20191205Comments.pdf

EDWARD J. JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-03r4
IDAHO BAR NO. 10446
R:CEIVED
Street Address for Express Mail:
I133I W CHINDEN BVLD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attomey for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
AUTHORITY TO DECREASE ITS RATES FOR
ELECTRIC SERVICE FOR COSTS
ASSOCIATED WITH THE BOARDMA}I
POWER PLANT
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cAsE NO. IPC-E-19-32
COMMENTS OFTHE
COMMISSION STAFF
COMES NOW the Staffof the Idaho Public Utilities Commission, by and through its
attomey of record, Edward Jewell, Deputy Attomey General, and in response to the Notice of
Application and Modified Procedure issued in Order No. 344'? 5 on November 6, 2019, in Case
No. IPC-E-19-32, submits the following comments.
BACKGROUND
On October 17,2019,Idaho Power Company ("ldaho Power" or "Company") submitted
an Application requesting the Commission approve adjustments to the Company's recovery of
expenses at the Boardman power plant ("Boardman"). Idaho Power owns a 10o% interest in
Bomdman, which entitles the Company to approximately 50 average megawatts of generation
capacity. Application at 2. Boardman is scheduled to cease coal-fired operations on
Decernber 3 l, 2020. Order No. 32457.
Idaho Power requests the Commission approve an overall decrease to customer rates of
$1.06 million (0.09% decrease), effective January 1,2O20, to reflect the decrease associated with
STAFF COMMENTS DECEMBER 5,20I91
the Boardman levelized revenue requirement. See Application at 8. The Company proposes the
rate decrease be spread to all customer classes through a uniform 0.09%o decrease. See Id. al '7 .
The Company requests the Commission find all actual investments made at Boardman
through Decernber 31, 2018 were prudently incurred. 1d. at 8.
The Company requests the Commission approve an update to forecasted investrnents
through 2020 at Boardman to be included in the levelized revenue requirement mechanism
established in Order No. 32457. Id.
STAFF REVIEW AI\D ANALYSIS
Staff conducted a thorough review ofthe Company's Application. The review focused
primarily on: l) a review of the balancing account, including a review ofthe inputs to the
levelized revenue requirement and an audit ofthe actual capital investments through December
31, 2018; 2) a prudency review of prior actual capital investments through Decernber 31, 2018;
3) a review of forecasted investments for 2019 ar,d 2020; and 4) verification that any change in
rate would properly be distributed to customers. As a result of this review, Staff drew the
following conclusions :
I . Staff s financial audit of the balancing account actual inputs concludes the
expenditures were properly recorded, with the exception ofan error for one
project. Staffbelieves any adjustment for this error should made and included in
the next filing for Staff review. Therefore, Staffrecommends no adjustment be
made to the rates proposed by the Company as a result of this enor;
2. Staffwas unable to fully assess prudency ofhistorical project capital invesunents
due to insufficient project source documentation, complexity in attaining the
supporting documentation, and a short filing schedule;
3. Staffbelieves the Company's forecasted investments and future decommissioning
costs at Boardman are a reasonable prediction of future costs, and by including
them in the balancing account, intergenerational equity is maximized; and
4. Staffreviewed the Company's methodology and calculations for spreading the
reduction in rates to customers and believes it is appropriate and accurate.
Further details describing the basis of Staffs conclusions are described below.
STAFF COMMENTS DECEMBER 5,20I92
Balancing Account and Levelized Revenue Requirement
In Commission Order No. 32457,ldaho Power was authorized to establish a balancing
account designed to track incremental costs associated with the early closure of Boardman in
2020. These costs include: I ) the retum on undepreciated capital investments to Boardman from
2012 until the closure of the plant in 2020:2) any accelerated depreciation associated with
Boardman investments; and 3) any decommissioning costs related to Boardman closure.
Using the Commission approved retum on equity of 9.5%, the present value ofeach of
these revenue requirement iterns is calculated and the values are then levelized to be recovered
fiom customers over the remaining life of the Boardman plant. As a result of this process, the
Boardman balancing account levels the cost for the early retirement of the Boardman plant over
the remaining life ofthe plant. In addition, it provides an opportunity for a full recovery of all of
the prudently incurred actual costs, while collecting estimated Boardman costs from customers
who will benefit.
Proposed Changes lo the Levelized Revenue Requiremenl
Idaho Power requests an update to three components ofthe levelized revenue requirernent
effective January 1,2020: l') the amount associated with plant investments as of May 31,2012;
2) the amount for investrnents made after May 31, 2012; and 3) the decommissioning and
salvage estimates.
The update to plant investments as of May 31,2012 trues up the estimate from Decernber
31, 201 I through May 31 ,2012. Originally, the actual plant values through Decernber 31, 201 1
plus the estimate of investments through May 31, 2012 were included in the balancing account.
The Company also corrected an error in the calculation ofthe net presant value ofthe revenue
requirement on existing investments for the first year of the levelized revenue requirement
determination. The updated levelized revenue requiranent on existing investments through May
3l,2Ol2 is an increase of approximately $400,000.
The second component ofthe levelized revenue requirement is updated to reflect actual
investments from June 1,2012 through Decernber 31,2018, and the latest forecast for plant
investments through 2019. This is a decrease of approximately $370,000. The Company
anticipates that any costs associated with repairs will be expensed, therefore there are no plant
investrnents expected in 2020.
STAFF COMMENTS DECEMBER 5,20I91
Finally, the Company is proposing an update to the decommissioning and salvage costs
based on the 2015 CH2M Hill decommissioning study. This study updated costs for thnee iterns:
1) the Carty reservoir removal costs, which will not be incurred because the reservoir will remain
in service for Portland General Electric ("PGE"); 2) transmission assets that will not be removed,
and; 3) the Tower Road extension costs that are no longer needed. Although the Company has
received the results ofthe latest decommissioning study completed this year, the results ofthat
study were not included in this filing.
ln total, the updates from the 2015 decommissioning study will decrease the Idaho
jurisdictional levelized revenue requirement by 538,922. Staffhas reviewed the inputs and
calculations associated with these three adjustments and believes they are accurately reflected in
the updated Levelized Revenue Requirement calculation.
Additional Adjustments to the Revenue Requirement Calcalation
The Company also proposes to adjust for the monthly deviations between forecast
revenue collection and actual revenue collection. In addition, the Company proposes to adjust
for the deviations between the existing levelized revenue requirement calculations and updated
levelized revenue requirement calculations. Staff has reviewed these calculations for the true-up
olprior years' revenue calculations and the true-up associated with deviations in levelized
revenue requirernent amounts collected in previous years. Staffbelieves the calculations are
correct.
The total over-collection associated with higher sales volume, through Septanber 30,
2019, is $473,097 on an Idaho jurisdictional basis. Staff supports the Company's proposal to
refund this to customers effective January 1, 2020.
The over-collection associated with the lower than forecasted capital investments in the
levelized revenue requirernent amounts collected in previous years is $295,1 58. Staff also
supports the Company's proposal to refirnd this to customers effective January 1,2020.
Finally, the Company proposes to include the gain on the sale ofShared Facilities
between Idaho Power and PGE. ln 2014, the Company entered into an agreement to convey
50% of the Shared Facilities to PGE, as detailed in the letter provided to the Commission on
August 19, 2014. The gain on the sale, or$251,077 on an Idaho jurisdiction basis, is
appropriatel y flowed to ratepayers.
4STAFF COMMENTS DECEMBER 5,2019
The total of all the adjustments on an Idaho jurisdictional basis is a decrease of
$ 1,058,255 or 0.09Yo as shown Table 1.
Table l: Proposed Change in Revenue Requirement
Annual Revenue R uirement lm to Customers
($38,922)
($29s,l s8)
($473,097)
($2s 1.077)
Firuncial Audit
Staffrequested copies ofall work orders, supporting documentation, and source
documents for the actual capital investments from June 2012 through Decernber 2018, and made
a sample selection ofrepresentative projects for further review. Staff reviewed work orders
totaling $3,408,294 out ofthe total capital investrnent of$4,984,128 from June l,2012 through
December 31, 2018.
In addition, Staffreviewed the forecast and budget documents prepared by PGE for the
planned capital additions. To review unplanned projects - those projects that had not been listed
in the forecasts - Staff asked the Company to provide a list ofprojects and costs that had not
been included in the forecasted additions at the Boardman plant between 2012 to Dccember 31,
2018. Staffconcluded that the projects and costs on the list were largely associated with general
maintenance and repair, and therefore are relevant to the Company's share of Boardman
operations and were not carried out to extend the life ofthe plant or push out decommissioning.
To assess the Company's intemal controls, Staff reviewed the intemal audit reports with
supporting work papers relevant to the Boardman plant and the results ofthe Sarbanes-Oxley
Compliance Reports specific to the Boardman plant. Overall, Staff found that the intemal
controls were adequate and effective.
Staffdid not receive the source documents and other information necessary to undertake
a full review of the projects selected. Instead, the Company provided the work order packet
prepared when each proj ect is closed to Plant-in Service. Each work order packet generally
contained enough information to veriff that PGE had billed Idaho Power for the capital
investment, that Idaho Power had correctly applied AFUDC, and that Idaho Power had recorded
the capital project to the correct FERC account.
STAFF COMMENTS DECEMBER 5,20195
Net Change in Levelized Revenue Requirement
True-Up of Levelized Revenue Requiranent
True-Up of Prior Year Collections
Conveyance of Shared Facilities Gain
Stafls review raised two issues ofconcem. First, Idaho Power was overcharged by PGE
on a project to install a sewage lagoon liner, Work Order 27385087, which closed to plant in
2015. In 2014, the owners of Boardman entered into an agreement to convey a 50% interest in
Shared Facilities to PGE for use at their new generation project on the Carty Reservoir. Because
ldaho Power conveyed 50%o of its Shared Facilities to PGE in 2014, its ronaining interest in
those shared facilities is now 570. This project is part of the Shared Facilities investment.
For this project, Idaho Power recorded its portion ofthe capital investment at l0% rather
thar, Soh. In consultation with the Company, this was the only project that involved the Shared
Facilities subject to the Assel Purchase Agreement. Therefore, Idaho Power's investment would
be $39,704, rather than $79,409 as previously recorded. Staffrecommends the Company make
the necessary entries to Plant-in-Service to record the proper plant amount, and that the
difference of$39,704 be carried forward in the balancing account until the next review and be
used to offset future costs. Including this adjustrnent in this case would result in an additional
decrease of 0.0042% and would have a very minimal impact on rates.
Stafl s second issue is the lack of documentation ofthe capital projects, as discussed in
firther detail in the next section. Staff asserts the Company has a responsibility to the ratepayers
to be able to provide sufficient documentation to support capital investments at Boardman, both
from a financial standpoint and from an operational standpoint. Staff recommends the
Commission require this additional information be available for the next Boardman review, and
for all capital investrnents, whether done by the operating partner at the other thermal plants, or
by Idaho Power.
Prudence of Past Capital lnvestment
In its Application, the Company requested $4.98 million in capital investrnents made to
Boardman from June 1,2012 through December 31, 2018 be declared prudent and further
authorized by the Commission for recovery. These investments amount are reflected in Table 2.
6STAFF COMMENTS DECEMBER 5,2019
Table 2: Boardman Investments 2012-2018
Year ldaho Power Share of
InYestments
2012 26 $r 63,426 zl)
2013 26 $1,310,858 45
2014 t7 $2,813,8 r 6 45
2015 t2 $229,563 33
2016 l5 9286,744 29
2017 8 $26,499 l5
2018 sl53.222 23
TOTAL 122 $4,984,128 216
However, for several reasons described below, Staff recommends a determination of
prudence be delayed until the next balancing account true-up filing, but the cost ofthese
investments rernain in the balancing account and in rates so that iffound prudent, customers that
gained the benefit ofthese investments will appropriately pay for the cost. There are four
primary reasons that Staff recommends a delay for determining prudence.
First, the filing schedule supporting the Company's request to update rates, effective
January l, 2o20,has limited Staff s ability to fully complete the prudence review as requested by
the Company. The plant operator, PGE has completed 122 separate capital projects at Boardman
reflecting 2l 6 budget items over the 5% year period. PGE has also potentially included plant
investrnents which do not directly align with the plant closure at the end of 2020, or may have
benefited an adjacent operating plant directly owned by PGE. The combination of a very limited
time schedule and the sheer volume and complexity of investments did not allow Staff to
perform adequate due diligence.
Second, the Company has been unable to provide adequate documentation to allow Staff
to properly perform its due diligence. According to the Company, coordination of
documentation is constrained given that the Company defers the management, vetting, and need
for capital projects to the operator PGE. Production Response No. 4. The Company also
indicates there is limited ability by the Company to influence capital expenditures at the plant
due to contractual limitations as a I 07o owner in the plant. Production Response No. 4.
Regardless, Staffbelieves the Company is obligated to its customers to assure that capital
investments made at Boardman are prudent and reasonable and encourages the Company to
rernedy the lack ofreview and availability ofsource information prior to the next case.
7STAFF COMMENTS DECEMBER 5,20I9
Proj€cts Budget ltems
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Third, complexity of working through both the Company and PGE documentation has led
to Company errors. For example, in response to Staff s Production Request No. 6 for Project
27363452, the Company indicated that "ldaho Power's share ofthe Boardman Sulfur Dioxide
('SO2) Controls project cost was approximately $500,000." This conflicts with the $2,77'7 ,774
amount for 2014 that is reflected in spreadsheets for the project contained in a separate
production request response. Production Response No. 2 Attachment - Response to Request
No.2 - Exhibits and work papers; Tab-2018Adds; Cell F84. This difference leads to a
discrepancy of $2.92 million to the balancing account.
Finally, as mentioned previously, there was insufficient evidence that projects were
needed or completed efficiently and in a least-cost way. To determine prudence, Staffbelieves
project source documents such as operational history, regulatory requirements, initial budgets,
request for quotes and proposals, contracts, change order requests, schedules, construction status
reports, and Company communication are necessary to show need and how capital projects were
completed, not just that costs were paid. Staffbelieves that until the Company provides
documentation as evidence in order to make their case for prudence, Idaho customers should not
be locked into recovery for the investments.
Forecast Capital Investment
Staffreviewed the update to the Company's forecasted investment of $48,206 in
Boardman and recommends this update be reflected in the balancing account. Since initiating
the balancing account in 2012, the Company has continued to update its actual plant investment
on an annual basis, as well as updating the ranaining yearly forecast of investments through the
end ofthe plant's operating life. Staff does not believe any ofthese future investrnents appear to
be unreasonable given the remaining life of the plant. In contrast to prior updates, the Company
has determined that any plant investment made in 2020 would be expensed because the
investments are not needed to extend the life ofthe plant.
Rate Verification
Staffreviewed the Company's proposed rate change work papers, and believes its
proposed changes to rates are reasonable. The Company proposes to refund $ I .06 million
associated with Boardman levelized revenue requirement collections to all customer classes
through a uniform percentage decrease to all base rate components except the servioe charge.
8STAFF COMMENTS DECEMBER 5,2OI9
The Company allocated the decrease related to the Boardman balancing account using the
jurisdictional separation study methodology consistent with that used to determine the Idaho
jurisdictional revenue requirement in Case No. IPC-E-l l-08. The proposed change equates to an
overall decrease of 0.09%.
Customer Notice, Press Release and Public Comments
The Company's press release and customer notice were included with its Application.
Staffreviewed the documents and determined that both meet the requirements of Rule 125 of the
Commission's Rules of Procedure. The notice was included with bills mailed to customers
beginning with the cunent billing cycle (application is dated October 17, 2019) and ending
November 29, 2019, providing customers with a reasonable opportunity to file timely comments
with the Commission by the Decernber 5,2019 deadline. As of Decernber 4,2019, the
Commission had received no public comments.
STAFF R.ECOMMENDATIONS
Staff recommends the following:
L The Commission approve the decrease in customer rates of $ I .06 million,
reflecting the decrease requested by the Company, to become effective
January I , 2020;
2. The Commission defer a determination on prudency of investments through
Decernber 31,2018 until a later filing after adequate documentation is available;
and
3. The Commission approve inclusion ofthe updated forecast investments to be
made through 2020 in the levelized revenue requirernent mechanism, per
Order No. 32457.
STAFF COMMENTS DECEMBER 5,2019I
Respectfully submitted this 2 day of December 2019.
>.4"J
EdwardJ.(Ulll
Deputy Attomey General
Technical Staff: Kathy Stockton
Johan Kalala-Kasanda
Rachelle Famsworth
Bentley Erdwurm
Rick Keller
i rumisc/cornm€nts/ipcc I 9.32ejklsjkdberk comneots
STAFF COMMENTS l0 DECEMBER 5,2019
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 5th DAY OF DECEMBER 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-19-32, BY MAILING A COPY TFIEREOF, POSTACE PREPAID, TO THE
FOLLOWING:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: lnordstrom(Ei oDowcr.com
do c ke ts lzr-r idahoDorver.com
MATT LARKIN
IDAHO POWERCOMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: mlarkirr(r)i dalropower.com
SECRET Y
CERTIFICATE OF SERVICE
(