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HomeMy WebLinkAbout20201231Annual Review 2019.pdfffm.- :: .= '.j I i. r :lj:il,t'--:.';*idLrJ :iir*:il3t Pfi ?: Ih :-. '-,i, ; l*:-lti ,{" ;:!r:,{liisl0}{ An DTGORP Compa/ry December 3'1,202A VIA ENCRYPTED ELECTRONIC TIIAIL Jan Noriyuki, Secretary ldaho Public Utilities Commission 11331 W. Chinden Blvd., Bldg 8, Suite 201-A(83714, PO Box 83720 Boise, Idaho 837204074 Re: Case No. IPC-E-19-08 Recovery of Costs Associated with NorUr Valmy Pourer Plant Dear Ms. Noriyuki Attached for electronic filing, pursuant to Order No. 34349, is ldaho Power Company's Valmy Levelized Revenue Requirement Balancing Account 2019 Annual Review. Please notethatAttachment No.2 oftheenclosure contains commerciallysensitive and potentially material non-public information under Regulation FD. The undersigned attorney, in accordance with RP 67, hereby certifies thatAttachment No. 2 of the ldaho Power Company's \hlmy Levelized Revenue Requirement Balancing Account 20l9Annual Review contiains information that is a trade secret as describecl in ldaho Code $ 74-101, et seq., and S 48-801, et seq., and as such is exempt from public inspection, examination, or copying. lf you have any questions aboutthe attached documents, please do not hesitate to contact me. Very truly yours, LISA D. NORDSTROII Lead Counrel lnotdrtrom&|fi hoomaconr LDN:slb Attachment X*!.Y^*t.-*, Lisa D. Nordstrom VALMY LEVELIZED REVENUE REQUIREilIENT BAI.ANCING ACCOUNT 2019 ANNUAL REVIEW Dacember3l,202O ln Order No. 33771 issued in Case No. IPC-E-16-24 on May 31,2017, the Idaho Public Utilities Commission ("Commission") approved a balancing account mechanism designed to smooth revenue requirement impacts associated with the accelerated shutdown of Valmy and allowforfull recovery of Valmy-related costs nearthe plant's end- of-life. ln addition, it more closely aligns the cost recovery period with the remaining operating life of the plant, resulting in a better matching of cost recovery from customers who benefit from the plant's operations while mitigating the risk of future customers bearing the costs of a plant that will no longer be providing service. There are four types of costs the Company records to the balancing account: (1) the return of and on existing Valmy plant investments as of May 31 ,2017, (2) the return of and on the incremental capital investmenb at Valmy after May 31 ,2017, (3) non-fuel operations and maintenan@ expense ('O&M) reductions, and (4) decommissioning costs related to the Valmy shutdoryn. Under the balancing account approach, the Company replaces the base rate revenue recovery associated with ldaho Power's existing investment in Valmy with a levelized revenue requirement and trac*s it in the Valmy balancing account. The levelized revenue requirement is determined by calculating the present value of the revenue requirement of each of the individual balancing account items and converting the values into a level payment stream from customers over the remaining recovery period. ln Case No. IPC-E-19-08, ldaho Power requested the Commission (1) approve the North Valmy Project Framework Agreement between NV Energy and ldaho Power dated as of February 22, 2019 ("Framework Agreement"), (2) find that all actual Valmy investments through December 31, 2018, were prudently incurred, (3) allow investments forecasted through December 31, 2025, at Valmy to be included in the levelized revenue requirement mechanism, and (4) adjust customer raEs to recover the associated incremental annual levelized revenue rcquirement. As part of their approval of the Company's request, the Commission, in Order No. 34349, also instructed ldaho Power to file an annual report detailing the amounts recorded to the Valmy balancing account. Specifically, Staff requested the report include any major changes to the forecasted capital expenditures, by unit, as well as a narrative description of the actual investments made at Valmy during the prior year. A discussion of the balancing account activity from January 1,2019, through December 31, 2019, is contained below. NORTH VALMY GENERATING STATION The North Valmy Generating Station ('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 followed in 1985. ldaho Power owns 50 percent, or 284 megawattsi ("MW') (generator nameplate rating), of Valmy. NV Energy is the co-owner of the plant, 1 For planning purposes, ldaho Power uses the net dependable capability of 262 MW" VALW LEVELtrED REI'ENUE REOUIRETEiIT BALAiICII{G ACCOUNT MIO ANITIUAL REVIEW 1 with the remaining 50 percent ownership, and operates the Valmy facility. ldaho Power and NV Energy (collectively, the "Parties') work jointly to make decisions regarding Valmy. The plant is connected via a single 345 kilovolt transmission line to the ldaho Power control area at the Midpoint substation. ldaho Power ov\rns the northbound capacity and NV Energy owns the southbound capacity of this line. The Company exited coal-ftred operations of Unit 1 December 31, 2019, as accepted2 by the Commission as part of ldaho Powe/s 2017 lntegrated Resource Plan. The ownership and operation of Valmy is dictated by three agreements: the Agreement for the Ownership of the North Valmy Power Plant Project, the Agreement for the Operation of the North Valmy Power Plant Project, both of which are dated December 12, 1978, and the North Valmy Station Operating Procedures Criteria, dated as of February 11, 1993, between ldaho Power Company and Siena Pacific Power Company, as amended by Amendment No. 1 to the Operating Procedure Criteria for Valmy Coal Diversion Procedures and Usage, dated as of January'1,2012 (collectively, the "Existing North Valmy Agreements'). Additionally, the Parties entered into the Framework Agreement, memorializing the terms and conditions under which either partner may elect exit of participation of Valmy. suti,tARY oF AcTtvtTtEs tN 2019 Although cessation of coal-fired operations atValmy is anticipated to occurfor both parties by year-end2025, there are investments required to be made to continue the safe and reliable operation of the plant. As explained in more detail in the discussion of the levelized revenue requirement update, approximately $2.09 million of investments were made at Valmy in 2019, $400,000 associated with Unit 1 and $1.63 million in Unit 2 and common facility investments. Because ldaho Power exited operations of Unit 1 on December 31, 2019, the Company has included a description of every project that resulted in capital investments required to maintain the reliable operations of Unit 1 during 2019, as well as a description those projects associated with Unit 2 or common facilities that were greater than $100,000. Unit 1 2019 Plant Additiona Unit 1 Revenue Meter Upgnde - Given ldaho Power's impending exit from Unit 1 operations, it is important to have in place a sufficient measurement infrastructure to properly accountfor both owners'utilization of each unit. Based upon NV Energy's review of the net megawatt ("MW') billing infrastructure, it was determined that Valmy lacked sufficiently accurate meters, totalizers, and communication infrastructure to reliably account for MW generation including transformer losses. At the time the Company joined the Energy lmbalance Market, the Valmy metering infrastructure had not been upgraded and instead relied on a mix of local readings from different meters and systems that did not always match. This project consolidates and standardizes Valmy net MW reporting by sending the data to the plant's distributed controls system, which then consolidates 2 Order No. 33983. VALUY LET'ELIZED REVENUE REQUIRETEI{T BALATICING ACC(ruilT 2OIO A]{iIIIAL RET'IEIY 2 the information and reports it in a single, consistent value to each owner. Total ldaho Power share of 2019 additions: $12,936. Unit 1 lst Point Feefuater lnlet Valve, Refurbish - ln August 2018 a steam leak to atmosphere from the pressure seal surface of the valve on Unit 1 was discovered. Disassembly and refurbishment was the only way repairs could be made to the valve to avoid the burn hazard of leaking steam to plant personnel and ensure continued reliabili$ of the unit's operation. Total ldaho Power share of 2019 additions: $14,564. Unit 1 1d Point Heater Extruction Sfeam Block Valve, Refufuish - The block valve that supplies extraction steam to the Unit 1 1d point feedwater heater failed in the closed position in July 2A18. This valve serves to isolate the 13t point feedwater heater from turbine fed extraction steam, and, also protects the turbine from backfloMwater induction by going to closed position when called on. The failure required the bypass of the 1st point feedwater heater affecting the plant reliability and diminishing the heat rate. This project refurbished the block valve. Total ldaho Power share of 2019 additions: $9,119. Unit 1 Circulating Water Pump 1A Motor, Rewind and Unit 1 Circulating Water Pump 1A Motor, Replace - ln April 2019, the Unit 1 circulating water pump failed due to a motor ground fault. Absent a circulating water pump in service, Unit 1 would be de-rated to approximately 125 net MW output, or half its normal load. The motor was sent to a contract repair shop for evaluation where it was determined that a complete motor rewind was required. At the request of the Western Electricity Coordinating Council, and because of the fourto six-week lead time associated with the repairs, a new replacement motor was purchased so that the plant could meet reliability and availability needs. The rewind was performed and used as a capital spare and a replacement motor was procured. Total ldaho Power share of 2019 additions: $59,765 and $35,960, respectively. Unit 1 lD PuMerizer RollWheel Assembly, Replace and Unit I Pulverizer D RollWheel Assemblies, Replace - ln April 2A19, the Unit 1D pulverizer roll wheel assembly failed. Black Butte coal requires all four pulverizers to achieve full load. The rollwheel assembly was replaced. !n addition, in September 2019, plant personnel reported over-amping of the Unit 1 pulverizer drive motor. Unit t had been experiencing muctr higher than expected availability requirements; the 1D coal pulverizer exceeded 20,000 hours of operation wilh significant wear and parE deteriorated beyond the service life expectations. Upon inspection, it was found that one of the three wheel assemblies was cracked and not rotating freely due to a bearing failure. The plant was coming up on its annualtesting and certification of the cold reheat safety valves, a compliance requirement of the annual State of Nevada Boiler Operating Permit, and needed to reach full load status, requiring allfour pulverizers. Due to the wear, there were sizing differences of the three roll wheels' diameters, requiring the replacement of all three of the roll wheel assemblies. Total ldaho Power share of 2019 additions: $58,924 and $159,459, respectively. Unit 1 Fly Ash Blower 18, Replace - A fly ash blower is needed to convey ash in order to keep the baghouse hoppers from overflowing which would lead to an eventual unit shutdown. Inspec'tion of the fly ash blower 18, after it began making unusual noises, VALW LEVEUZED REVEI{UE REQUIRETENT BAI.AI{CING ACCOUNT 2OI9 AII]IUAL REVIET'U 3 determined that the blower was not reliable for dependable service and failure was imminent due to intemalwear and damage. Plant reliability is increased as replacing the 18 fly ash blower ensures that there is a rcdundant blower to convey ash and fluidize when needed to do so. Total ldaho Power share of 2019 additions: $27,503. Unit 2 and Common Facilitv Plant Additions Greater than $100.000 Unit 2 Genentor Bushings, Replace - The terminal plate gaskets for the high voftage bushings of the generator were worn out and there was indication of bushing gaskets leaking as the viscasilwas seeping through the bushing gaskets. Bushing gasket leakage could lead to catastrophic failure of the generator. The issue was first identified in 2010 and temporary repairs were made. ln 2017, it was noticed that the leak had become significant and one more temporary repair was made and annual inspections conducted. The 2018 annual inspection discovered more leakage sothe replacement of the bushings and regasketing of the bushing terminal plate was performed. Total ldaho Power share of 2019 additions: $106,641. Unit 2 Condenser lnlet Waterbox, Recoat - The condenser inlet tube sheet of a unit is exposed to erosion from particles and turbulence in the circulating water so it is coated with a wear resistant coating to protect the metal tube sheet and condenser tube ends. The coating on Unit 2 had worn to the point that significant portions of bare tube and tube ends were exposed. When exposed, the tube ends will erode and can result in tube failure and leakage of circulated water into the steam side of the condenser, contaminating the boiler water. The scope of the proiect included the recoating of the tube sheet. \A/hen the recoating began, the plant was able to repair some of the waterbox coating resulting in project costs lower than initially estimated. Total ldaho Power share of 2019 additions: $108,028. Unit 2 Stack Hevator, Replace - The Unit 2 stack elevator reliability and safety was compromised due to the age of the elevator and replacement parts had become obsolete. The elevator installed with Unit 2 was constructed in 1984. On several occasions the elevator stopped operating properly during the installation of environmental compliance equipment and priorto scheduled emission testing, causing delayed installation timelines. The project included a complete elevator replacement including the car, brake assembly, drive motor and gearbox, electrical system replacement and call system replacement. Total ldaho Power share of 2019 additions: $107,276. Unit 2 Pin Mixer/Unloader, Rebuild - The existing original Unit 2 pin mixer (wet fly ash unloader) required replacement due to normalwear and tear. ln addition, in 2018, an ash hauling dump truck darnaged the Unit 2 wet fly ash unloader, further impacting the reliability of the pin mixer. The pin mixer/unloader was rebuilt prior to the summer run to avoid the potential of serious failure of the non-redundant equipment. Total ldaho Power share of 2019 additions: $225,624. Unit 2 AtomizerWheels, Replace -A dry scrubber utilizes nine atomizing spray machines to atomize a lime/recycled fly ash mixed slurry that rcacts with the sulfur dioxide in the flue gas to produoe calcium sulfate. ln 2018, Valmy was expected to be used as a seasonal facility and to only run during the summer peak months. The plant was utilized VALIY LEVELIZED RET'ENUE REOUIRETEilT BAI.ANCING ACCOUilT 2OIO AilNUAL REVIEW 4 more than anticipated and stayed on through the winter of 2018 and into the spring of 2019, primarily due to the impacts of the Enbridge pipeline explosion that occuned in October 2018. The extended run time amounted to many more hours on the wheels than originally anticipated requiring the procurement of six new atomizer wheels. The replacement of the wheels ensured the plant's reliability for the 2019 summer peak season. Total ldaho Power share of 2019 additions: $1 15,962. Common Facility, Frceze Prctection Heaters, lnstall- When the Valmy operating mode shifted to running the units in only the summer months, and to be in tong-term layup during the remaining months of the year, it was determined that with both units offline there was no auxiliary steam to provide heat to the turbines, boilers and buildings to keep them dry and above the dew point, per the long-term layup plan. The plant was renting portable electric spaoe heaters to sufficiently heat the plant buildings and equipment during the layup period. lt was determined that the purchase of the heaters was more cost eftctive than renting. ln addition, the purchase and installation included four water-to-air dry finned coolers which cool the component cooling system on each unit and exhaust warm dry air into the lower levelof the turbine building, reducing the number of electric heaters required to be purchased, Total ldaho Power share of 2019 additions: $541,358. Common Facility, Fire Prctection Sysfemg Refurbish - ln November2017,an evaluation of the fire protection systems was performed that determined the refurbishment or replacement of the systems was required due to degradation of the existing system, through a combination of worn out and/or outdated components and systems. This project included the refurbishment of the Early Warning Smoke Detection system, the replacement of the Unit 1 and Unit 2 stand pipe booster pipes, the replacement of the fire alarm control panels and associated controls and alarms, replacement of deluge valves, the electric fire pump and the required flow testing on the dieselfueltank system. Totral ldaho Power share of 2019 additions: $262,492. LEVELIZED REVENUE REQUIREiiENT UPDATE Order No. 34349 issued in Case No. IPC-E-19-08 approved an update to the Valmy levelized revenue requirement amounts in rates based on plant investments as of December 31, 2018. As presented in Attachment No. 1 to this report, ldaho Power has recalculated the levelized revenue requirement and summarized the update, if any, to the @mponents below: Component A - Existing lnvestments at Mav 31. 2017. The revenue requirement component related to existing investments is based on the Valmy-related balances in effect prior to the establishment of the Valmy balancing account or existing investments as of May 31 ,2017. This component of the revenue requirement, approximately $34.4 million on an ldaho jurisdictional basis, did not change since the update in Case No. IPC- E-19-08, and will remain constant through the remaining life of Valmy. Component B - lncremental lnvestments. The revenue requirement on incremental investments can be summarized in two subcomponents: (1) the revenue requirement on incremental investments at Unit 1 from June 1 ,2017, through Deember 31,2019, and (2) the revenue requirement on Unit 2 and @mmon facility investments VALTY LEVELIZED RET'ENUE REQUIRETIENT BAI.ANCING ACCOUNT 2OI9 ANIUAL REVIETV 5 after May 31, 2017, including the revenue requirement of Unit 1 beyond 2019. The first update made was to subcomponent (1), to include actual Unit 1 investments for the January 1,2019 through December 31,2019, time period. Although actual investments were nearly equivalent to the forecast of investments, approximately $398,000 and $400,000, respectively, there were approximately $47,000 in investments that had not closed to plant, but subsequently did in 2020. Therefore, the revenue requirement of subcomponent (1) increased approximately $21,000, for a total of $120,403 on an ldaho jurisdictional basis. Subcomponent (2) was updated to include actual Unit 2 and common facility investments for the January 1,2019 through December 31 , 2019, time period. The actual investments made were $1.63 million, slightly lower than the forecast of $1.68 million. ln addition, subcomponent (2) was updated to include the latest forecast for Unit 2 and common facility investments. As explained in more detail later, the updated forecast was $1.77 million higher, or a tota! of $5.26 million. The updates to Component B -lncremental lnvestments resulted in an increase of approximately $225,000, for a total levelized revenue requirement of $1,437,013 on an ldaho jurisdictional basis. Comoonent C - Deoommissioninq Costq. There have been no updates to cost estimates associated with decommissioning activities therefore the revenue requirement associated with future decommissioning costs remains unchanged at approximately $1.04 million on an ldaho jurisdictional basis. Comoonent D - O&M Savings. The Valmy levelized revenue requirement mechanism includes expec'ted non-fuel O&M savings when compared to Valmy-related non-fuel O&M amounts approved in the Company's last general rate case. ldaho Power has updated the revenue requirement associated with O&M savings to include actual Valmy-related non-fuel O&M amounts for the January 1, 2019 through December 31, 2019, time period. O&M savings over the life of the plant are less than originally estimated resulting in a reduction to the expected O&M savings for a total ldaho jurisdictional revenue requirement reduction of $4.60 million. ln addition to the four components described above, the Company has computed the true-up resulting from collections of levelized revenue requirement amounts for the January 1,20'19 through December 31, 2019, time period. Actual ldaho jurisdictional sales volumes were lower than forecasted resulting in a total under collection, including applicable carrying charges of $75,834. The result is an under collection to be collec{ed over the remaining recovery period through 2028, of $9,214 per year. Adding this to the load variance true-up of $9,1 83 included in the June 1 , 2019 rate change, results in a total load variance true-up since establishment of the levelized revenue mechanism of $18,397. The updated levelized revenue requirement associated Valmy includes $34.4 million associated with existing investments, $1.56 million related to incremental investments, $1.04 million in decommissioning costs, $4.60 million in non-fuel O&M savings, and a load variance true-up of $18,397, for a total levelized revenue requirement of $30,385,445 on an ldaho jurisdictional basis, which is $487,023 greater than the existing Valmy-related levelized revenue requirernent cunently included in customer VALTY LEVELIZED RB'EiIUE REOUIRETEIIT BALAIICING ACGOUNT Mtg ANNUAL REVIEW 6 rates. Differences between the annual Valmy-related levelized revenue requirement updates and the associated level of collection in customer rates will continue to be tracked in the balancing account until it is determined by the Commission that such differences warrant credit or collection through customer rates. FORECASTED CAPITAL EXPENDITURES Forecasted capital expenditures for the 2020 through 2025 time period used as the basis forthe levelized revenue requirement approved in Case No. IPC-E-19-08, were $3.49 million and all associated with Unit 2 and common facilities due to ldaho Powe/s exit of coal-fired operations in Unit 1. Using the latest forecast ftom the plant, capital expenditures are approximately $5.26 million, or $1.77 million higher. As can be seen in Confidential Attachment No. 2, the majori$ of the increase, $1.46 million, is expected to occur in 2021 when Unit 2 will need the replacement of a baghouse bag, the boiler penthouse insulation, the burner barrel, and the pulverizer spare roll wheels and grinding segments. Previously, the capital business plan included a blanket budget of $400,000 for Unit 2 capitral restoration. The forecast has been refined, with the above four replacements totaling $1.25 million. ln addition to the increase in2021, the capital expenditure forecast tor 2022 through 2024 grew by approximately $100,000 as the Unit 2 capital restoration blanket budget items were refined and assigned to specific projects. coNcLustoN ldaho Power will continue to recalculate the Valmy levelized revenue requirement and provide an update to the Commission annually, detrailing the amounts recorded to the balancing account while also identiffing any major changes to the forecasted capital expenditures. The Company continues to ensure that actual investments made are prudent and only necessary for environmental compliance, and the continued safe, reliable and economic operation of the plant. ldaho Power would also like to note that this report represents the first annual update filed with the Commission related to the Valmy plant. For this inaugural report, the information and attachments are presented in a manner identicalto the format utilized in the Company's most recent Valmy filing, IPC-E-19-08, and simihr to the Boardman Power Plant Annual Reports. However, in comments filed in Case No. IPC-E-20-32 related to the Boadman Power Plant, Staff expressed a desire to hold discussions with ldaho Power to develop an approach and method for documenting and supporting future prudency review filings for joint-venture projects. Given the timing of Staffs comments and the filing of this report, the Company believes the newly-implemented Valmy reporting requirement provides the opportunity for ldaho Power to work with Staff to develop the desired reporting structure on a going forward basis. The Company intends to contact Staff to discuss the desired report structure for future reports and the presentment of updates to both forecast and actual expenditures when mmpared to the most recent Commission-approved amounts currently included in customer rates, and how the changes should be reflected in future filings. The Company expects these conversations to occur within the first quarter of 2021. VALMY LEVEUZED REVENUE RECIUMEMENT BALANCING ACCOU}IT 2019 AIiINUAL REVIEW 7 o€ oco ilro.Eog 0EF.i HicS =EocEr.oii:'9aQs4 EEE8 OoFi€ oeET(s.B;eEExE!Ag5r XEF5E3]G!F-1, Ei; :8HClLoC5ETJo:€, EF EE85EEgr50ELoo OEiEEr6NLELOgn OoEE3s3'eRE.l-,oiElitbEEoE.P mdo 3t F2sA- 3u- coEF2E Ee aUc,ED- Hc, E BU J 2o E EG?I ELII PEI2 6 2E EI: E 6t6e B Or ot il gind 6tl mC' odo oG 6c,rtd I m'$t' H d EEE --o6& E tET E s H; E Eeog E SE EEE i E 5 *EEi F EEEESo E EE gE E f i iIEESE IER E 2 *-eEhgT 6 t 6 o666 od 6il+' to6ddt io 6N,\ t!ot' ciON 66 or' 6!t ct B.m(!ts o6a8=S tsoNdFi.l oG ol tloENqor38Edq t6md'd stm6-idr! nt c! arrt6o6gr{ +dt 6t mc, Eo E I TII 6dE*I ! .!' 6 Hiod at E F I5 fDIE TEE|i tItIao T IE I EE.it E! $ E E IUI6tq rt rOd mE.+ oo I oo utd o tod Ed N6' od R-l.# iEEErE E E gE E fEEgE E 3ES& E;*EE E- c oE iEEIs H Ef;EBEEI EF*=EE ! I.io4 roni( {hadct ^l+F s16 ".i 6sFlo+jdt e 8'c, 6oil 8- d t6t' E+ do m6ElNOFoN63cE' ..1 ^l .i +6doOFNO66!0d{ !tractrt Nd GNho6mdo'GC 8Rqo- tsnCl i{rt'o @C' dId. Erq UtB g .lt ! 9c 5H I ls I -f, a6gd EE ;. TE IE EE otr ff; l b(t* E Ee€ sE€f;IEIrEs e!+, diLd ffiE E ='SEEI'= trtJ-asti sRitri-OT odt:EE.NEEEgt Eato !to T FGorurEJ =z = .J oIz o..o C'uul =oo.oE o;,F ozF-ul. (, rt- o a CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 31st day of December 2020,1 served a true and correct copy of IDAHO POWER COMPANY'S VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT 2019 ANNUAL REVIEW upon the following named parties by the method indicated below, and addressed to the following: Gommission Staft Edward Jewell Deputy Attorney General ldaho Public Utilities Commission 472 West Washington Street (83702) P.O. Box 83720 Boise, ldaho 837 2O-0O7 4 _Hand Delivered _U.S. Mail _Overnight Mail _FAXX Email edward.iewell@puc.idaho.qov Idaho Conservation League Benjamin J. Otto ldaho Conservation League 710 North 6n Street Boise, ldaho 83702 _Hand Delivered _U.S. Mail Overnight Mail _FAXX Emai! botto@idahoconservation.orq Stephanie Buckner, Executive Assistant