20190308Harvey Direct.pdf

BEFORE THE IDAHO PUBL]C UTILITIES COMM]SSION
IN THE MATTER OE TDAHO POWER
COMPANY' S APPLICATION FOR
AUTHORITY TO ]NCREASE ]TS RATES
FOR ELECTRIC SERV]CE TO RECOVER
COSTS ASSOCIATED W]TH THE NORTH
VALMY POWER PLANT.
IDAHO POWER COMPANY
DIRECT TEST]MONY
OE
TOM HARVEY
CASE NO. IPC_E_19_OB
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O Pl-ease state your name, business address, and
present position with Idaho Power Company ("Idaho Power" or
"Company").
A.
is 7221 West
My name is Tom Harvey and my busi-ness address
Idaho Street, Boise, Idaho 83102. I am
employed by Idaho Power as the
Supply, Planning and Operations
Department.
General- Manager of Power
1n the Power Supply
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Pl-ease describe your educational background.
I have a Bache]or of Business Administration
management from Boise State University. I al-so
, University of Idaho's Utility Executive Course
11 in business
!2 attended the
13 in 2071.
74 o Please describe your work experi-ence with
15 Idaho Power.
t6 A. I was hired by Idaho Power in JuIy 1980 to
work in the Plant Accounting Department. Erom 1985 through
2009, I was the Fuels Management Coordinator and then was
promoted to the Joint Projects Manager. In April 2015, I
was promoted to Resource Planning and Operations Di-rector.
In January 2018, I was promoted to my current position,
General Manager of Power Supply, Planning and Operations j-n
the Power Supply Department. My current responsibil-ities
incl-ude supervision over Idaho Power's jointJ-y owned coal
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Idaho Power Company
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1 assets, integrated resource planning, load serving
2 operations, and merchant activities.
3 Q. What is the purpose of your testimony in this
4 case?
5 A. The purpose of my testimony is to discuss the
6 results of successful- negotiations between Idaho Power and
7 Sierra Pacific Power Company d/b/a NV Energy ("NV Enerqy")
8 by describing the provisions of the North Valmy Project
9 Framework Agreement between NV Energy and Idaho Power dated
10 as of Eebruary 22, 20L9 ("Agreement"). I will discuss how
11 those provisions clarify the respective rights and
72 obligations of Idaho Power and NV Energy ("Party" or
13 col1ectlvely, the "Parties") with respect to the continued
L4 operation, retirement, and decommissioning of the Valmy
15 plant or the units thereof, resulting in benefits for Idaho
76 Power's customers. I wil-l also present an evaluation of
71 the economics of a Unit 2 cl-osure supporting a December 37,
18 2025, end-of-Iife date. Finally, I wil-I dlscuss the
19 prudence of investments made at the Val-my plant that have
20 added to the associated plant balances since the Company's
21, last request to update Valmy plant balances became
22 effective on June 1-, 2017, and to inform the Idaho Pub]ic
23 Utilities Commission ("Commission") of necessary future
24 investments at the plant to ensure Unit 1 and Unit 2
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HARVEY, Df 2
Idaho Power Company
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continue to be availabl-e for reliable load service through
the end of 2079 and 2025, respectively.
O. Pl-ease describe the Val-my p1ant.
A. Valmy is a coal--fired power plant that
consists of two units and is located near Winnemucca,
Nevada. Unit 1 went into service in 1981 and Unit 2
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followed in 1985. Idaho Power owns 50
megawattsl ("MW") (generator nameplate
NV Energy is the co-owner of the plant
50 percent ownershi-p and operates the
Parties work jointly to make decisions
percent, or 284
rating), of Valmy.
with the remaining
Valmy facility. The
11 regarding Valmy.
kil-ovolt12 The plant is connected via a single 345
13 transmission line to the Idaho Power control- area at the
14 Midpoint substation. Idaho Power owns the northbound
15 capacity and NV Energy owns the southbound capacity of this
t6 l-ine.
71 Coal for Valmy is shipped via railroad from various
18 mines in Utah, Wyoming, and Colorado. The power plant uses
19 a variety of emissions control technologies, including
20 state-of-the-art fabric filters that remove more than 99
27 percent of particul-ate emj-ssions. Additionally, a dry
22 sorbent injection system has been instal-led on Unit 1 to
23 reduce acid gas emj-ssions and flue-gas scrubber
1 Eor planning purposes, Idaho Power uses the net dependable
capability of 262 MW.
HARVEY, Df 3
Idaho Power Company
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technology is utilized on Unit 2 for the reduction of
sulfur dioxide emissions.
O. Please describe the current agreements under
which NV Energy and Idaho Power own and operate Va1my.
A. Currently, the ownership and operatj-on of
Valmy is dictated by three agreements: the Agreement for
the Ownership of the North Valmy Power Pl-ant Project
("Ownership Agreement"), the Agreement for the Operation of
the North Valmy Power Plant Project ("Operation
Agreement"), both of which are dated December 72, 1918, and
the North Valmy Station Operating Procedures Criteria,
dated as of February 77, 1993, between ldaho Power Company
and Sierra Pacific Power Company, as amended by Amendment
No. 1 to the Operating Procedure Criteria for Val-my Coal
Dj-version Procedures and Usage, dated as of January l, 2012
(col-l-ectively, the "Existing North Valmy Agreements") . The
Ownership Agreement sets forth Idaho Power's ownership
rights and interests in the Valmy plant while the Operation
Agreement assigns NV Energy as the operator of the Valmy
plant while al-so setting forth operating decision
procedures, operating expense payments, and the annual
budgeting process, among other terms and conditions. The
Existing North Valmy Agreements have provided the Partj-es
the basis for owning and operating the Val-my plant for over
40 years.
HARVEY, DI 4
Idaho Power Company
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NV Energy
in a Valmy
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I. THE AGREEMENT
Do the Existing North Valmy Agreements offer
or Idaho Power the ability to end participation
unit ?
No. While the
for cessation of operations
none contemplate a scenario
Ownership Agreement provides
under a variety of scenarios,
1n whlch one party chooses to
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exit one or both unj-ts during the time the other party
wishes to continue operations.
O. Pl-ease provide an overview of the provisions
of the Agreement.
A. As described in the testimony of Company
witness Matthew T. Larkin, the Agreement, included as
Exhibit No. 2 Lo my testimony, cl-arifies the respective
rights and obl-igations of the Parties with respect to the
contj-nued operati-on, retirement, and decommissioning of the
Valmy plant or the units thereof. The Agreement sets forth
provisions that:
o Al-l-ow for the termination of participation
20 in a unit and the retirement of a unlt;
27 o Include the el-ection to retire or continue
22 to operate and the associated decommissioning study,
decommissioning fee, and final- exit;
24 o Set forth decommissioning governance;
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Idaho Power Company
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o Detail- decommissioning activities during
the interim period;
o Provide for a decommissioning plan;
o Establish a decommissioning budget,
dispute, and payment processes; and
o Contai-n representation and warranties of
the Parties, describe defaults, and incorporate other
miscel]aneous terms.
It al-so provides for a contractual- mechanism by which Idaho
Power may meet its obligations pursuant to Order No. 33771
in Case No. IPC-E-16-24 in which Idaho Power agreed2 to use
prudent and commercially reasonable efforts to reach an
agreement with NV Energy to amend the Existing North Valmy
Agreements to provi-de for the cessation of Idaho Power's
coal-fired operations, oL participatj-on thereof, dt Va1my.
A. Termination of Participation in a Unit; Retirenent of a
Unit.
I What are the termination of participation and
in the Agreement?20 retirement of a unit provisions set forth
2 In the lulatter of the AppTication of ldaho Power Company forAuthority to Increase Its Rates for Electric Service to Recover Costs
Associated with the North Valmy Plant, Case No. IPC-E-16-24, Settl-ement
Stipulatlon and Motion to Approve Settlement Stipufation s-igned by
Idaho Power, commission Staff, the Idaho Irrigatj-on PumpersAssociatlon, Inc., Micron Technology, Tnc., the U.S. Department of
Energy and Federal- Executive Agencies, the Idaho Conservation League,
Sierra Cl-ub, and the Industriaf Customers of Idaho Power (fiIed May 3,
2071) ("Settfement Stipulation") . The Settlement Stipulation was
approved by Commission Order No. 33771 (May 31, 2011).
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Idaho Power
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A.Article III gives each Party the right to
elect to terminate participation in a unitr dr option not
avail-abl-e in the Existing North Valmy Agreements. If a
Party desj-res
Participant" )
written notice
to exit a unit, that party (the "Exiting
must provide the remaining participant
no less than 15 months prior to the proposed
exit notice shafl indicate whether or notexit date. The
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the Exiting Participant intends to retain ownership of its
ownership interests and liabilities with respect to the
unit and confj-rm that the Exiting Participant foregoes its
right to all output and productive uses of the unit upon
exit. of the unlt. Upon recei-pt of the exlt notice, the
remai-ning participant has the right to elect to retire such
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election on
notice to the Exiting Partlcipant of such
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t1 retirement date.
O. Has the Company provided NV Bnergy an exit
notice for Unit 1 pursuant to the terms of the Agreement?
A. Yes. Article fII acknowledges that Idaho
Power's prior notj-ce to NV Energy of its desire to exit
Unit 1 on December 31, 2019, contained in the Term Sheet
dated December 2J, 20t1, constitutes a val1d exit notice.
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Idaho Power Company
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output from a
participation
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not elect to
What happens to Idaho Power's share of the
unit upon Idaho Power's cessation of
in operation of that unit?
Pursuant to Section 3.7.4, Lf NV Energy does
exits
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retire a unit when the Company
participation of that unit, Idaho Power's ownership
percentage share of the output of the unit will no longer
be avail-abl-e to either Party. Shoul-d inadvertent use of an
Exiting Participant's output occur at a unit, do
inadvertent output operations fee will- be assessed.
Exhibit C, Unit Operation Limltations and Control-s, of the
Agreement describes the means and methods to l1mit the net
capacity of a unlt after a party has exited partlcipation
in the operation of that unit.
O. Woul-d Idaho Power be responsible for any costs
associated with the operation of Valmy upon exiting a unit?
A. Yes. As Mr. Larkin mentioned in his
testimony, the Agreement sets forth payment obligations
associated with a Party's exit from participation in
operation of a Valmy unit, whj-ch obligations are described
in Exhibit A of the Agreement. Under the Agreement, the
Company woul-d be responsible for the applicable exit fees
and its portion of shared costs until- the earl-ier of the
retirement date of the unit or December 3I, 2025. fn
addition, Idaho Power remains responsible for its share of
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Idaho Power Company
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1 the applicable decommissioning costs, or those liabilities,
2 costs, and expenses arising from activlties that occurred
3 prior to exit of the unit. The Company woul-d not, however,
4 be responsible for the following costs arising after exit
5 from the unit: operating expenses, fuel-rel-ated costs,
6 costs of capital additions, or any new fixed or varj-abIe
7 costs, associated wlth such unit.
B Q. Company witness Mr. Larkin discussed the exit
9 fee and shared costs. Please describe these costs detai]ed
10 in Exhibit A of the Agreement.
11 A. The exit fee and shared costs , or col-l-ectively
12 "Project Costs," are an Exiting Participant's contractual
13 payment obligations for the Valmy plant and both categories
!4 of costs represent ongoing Valmy-related costs that the
15 Exiting Partici-pant wou1d have been responsible for under
L6 the Existing North Va1my Agreements. The exit fee is a
t1 fixed dollar amount that was calcul-ated based upon (1)
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19 exited unlt, (2) non-Iabor fixed operations and maj-ntenance
20 (*O&M") costs for the exited unit, and (3) government-
2l mandated fixed O&M costs for the exited unit.
22 Shared costs are those known, ongoing
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payment obligations that exist regardless of
exit from a unit. Shared costs include the
pJ-ant-related
a decision to
actual- common
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Idaho Power Company
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and fuel- handling fixed O&M expenses j-n accordance with the
Existing North Valmy Agreements. An Exiting Participant is
responsible for 50 percent of the shared costs.
O. Will either of the Pro;ect Costs change over
time?
A. The exit fee wil-l not change over time, except
in the event a unj-t is retired on or prior to December 31,
or in the event2025, dt which time the exit fee may cease,
that the exit date for the exited unit
10 1 of the exit year, when the exit fee
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occurs after January
is proporti-onately
based on actualBecause the shared costs
they change each month.
What is the amount of
are
12 expenses,
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the annual exit fee that
Idaho Power will be responsible for assuming the Company
exits from participation in Unit 1 operations at December
31, 2079?
A. The bel-ow Tabl-e 7, included as Tab1e A-1 in
Exhibit A of the Agreement, summarj-zes the exit fee and
shared costs Idaho Power would be responsj-bIe for under the
current assumption that the Company ceases participation in
operations of Unit I on December 31, 2079, but remains a
participant in Unit 2 operations until December 31, 2025.
HARVEY, DI 10
Idaho Power Company
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1 Table 1. Exiting Participant Exits Unit 1 and Renains in Unit 2
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REDACTED HARVEY, DI
Idaho Power
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O. If NV Energy ceases
December 37, 2021, would the exit
cease ?
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operations of Unit I on
Yes. If NV Energy contj-nued to operate Unit 1
fees listed i-n Table 1
the exit fees or shared costs?
In accordance with the Existing North
Idaho Power is obligated to pay its
capital projects required for
through
sources3
cease on
continue
December
December 37, 2027, ds current publicly availabl-e
suggest, Tdaho Power's exit fee obligations would
that date.Shared cost obligatlons however woul-d
Unit 2 was in operationr or until-
whichever is earl-ier.
as long as
31,2025,
. When are the exit fees and shared costs paid?10 0
11 A. The first exit fee is payable on or prj-or to
the exit date for a unit, and annually on or before
December 1 of each year thereafter. Shared costs are paid
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Agreements.
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accordance with the Existlng North Valmy
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t6 Are there any other costs Idaho Power would be
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not a component of
A. Yes.
Valmy Agreements,
27 ownership percentage share of
3 Joint Application of Nevada Power Company d/b/a NV Energy and
Sierra Pacific Power Company d/b/a NV Energy for approval- of their
201-9-2038 Trienniaf Integrated Resource Pfan and 2079-202L Energy
SuppLy Plan, Docket No. 18-06003 (December 21, 2018).
HARVEY, DI L2
Idaho Power Company
1 operation of the plant's common facilitiesa and any capital
2 prolects specific to uni-ts it has not exited. In addition,
3 the Company is responsible for its ownership percentage
4 share of material-s and supplies purchased and used in the
5 sol-e operation of any unit it has not exited, and coal and
6 diesel fuel consumed in the operati-ons of any unit it has
7 not exited.
You indicated earlier that upon receipt of an
, right toexit notice, the
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10 el-ect to retire
11 that it intends
remaining
such uni-t.
to retire
participant has the
Has NV Energy provided notice
Unit 1 upon Idaho Power's exlt on
72 December 31, 2079?
13 A No.
74 Agreement, shoul-d
15 fees for such unit
However, under the provj-sions of the
NV Energy choose to retire a unit, exit
will cease upon retirement.
Retire or Continue to Operate;B. Election toT6
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Decommissioning Study, Decommissioning Fee, Final Exit;
Decommissioning Activities During Interim Period.
O. At this time, Idaho Power expects to cease
operations of both units by December 31, 2025, and NV
Energy's Integrated Resource PIan (*IRP") suggests that it
has simil-ar timing. When will decommissioning activities
begin?
a Excl-uding common facility projects that are solely attributabfeto production, which ldaho Power will be bil-Ied at a rate equal to the
applicable revised net capacity after exit of a unit.
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HARVEY, DI 13
Idaho Power Company
1 A. Under the provisions of the Agreement, a
2 remalning participant wil-l- provide notice to an Exiting
3 Participant as to whether or not the remaining particlpant
4 will- retire the units on December 37, 2025, or continue to
5 operate them beyond December 31, 2025. If the remaining
5 participant chooses to contj-nue to operate, within 30 days
7 from the notice, the Exiting Participant has the right to
B elect to (1) fol-Iow the decommissioning provisions in
9 Articl-es VII and VIII of the Agreement, which al-l-ow for
10 decommissioning actlvities to occur under a decommissioning
11 committee structure or (2) in the alternatj-ve, jointly
72 undertake the development of a decommissioning study with
13 the option to pay the remaining participant a one-time
74 decommissioning payment equal to 50 percent of the total-
15 decommissioning costs as described in Section 4.3 of the
76 Agreement. Either option would sati-sf y an Exit j-ng
l1 Participant's obligations to pay decommj-ssioning costs.
18 O. Under the one-time decommissioning payment
1,9 structure, once that decommissioning payment is made, is
20 the Exiting Participant responsible for any other
2l decommissioning costs?
22 A. After payment of the decommissioning fee, the
23 onJ-y other decommissioning-related costs would be for costs
24 that were unknown at the time of payment, lncluding costs
25 that (1) were not the type described in the decommissioning
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study, (2) were not known to the remaining participant at
the time the decommissioning study was completed, (3) were
not reasonably foreseeable by a plant operator, and (4)
were not due to actions of the remaining participant after
the Exiting Participant's exit date for a unit.
O. What woul-d happen to Idaho Power's ownership
rights in the Valmy plant if NV Energy continued to operate
a unit or units after year-end 2025?
A. If NV Energy continued to operate either unit
after December 37, 2025, Idaho Power's ownershi-p interests
in the Val-my plant woul-d be terminated by the conveyance to
NV Energy via an asset purchase agreement in form and
substance mutuaI1y accepted by both Parties, releasing the
Company of liability for future claimss with respect to the
Valmy pIant.
O. What will occur if the notice to the Exiting
Participant indicates the Valmy units will be retired on
December 31, 2025?
A. If the remaining participant notifies the
Exitlng Particj-pant that it wj-l-l- retire the units on
December 31, 2025, then the Parties wil-l- begin the
establ-ishment of a decommissj-oning plan and a
s Idaho Power woufd conti-nue to be fiable for unknown
Decommissionj-ng Costs as defined in the Agreement and set forth in
Section 4.3.3, l-iabifities due to events that occurred prior to the
date which it exited a unit, and certain types of fiabifities that by
l-aw cannot be discfaimed via contract.
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Idaho Power Company
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decommj-ssioning budget, a dispute process, and a
process as described in Articles VII and VIII of
Agreement.
payment
the
o.Does the Agreement provide an avenue for
decommissioning activi-ties to occur on Unit 1 once the unit
is no longer in operation?
A. Not necessarily. However, tf any
decommissioning activities are undertaken during the period
between cessation of Unit 1 operations and the complete
10 cessation of the Valmy p1ant, those activlties would be
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to the
to the Retirement Guldelines included as Exhibit B
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Agreement. The
Parties and are
74 work scope components
of the Valmy plant in
Valmy Agreements.
C. Decommissioninq:
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Governance PIan; Budget; Disputes,'
!2 Retirement Guidelines were prepared
intended to identify the prlmary
necessary to complete the retirement
accordance with the Existing North
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Pa1'ments.
O. Please describe the establishment of the
decommissioning plan that wi]l- commence once both units are
retired.
A. The decommissioning plan wil-l determine the
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24 current federal and state requj-rements under 1aw, if dny,
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26 decommissioning. This plan wil-l- serve as a foundation for,
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Idaho Power Company
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1 and describe in reasonabl-e detail, the decommissioning
2 acLivities proposed to be performed under the direction of
3 the decommissioning agent or the decommissioning committee.
4 Q. What is a decommissionj-ng agent?
5 A. A decommissioning agent is responsible for
5 performing decommissioning activities assigned by the
7 decommissioni-ng committee. In accordance with Article V of
I the Agreement, NV Energy is appoi-nted as the
9 decommj-ssioning agent.
10 O. Pl-ease describe the decommissioning committee.
11 A. The decommissioning committee consists of one
72 appointed representative of each Party. The committee wiII
13 oversee the performance of the decommissioning agent,
74 incl-uding decommissioning activities and the identification
15 thereof . The functj-ons and responsibil-ities of the
76 decommissioning committee include the review, and approvaf
11 or rejection of , (l) the decommissionj-ng pJ-an proposed by
18 the decommissloning agent, (2) any changes to the
79 Retirement Guidelines, (3) each annual decommissioning
20 budget, (4) any changes to the scope of decommissioning
2L activities or incurrence of additional decommissioning
22 costs proposed by the decommissioning agent, (5) the
23 reports submitted by the decommissioning agent regarding
24 interim decommissioning actj-vities, and (6) proposed
25 decommissioning costs or increases in the decommissioning
HARVEY, Df Ll
Idaho Power Company
1 budget in excess of the amounts identified in Exhibit E of
2 the Agreement.
3 In addition, the decommissioning committee wil-I be
4 responsibl-e for determining each Party's decommissioning
5 share pursuant to the Agreement and determining when the
6 decommissioning activities and the decommissioning have
7 been completed. The decommlsslonlng agent will monitor
8 budgets and schedul-es for the decommissioning activities
9 and approve all proposed changes to the budgets or
10 schedules for the decommissioning activities.
11 O. With representation from both NV Energy and
1,2 Idaho Power, how is approval of a request from the
13 decommissioning agent decided?
!4 A. Any actions or determinations brought to the
15 decommissioning committee require a unanimous vote by both
1,6 members.
11 O. You indicated the decommj-ssioning budget is
18 prepared annually and presented to the decommissioning
19 committee for approval or rejection. Is there a process in
20 place for dj-sputes to components of the decommissioning
2L budget?
22 A. Yes. Once the budget j-s received from the
23 the decommj-ssioning committee
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decommissionlng
provide written the decommj-ssionlng
the decommissioning
agent
may
of any
budget that
agent,
notice to
25 activities or costs within
HARVEY, Dr l_8
Idaho Power Company
1 it disputes. The written notice must contain supporting
2 documentation to show the basls for the dispute. The
3 decommissioning agent may then revj-se the decommissioning
4 budget and resubmit it to the decommissioning committee.
5 Q. Are decommissioning payments made based on the
6 annual decommissioning budget?
7 A. Yes. Idaho Power would be responsible for
8 making its payment of the Company's ownership percentage
9 share of the annual decommissloning costs on or before
10 January 15 and July 1 of the budget year. During that
11 budget year, oD a monthly basis, the decommissioning agent
12 will submit to the decommissioning committee a comparison
13 of monthly and year-to-date actuaf and budgeted
L4 decommissioning costs. The decommissioning agent wiIl
15 true-up the total decommissj-oning costs paid on or before
76 March 1 of the year fol-l-owing the budget year.
11 O. Does the Agreement allow for a review of the
18 actual expenditures once the decommissioning activitles
79 have been completed and payment has been made?
20 A. Yes. Following the true-up of the
2l decommissioning costs billed for the prior budget year,
22 either Party may perform an audit of the expenditures.
23 Each party has 12 months to dispute any portj-on of the
24 decommissioning costs.
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HARVEY, DI T9
fdaho Power Company
1 Q. Are there any other provisions of the
2 Agreement you have not discussed?
3 A. Yes. In addition to the provisj-ons described
4 earlier in my testimony, the Agreement contains
5 representation and warranties of the Parties, descri-bes
6 defaults, and incorporates other miscellaneous terms.
1 Q. Please provide an overview of the provisions
8 of the Agreement.
9 A. The Agreement provides for a mechanism by
10 which either Party can cease participation in Valmy
11 operatj-ons and sets forth the terms by which
1,2 decommissioning of the plant is to occur, which was not
13 provided for in the Existing North Valmy Agreements and
t4 affords Idaho Power a contractual- mechanism by which the
15 Company may meet its obligations pursuant to Order No.
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11 II. VAT,MY T'NIT 2 CLOSI'RE AI{ALYSIS
18 O. Order No. 33171 requires that the Company
19 continue to conduct Unit 2 cl-osure analyses. Has Idaho
20 Power performed any analyses evaluating an earl-ier
2I retirement date for Unlt 2?
22 A. Yes. Ej-rst, in accordance with the Settlement
23 Stipulation approved in Order No. 33771, Idaho Power is
24 eval-uating the economics of a Unit 2 retirement as part of
25 the Company's 2019 fRP. The 20L9 IRP is currently in the
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development
results is
phase, and
premature.
results of
therefore a discussion of the
The Company expects to have
this analysis no l-ater than the end
10
preliminary
of March.
However, the provj-sions of the Agreement,
specifically Artic1e III, Termination of Participation in a
Unit; Retirement of a Unit, set forth the Parties'
contractual- payment obligatJ-ons, which provide insight into
the economics of a Unit 2 cl-osure. As I discussed earl-ier
i-n my testimony, Artic1e IIf defines the effects of a
Party's notice of exiting a unit and the associated fee
schedul-e, ds set forth in Exhibit A to the Agreement. This
fee schedule, in combination with the Existing North Valmy
11
72
13
L4 Agreements, indicate that it is unlikely there wou.l-d be any
15 economj-c benefit associated with the exit of Unit 2 prior
L6 to December 31, 2025.
l1 further.
1B in my testimony, Table A-
19 1 in Exhibit A of the Agreement establishes the exj-t fee
20 structure for costs associated with Idaho Power's exit from
2l Unit 1 in 2079 prior to NV Energy and both Parties' exj-t
22 from Unit 2 in 2025. Beginning January L, 2020, the
23 Company would be responsible for an exit fee and sustaj-ned
24 payment of shared costs. The exit fee payments would
25 continue through the earlier of year-end 2025 or NV
HARVEY, Dr 2L
Idaho Power Company
O
A
Please explaln this
As discussed earlier
1
2
3
4
5
6
7
U
9
Energy's exit from Unit 1 operations, which is set for 2027
in NV Energy's current IRP. Shared costs, that are fixed
in nature, woul-d
operation. Idaho woul-d be responsible
consumes and for 50
for the cost
be paid as long as Unlt 2 remained in
Power
diesel- fuel consumed
associated with coal it percent of
at the p1ant. These payment
accordance with the Existing North
under the terms of the Agreement wou1d
obligations exist
Va1my Agreements
continue through
participation in
Therefore,
l-n
and
10
2025, or until- NV Energy ceases
Unit 2, whichever is earl-ier.
it is unlikely that fdaho Power's exit
result in
11
72 from Unit 2 operatj-ons prior to 2025 would
material- savj-ngs because the only payment13 obligation rel-ief
L4 would come from a reduction in certain costs associated
15 with Idaho Power's capacity reduction in Unit 2 operations.
76 To the extent Idaho Power has payment obllgations
l7 associated with participation in Unit 2 operations, the
18 Company benefits from its ownership share of Valmy's
19 capacity by having that capacity avaj-lable shou1d 1ts
20 dispatch prove to be economically viab1e.
21 Moreoverr ds detailed in the 20L7 IRP Appendix C,6
22 Idaho Power's ownership share of Valmy's capacity is
6 In the Matter of ldaho Power Company's 2077 Inteqrated Resource
PJan, Case No. IPC-E-1'7-77, 2017 IRP Appendix C, pp. 42-48 (fil-ed June
30, 201-l). The Commisslon acknowl-edged the Company's 2071 Integrated
Resource Plan in Order No. 33983 (February 9, 2018).
HARVEY, DI 22
fdaho Power Company
1 util-ized to meet the Company's current peak-hour load and
2 resource balance. Without it, Idaho Power coul-d experience
3 a deficit during the year, with potential- deficits growing
4 in subsequent years through 2025. Valmy is a necessary,
5 al-though relatively infrequent, contrj-butor to system
6 rel-iabilj-ty through 2025 and there is no material economj-c
7 benefit associated with the exit of Unit 2 prror to year-
8 end 2025.
9 Q. Pl-ease describe the analysis the Company is
10 performing as part of the 2019 IRP that evaluates the
11 economics of the cessation date of Unit 2 operatj-ons.
72 A. The Company committed to conducting ongoing
13 analyses that eval-uate the economics of a Unit 2 retirement
L4 date prior to December 31, 2025, ds part of the Settl-ement
15 Stipulation approved wlth Order No. 33117, and to submit
16 those as part of the IRP process. Idaho Power wil-l-
1,7 continue monitoring the economics and include the analysis
18 resul-ts in its 20L9 fRP, at a minimum.
19 III . VAIMY II{\IESII\{ENTS
20 a. Company witness Mr. Larkin explained the
2L Commission approved actual Valmy-rel-ated plant investments
22 as of July 31, 2076, and approximately $1.5 million in
23 forecasted investments associated with Unit 1 through
24 December 37, 201,8, ds part of the levelized revenue
25 requirement incl-uded in customer rates with Order No.
HARVEY, Df 23
Idaho Power Company
2
3
4
5
6
7
9
I 33111, and that the Settlement StipulationT requires the
those forecastedCompany to true-up to actuals
expenditures. Pl-ease explain the investments made at the
Valmy plant since JuIy 37, 20L6.
A. Whil-e Idaho Power is cognizanl of the
approachJ-ng end-of-life date for Unit L, there were some
required investments to ensure Valmy remains operational in
a safe, efficj-ent, and re1iable manner, including
investments required to ensure environmental compliance, as
well as a number of investments for routine maintenance and
repair.
a. Does fdaho Power perform a review of the
planned capital projects prior to any i-nvestments being
made at Valmy?
A. Yes. Eor all planned capital projects, Idaho
Power receives from NV Energy as the plant operator a
description of the project, the factors driving the need
for the project, and a recommendation for the work to be
performed. In addition, as part of the drafting of the
Agreement, the Parties extensively reviewed the 201,9
through 2025 capital busj-ness p1ans, identifyi-ng and
ensuring the forecast incl-uded only those projects needed
for environmental- compli-ance and for the safe, efficient,
and reliable operation of the Val-my p1ant.
10
11
72
13
74
15
t6
71
1B
19
20
27
22
23
1 Settfement Stipulation, pp. 8-9, paragraph 15.
HARVEY, DI 24
Idaho Power Company
24
1
2
3
4
5
6
1
I
9
O.Have you prepared an exhibit detailing the
investments made since July 31, 2016?
A Yes. Exhibit No. 3 details the investments
made at Valmy sj-nce July 31, 20L6, including the investment
by unit or
whether the
common facility and a cl-assifi-cation as to
environmental compliance,
of the plant, or for
reliability purposes
operation
for those projects over $100,000.
allExhibit No. 3 al-so incl-udes a descriptlon of
10 investments made slnce July 3L, 2016, and justification for
11 those investments over $100,000.
t2 O. You stated Exhibit No. 3 indicates whether an
13 investment was for environmental-compli-ance, the safe and
or for reliability
the safe and economic
74 economi-c operation
Please15 purposes.
investment was for
of the p1ant,
descri-be the investments made for
1,6 environmental compliance sj-nce August 7, 20L6.
77 A. There was only one investment for the sol-e
18 purpose of environmental- compliance sj-nce August 3L, 2016.
19 This investment was associated with Unit 1 and mentj-oned by
20 Mr. Larkin in his testimony. During a required inspection
2l in December 20L1, it was discovered that unexpected
22 significant degradations were noted on 22 thermocouples, 15
23 coal burner assemblies, and refractory around al-l- burners.
24 The Mercury and Alr Toxics Standard (*MATS") requires
25 burner and combustion control- inspection and combustion
HARVEY, DI 25
Idaho Power Company
1
Z
3
4
5
6
1
x
9
tuning
burner
every 35 months and, as
and combustion control
a result of the degradation,
10
parts were required to be
replaced in order to comply with MATS regulations.s
O. What investments were made for the safe,
reliable, and economic operatj-on of the plant?
A. The remaining investments made for the
continued safe, re1iable, and economic operation of the
plant included the eliminatj-on of arc flash hazards in the
plant, the redesign and instal-l-ation of the clarifier
reclrcufation system on both units, a pulverizer rebuild of
Unit 7, and instal-l-ation of the spare generator step-up
unit ("GSU") on Unit 2 due to failure of the existj-ng GSU,
a turbine water injection protection system for both units,
and a secure wireless system. In addi-tion, a Unit I
sootblower system redesign was required, insulation and
lagglng work was done at the pIant, cyber security program
enhancements were made, Unit 2 GSU work was performed, and
replacement of a productj-on wel-l- pump, secondary air heater
gearbox, emergency lighting, and fan motors on both units
occurred.
One other investment was made in combination with
the safe operation
original domestic
of the plant: the re-dril-l- of the
in 7971,
and that
water welf. The weII, drilled
24 that provj-des domestic water supply to the plant
8 Mercury and Air Toxics Standards Rul-e 40 CFR 63.10021
HARVEY, DI 26
Idaho Power Company
11
72
13
t4
15
t6
77
18
79
20
2L
22
Z3
1 is used for the plant sanitary system, eye wash system, and
2 safety showers had reached the end of its useful life and
3 re-dri1ling was the only option.
4 Q. What type of investments does Idaho Power
5 anticlpate will- be made at the Val-my plant for the
6 remainder of its operating l-ife?
7 A. Idaho Power anticipates necessary, routine
B capital expendj-tures to safely and rel-iab1y operate Valmy
9 t.hrough the plant's end-of-lj-fe in 2025. Only standard,
10 annual maintenance and repairs are forecasted for Unit 1
11 durlng 2079. Eor Unit 2 and common facilities, a number of
12 upgrades and replacements of plant infrastructure that are
13 required periodically will be made in 201,9, including an
74 outage that requires lnspection and selected refurbishment.
15 This outage'is the last large one to be performed and will-
16 help ensure the unit is operati-onal and can continue to
11 provide rel-iabl-e service through 2025.
18 O. Will Idaho Power perform the same review of
19 future incremental investments prior to any work being
20 done?
2l A. Yes. The Parties wil-l- continue the annua]
22 budget
budget
meetJ-ngs where all capital projects included 1n the
23
24
25
are reviewed and approved by
description
Idaho Power.
of the factors
The
driving
the work
Company w111
the need for
receave a
the project and a recommendation for
HARVEY, DI 21
Idaho Power Company
1 to be performed from the plant operator, NV Energy. The
2 estimated cost of each project will then be compared to the
3 expected l-ife of the asset as well as the Valmy end-of-l-j-fe
4 date to determine prudency of the planned investment. In
5 addition, Idaho Power and NV Energy wil-l- work together to
6 identify ways to reduce O&M as both partners prepare for
7 future 1ow production from the plant through its end-of-
8 1ife.
9 Q. Please summari-ze your testimony.
10 A. The Agreement provides for a contractuaf
11 mechanj-sm by which Idaho Power may meet its obligations
L2 pursuant to Order No. 33111 and cl-arifies the respective
13 rights and obligations of the Parties with respect to the
14 continued operation, retirement, and decommissioning of the
15 Valmy plant or the units thereof. Whil-e NV Energy and
16 Idaho Power are cognizanL of the approaching end-of-Iife of
l7 the pIant, some investments were required to ensure the
18 plant remains operational in a safe, efficient, and
19 reliable manner, includlng investments required to ensure
20 environmental compliance. Idaho Power wil-I continue to
2L work with NV Energy to ensure that any future investments
22 in the Val-my plant are necessary and prudent in light of
23 the expected end-of-1ife dates dj-scussed in my testimony.
24 VaImy is a necessary, although relatively infrequent,
25 contributor to system reliability through 2025 and there is
HARVEY, DT 28
Idaho Power Company
1 no material- economic benefit associated with the exit of
Unit 2 prior to year-end 2025.
O. Does this complete your testimony?
A. Yes, it does.
2
3
4
q
6
1
o
9
10
11
L2
13
t4
15
76
71
1B
t9
20
27
22
Z3
24
HARVEY, DI 29
Idaho Power Company
25
1
2
3
4
5
6
1
8
9
ATTESTATION OF TESTIMONY
STATE OF IDAHO
ae
County of Ada
I, Tom Harvey, having been duly sworn to testify
truthfully, and based upon my personal knowledge, state the
following:
I am employed by Idaho Power Company as the General-
Manager of Power Supply, Planning and Operations in the
Power Supply Department and am competent to be a witness j-n
this proceeding.
f declare under penalty of perjury of the laws of
the state of Idaho that the foregoing pre-filed testimony
and exhj-bits are true and correct to the best of my
information and belief.
DATED this 8th day of March 2079.
10
11
72
13
t4
15
16
17
18
79
20
27
22
23
Tom Harvey
SUBSCRIBED AND SWORN to before me this 8th day of
March 201,9.
&1,
tl
A
3
24
25
26
21
28
29
S.ary Public for Ida
Residing at:Meridian Idaho
My commission expires:02/04/20
rl
HARVEY, DI 30
Idaho Power Company
ot
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. !PG.E.l9.08
IDAHO POWER COMPANY
HARVEY, DI
TESTIMONY
EXHIBIT NO.2
EXHIBIT NO.2
IS CONFIDENTIAL AND
WILL BE PROVIDED TO
THOSE PARTIES THAT
EXEGUTE THE
PROTECTIVE AGREEMENT
IN THIS MATTER
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-I9-08
IDAHO POWER COMPANY
HARVEY, DI
TESTIMONY
EXHIBIT NO.3
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Case No. IPC-E-19-08
T. Harvey, IPC
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