced for wind and solar,meaning that
DER and targeted efficiency measures could not be properly evaluated.One commenter also
noted that decentralized DER would enhance the grid and decrease risk if an attack on energy
infrastructure should occur.
Similarly,STOP argued that Idaho Power did not reasonably analyze the valuation of
battery storage,ancillaryservices,solar and Combined Heat and Power (CHP),or other potential
sources of distributed generation in its 2017 IRP.STOP Comments at 27.STOP also argued
ORDER NO.33983 7
that the Company continues to ignore benefits accruing under the Public Utility Regulatory
Policies Act (PURPA),and discourages energy-efficiency measures through cancelled power
purchase agreements and attempts to alter its net metering program.Id.
STOP asked the Commission to direct Idaho Power to:(1)analyze the costs and
benefits of all DER;(2)partner with residential and industrial customers before building new
expensive infrastructure;and (3)reconsider its "out-dated [sic]centralized grid planning at
ratepayer expense."Id.at 33.In response,Idaho Power stated that STOP's position is
inconsistent,that,instead,economies of scale require utility-scale investment that protects
customers from inflated rates.Idaho Power Reply Comments at 23.The Company also
maintained its preferred portfolio is least-cost and least-risk,despite lacking DER,because solar
and DER presently are not "cost-effective."Id.STOP also recommended the Company analyze
CHP,which,it claims,is cheaper than standalone generation.STOP Comments at 27.Idaho
Power responded that it is "greatly interested"in CHP,but that "substantial logistical and
administration difficulties"have proven challenging.Idaho Power Reply Comments at 24.
Sierra and Staff expressed concerns related to retiring Jim Bridger Units 1 and 2.
Sierra Comments at 30;Staff Comments at 12.Sierra believes earlier retirement dates are
possible,including almost immediate shutdown.Sierra Comments at 30.Staff is concerned that
the Bridger units may operate for 7-10 years after the mandated SCR compliance schedule has
run.Staff Comments at 13.The Company responded that it is not the only party that controls
Bridger's fate.The Company noted that PacifiCorp owns 67 percent,and that the Company
reasonably paralleled the Bridger analysis from PacifiCorp's 2017 IRP.Idaho Power Reply
Comments at 14.Further,the Company said it did not consider SCR investments because the
most likely outcome is a transition away from coal-fired capacity over the next 20 years.Id.at
15.
Sierra also argued that the Bridger units are uneconomic,and will remain so,because
the Company failed to account for costs beyond 2034 and that costs will decrease rapidly before
2034.Sierra Comments at 13-14.The Company refuted this argument by stating that
"[e]valuatingscenarios that contemplate varying operating lives of existing resources requires a
different modeling approach,"which it then described.Idaho Power Reply Comments at 16.
However,the Company stated that even with Sierra's imputed assumptions,SCR investment
looked even less attractive.Id.
ORDER NO.33983 8
Sierra further suggested that the Company relied on incorrect assumptions related to
coal costs and market prices in its 2017 IRP,which biased maintenance of the Bridger units as
capacity resources.Sierra Club Comments at 15.Idaho Power countered by stating that it relies
on coal forecast data to appropriately reflect future outcomes,and that its fuel planning process
and modeling did not skew market prices toward Bridger.Idaho Power Reply Comments at 17-
18.
Sierra and some public comments,as noted above,argued that the Company
incorrectlymodeled increasing solar expenses.Sierra Comments at 21-22.Specifically,Sierra
noted that the cost of utility-scale solar has declined by 85 percent over the past seven years.Id.
Commenters thus argued Idaho Power is unreasonable in its downward trending levelized capital
cost of solar forecast.Id.The Company disagreed with these criticisms,insisting it relied on
Lazard reports alongside its tracking of power purchase agreements.Idaho Power Reply
Comments at 19.While it agreed that solar is becoming increasingly cost-effective,it argued
that the comments ignored solar's on-peak capacity credit,unpredictability,and variability.Id.
Based on its solar integration studies and IRP tipping point analysis,the Company argued that
solar would need to decrease by more than 35 percent to compete with natural gas resources,and
more than 90 percent to compete with B2H.Id.at 19-20.
Sierra stated solar will continue to develop despite a decreased investment tax credit.
Sierra Comments at 21.The Company countered that between the present and 2023,it has no
need for additional resources,and,therefore,additional resources would not be prudently
incurred,without further evaluation of future cost decreases.Idaho Power Reply Comments at
20.
Sierra next argued that the Company did not sufficiently assess and model the
decreasing price of energy storage.Sierra Comments at 22.ICL commented that the Company
did not sufficiently quantify how energy storage technology might affect grid services.ICL
Comments at 9.The Company countered that there are two barriers to aggressive storage
implementation,and,therefore,ostensibly higher capital costs and uncertain lifetime cycles for
long-term planning.Idaho Power Reply Comments at 21.
Sierra also argued that Idaho Power unreasonably assumed that some PURPA wind
contracts would be renewed while others would not because wind facilities have negligible
ongoing operating costs.Sierra Comments at 12.Idaho Power countered that wind facilities
ORDER NO.33983 9
differ from other types of renewable resources,in that repowering is too uncertain to plan on.
Idaho Power Reply Comments at 22.
C.Demand-Side Resources
Some public commenters expressed that the Company consistently underestimated
energy efficiency in its IRP planning process.These commenters pressured the Company to
more fairly evaluate energy efficiency in its 2019 IRP.On the other hand,one customer stated
that the IRP relied too much on energy efficiencyand the purchase of low-cost power from the
wholesale electric market.This commenter noted that the wholesale electric market will not
necessarily remain a viable low-cost alternative to additional electricity generation,and that coal-
fired plants should remain in the Company's portfolio until new generation facilities are
available.
Idaho Power and Staff agreed that "the benefits of energy efficiency extend beyond
the value of the energy saved and the avoidance of generating capacity;energy efficiency also
has the potential to defer other investment in grid infrastructure."Idaho Power Reply Comments
at 24;Staff Comments at 10.However,Staff and the Company disagreed how to treat demand-
side resources.Staff maintained that the Company favored supply-side resources,while Idaho
Power countered that it preferred demand-side resources,as indicated by their inclusion in each
resource portfolio,regardless of need.Idaho Power Reply Comments at 25.
Idaho Power,Staff and other parties and commenters provided distinct viewpoints on
how the Company should determine the level of energy efficiency in this and future IRPs.Staff
maintained the Company should,like other regional utilities,use modeling software to select
demand-and supply-side resource portfolios.Staff Comments at 9.While Idaho Power
acknowledged that other regional utilities use modeling software,the Company views software
modeling as only a potential alternative to its current methodology.Idaho Power Reply
Comments at 27.The Company maintained its methodology is sufficient because there is little
evidence the outcome would change if the Company used models to select portfolios.Further,
the Company explained it analyzes energy efficiency from the first year and not at the time of a
resource deficit.The Company stressed it used a well-qualified,nationally recognized
consultant,which found energy efficiency in line with recommendations made by Northwest
Energy Efficiency Council.Id.at 27-28.Last,the Company noted the IRP's energy-efficiency
analysis does not represent a static ceiling but a collaborative,evolvinganalysis.Id.at 29.
ORDER NO.33983 10
Sierra and STOP characterized the Company's conservation and energy-efficiency
efforts as "tepid,"and noted the Company assumes future savings that are much lower than the
savings its cost-effective programs currentlyachieve.Sierra Comments at 3;STOP Comments
at 21.Sierra also stated that the Company should model savings declines,given evolving
lighting standards.Idaho Power replied that,"when savings are lost from Idaho Power's
program portfolio due to manufacturing standards or code changes,the savings then become part
of the load forecast econometric process,which incorporates data and trends related to codes and
standards into the forecast."Sierra Comments at 11;Idaho Power Reply Comments at 29.
STOP complained that the Company has added only two new energy-efficiency
programs since 2009.STOP Comments at 18.The Company countered that it continuallyadds
to its 23 energy-efficiency programs,which include over 275 energy-efficiency measures.Idaho
Power Reply Comments at 30.It argued that it has actually added three programs and expanded
others,and is engaged in regional energy-efficiency planning and analysis.Id.at 30-31.
Idaho Power countered STOP's argument that it achieved less energy efficiency than
nearby regional utilities by citing a statistic showing Idaho (where the Company provides 95%of
its service)is one of the most improved states under the 2017 State Energy Efficiency Scorecard.
However,the Company acknowledged the scorecard was based on the entire State of Idaho and
not just Idaho Power.See STOP Comments at 18;The 2017 State Energy Efficiency Scorecard,
American Council for an Energy-EfficiencyEconomy,September 2027 Report Ul710,page viii;
and Idaho Power Reply Comments at 31.
In terms of transmission and distribution infrastructure (T&D),the Company
maintained that its methodology is defensible,and it has worked with regional utilities to
determine proper and consistent methodologies for developing future energy efficiency T&D
deferral benefit studies.Id.at 32.
STOP criticized the Company's demand response (DR)programs.STOP Comments
at 22-24.However,the Company responded that its three DR programs follow the Northwest
Power and Conservation Council's 7th Power Plan2 and settlement agreements and orders that
stipulate how each program will be utilized,marketed or expanded.Idaho Power Reply
Comments at 34.
2 Northwest Power and Conservation Council's 7th Power Plan,Chapter 14 Demand Response,page 14-2.Availableat https://www.nwcouncil.org/media/7149925/Tthplanfinalchapl4 dr.pdf.
ORDER NO.33983 11
STOP also complained about the Company's Advanced Metering Infrastructure
build-out,as it related to digitallymediated customer-based DR.Id.;STOP Comments a 22.
The Company countered that it continually upgrades and expands its Advanced Metering
Infrastructure capability and believes the Advanced Metering Infrastructure system is efficient
and effective given the variability of the Company's service area.Idaho Power Reply Comments
at 34.
D.Forecasting
Public comments expressed concern about the Company's forecasting inputs.For
example,one commenter argued the Company should use the same area of Lazard's cost
spectrum for both solar and natural gas.The commenters stated that prices reflected in the 2017
IRP should reflect real world costs,including costs related to solar.Thematically,comments
focused on the perception that the Company skewed its price forecasts to unfairly favor natural
gas.
Staff recommended that the Company improve peak-load forecasting by
incorporating class-specific forecasts in its analyses.Staff Comments at 3-6.The Company
supported Staff's recommendation to add more information about peak forecasting
methodologies in future IRPs.Id.at 35.However,the Company maintained its current system
peak modeling is best used to forecast long-term planning decisions.Id.While Staff suggested
hourly class observation,the Company argued that hourly doesn't represent sufñcient history
and,therefore,represents insufficient "empirical evidence to suggest that the assumptions
required to leverage limited data for customer class level peak models behave in a more stable
and accurate manner than system data for long-term capacity planning."Id.at 35-36.
ICL argued that the Company's load forecasting did not include the:(1)impact of
historic settlement agreements between Idaho water users;(2)impact of historical weather
patterns;and (3)insufficient consideration of changing weather trends.ICL Comments at 4;
Idaho Power Reply Comments at 36.The Company countered that it analyzed the historical
water user agreements and climatology trends by studying whether to include different weather
variables in its residential class outside the 30-year normal.Id.
Next,Sierra argued that the Company failed to model load stochastically,creating
uncertainty through year-to-year variation and systemic variation.Sierra Comments at 32.The
Company admitted that they may use a more varied load stochastic for the 2019 IRP,but
maintained that using different starting points to perform stochastic modeling is important in
ORDER NO.33983 12
determining load environment level on portfolio performance.Idaho Power Reply Comments at
37.
Prior to its 2013 IRP,the Company used its own proprietary natural gas forecast and
in the 2013 and 2015 IRPs it utilized the Energy Information Administration's (EIA)price
forecast,"to increase transparency."Id.Previously,it used the EIA's Reference Case,but now
seeks acknowledgment of its use of the "High Oil and Gas Resource and Technology"case.Id.
The Company claimed it changed to the High Oil and Gas Resource Technology because:(1)
actual natural gas prices have been lower than the Idaho Power IRP Planning Case EIA forecasts
under previous IRPs;and (2)the Company's analysis of Intercontinental Exchange (ICE)settled
forward contracts most closely aligned with it.Idaho Power Reply Comments at 37.
Staff,REC,Sierra and ICL strongly disagreed with this decision because:(1)The
IRPAC stakeholders unanimouslyopposed the move,including the Company's own oil and gas
industry advisor;(2)the EIA Reference Case already includes forecasts of market price declines
and ICE futures options (for near-term price forecasting);(3)ICE futures options do not reflect
actual future spot market pricing or inflation;(4)the use of very low natural gas price forecasting
contradicts how the Company plans for water conditions,average load,and peak-hour capacity;
(5)the skewed forecasting makes natural gas variables appear less costly than other resources,
leaving the risk of potential future variable price increases from capital investment(s)to the
customer;(6)the Company's continued reliance on low natural gas prices will cause under
investment in conservation and inaccurate avoided costs rates;and (7)the Company incorrectly
assumed that levelized costs of resources will increase at the rate of inflation despite evidence of
declining costs in technology such as battery storage and solar.These parties believe the EIA
Reference Case,as used by the Company in its 2013 and 2015 IRPs,is preferable as forecast
indicator of natural gas pricing.Where the EIA's analysis covers the long-term planning period,
the Company's analysis mostly looks backward because ICE futures only predict a short time
into the future.
Idaho Power replied to these concerns by stating that Staff incorrectlydescribed ICE
futures as options instead of what Idaho Power considers to be a fix for floating swaps,where
exiting the transaction would require an offsetting transaction.Id.at 39.The Company
countered arguments that the switch would decrease conservation planning by noting that,
although the Company will now use the IRP and High Oil and Gas Resource Technology for
ORDER NO.33983 13
DSM cost-effectiveness,the Company will generally continue to pursue cost-effective
achievable energy efficiencyon all fronts.Id.at 41.
Sierra further recommended the Company include coal prices in its stochastic
analysis.Sierra Comments at 33.The Company replied by stating:"[B]y varyingthe natural gas
prices relative to the coal price and limitingthe new resource technologies to B2H,solar,and
natural gas in the portfolio design,the Company's analysis has effectively tested the viabilityof
coal to economically compete in the future."Id.at 41-42.
Finally,ICL criticized the Company's hydroelectric forecast for not analyzing future
impacts to the backbone of the Company's generation fleet.ICL Comments at 7;Idaho Power
Reply Comments at 42.The Company responded,stating it does not "make predictions specific
to changes in the scale and timing of hydrologic effects or any other aspect of the Company due
to future climate variability."Id.at 42.However,it also stated that it tracks the latest climate
impact science,participates in the River Management Joint Operating Committee,and
coordinates with Idaho university researchers related to climate variability and hydrologic
modeling.Id.
E.B2H
The Company asked that the Commission acknowledge the B2H transmission line
under the 2017 Idaho IRP to bolster the Company's standing before the Oregon PUC and the
Oregon EFSC,where the Company has a pending construction plan.Id.at 44.The Company
stated that it must show a "need"for B2H under the EFSC's least-cost plan rule or system
reliability rule.Id.at 43-44.It is adamant it "does not request that the Commission review,
approve,or acknowledge the specific routing of the line nor the ratemaking treatment of the line"
at this time.Id.at 43.Instead,it reiterates that the line is a transmission resource that will
operate under shared ownership with PacifiCorp and BPA,that the Commission should consider
regional need and broader benefits of increase transmission in the Northwest.Id.Further,the
Company maintained that,based on its analysis of capacity costs,energy costs,energy
efficiency,CCCT,since 2009,B2H represents the lowest overall cost to the Company and its
customers.Id.at 49-52.
The Company noted that STOP is the only party that opposed the Company's
proposed B2H transmission project,although there was additional public commentary.Id.
Public comment relayed concern that the Company may have selected its portfolio to justify
building B2H,and not truly studied all reasonable portfolio possibilities.Generally,public
ORDER NO.33983 14
comments criticized the 2017 IRP B2H analysis for:(1)overestimating future solar cost;(2)
undervaluing storage costs;(3)ignoring the potential to defer T&D system upgrades;(4)
ignoring reduced transmission loss from locating storage closer to the load being served;and (5)
not using an optimization modeling tool to find the best resource.Most commenters considered
Idaho Power's plan to buy a great deal of power to cover future capacity shortfalls to be overly
risky.
STOP provided an array of arguments against the Company's inclusion of B2H in the
2017 IRP.STOP argued the Company mischaracterized B2H as a supply-side resource and that
the Company had not sufficiently analyzed B2H in terms of its underlying power resource:
short-term forward capacity purchases.STOP Comments at 6.Idaho Power countered that
STOP misunderstands its modeling and is factually incorrect,because both Idaho and Oregon
recognize transmission resources as resource options to be analyzed according to defined
criteria.3
The Company further stated that its retirement scenarios lend toward inclusion of 500
MW of capacity provided by B2H in IRP planning.Idaho Power Reply Comments at 46.The
Company's modeling purported to show that "the Northwest will continue to have sufficient
resources available for Idaho Power to purchase and deliver to Idaho Power customers across the
B2H line."Id.at 55.The Company thus argued B2H should be acknowledged and constructed,
even if supplies decrease and prices increase,because B2H remains least-cost "for all natural
gas/market price sensitivities except the sensitivity that assumes a 400 percent natural gas
increase over the Planning Case."Id.at 56-58.
However,STOP argued that B2H is now moot because the Company has acquired
additional,sufficient assets from a recent exchange with PacifiCorp.STOP Comments at 8.The
Company countered by arguing that the recent asset exchange allowed increased system
utilization and efficiency through reduced wheeling costs,not increased capacity.Idaho Power
Reply Comments at 47.In addition,Idaho Power stated that the Idaho and Oregon Commissions
approved the asset exchange.Id.at 47-48.Simultaneously,the Company maintained there is no
additional transmission capacity-rather there exists capacity constraint-for imports in the
Northwest,because Idaho Power is a summer peaking utility,in contrast to Northwest utilities
that peak in winter.Id.Therefore,the Company argued that B2H is actuallyintegral to regional
transmission planning.Id.at 49.
3 See Idaho Order No.22299 at 7;Oregon Order No.07-002 at 13.
ORDER NO.33983 15
STOP also argued that the Company did not sufficiently analyze cost overruns
associated with building out transmission,based on evidence from what it considered similar
construction projects undertaken by other utilities.STOP Comments at 16.The Company
countered that it included a 20 percent contingency built in to its transmission line construction
estimate,which included permitting,litigation and unexpected cost increases and that the utility
project comparisons STOP provided are not analogous to constructing B2H.Idaho Power Reply
Comments at 53.
STOP next argued that Idaho Power understated B2H's costs by limiting its analysis
to the 20-year IRP planning horizon.STOP Comments at 16;Idaho Power Reply Comments at
53.The Company responded by stating that a mismatch would occur if STOP's proposed 55
year planning horizon was used in an IRP analysis,and that the Company's modeling follows
Commission orders and generally accepted fmancial accounting practices for comparing projects
with unequal lives.Id.
STOP next argued that the Company did not account for how daily natural gas prices
relate to the daily market price of power in the Pacific Northwest.STOP Comments at 11.
STOP also argued that the Company did not sufficiently analyze the effect of retired coal
capacity on spot market prices.Id.at 10-11.STOP claimed the Company penalized portfolios
without B2H based on the inclusion of high gas price sensitivities,but not B2H portfolios that
rely on relatively future higher-cost market purchases.Id.at 13.The Company refuted these
arguments by stating that it used "extensive natural gas price sensitivities"to determine how
B2H portfolios compared in dramatically different forecasted market prices.The Company
stated that B2H outperformed in even the extreme scenarios.Idaho Power Reply Comments at
60.Further,Idaho Power argued that gas-fired resources and import market prices on B2H
properly and fairly correlate in the Company's analyses.Id.at 61.
STOP expressed doubt about the existence of third-party transmission wheeling
revenue as a "hardwired"revenue input into the Company's modeling.STOP Comments at 14.
The Company stated that additional transmission revenue was actually calculated separately
from the Company's modeling,and then included in the B2H portfolios and that its modeling
chooses to first purchase power from the lowest cost zone,and accounts for wheeling costs and
transmission line losses,concluding that "[u]sing regional resources achieves the lowest cost
power supply,which,in turn,lowers costs to customers...."Id.at 62-63.
ORDER NO.33983 16
Finally,the Company attempted to further bolster the inclusion of B2H as least-cost,
least-risk by stating that B2H is necessary for it to enter into additional bilateral market
transactions and that it's planning and modeling related to B2H economically uses regional
resources to achieve the lowest cost power supply for its customers.Id.at 62.
F.Risk Analysis
Public comments complained about the risk imparted in the Company's preferred all-
gas portfolio.One commenter believed that the Company had not accounted for the risk of gas
fuel being unavailable during the planning period,finding it unacceptable to saddle customers
with both fuel unavailabilityrisk and the majority of fuel cost risk.Commenters also expressed
concern related to Idaho Power's lack of analysis of the potential effects of climate change over
the 20-year planning horizon.ICL stated that the Company's risk assessment remains
incomplete without including wholesale market prices as an independent quantitative factor.
ICL Public Comments at 17.
Idaho Power countered that while it agreed with ICL that wholesale electric price
volatilityhas increased over recent years,it did not agree that its risk analysis is deficient by not
capturing wholesale electric price volatility,because it captured risk to high market conditions
instead.Idaho Power Reply Comments at 63-64.
ICL also argued that the Company relied exclusively on historical records when
assessing future hydroelectric and customer load conditions.The Company retorted,however,
that IRP streamflow forecasting "takes into account trends and changes observed in Snake River
Basin streamflows"and produces trends as significant or highly likely water management
practices,and therefore,its risk analysis related to hydroelectric and customer load conditions
does not rely solely on historical records.ICL Comments at 16;Idaho Power Reply Comments
at 64.
STOP argued that the Commission should investigate the "questionable"-meaning
incomplete over the life of the project---risks of the Company's reliance on purchasing power to
meet firm loads and the secondary transmission revenue credits that have the effect of reducing
the cost of B2H to ratepayers.STOP Comments at 15.
DISCUSSION AND FINDINGS
Idaho Power is an electrical corporation and public utility as defined in Idaho Code
§§61-119 and -129,and the Commission has jurisdiction over it and the issues in this case under
Title 61 of the Idaho Code,includingIdaho Code §61-501.
ORDER NO.33983 17
Having reviewed the record,we find that the Company's 2017 Electric IRP satisfies
the requirements in the Commission's prior orders.We thus acknowledge that the Company has
filed the 2017 Electric IRP.In doing so,we reiterate that an IRP is a working document that
incorporates many assumptions and projections at a specific point in time.It is a plan,not a
blueprint,and by issuing this Order we merely acknowledge the Company 's ongoing planning
process,not the conclusions or results reached through that process.
With this Order,the Commission is not approving the IRP or any resource
acquisitions referenced in it,endorsing any particular element in it,opining on the Company's
prudence in selecting the IRP's preferred resource portfolio,or allowing or approving any form
of cost recovery.The appropriate place to determine the prudency of the IRP or the Company's
decision to follow or not follow it,and the validation of predicted performance under the IRP,is
a general rate case or other proceeding where the issue is noticed.
The Commission sincerely appreciates the active and vigorous participation in the
IRP process by the Staff,REC,Sierra Club,STOP B2H,and other stakeholders and customers,
and we are confident that their input helps the Company develop a better and more
comprehensive IRP.We recognize the participants'valid viewpoints and commentary as they
relate to the Company's preferred portfolio decision(s),forecasting,B2H and SCR.We
encourage the Company to seriously contemplate the comments in this case as it undertakes its
planning for the 2019 IRP.
We again encourage the Company to use its IRPAC meetings and other outreach
opportunities to continue to explore issues raised in this case.The Company must maintain
transparency and openness in its planning,with an eye toward including all reasonably
foreseeable potential resource outcomes.We expect the Company to actively consider the
concerns raised in this case as it plans,and to continue evaluating all resource options and the
best interests of its customers when developing the 2019 IRP.
Finally,we recognize the inherent difficulty of forecasting and,therefore,expect the
Company will continue improving its forecasting methodologies by analyzing a broad and
diverse range of measures to avoid disadvantageous or unfair forecasting treatment of certain
resources over others.
ORDER NO.33983 18
ORDER
IT IS HEREBY ORDERED that the filing of Idaho Power's 2017 IRP is
acknowledged.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2018.
PÁUL KJELLA DER,PIULSIDENT
KIdŠTINERAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\LORDERS\IPCE1711 se ORDERdoc
ORDER NO.33983 19