20211229Annual Review 2020.pdf

LISA D. NORDSTROM Lead Counsel [e-mail]
December 29, 2021
VIA ELECTRONIC FILING
Jan Noriyuki, Secretary Idaho Public Utilities Commission 11331 W. Chinden Blvd., Bldg 8, Suite 201-A (83714)
PO Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-19-08 Recovery of Costs Associated with North Valmy Power Plant – Idaho Power
Company’s Application
Dear Ms. Noriyuki:
Attached for electronic filing, pursuant to Order No. 35058, is Idaho Power
Company’s Valmy Levelized Revenue Requirement Balancing Account 2020 Annual
Review.
Please note that Attachment No. 2 of the enclosure contains commercially sensitive and potentially material non-public information under Regulation FD. The undersigned
attorney, in accordance with RP 67, hereby certifies that Attachment No. 2 of Idaho Power
Company’s Valmy Levelized Revenue Requirement Balancing Account 2020 Annual Review contains information that is a trade secret as described in Idaho Code § 74-101, et eq., and § 48-801, et seq., and as such is exempt from public inspection, examination, or copying.
If you have any questions about the attached documents, please do not hesitate to contact me.
Very truly yours,
Lisa D. Nordstrom LDN:sg
Attachment
RECEIVED
2021 DEC 29 AM 11:57
IDAHO PUBLIC
UTILITIES COMMISSION
VALMY LEVELIZED REVENUE REQUIREMENT
BALANCING ACCOUNT 2020 ANNUAL REVIEW
1

VALMY LEVELIZED REVENUE REQUIREMENT BALANCING ACCOUNT
2020 ANNUAL REVIEW
December 29, 2021
In 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
allow for full recovery of Valmy-related costs near the plant’s end-of-life. In 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 investments at Valmy after May 31, 2017, (3) non-fuel operations and
maintenance expense (“O&M”) reductions, and (4) decommissioning costs related to the Valmy
shutdown. Under the balancing account approach, the Company replaces the base rate revenue
recovery associated with Idaho Power’s existing investment in Valmy with a levelized revenue
requirement and tracks 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.
In Case No. IPC-E-19-08, Idaho Power requested the Commission (1) approve the North
Valmy Project Framework Agreement between NV Energy and Idaho 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
rates to recover the associated incremental annual levelized revenue requirement. As part of
their approval of the Company’s request, the Commission in Order No. 34349 also instructed
Idaho 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, 2020,
through December 31, 2020, 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. Idaho Power owns 50 percent of Valmy and NV Energy is the co-owner of the
plant with the remaining 50 percent ownership and operates the Valmy facility. Idaho 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 Idaho Power control area at the
Midpoint substation. Idaho Power owns the northbound capacity and NV Energy owns the
southbound capacity of this line. The Company exited coal-fired operations of Unit 1 December
VALMY LEVELIZED REVENUE REQUIREMENT
BALANCING ACCOUNT 2020 ANNUAL REVIEW
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31, 2019, as accepted1 by the Commission as part of Idaho Power’s 2017 Integrated Resource
Plan.
The ownership and operation of Valmy is governed 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 Idaho
Power Company and Sierra Pacific Power Company,2 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.
SUMMARY OF ACTIVITIES IN 2020
Although cessation of coal-fired operations at Valmy is anticipated to occur for both parties
by year-end 2025, 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 below, approximately $600,000 of investments were made at Valmy in 2020
-- $33,880 associated with Unit 1 completed in 2019, which was offset by $15,056 in credits from
prior years’ Unit 1 projects, and $580,000 in Unit 2 and common facility investments. While Idaho
Power exited operations of Unit 1 on December 31, 2019, there was one project associated with
Unit 1 for which the costs were not recorded until 2020 and is described below. In addition, the
Company has included a description of projects that resulted in capital investments required to
maintain the reliable operations of Unit 2 or common facilities that were greater than $30,000.
Unit 1 2020 Plant Additions
Unit 1 Primary Air Fan A Motor, Replace – On October 31, 2019, the Unit 1 A Primary Air Fan
motor inboard bearing overheated and failed while in service. The motor inboard bearing alarm
sounded and upon inspection of the motor, plant personnel discovered a large amount of smoke
coming from the motor inboard bearing housing. The motor was shut down and replaced with the
existing spare motor. The damaged motor was refurbished to become a spare Primary Air Fan
motor. Unit 1 Primary Air Fans are used to convey fluidized coal from the pulverizers to the boiler
burner through attached coal conduit piping. Without both Primary Air Fans, Unit 1 could not
reach stable operation and would have been curtailed until late December 2019 while the
damaged motor was repaired. While the costs appear as 2020 plant additions, the work was
performed on Unit 1 in 2019 but final costs did not close to the project until early 2020. Total
Idaho Power share of 2020 additions: $33,880
Unit 2 and Common Facility Plant Additions Greater than $30,000
Unit 2 Pulverizer A Major Rebuild – Pulverizers are utilized to grind coal to fine dust before being
transported to burner fronts. This process wears out roll wheel assemblies, table grinding
segments, and the interior of pulverizer equipment. The normal operating life cycle of a Unit 2
pulverizer is roughly 18 to 24 months. Routine inspections are performed at 3,000 hours and
required maintenance is performed to ensure the maximum life of the pulverizer rebuild. Major
overhauls are required for the continued reliable operation of Unit 2 and include replacements of
roll wheels, air seals, coal shields, bearings, wear resistant ceramic liners, classifier vanes, coal

1 Order No. 33983.
2 Sierra Pacific Power Company has conducted business as NV Energy since 2008.
VALMY LEVELIZED REVENUE REQUIREMENT
BALANCING ACCOUNT 2020 ANNUAL REVIEW
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feeder wear components, spring frame wear plate, and the pyrites plow. A pulverizer overhaul
was scheduled for 2019 but due to reduced run times for Unit 2, a full pulverizer overhaul was not
yet needed. Instead, three refurbished trunnion wheel assemblies were purchased as capital
spares. The capital spares will allow the capital maintenance outages to be completed on an as
needed basis, as opposed to during the routine inspection, when the pulverizers’ hours of
operation and level of wear justifies the overhauls. Total Idaho Power share of 2020 additions:
$165,540
Unit 2 Scrubber Outlet Duct Pluggage, Modification – The three dry scrubber vessels on Unit 2
often suffer severe scaling and/or debris material buildup as scale is dislodged from the scrubber
vessel walls. The scale and buildup can be severe enough that several times per year the unit is
curtailed 70 MW’s while the scale and buildup are removed from the vessel walls and the outlet
duct via the existing debris chute and from the outlet duct door. The debris material is then
collected and transported to the ash landfill. The removal is also required under the Mercury and
Air Toxic Standards regulations. This project enlarged the existing Unit 2 scrubber vessel debris
chute and installed three 24-inch diameter hydraulically actuated knife gate valves to allow for the
faster and safer removal and collection of the scale, sludge and debris for disposal in the ash
landfill. The duration of forced outage was decreased by half and automated the valves to open
the scrubber vessel, which previously required personnel to perform via a ladder, improving
safety. Total Idaho Power share of 2020 additions: $139,284
Unit 2 Scrubber Atomizer Wheels, Replace – The dry scrubber on Unit 2 utilizes nine atomizing
spray machines (three atomizers per scrubber vessel) to atomize a lime/recycled fly ash mixed
slurry that reacts with the sulfur dioxide in the flue gas to produce calcium sulfate. The solid
calcium sulfate particles are then collected along with fly ash in the baghouse. To accomplish
this the atomizer wheel rotates at approximately 13,000 revolutions per minute and centrifugal
force shears the lime/recycled ash slurry into very small droplets for intimate liquid/gas contact.
The force of the shearing slurry slowly erodes the atomizer wheel face and the wheels require
routine replacement. An atomizer wheel can be expected to last for 10,000 – 12,000 hours in
service. This project replaced five of the atomizer wheels that were at the end of their service life
and was necessary to ensure the plant’s reliability for the 2020 summer peak season. Total Idaho
Power share of 2020 additions: $108,817
Common Facility Vans, Replace (3) – The plant was concerned with the safety and reliability of
the van transportation fleet. The Valmy fleet was aging and reaching high mileage, traveling
approximately 1,650 miles for maintenance and 4,575 miles for operations/fuels per month. The
vans transport employees to and from the remote plant site, 24 hours a day, seven days a week,
which is a standard in northern Nevada set by local mining companies. The cost of the vans is
partially offset by a payroll deduction from each employee riding in the van. This project replaced
three of the existing nine vans, each van is over ten years old with between 190,000 to 256,000
miles. Total Idaho Power share of 2020 additions: $87,965
Common Facility De-Militarized Zone Server Cluster – The configurations in the Valmy De-
Militarized Zone (“DMZ”) included five individual servers for each functional and protective
service. One of the servers had reached the end of its life because it was running on an outdated
operating system that was no longer supported by Microsoft. As a result, the cyber security
patching was no longer available for that server. This project moved the many individual servers
in the Valmy DMZ to a high availability server cluster capable of resisting hardware failure and
facilitating cyber security compliance. Total Idaho Power share of 2020 additions: $36,493
Common Facility Reverse Osmosis Membranes, Replace – First pass reverse osmosis
membranes foul and plug over time. New membranes are required approximately every two
VALMY LEVELIZED REVENUE REQUIREMENT
BALANCING ACCOUNT 2020 ANNUAL REVIEW
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years to maintain ultra-pure condensate for boiler makeup. This project replaced the east and
west first pass reverse osmosis membranes which were last replaced in 2018. Total Idaho Power
share of 2020 additions: $31,851
LEVELIZED REVENUE REQUIREMENT 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, Idaho Power has recalculated the levelized
revenue requirement and summarized the update, if any, to the components below:
Component A - Existing Investments at May 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 $32.3 million on an Idaho
jurisdictional basis, net of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) impact, 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 – Incremental Investments. 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 December 31, 2019, and (2) the
revenue requirement on Unit 2 and common facility investments after May 31, 2017, including the
revenue requirement of Unit 1 beyond 2019. No changes were made to subcomponent (1), actual
Unit 1 investments through December 31, 2019, as the 2020 investments are included in
subcomponent (2) because they occurred after December 31, 2019. The revenue requirement of
subcomponent (1) is $92,876 on an Idaho jurisdictional basis, net of the reduction associated with
Tax Reform. While no changes were made to subcomponent (1), this differs slightly from the
Idaho jurisdictional revenue requirement presented in the 2019 Annual Report due to errors in the
presentment of the regulatory asset balance.
Subcomponent (2) was updated to include the net $18,824 in Unit 1 investments
discussed above and actual Unit 2 and common facility investments for the January 1, 2020,
through December 31, 2020, time period. The actual investments made were $602,383, lower
than the forecast of $1.06 million. In 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 is $4.94 million higher, or a total of $7.37 million. The updates to Component B –
Incremental Investments resulted in an increase of approximately $440,000 for a total levelized
revenue requirement of $1,876,898 on an Idaho jurisdictional basis.
Component C – Decommissioning Costs. 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 $1.10 million on an Idaho
jurisdictional basis.
Component D – O&M Savings. The Valmy levelized revenue requirement mechanism
includes expected non-fuel O&M savings when compared to Valmy-related non-fuel O&M
amounts approved in the Company’s last general rate case. Idaho 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, 2020, through December 31, 2020, time period. O&M savings over
the life of the plant continue to be lower than originally estimated resulting in a decrease to the
VALMY LEVELIZED REVENUE REQUIREMENT
BALANCING ACCOUNT 2020 ANNUAL REVIEW
5

expected O&M savings for a total Idaho jurisdictional revenue requirement reduction of $4.61
million.
In 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, 2020,
through December 31, 2020, time period. Actual Idaho jurisdictional sales volumes were slightly
higher than forecasted resulting in a total over collection, including applicable carrying charges of
$82,125. The result is an over collection to be refunded over the remaining recovery period
through 2028 of $852 per year. Adding this to the load variance true-up of $9,183 included in the
June 1, 2019, rate change, results in a total load variance true-up since establishment of the
levelized revenue mechanism of $8,331.
The updated levelized revenue requirement associated Valmy includes $32.3 million
associated with existing investments, $1.97 million related to incremental investments, $1.10
million in decommissioning costs, $4.61 million in non-fuel O&M savings, and a load variance
true-up of $8,331, for a total levelized revenue requirement of $30,748,803 on an Idaho
jurisdictional basis, which is $850,381 greater than the existing Valmy-related levelized revenue
requirement currently included in customer 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. Idaho Power continues to monitor the balance
and, in compliance with Order No. 34349, will submit a filing to the Commission no later than
February 28, 2022, to true-up the balancing account with actuals, effective June 1, 2022, if it is
determined by the Commission that such differences warrant credit or collection through customer
rates.
FORECASTED CAPITAL EXPENDITURES
Forecasted capital expenditures for the 2021 through 2025 time period used as the basis
for the levelized revenue requirement approved in Case No. IPC-E-19-08 were $2.43 million and
all associated with Unit 2 and common facilities due to Idaho Power’s exit of coal-fired operations
in Unit 1. Using the latest forecast from the plant, capital expenditures are approximately $7.37
million, or $4.94 million higher. As can be seen in Confidential Attachment No. 2, the majority of
the increase, $3.82 million, is expected to occur in 2021 and 2022 when the turbine on Unit 2 will
need the high-pressure/intermediate-pressure turbine shell studs replaced along with a steam
leak repaired on the inner and outer shell sections of the turbines, the pulverizer will require the
replacement of the spare roll wheels, grinding segments and the gearbox, and the unit will require
an Ovation human machine interface and server update. Previously, the capital business plan
included a blanket budget of $400,000 for Unit 2 capital restoration in both 2021 and 2022. The
forecast has been refined, to a blanket budget of $50,000 along with the above four replacements
totaling $3.10 million. In addition to the increases in 2021 and 2022, the capital expenditure
forecast for 2023 and 2024 grew by approximately $1.12 million as the complete baghouse bag
replacement on Unit 2 was moved from 2021 to 2023 and the capital restoration blanket budget
items were refined and assigned to specific projects.
CONCLUSION
Annually, Idaho Power will recalculate the Valmy levelized revenue requirement and
provide an update to the Commission, detailing the amounts recorded to the balancing account
while also identifying any major changes to the forecasted capital expenditures. The Company
maintains that actual investments made are prudent and only necessary for environmental
compliance, and the continued safe, reliable and economic operation of the plant.
Component A Component C Component D True-Up
TOTAL SYSTEM
Existing @
5/31/2017
Incremental Capital
Unit 1 2017-2019
Incremental Capital
2020-2025
Decommissioning
Costs
O&M Savings
2017-2025 Load Variance SYSTEM Total
Annual Levelized Revenue Requirement in Rates effective June 1, 2019 33,951,978 100,941 1,274,034 1,152,182 (5,046,137) - 31,432,998
Incremental Change - (3,262) 699,915 - 198,666 - 895,319
New Levelized Revenue Requirement Effective December 31, 2020 33,951,978 97,679 1,973,949 1,152,182 (4,847,472) - 32,328,317
Component A Component C Component D True-Up
(1)(2)
IDAHO JURISDICTIONAL
Existing @
5/31/2017
Incremental Capital
Unit 1 2017-2019
Incremental Capital
2020-2025
Decommissioning
Costs
O&M Savings
2017-2025 Load Variance
Annual Levelized Revenue Requirement in Rates effective June 1, 2019 32,282,687 95,978 1,211,394 1,095,534 (4,796,353) 9,183 29,898,422
Incremental Change - (3,102) 665,503 - 188,832 (852) 850,381
New Levelized Revenue Requirement Effective December 31, 2020 32,282,687 92,876 1,876,898 1,095,534 (4,607,522) 8,331 30,748,803
TOTAL INCREMENTAL CHANGE TO THE IDAHO JURISDICTIONAL LEVELIZED REVENUE REQUIREMENT FOR THE VALMY PLANT 850,381
1. On June 1, 2018, customer rates were reduced to reflect the impact of the federal Tax Cuts and Jobs Act of 2017, as directed by Order No. 34071. The computation of the incremental
change in the levelized revenue requirement amounts are based on the corporate tax rate in effect in the respective years presented.
Levelized Revenue Requirement for the Valmy Plant
2020 Annual Update
Idaho Power ceased participation in U1 12-31-19; NV Energy operates U1 through 12-31-21; Both parties operate U2 through 12-31-25
Component B
Component B
IDAHO Total

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the 29th day of December 2021, I served a true and
correct copy of IDAHO POWER COMPANY’S VALMY LEVELIZED REVENUE
REQUIREMENT BALANCING ACCOUNT 2020 ANNUAL REVIEW upon the following
named parties by the method indicated below, and addressed to the following:

Commission Staff
Dayn Hardie
Deputy Attorney General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg No. 8,
Suite 201-A (83714)
P.O. Box 83720
Boise, Idaho 83720-0074

Hand Delivered
U.S. Mail
Overnight Mail
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X Email [e-mail]

Idaho Conservation League
Benjamin J. Otto
Idaho Conservation League
710 North 6th Street
Boise, Idaho 83702
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U.S. Mail
Overnight Mail
FAX
X Email [e-mail]

_____________________________________
Stacy Gust, Regulatory Administrative Assistant