20190627Application.pdf

June 27,2019
VIA HAND DELIVERY
Diane M. Hanian, Secretary
!daho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-19-18
Validation of North Valmy Power Plant Unit 2 Closure in2025 - ldaho Power
Company's Application and Testimony
Dear Ms. Hanian:
Enclosed for filing in the above matter please find an original and seven (7) copies
of ldaho Power Company's Application.
Also enclosed are an origina! and eight (8) copies of the Direct Testimony of Tom
Harvey filed in support of the Application. One copy of Mr. Harvey's testimony has been
designated as the "Reporter's Copy." A disk containing a Word version of Mr. Harvey's
testimony is enclosed for the Reporter.
Very truly yours,
LISA D. NORDSTROM
Lead Counsel
[e-mail]
LDN:csb
Enclosures
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An IDACORP CompanY
LISA D. NORDSTROM (lSB No. 5733)
JULIA A. HILTON (lSB No. 7740)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I no rd stro m @ ida hooowe r. co m
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Attorneys for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
DETERMINATION VALIDATING A NORTH
VALMY POWER PLANT UNIT 2 CLOSURE
tN 2025.
CASE NO. !PC-E-19-18
APPLICATION
ldaho Power Company ("ldaho Powed' or "Company"), in accordance with ldaho
Code SS 61 -502,61-503, and 61 -524 and RP 052, respectfully makes application to the
ldaho Public Utilities Commission ("Commission") for an order acknowledging the
Company has sufficiently validated the economic retirement date of the North Valmy
power plant Unit 2 as December 31 ,2025, as directed by the Commission in Order No.
34349.1
ln support of this Application, ldaho Power asserts as follows:
1 ln the Matter of the Application of ldaho Power Company for Authority to lncrease /fs Rafes for
Electric Service to Recover Cosfs Assoclated with the North Valmy Power Plant, Case No. IPC-E-19-08,
Order No. 34349 at 4-5 (May 31,2019).
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APPLICATION - 1
I. BACKGROUND
1. The North Valmy power plant ("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 megawatts2
('MW') (generator nameplate rating), of Valmy. NV Energy is the co-owner of the plant
with the remaining 50 percent ownership and operates the Valmy facility. ldaho Power
and NV Energy (collectively, the "co-owners") 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 owns the northbound
capacity and NV Energy owns the southbound capacity of this line.
2. The ownership and operation of Valmy is dictated by three agreements:
(1) the Agreement for the Ownership of the North Valmy Power Plant Project; (2) the
Agreement for the Operation of the North Valmy Power Plant Project, both of which are
dated December 12, 1978; and (3) the North Valmy Station Operating Procedures
Criteria, dated as of February 11, 1993, between ldaho Power Company and Sierra
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.
Additionally, as presented in Case No. IPC-E-19-08, the co-owners entered into the
North Valmy Project Framework Agreement between NV Energy and ldaho Power,
dated as of February 22,2019 ("Framework Agreement"), memorializing the terms and
conditions under which either partner may elect exit of participation in Valmy.
2 For planning purposes, ldaho Power uses the net dependable capability of 262 MW
APPLICATION - 2
3. ldaho Power, in the settlement stipulation approved by the Commission
with Order No. 337713 in Case No. IPC-E-16-24, agreed to use prudent and
commercially reasonable efforts to end its participation in the operation of Unit 1 by
December 31, 2019, and Unit 2 by December 31 , 2025. Subsequent to Order No.
33771, the Company filed an application to increase its rates to recover costs
associated with Valmy in Case No. IPC-E-19-08. During review of ldaho Power's
Application in the case, Commission Staff ("Staff') indicated that it reviewed the
Company's Unit 2 closure analysis but did not have adequate information from ldaho
Power at the time to determine whether the Company had completed a thorough review
of a unit withdrawal date of December 31 , 2025. The Commission adopted Staff's
recommendation in Order No. 34349 that the Company use best efforts to file within 21
days of the service date of the order: (1) an analysis validating the December 31 , 2025,
economic retirement date of Unit 2 or (2) an analysis supporting a different economic
retirement date of Unit 2.
II. UNIT 2 RETIREMENT ECONOMIC ANALYSIS
4. Since Order No. 34349 was issued, ldaho Power has completed additional
analyses supporting the economic retirement date of Unit 2. The Company's analyses
can be grouped into three general categories: (1) a Long-Term Capacity Expansion
("LTCE') analysis performed during the development of the 2019 lntegrated Resource
Plan ("lRP"); (2) a portfolio cost comparison between a 2019 Unit 2 shutdown and a
2025 Unit 2 shutdown under the planning assumptions from the 2019 IRP; and (3) a
comprehensive Valmy verification for all 24 portfolios modeled in the !RP, including all
costs and benefits associated with the Framework Agreement.
3 ln the ltlatter of the Application of ldaho Power Company for Authority to lncrease /fs Rates for
Electric Service to Recover Cosfs Associated with the North Valmy Plant, Case No. IPC-E-16-24, Order
No. 33771 (May 31 ,2017).
APPLICATION - 3
5. Concurrent with the processing of Case No. IPC-E-19-08 and in
conjunction with the development of the 2019 lRP, ldaho Power developed 24 resource
portfolios using the LTCE capability of the AURORA model to analyze whether exiting
Unit 2 prior to 2025 would benefit customers. The LTCE capability of AURORA
produces a Western Electricity Coordinating Council- ("WECC") optimized portfolio
under various future conditions, such as varying assumptions for natural gas prices and
carbon costs. The WECC-optimized portfolio includes the addition of supply- and
demand-side resources for ldaho Power's system while simultaneously evaluating the
economics of exiting from current generation units.
6. LTCE Analvsis. The AURORA LTCE modeling was performed using three
natural gas and four carbon emissions adders to develop optimized resource portfolios
for a range of possible future conditions, with the Boardmanto-Hemingway
transmission line project and without. Twenty-four separate portfolios were developed
which included varied amounts of nameplate generation additions, creating a diversity
of resource mixes and illustrating the many combinations of resources that result in a
reliable system for customers at varying costs. ldaho Power modeled the 24 portfolios
to validate a Unit 2 shutdown date of 2025. ln all 24 scenarios, Unit 2 did not shut down
prior to 2025. However, these runs did not include the final costs and benefits
associated with the newly-executed Framework Agreement.
7. Portfolio Cost Comparison. To com pare the net cost and benefits of an
early Unit 2 shutdown, ldaho Power did an analysis using planning natural gas and
carbon assumptions with the full costs and savings of the Framework Agreement
included, but this time forced Unit 2 to shut down in 2019. The Company compared this
portfolio cost to that of its 2019 IRP preferred portfolio, which includes a 2019 and 2025
shutdown for Units 1 and 2, respectively. The result was a portfolio cost of
APPLICATION.4
approximately $95 million more than the preferred portfolio, supporting the conclusion
that the net cost savings associated with an early retirement of Unit 2 would not support
a shutdown of Unit 2 prior to 2025. The results of this cost comparison are summarized
in Exhibit No. 1 to the Direct Testimony of Tom Harvey.
8. Comprehensive Valmv Verification ln addition, ldaho Power ran the
capacity expansion model for all 24 portfolio scenarios with the full costs and savings of
the Framework Agreement included as inputs to the model. Under this approach, the
LTCE model was allowed to shut down Unit 2 in any year prior to 2025, taking into
account all costs and benefits associated with an early exit; i.e., exit fees resulting from
the Framework Agreement, avoided capital expenditures, and avoided operations and
maintenance expense. All 24 portfolios validated a Unit 2 closure of 2025 as the least
cost option because each of the modeled scenarios shut down Unit 2 in 2025. lt is
important to note that this analysis included a model run that reflected the least
favorable coal scenario that is most likely to result in early coal closure-the high
carbon, planning gas scenario. Even under this "least favorable" coal scenario, Unit 2
was shown to be needed and cost-effective until the end of 2025.
9. The results of all three analyses indicate that, under the broad range of
modeled scenarios, in no case is it economically beneficial to exit Unit 2 prior to 2025.
Given the fact that these models included all expected costs and benefits associated
with an early exit from Unit 2, this analysis validates year-end 2025 as the appropriate
exit date for both depreciation purposes and the Company's planned exit from the
Valmy plant.
III. MODIFIED PROCEDURE
10. ldaho Power believes that a hearing is not necessary to consider the
issues presented herein and respectfully requests that this Application be processed
APPLICATION - 5
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201,
ef seg. lf, however, the Commission determines that a technical hearing is required, the
Company stands ready to present its testimony and support the Application in such
hearing.
IV. COMMUNICATIONS AND SERVICE OF PLEADINGS
11. Service of pleadings, exhibits, orders, and other documents relating to
this proceeding should be served on the following:
Lisa D. Nordstrom
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
I no rd stro m @ ida hopowe r. co m
dockets@idahopower. com
Matt Larkin
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
m la rki n @ ida hopower. co m
V. REQUEST FOR RELIEF
12. ldaho Power respectfully requests that the Commission issue an order
acknowledging the Company has sufficiently validated the economic retirement date of
Valmy Unit 2 as December 31 , 2025, as directed by the Commission in Order No.
34349.
DATED at Boise, ldaho, this 27th day of June 2019.
LISA D
Attorney for Idaho Power Company
APPLICATION.6