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HomeMy WebLinkAbout20190220Reply Comments.pdf3Iffi*. An TDACORP CompanY :;ri riB 20 P$,1 h: l+5 DONOVAN E. WALKER Lead Counsel dwa I ker@i dahopowe r. com tisl0i.l February 20,2019 VIA HAND DELIVERY Diane M. Hanian, Secretary ldaho Public Utilities Commission 472 West Washington Street Boise, ldaho 83702 Case No. IPC-E-19-01 J.R. Simplot Company - Pocatello Project Reply Comments of Idaho Power Company Dear Ms. Hanian Enclosed for filing in the above matter please find an original and seven (7) copies of the Reply Comments of ldaho Power Company. Very yours, Re Donovan E. Walker DEW:csb Enclosures 1221 W. ldaho 5t. (83702) P.O. Box 70 Boise, lD 83707 DONOVAN E. WALKER (lSB No. 5921) ldaho Power Company 1221\Nest ldaho Street (83702) P.O. Box 70 Boise, ldaho 83707 Telephone: (208) 388-5317 Facsimile: (208) 388-6936 dwalker@ idahopower. com Attorney for ldaho Power Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION i,;:i.;i:iVLD ."i'j llil 20 PH h: trS !iul'Jr IN THE MATTER OF THE APPLICATION OF IDAHO POWER FOR APPROVAL OR REJECTION OF AN ENERGY SALES AGREEMENT WITH J.R. SIMPLOT COMPANY - POCATELLO COGENERATION AND SMALL PURCHASED POWER PROJECT CASE NO. IPC-E-19-01 REPLY COMMENTS OF IDAHO POWER COMPANY ) ) ) ) ) ) ) ) ldaho Power Company ("ldaho Power" or "Company"), in accordance with the ldaho Public Utilities Commission's ("Commission") Notice of Modified Procedure, Order No. 34235, hereby respectfully submits the following Reply Comments. ldaho Power appreciates Commission Staffs ("Staff') thorough review of the Energy Sales Agreement ("ESA") between ldaho Power and J.R. Simplot Company ("Simplot") applicable to the Simplot-Pocatello Qualifying Facility ('QF") entered into pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA). ldaho Power also recognizes and appreciates that Staff and the other Comments filed in this matter all REPLY COMMENTS OF IDAHO POWER COMPANY - 1 recommend that the change in notification of adjustments to Estimated Net Energy Amounts be approved. ldaho Power also believes this change to be reasonable and to possibly result in more accurate Estimated Net Energy Amounts submitted by the QF. Consequently, ldaho Power also recommends that the Commission approve such change in the notification process, approve the ESA, and declare that ldaho Power's payments to Simplot under the ESA be allowed as prudently incurred expenses for ratemaking purposes. Although Staff recommends the change in notification process to be reasonable for Simplot and for other replacement ESAs for previously existing contracted QFs, Staff expressed concern "whether it is appropriate for new ESAs to contain only a five day ahead lead-time notification." Staff Comments, p. 3. Staff stated, "ln those circumstances, the Company does not have historical generation information from those projects to rely upon for month-ahead and longer-term planning purposes." ld., p.4. To clarify, the modification in notification of changes to the QF's monthly Estimated Net Energy Amounts from a month-ahead to the earlier of the 25th day of the month or the last business day before the 25th day prior to the upcoming month does not change in any way the manner and process used by ldaho Power to estimate QF generation. The Company will continue to receive 12 months of Estimated Net Energy Amounts in each QF ESA and will utilize the same processes previously described to make estimates of QF generation from a monthly basis through real-time operations. The process used by ldaho Power to estimate generation from the month-ahead, through the day-ahead, and into real-time operations that is required to serve load and balance the system was previously outlined in ldaho Power Company's Answers and Responses to J.R. Simplot's REPLY COMMENTS OF IDAHO POWER COMPANY - 2 First lnterrogatories, Requests for Admission, and Requests for Production from Case No. IPC-E-18-07. ln ldaho Power's Answer to lnterrogatory No. 2 from that case, ldaho Power outlines the development of the monthly Operating Plan that is then used by ldaho Power's Load Serving Operations in the development of short-term forecasts, which lead into the preliminary plan for the day and the day-ahead processes, through to actual deliveries of generation and operations within the balancing limits. See ldaho Power's Answer to lnterrogatory No. 2 attached hereto as Attachment 1. Additionally, ldaho Power's Answer to lnterrogatory No. 6 in that same case further describes how ldaho Power uses the monthly Estimated Net Energy Amounts from QF project generation to feed into the Operating Plan and processes described in the Company's Answer to lnterrogatory No. 2. ldaho Power's CSPP [Cogeneration and Small Power Productionl forecast, which includes all QF projects under contract, is developed for each project based on a number of factors including contract estimated generation amounts, most recent 12-month history, five-year rolling average, project adjusted estimated net energy amounts, and any previous or current adjustments. Generally, the starting pointis the rolling five-year historical average of monthly generation, or shorter if the project has operated less than five years. lf a project has operated less fhan one year, the generation esfi'mates from the projecf's ESA are used. ldaho Power uses the monthly adjusted net energy amounts supplied by QF's to verify information and make adjustments in its preparation of the CSPP forecast. This forecast is used by the Company as an input to its monthly Operating Plan forecast and risk management process, which then is integrated with the Company's day-ahead balancing operations processes. ldaho Power's Answer to lnterrogatory No. 6, Case No. IPC-E-18-07, attached hereto as Attachment 2 (emphasis added). ln fact, as referenced in ldaho Power's Answer to lnterrogatory No. 7 in that same case, the process is the same even for QF projects that REPLY COMMENTS OF IDAHO POWER COMPANY - 3 have contracts that do not contain 90o/o1110% provisions. See ldaho Power's Answer to lnterrogatory No. 7, Case No. IPC-E-18-07 , attached hereto as Attachment 3 The process is the same for QF projects that have ESAs without 90o/o1110% requirements, except that projects without 90o/o1110% provisions lack the additiona! information provided by projects that supply adjusted amounts, which reduces the accuracy of the CSPP forecast as future adjustments may not be recognized in the forecast and significant changes to generation amounts may not be known to ldaho Power until actual historical information is collected and included. td. The monthly Estimated Net Energy Amounts, which are necessary for administration of the 90%/1 10% provisions of a QF ESA, provide a basis of estimated generation deliveries that helps inform the Company's processes as described above, and as Staff recognized, the change in the notification process to, at the minimum, a five day-ahead requirement may improve the accuracy of those forecasts. Staff Comments, p. 3. There is no difference in the way in which Estimated Net Energy Amounts provided by QFs in new ESAs are currently utilized in the processes described above from the way in which those estimates would be utilized with a change to the shorter notification period proposed in this case, or in comparison to renewal ESAs. The process of forecasting monthly generation from QFs as applied to the Company's operations would not change due to the changed notification process proposed in the ESA with Simplot, nor would it affect the Company's month-ahead planning. The same information that is currently available under the notification process for changing future Estimated Net Energy Amounts would continue to be available under the process identified in the new "replacement" ESA. REPLY COMMENTS OF IDAHO POWER COMPANY - 4 ldaho Power respectfully requests that the Commission approve the proposed change in notification process for Estimated Net Energy Amounts, approve the ESA, and declare that ldaho Power's payments to Simplot under the ESA be allowed as prudently incurred expenses for ratemaking purposes. Respectfully submitted this 20th day of February 2019.€curu OVAN E. WALKER Attorney for ldaho Power Company REPLY COMMENTS OF IDAHO POWER COMPANY - 5 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 20th day of February 2019 I served a true and correct copy of the within and foregoing REPLY COMMENTS OF IDAHO POWER COMPANY upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Edward Jewell Deputy Attorney General ldaho Public Utilities Commission 472 West Washington Street (83702) P.O. Box 83720 Boise, ldaho 83720-007 4 J.R. Simplot Company Gregory M. Adams RICHARDSON ADAMS, PLLC 515 North 27th Street (83702) P.O. Box 7218 Boise, ldaho 83707 General Counsel Don Sturtevant J.R. Simplot Company P.O. Box27 Boise, ldaho 83707 ldaHydro C. Tom Arkoosh ARKOOSH LAW OFFICES 802 West Bannock Street, Suite LP 103 P.O. Box 2900 Boise, ldaho 83701 Renewable Energy Coalition J. Kahle Becker Attorney at Law 223 North 6th Street, Suite 325 Boise, ldaho 83702 X Hand Delivered _U.S. Mail _Overnight Mail _FAXX Email edward.jewell@puc.idaho.qov _Hand DeliveredX U.S. Mail _Overnight Mail _FAXX Email qreq@richardsonadams.com _Hand DeliveredX U.S. Mail _Overnight Mail _FAXX Email iames.alderman@simplot.com don. stu rtevant@simplot. com _Hand DeliveredX U.S. Mail _Overnight Mail _FAXX Email tom.arkoosh@arkoosh.aam _Hand DeliveredX U.S. Mail _Overnight Mail _FAXX Email kahle@kahlebeckerlaw.com REPLY COMMENTS OF IDAHO POWER COMPANY - 6 Christa Bearry,nt BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION CASE NO. !PC-E-l9-01 IDAHO POWER COMPANY ATTACHMENT 1 INTERROGATORY NO. 2:ldentify the employees at ldaho Power who are responsible for forecasting the output of ldaho Power's company-owned hydro, wind, solar and other generation projects for month-ahead and day-ahead power supply planning purposes. List the employees in descending order of decision-making hierarchy and list the job title of each such employee. ANSWER TO INTERROGATORY NO. 2: Estimates of generation on a monthly basis from ldaho Power-owned projects used to determine long-term estimated monthly energy deliveries to ldaho Power are derived from the monthly Operating Plan as part of the Company's risk management process. The process used to develop the Operating Plan forecast is a multi-step, coordinated process that involves a number of separate analyses prepared by multiple subject matter experts within the Company. The Operating Plan forecast reflects an economic dispatch of the Company's resources on a monthly basis segmented into Heavy Load ("HL") and Light Load ("LL") hours. The following is a summary describing the development of the Operating Plan and the employees whose responsibilities include the development of the listed components. 1. Market Price Forecast - The market price forecast is the starting point for the economic dispatch of Company resources. To start, the 18-month load forecast is divided into monthly HL and LL hours. Two plans are then created: a HL forecast and a LL forecast. Hub prices are from the Mid-Columbia (Mid-C) and Palo Verde energy markets and are then developed based upon the forward price curves published by the lntercontinental Exchange ("lCE'). Border prices are at the edge of ldaho Power's system and are based on Hub prices, adjusted IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 3 for seasonality and transmission to and from the Company's system. Prepared by Andy Husted, Senior Risk Analyst; Reviewed by Jill Sprenger, Risk Manager. 2. Resource Sfack Development - Once the market price forecast is created, the resource stack is developed. This process is followed for both the HL and LL forecast. a. Public Utility Regulatory Policies Act of 1978 ('PURPA") and Purchased Power Agreements - The bottom of the "resource stack" begins with the Company's must run resources: PURPA and Purchased Power Agreements. ldaho Power's cogeneration and sma!! power production ("CSPP') forecast, which includes all qualifying facility ('QF") projects under contract, is developed for each project based on a number of factors including contract estimated generation amounts, most recent 12- month history, five-year rolling average, project-adjusted estimated net energy amounts, and any previous or current adjustments. Generally, the starting point is the rolling five-year historical average of monthly generation (or shorter if the project has operated less than five years). lf a project has operated less than one year, the generation estimates from the project's energy sales agreement ('ESA") are used. The forecasted generation is adjusted as necessary due to information known to ldaho Power or by changes in adjusted monthly net energy amounts provided by the projects. The goal is to create the most accurate estimate as possible of the actual energy deliveries from each project. Prepared by Michael IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY - 4 Darrington, Energy Contracts Leader; Reviewed by Mike Polito, Power Supply Operations Senior Manager. b. Gas - The dispatch price for each unit is determined using gas prices, including transportation and operations and maintenance ("O&M") charges, and ambient monthly temperature and unit efficiencies. The dispatched prices are compared to the market price (the border prices), and modified to include transmission wheeling costs. !f a unit is economical, it is shown as being available. Later in the process, the gas units are compared to the coal units to provide the most economical dispatch of resources. Prepared by Darren Anderson, Term Transaction Specialist ll; Reviewed by Eric Race, Gas Transaction Leader. c. Hydro - Next, the hydro model is run. The hydro model optimizes the use of water during individual months of the water year. The model uses updated inflows, market prices, and an updated position (surplus or deficit) for all components except coal. The model includes any unit constraints, reservoir levels, flood requirements and minimum flow requirements, maintenance schedules, and unit generation capacities. The results of the hydro model are added to the resource stack and an updated position (surplus or deficit) is passed to the coal forecast. Prepared by Frank Gariglio, Senior Engineer; Reviewed by Tim Brewer, Principal Engineer, and Jeff Connor, Engineering Leader. d. Coal - Following the hydro model run, the coal generation forecast is prepared. The system HL and LL energy positions are determined using IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 5 the current month portfolio. The dispatch price for each plant may be based on an incremental price of coal or an average price of coal in inventory, depending on forecast burn levels and contract flexibility existing at each plant. The dispatch price for each plant is calculated and compared to the market price forecast, which is modified to include transmission wheeling costs. Each unit that is economic and included in the production forecast reduces the system position prior to the next unit being evaluated. The Bridger and Valmy unit forecasts include estimates of operations to provide operational system reliability and flexibility. The reliability energy forecast is not evaluated via the economic dispatch process. The reliability forecast forms the minimum output levels of the units and is the starting place for the economic unit dispatch process described above. The results of the coal generation forecast are added to the resource stack. Prepared by Elizabeth Finley, Senior Mine Operations Coordinator; Reviewed by John Carstensen, Joint Projects Leader. e. Load Forecast - Once the portfolio of resources has been developed according to an economic dispatch, it is compared to the system load forecast. At this point, any new hedging transactions are added to the resource stack. They are valued at the actual hedge price at that time, not the market price. The resulting surplus or deficit position translates to surplus sales or purchased power using a forward market curve. IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY - 6 Prepared by Barr Smith, Lead Planning Analyst; Reviewed by Jordan Prassinos, Load Research and Forecasting Leader. f . Hydro Model Rerun - The hydro model is run again prior to the final portfolio using updated gas and coal forecasts to optimize the water with the constraints. Because the constraints are fairly severe in most months, the rerun of the hydro model typically does not significantly change the outcome of the hydro positions in the portfolio; however, significant changes in the coal forecast can change the outcome of the portfolio. Prepared by Karen Flynn, Lead Planning Analyst, and Phil DeVol, Lead Planning Analyst; Reviewed by Rick Haener, Power Supply Planning Leader. 3. Final Portfolio - The completion of the resource stack signals the final portfolio to be used for the Operating Plan. Prepared by Karen Flynn, Lead Planning Analyst, and Scott Wright, Lead Planning Analyst; Reviewed by Rick Haener, Power Supply Planning Leader. Data from the Operating Plan is used by ldaho Power's Load Serving Operations department in the development of short-term forecasts, to determine trends and expectations for energy deliveries on a long-term and near-term basis, including day- ahead. Throughout the month, this process compares balance of month purchases and sales with ldaho Power available generation, the CSPP forecast and load forecast to derive a preliminary plan for the day. This process can be performed up to daily if system generation and loads are changing rapidly. Any time the preliminary plan is outside of limits of the balance of the month by amounts as small as 1 megawatt IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY - 7 ("MW'), decisions to purchase or sell are made, so the accuracy of the inputs to the process is critical. The preliminary plan is then forwarded to the day-ahead process, where the forecasting process updates the preliminary plan to correct short or long positions, based on three-day trending of average output from generation resources, to estimate expected deliveries for the upcoming day. Actual deliveries from ldaho Power available generation resources, CSPP projects, the latest load forecast, and the latest wind and solar forecasts are all used to determine if the Company is within balancing limits or if orders need to be filled to balance the system. Prepared by Shaun Jensen - Term Balancing Operator, Reviewed by Perry Kerfoot, Day Ahead Balancing Operations Leader. Generation from wind and solar resources is forecasted using physical and statistical modeling approaches. ldaho Power uses data output from high resolution numeric weather prediction models that the Company runs in its operations. These models are run in one hour incremental output and produce a broad range of meteorological parameters. For wind, once the initial model output is produced, statistical methods use the difference between previous predicted and actual wind speeds to adjust model output parameters. Once model output has been refined, it is fed into an established power curve designed for each wind project to produce the generation forecast. The statistical adjustments are applied for the first six hours of the forecast in a weighted manner so the first hour receives the most adjustment and the sixth hour receives the least adjustment. For solar generation forecasting, ldaho Power uses historical solar intensity observations and forecasts to derive a function that computes future solar intensity for a IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 8 given time horizon from a set of forecasted weather metrics. The model formulas are based on linear least squares regression. Once the initial model output is produced, statistical methods use the difference between previous predicted and actual solar intensity to adjust model output parameters. The statistical adjustments are applied for the first four hours of the forecast in a weighted manner so the first hour receives the most adjustment and the fourth hour receives the least adjustment. Prepared by the Power Supply Technical Applications Support group, Ron Tarkowski, Technical Application Support Leader, and Mel Kunkel, Meteorologist. The Answer to this lnterrogatory is sponsored by Michael Darrington, Energy Contracts Leader, ldaho Power Company. IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 9 BEFORE THE IDAHO PUBLIC UTILITIES GOMMISSION GASE NO. IPC-E-19-01 IDAHO POWER COMPANY ATTACHMENT 2 INTERROGATORY NO. 6:Explain how ldaho Power uses the monthly adjusted estimated net energy amounts supplied by QFs under their energy sales agreements in Idaho Power's month-ahead and day-ahead power supply planning activities. lnclude examples of specific instances where ldaho Power has adjusted its power supply planning based upon the QF's monthly adjusted estimated net energy amounts. ANSWER TO INTERROGATORY NO. 6: ldaho Power's CSPP forecast, which includes all QF projects under contract, is developed for each project based on a number of factors including contract estimated generation amounts, most recent 12- month history, five-year rolling average, project adjusted estimated net energy amounts, and any previous or current adjustments. Generally, the starting point is the rolling five- year historical average of monthly generation, or shorter if the project has operated less than five years. lf a project has operated less than one year, the generation estimates from the project's ESA are used. ldaho Power uses the monthly adjusted net energy amounts supplied by QF's to verify information and make adjustments in its preparation of the CSPP forecast. This forecast is used by the Company as an input to its monthly Operating Plan forecast and risk management process, which then is integrated with the Company's day-ahead balancing operations processes. As described in ldaho Power's answer to Simplot's lnterrogatory No. 2, data from the Operating Plan is used by Idaho Power's Load Serving Operations department in the development of short-term forecasts, to determine trends and expectations for energy deliveries on a long-term and near-term basis, including day-ahead. Throughout the month, this process compares balance of month purchases and sales with ldaho IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 13 Power available generation, any updates to the CSPP forecast, and load forecast to derive a preliminary plan for the day. This process can be performed up to daily if system generation and loads are changing rapidly. Any time the preliminary plan is outside of limits of the balance of the month by amounts as small as 1 MW, decisions to purchase or sell are made, so the accuracy of the inputs to the process is critical. The preliminary plan is then forwarded to the day-ahead process where the forecasting process updates the preliminary plan to correct short or long positions, based on three- day trending of average output from generation resources, to estimate expected deliveries for the upcoming day. Actual deliveries from ldaho Power available generation resources, CSPP projects, the latest load forecast, and the latest wind and solar forecasts are all used to determine if the Company is within balancing limits or if orders need to be filled to balance the system. The monthly adjusted net energy amounts are used to determine if the Company's monthly forecasted generation is reasonable, or if adjustments should be applied based on updated information from the individual QF's. For example, on Apri! 28, 2016, the Simplot-Pocatello QF provided notice to ldaho Power to change the monthly net energy amount for June 2016, from 5,040,000 kilowatts (.kwh') to 2,181,000 kwh. Based on this adjustment and subsequent energy deliveries during June, ldaho Power reduced the amount of expected energy deliveries from the Simplot- Pocatello project in its CSPP forecast. ln another example, multiple times throughout the past year, the majority of solar QF projects that came online in late 2016 and 2017 submitted adjusted monthly net energy amounts that were generally reductions in estimated generation from the values contained in the projects' ESAs. ldaho Power has IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY - 14 reduced the forecast generation for solar generation in its CSPP forecasts to more closely align with the adjusted estimates provided by the projects. The Answer to this lnterrogatory is sponsored by Michael Darrington, Energy Contracts Leader, ldaho Power Company. IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY- 15 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION cAsE NO. IPC-E-I9-01 IDAHO POWER COMPANY ATTACHMENT 3 INTERROGATORY NO. 7: Explain how ldaho Power forecasts the energy deliveries made under ESAs that do not contain the 901110 Performance Band. lnclude description of al! differences between the practices used to forecast energy deliveries from hydro QFs providing monthly adjusted estimated net energy amounts under the 90/110 Performance Band and hydro QFs that do not provide monthly adjusted estimated net energy amounts under the 90/110 Performance Band. ANSWER TO INTERROGATORY NO. 7: Please see ldaho Power's Response to Simplot's lnterrogatory No. 6. The process is the same for QF projects that have ESAs without 9Oo/ol110o/o requirements, except that projects without 90o/ol110o/o provisions lack the additional information provided by projects that supply adjusted amounts, which reduces the accuracy of the CSPP forecast as future adjustments may not be recognized in the forecast and significant changes to generation amounts may not be known to ldaho Power until actual historical information is collected and included. The Answer to this lnterrogatory is sponsored by Michael Darrington, Energy Contracts Leader, ldaho Power Company. IDAHO POWER COMPANY'S ANSWERS AND RESPONSES TO J.R. SIMPLOT'S FIRST INTERROGATORIES, REQUESTS FOR ADMISSION, AND REQUESTS FOR PRODUCTION TO IDAHO POWER COMPANY - 16