20180330Comments to IPC Status Report.pdf

Benjamin J. Otto, ISB No. 8292
Idaho Conservation League
Post Office Box 844
Boise,Idaho 83701
(208) 34s-6933 x 12
botto @idahoconservation. org
Travis Ritchie, CA Ba# 258084 (pro hac vice)
Sierra Club
2101 Webster Street, Suite 1300
Oakland, CA94612
(4ts) 977-s727
travis. ritchie@sierraclub. org
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
FOR ELECTRIC SERVICE TO RECOVER
COSTS ASSOCIATED WITH THE NORTH
VALMY PLANT
RECEIVED
?:tt8iiiR 30 PH 2:25
'': i'-
,. .,.11,1!l,l- i -.: . 1,.,,i,:-5lUli
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC-E-16-24
IDAHO CONSERVATION
LEGAUE AND SIERRA CLUB
COMMENTS IN RESPONSE TO
STATUS REPORT
In accordance with Order No. 33771 issued on May 31,2017 by the Idaho Public
Utilities Commission ("Commission"), Idaho Conservation League ("ICL") and Sierra Club
hereby submit the following comments in response to the Status Report filed by Idaho Power
Company on December 29,2017.
ICL and Sierra Club joined the Settlement Agreement approved by Order No. 33771. The
Settlement established target shutdown dates for Valmy Units I and2 in2019 and2025,
respectively. During the proceeding, Idaho Power asserted that it could not unilaterally decide to
shutdown the Valmy Units because its co-owner, NV Energy, also had to agree to shutdown
date. As part of the Settlement, Idaho Power agreed to negotiate with NV Energy to accomplish a
permanent end to coal-burning operations at Valmy Unit 1 and20l9 and Unit 2by 2025.The
Status Report filed by Idaho Power on December 29,2017 provided an update on those
negotiations.
Idaho Power designated the entire Status Report as confidential. ICL and Sierra Club
therefore do not discuss the details here. As of the date Idaho Power filed the Status Report,
ICL-SC Comment on Status Report
LPC-E-I6-24
March 30,2018
1
discussions were ongoing with NV Energy. Based on the representations made in the Status
Report, ICL and Sierra Club believe that Idaho Power is complying with the requirements of the
Settlement Agreement to use prudent and commercially reasonable efforts to negotiate an end to
coal burning at Valmy. However, despite these reasonable efforts by Idaho Power, it appears that
NV Energy remains an intransigent and irrational partner.
NV Energy's northern service territory is regulated by the Nevada Public Utilities
Commission under the business name of Sierra Pacific Power Company. Nevada requires its
utilities to submit detailed integrated resource plans ("IRP") every three years. Unlike the
process in Idaho, the IRP process in Nevada is conducted as an adjudicated proceeding. NV
Energy provides little to no opportunity to collaborate with stakeholders prior to filing the IRP.
Instead, the filing of the IRP initiates an adversarial process that includes discovery, evidentiary
hearings, and a final order from the Nevada PUC.
Sierra Club intervened in NV Energy's most recent IRP for its northern territory in20l6.
(Docket 16-07001.) That proceeding culminated in an order from the Nevada PUC finding,
among many other topics, that NV Energy had failed to provide sufficient analysis of NV
Energy's plans for the retirement of Valmy.l The Nevada PUC therefore ordered NV Energy to
develop and submit a"Life Span Analysis Process" (LSAP) for Valmy Units I and2 within a
year of the final IRP. NV Energy submitted the LSAP on February 16,2018. The LSAP is
attached to these comments as Attachment 1.
The LSAP revealed that NV Energy had shifted production at Valmy to "summer only."
(LSAP at p.18.) NV Energy's annual capacity factors are expected to be less than 5Yoin2020-
2022, even dropping below lYo in202l. The LSAP also concluded that it would be more
economic for NV Energy to close Valmy I in2019 and replace it with clean energy. (See LSAP
atp.25, Figure 7, "Scenario V1 in 2019".) Despite a net present value revenue requirement
benefit to closing Valmy I in2019 of more than $200 million over a 2}-year planning period,
NV Energy still concluded that it did not want to close the unit. NV Energy's rationale for
rejecting the lower cost scenario is that it does not think the Company has sufficient time to
acquire PV resources to replace summer capacity from Valmy.
I Final Order at11206, Feb. 16, 2017, Docket 16-07001. Available at:
http://pucweb I .state.nv.us/PDF/AxImaees/DOCKETS 201 5 THRU PRESENT/2016-7ll 8652.pdf
2
ICL-SC Comment on Status Report March 30, 2018
rPC-E-t6-24
NV Energy's lack of planning is appalling. Sierra Club had to ask the Nevada PUC to
compel NV Energy to take a thorough look at the plant. When it did, NV Energy concluded that
it will cost customers over $200 million on a 2}-year basis to keep that plant open compared to
buying a lower cost, cleaner alternative. Yet after dragging its feet and delaying the analysis for
years, NV Energy now claims that it does not have sufficient time to find the necessary
replacement resources.
NV Energy's poor planning and irrational decision making should be a cause for concern
to Idaho Power and the Idaho Public Utilities Commission. Idaho Power's 2017IRP assumes the
Company will retire its share of Valmy Unit 1 in20l9 to ensure a least cost portfolio for
Idahoans. NV Energy's LSAP confirms retiring Valmy Unit I in2019 is the least cost path for
Nevadans. Yet, NV Energy refuses to agree to that money saving proposition thereby creating
risk that Idahoans could be on the hook for NV Energy's uneconomic actions.
Based on our limited ability to review the efforts of Idaho Power through the confidential
Status Report, ICL and Sierra Club appreciate the efforts Idaho Power appears to be taking to
come to an agreement with NV Energy. However, based on NV Energy's actions, those efforts to
negotiate may not be sufficient to protect Idaho Power customers. ICL and Sierra Club therefore
recommend that Idaho Commission Staff remain engaged in the process related to Valmy and
provide support, as appropriate, to Idaho Power's efforts to extract itself from Valmy. Efforts
should include consideration of arbitration or other binding dispute resolution between the
utilities. Even if Idaho Power ultimately is required to pay some form of exit fee to NV Energy,
the savings for getting out of Valmy would likely overcome those costs.
Dated this 30th day of March, 2018
submitted,
Benjamin J. Otto
Attorney for ldaho Conservation League
/s/ Travis Ritchie
Travis Ritchie
Attorneyfor Sierua Club
J
ICL-SC Comment on Status Report
[PC-E-I6-24
March 30,2018
Benjamin J. Otto, ISB No. 8292
Idaho Conservation League
Post Office Box 844
Boise,Idaho 83701
(208) 34s-6933 x 12
[e-mail]
Travis Ritchie, CA Ba# 258084 (pro hac vice)
Sierra Club
2101 Webster Street, Suite 1300
Oakland, CA946l2
(4ts) e77-s727
travis.ritchie@sierraclub. org
IN THE MATTER OF THE APPLICATION )
oF rDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
FOR ELECTRIC SERVICE TO RECOVER )
COSTS ASSOCIATED WITH THE NORTH )VALMY PLANT )
Attachment I
NV Energy Life Span Analysis Process Report
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-16-24
IDAHO CONSERVATION
LEAGUE AND SIERRA CLUB
ATTACHMENT TO COMMENTS
YNVEnergy
Re
February 16,2018
Trisha Osbome
Assistant Commission Secretary
Public Utilities Commission of Nevada
I150 East William Street
Carson City, Nevada 89701
Docket No. 16-07001: Sierra Pacific Power Company d/b/a NV Energy's Triennial
Integrated Resource Plan; Valmy LSAP Compliances
Dear Ms. Osborne
On February 16, 2017, the Public Utilities Commission of Nevada ("Commission") issued an
Order in Docket No. 16-07001 addressing a petition for reconsideration filed by the Applicant,
Sierra Pacific Power Company d/b/a NV Energy ("Sierra"). In the February 16,2017 Order, the
Commission addressed challenges to the Commission's December 23,2016 Order, that included
references to sections of the December Order addressing the need to prepare updated Life Span
Analysis Process ("LSAP") assessments for Units I and 2 at the Valmy Generation Station (see,
paragraph 49 of the February 16,2017 Order; see also, paragraphs 176-208 of the December 23,
2016 Order). Ultimately, the Commission issued a Modified Final Order, which was attached to
the February 16,2017 Order as Attachmentl. See, ordering paragraph 2, February 16,2017 Order.
The Modified Final Order contains the following provisions:
207. Therefore, the Commission finds that an updated LSAP study is required 12
months from the issuance of this Order and shall reflect Valmy's expected mode of
operation, expected value attributes, and expected operation and maintenance costs
in this mode of operation.
208. Additionally the Commission finds that SPPC shall also file 12 months from
the issuance of this Order a plan for meeting system reliability requirements with
the retirement of the Valmy facility in2025. This plan shall include a description
of the reliability issues associated with Valmy coal-fired generation retirement,
analysis supporting these reliability concerns and proposals for generation,
operational, and transmission alternatives that can address these reliability
concerns.
Attached to this transmittal letter are the two analyses described above. The "2018 Update" to the
'North Valmy Generating Station, Unit 1 and Unit 2" LSAP was prepared by the generation and
resource planning groups and is filed in compliance with paragraph 207 . For ease of reference, this
analysis will be called the "Generation Valmy LSAP" below. The transmission group has prepared the
"Valmy Life Span Analysis & Retirement Study," dated February 2018, to comply with paragraph
208. This analysis is referred to as the "Transmission Valmy LSAP" below. Both analysis were
performed using the techniques and analytical frameworks described in the Commission's approved
P.O. BOX 98910, LAS VEGAS. NEVADA 89I51-()()O1 6226 WEST SAHARA AVENUE. LAS VEGAS, NEVADA 89146
P.0. BOX 10100, REN0, NEVADA 89520-002t+ 6100 NEIL ROAD, RENO, NEVADA 89511 nyenergy.com
Ms. Osbome
February 16,2018
Page 2 of3
LSAP, and governing long term resource and transmission planning. Thus both studies are supported
by material information set forth in technical appendices.
Portions of certain of the technical appendices contain confidential information. From the Generation
Valmy LSAP, the following technical appendices contain confidential information:
. Appendix B - Confidential Principles of Agreement
. Appendix D - North Valmy Generating Station Cost information
. Appendix E - Solar Photovoltaic Price Forecast
These documents are to be kept under seal as confidential commercial information pursuant to
NRS $ 703.190(2) and NAC S 703.527 et seq. This information derive independent economic
value from not being generally known, and is not known outside of Sierra. Furthermore, the
distribution of this information is limited within Sierra. Publication of this highly sensitive
commercial information would disadvantage Sierra and Sierra's customers by compromising
Sierra's abilities to successfully compete on customers' behalf in the energy market, both when
securing supply on behalf of customers or in selling into the market (the proceeds from the sale of
energy into the market are retumed to customers via the deferred energy accounting adjustment
mechanism). Finally, publication of this information would limit Sierra's abilities to participate in
competitive markets, advantaging competing market participants and hindering Sierra's abilities
to achieve the most favorable pricing, terms and conditions from competing suppliers on behalf of
customers.
For the Transmission Valmy LSAP, four discrete case studies were performed. Each is attached to the
Transmission Valmy LSAP, as Appendix A, B, C and D, and each contains confidential information.
One-line diagrams included within each case study are classified as Critical Infrastructure Information,
and confidential pursuant to the North American Electric Reliability Corporation's Critical
Infrastructure Protection standards and initiatives. As such, this information may not be publicly
disclosed to any unqualified individual or group. In addition, customer-specific load information is
discussed and utilized in each of the four analyses. This information is confidential pursuant to
assertions by the customers that their customer-specific load information is a trade secret under NRS
$ 49.190. As such, this information is confidential pursuant to NRS $ 703.190(2) and NAC 5 703.527,
et seq. Moreover, NRS $ 104.151 directs the Commission to adopt regulations that ensure "effective
protection for customers who depend upon electric service." NAC $ 704.320(4) provides that a utility
may not provide any information about is to customers to any other person for commercial purposes.
As such, customer-specific information is confidential and subject to protection under NRS $ 703.196
and NAC S 703.5274.
Confidential information is contained in a sealed envelope appropriately marked, and contains the
unredacted versions. The Company asks that this information be kept confidential for a period of
five (5) years, after which it may be retumed or destroyed at the convenience of the Commission.
All confidential information will be provided to the Regulatory Operations Staff and the Bureau
of Consumer Protection, both of whom have executed protective agreements in this docket.
Commercially confidential information will be provided to any other intervener in this docket who
makes such a request. However, Critical Infrastructure Information and customer-specific load
information cannot be provided to parties other than the Staff and BCP.
Ms. Osbome
February 16,2018
Page 3 of3
If you have any questions regarding the subject matter ofthis letter, please do not hesitate to contact
me at 7 7 5 -83 4-5 69 4 or [e-mail]
Respectfully submitted,
/s/ Elizabeth Elliot
Elizabeth Elliot
Associate General Counsel
cc: Parties of Record
GENERATION VALMY LSAP
NYEnergy
Life Span Analysis Process
North Valmy Generating Station,
Unit 1 & Unitz
Humboldt County, Nevada
2018 Update
North Valmy LSAP 2018
Table of Contents
EXECUTIVE SUMMARY7.0
2.0
2.1
2.2
2.3
2.4
3.0
3.1
3.2
3.3
4.0
4.1
4.2
4.3
UNIT DESCRIPTIONS
4
6
8
8
9
9
Projected Operation
Projected O&M Bu
Projected Capital Budget
ldaho Power Company
LSAP REASSESS M E NT CRIT E RI A 77
Unit Condition Considerations 13
Environmental Considerations 14
I nfrastructure Considerations 15
OPTION DEVELOPMENT 76
Base Case, Retire both Units 1 and 2 as of L2l3Ll2O25 L6
Option A - Early Retirement, Retire Unit 1 Early, as of 1213t12019 and Unit 2 t2l3tl2025tG
Option B- Extend operation to 2035 (Coal), Retire Unit I 12/3112025 and Unit 2
6.1 Economic Analysis
6.2 Assumptions
5.3 Results
6.4 Risk Discussion
7.0 LSAP RETIREMENT DATE RECOMMENDATION
16
4.4 Option C- Extend Operation to 2030 (Coal/Gas), Retire Unit 1 12/3112025 and Unit 2
Lzl3u2O3s
5,0 PI,/.NNING ASSUMPTIONS 78
5.1 Summer Only Operation 18
5.2 Labor 18
5.3 2Ot7 and 2018 Operations 19
5.4 Expected Operations Strategy: 19
5.5 Reserve Readiness 20
6.0 OPTION ANALYSIS 27
2t
24
24
25
26
Page2 of26
North Valmy LSAP 2018
Table of Figures
Figure I - Valmy Plant Photo 7
7
8
9
t9
Figure 2 - North Valmy Plant Location
Figure 3 - Projected Operations through 2025
Figure 4 - Projected O&M Budget
Figure 5 - Estimated Headcount
Figure 6 - Summary of Case Resorrces 23
25Figure 7 - Economic Analysis R.rrrlt.
Page 3 of26
North Valmy LSAP 2018
1..0 EXECUTIVE SUN/ItVIARY
In its December 23,2016 Order in consolidated Docket Nos. 16-07001, 16-07007 and
16-08027 ("Order"), the Public Utilities Commission of Nevada ("Commission")
ordered Sierra Pacific Power Company ("Sierra") to file an updated Life Span Analysis
Process ("LSAP") study for the North Valmy Power Plant ("Valmy"). At ParagraphZlT ,
the Commission ordered that an LSAP should be prepared, and that it "shall reflect
Valmy's expected mode of operation, expected value attributes and expected operation
and maintenance costs in this mode of operation." Valmy is available for operations only
in the summer (that is, between June I and September 30). The Commission also
required that Sierra file "a plan for meeting systems reliability requirements with the
retirement of Valmy facilities in2025."1
Sierra has prepared this LSAP in compliance with the Order. Based on the LSAP, Sierra
concludes that there is no basis, at this time, for requesting a change in the current
retirement of Units I and 2. At this time, there are no known environmental or pending
environmental regulations that would have a material impact on the cost of operating
Units I and2 in the manner planned by Siena.
Sierrahas an open capacity position in 2018, 2019 and2020.In 2016, Sierra completed
a Commission-directed 10-year capacity request for proposal that yielded no proposals
for capacity to be delivered to its system. The request for proposal led to the
recommendation to purchase the South Point Energy Center, which was denied by the
Commission on a 2-l vote in this docket. In the Order, the Commission directed the
Company to consider short-term capacity purchases only.
Pursuant to their energy supply plans, the Sierra and Nevada Power Company issued
requests for proposals in January 2018 seeking capacity products. With only one
response received, the Company determined that the process was noncompetitive and in
February 2018 re-issued the first of three request for proposals for 2018 capacity
products. The proposals were for 2018-only fixed priced products delivered to the Mead
trading hub based on anticipated liquidity. Subsequent requests for proposals will
include 2019 and 2020 fixed price products with delivery point to much less liquid hubs
within Sierra's system
Based on these results Sierra does not recommend changing the retirement dates at this
time of both Units I and 2 through2025.
Though there are no known approved or pending environmental regulations that would
materially affect Units 1 andZ,the general uncertainty regarding the future of coal plants
leads Sierra to make no recommendations to extend the requirements to operate beyond
lOrder at paragraph 208
Page 4 of26
North Valmy LSAP 2018
the current 2025 date at this time. The analysis provided in this report shows a small
benefit to the retirement of Unit I in2019, but before replacement capacity could be
acquired. This alternative involves relying on the market to meet the summer capacity
needs of Sierra's customers before replacement capacity could be acquired. In light of
Sierra's open capaoity position, the results of requests for capacity, the potential for
growth in Sierra's service territory, and the magnitude of the projected economic benefit,
Sierra concluded that there is no basis for requesting a change in the Unit I retirement
date at this time.
A second factor reinforces Sierra's conclusion. In Novembet 2018, Nevada voters will
cast ballots on Question 3. If Nevada voters approve Question 3, Sierra will sell its
generating units. The early retirement of either or both of the Valmy units would only
ensure that customers bear the cost of capacity from which they receive no benefit.
Stated differently, the continued operation of both Valmy units and sale of the units
would mitigate stranded costs, while retirement of the units would not.
Transmission considerations associated with the retirement of Valmy also have been
investigated. The results of that analysis are provided in a separate concurrently filed
report, Transmission Impacts: Valmy Life Span Analysis & Retirement Study. The
transmission study investigated the impacts on the transmission system under several
post- Valmy scenarios. The impacts on the transmission system and their potential
remedies identified in the transmission study are not addressed in this generation study;
however, it should be noted that any early retirement of the Valmy station will
necessitate earlier investment in the transmission remedies.
This LSAP only analyzes Sierra's share of Valmy and assumes that any change in
participation of co-owner Idaho Power Company ("IPCo") will not impact the results
reported in this analysis. This assumption is based on ongoing discussion between Sierra
and IPCo to address future operations and is discussed later in this document.
Page 5 of26
North Valmy LSAP 2018
2O UNIT DESCRIPTIONS
Valmy Generating Station is located between Winnemucca and Battle Mountain in a
remote section of Humboldt County, Nevada and consists of two coal-fired, steam
generating units, Unit I and Unit 2. Sierra and IPCo own the Valmy Station jointly, with
each having a 50Yo undivided ownership in the facility.
Unit 1 is rated for a net dependable capacity of 254 MW and is designed to fire
pulverized coal. Diesel oil is used as the start-up fuel. The unit optimally operates at an
approximate 10,350 BTUlkWh heat rate. Until recently, Unit t has operated as a base-
load unit. Unit I began commercially operating in 1981, and has operated continuously
for the past 36 years. Unit 1 is expected to be fully depreciated in2025.
Unit I is equipped with Low NOx burners for nitrogen oxide emission control, and a
baghouse for particulate emissions control. Ln2014, a Dry Sorbent Injection System was
installed and began operation to control mercury emissions. Unit I is also equipped
with a Continuous Emissions Monitoring System ("CEMS").
Unit 2 is rated for a net dependable capacity of 263 MW and is designed to fire
pulverized coal. Diesel oil is used as the start-up fuel. The unit optimally operates at an
approximate 9,860 BTU/kWh heat rate. Until recently, Unit 2 has operated as a base-
load unit. Unit 2 began commercial operations in 1985 and has been operated
continuously for the past32 years. Unit2 is expected to be fully depreciated in2025.
Unit 2 is equipped with Low NOx burners for nitrogen oxide emission control, a
baghouse for particulate emissions control, and a lime-based scrubber to control SO2
emissions. Unit2 is also equipped with a CEMS.
Both units currently meet all permitted emissions levels including the Mercury and Air
Toxics Standards ("MATS").
Figure 1 shows a picture ofthe Valmy station and Figure 2 provides a map ofthe location
of the units.
Page 6 of26
North Valmy LSAP 2018
I
f
North Valmy
LInit 2
Figure 1 - Volmy Plant Photo
Figure 2 - North Valmy Plant Location
Page7 of26
I
rI
t I
L
North Valmy LSAP 2018
2.1, ProjectedOperation
Given recent market prices for natural gas, operations at Valmy have been modified
from continuous base-load to summer-only to support customer demand during the
critical months of June through September. Based on Sierra's most recent fuel prices
forecast, Valmy's projected output through 2025 are reflected below. Under the
currently-projected operations scenario, both Units would be available to operate from
June to September and be in lay-up status the remainder of the year.
Figure 3 - Projected Operations through 2025
2.2 Projected O&lV Budget
With the reduced operational availability and summer only operation, the operations and
maintenance ("O&M") budget for Valmy has been drastically reduced. In the past five
years of continuous operations, the total Valmy Station O&M budget averaged $23.5
million ($11.8 million Sierra's share). The 2018 O&M budgeted expenditures are $18.8
million ($9.4 million Sierra's share). Sierra's projected O&M budget for 2019 through
2025 is $10.5 million and for the entire Valmy Station averages $21.0 million. These
reduced O&M levels are reflected in the PROMOD modeling of the Valmy Units in this
LSAP.
Sierra MWh 149,319 28,476 70,227 65,524 203,679 233,664 295,862
198,120 198,720 198,720 198,720 198,720 198,120 323,828IPCo MWh
227.196 268,947 264,244 402.399 432,384 609,690Total348,099
12%Sierra Capacity Factor 6%t%3%3%8%t0%
IPCo Capacity Factor 8%8%8%8%8%8%t3%
Total 7%5%6%5%8%9%13%
2019 2020 2021 2022 2023 2024 2425
Page 8 of26
North Valmy LSAP 2018
Va Station Forecast
Labor - Fixed
Labor - Variable
Fixed Operations
Fixed Maintenance
Variable Operations-
Consumables
Variable Operations
Variable Maintenance
Planned Outages
Unplanned Maintenance
Partnership Billing
8,916
7s0
1,966
2,819
7,841
750
2,062
2,949
10,263
750
1,956
2,849
9,',701
750
1,894
2,930
8,613
750
2,022
3,286
773
9
3,051
0
J,JJJ
(11,118)
8,274
750
2,048
3,231
5,903
750
1,930
3,219
863
9
2,713
0
1,180
(10,506)
591
9
)'75q
0
1,909
( 10,459) (
743
9
2,979
0
2,777
10,700)
1,181
9
3,102
0
3,909
(11,459)
1,3 15
9
3,091
0
3,876
(l 1,148)
1,802
9
3,066
0
5,019
(1 1,083)
2At9 2020 2021 2022 2023 2021 2025
Total Net Budget 10,136 10,088 10,3 18 t0,719 17,045 10,7 44 10,67 4
100% Cost 24,642 20,546 21,0t8 21,837 22,505 21,992 21,757
IPCo Billing Percentage -50.8% -50.8% -50.8% -50.8% -50.8% -50.8% -50.8%
Figure 4 - Projected O&M Budget
2.3 Projected Capital Budget
Under current operating assumptions, the capital budget for the Valmy Station has also
been dramatically reduced. The current capital budgets only include nonnal capital
replacement of damaged or worn out equipment. No major capital expenditures are
expected for the Valmy Units through2025.
2.4 ldaho Power Company
In its 2015 Integrated Resource Plan ("IRP"), IPCo noted that the portfolios with a2019
early retirement of Unit I showed favorable economics, but also indicated, "...these
portfolios carry considerable risk ..."2 Due to these risks, IPCo recommended a
preferred portfolio which included the retirement of both Valmy units at the end of 2025.
In its 2017 IRP, IPCo changed its preferred portfolio from its 2015 IRP, in which it
contemplated the retirement of both Valmy units at year-end 2025. IPCo modified its
baseline assumptions regarding risk associated with the retirement of Unit 1 in2019,
indicating that their customers' economic benefits of retiring Unit 1 in2019 outweighed
the risks and as a result, recommended changing the retirement of their share of Unit 1
to 2019, maintaining its Unit 2 assumption to year-end2025.
2 Idaho Power Company 2015 Integrated Resource Plan, page l0
Page9 of26
North Valmy LSAP 2018
In that same IRP, on page 68 under the section heading "Nevada without North Valmy"
IPCo states that "...wholesale energy from Nevada is likely to encounter scarcity and/or
costly energy." In the same section on page 68, the IRP states "Idaho Power recognizes
the assumption that wholesale capacity imports from Nevada can replace North Valmy
generating capacity may prove unfounded, and future IRPs may need to reflect such a
change."
In its OrderNumber 33771to Docket IPC-E-16-24, a depreciation rate filing, the Idaho
Public Utilities Commission approved a Settlement Stipulation between the parties. In
the Settlement Stipulation, IPCo agreed: "The estimated target shutdown dates for the
two coal-burning units at Valmy are the end of 2019 for Unit l, and end of 2025 forUnit
2...."3 The Settlement Stipulation also provides that IPCo "will negotiate with co-owner
NV Energy using prudent and commercially reasonable efforts to accomplish a
permanent end to coal-burning operations of Valmy Unit I by December 31,2019, and
of Valmy lJnit2 by December 31,2025."4. Alternatively, the Parties agreed that Idaho
Power would use prudent and commercially reasonable efforts to "end its participation
in the operation of fValmy] Unit 1 by December 31, 2019, and [Valmy] Unit 2 by
December 31,2025.t.
IPCo agreed to provide the Idaho Commission and parties to the IPCo 2017 IRP a status
report on such negotiations with NV Energy by Decemb er 3l , 2017. The Parties agreed
to file comments responding to such status report by March 31,20186
On December 29,2017,lPCo completed a compliance filing for Case Number IPC-E-
16-24, which included a document entitled "Confidential North Valmy Power Plant
Status Report." Sierra was not party to the proceeding before the Idaho Commission or
to the settlement agreement.
The Operating and Ownership Agreements between Sierra and IPCo that govern their
involvement in the Valmy Station, do not address the circumstance in which one party
chooses to end its involvement in one or both units. Sierra and IPCo have begun
discussions regarding an agreement that would allow one party to end its involvement
in one or both units independent of the other party. The companies have developed a
confidential, principles of agreement that would govern a future agreement. These
principles of agreement are included as Appendix B which is confidential.
3 IPUC Order No. 33771, Settlement, page 3 (Order Attached as Appendix A)
4Id.at6
sId
6.Ld.
Page 10 of26
North Valmy LSAP 2018
3 O LSAP REASSESSTVIENT CRITERIA
As generally conceived, the LSAP provides an initial life span estimate of a generating
unit based on its design and intended mode of operation. The LSAP is unique among
electric utilities, and provides a revenue-neutral opportunity for quantitative and
qualitative assessments (i.e., outside depreciation filings) of generation unit conditions
and expected lives. An initial life span for a generating unit is established when the unit
is first put in service, or in the case of older units, when an LSAP was approved by the
CommissionT, using the Reassessment Protocol.
After a particular generating unit is commissioned and has been in operation, its life
span may be reassessed to ensure that the initial life span is still valid, or to determine
whether a new life span is more appropriate for the unit. The reassessment of unit life
span can be undertaken for any of the following criteria:
Reassessment C riteria :
. Annual Business Plan Reviewo Last Decade of Unit Life Spano EnvironmentalComplianceo Infrastructure. Significant Event
o PUCN Ordered Reassessment.
When a reassessment is undertaken, it can range from a cursory review to a much more
detailed analysis, depending on the nature of the revisit. For example, during the initial
years of operation, the reassessment due to an Annual Business Plan Review may be
relatively simple and result in a business decision confirming the Initial Life Span
Assessment. At the other end of the spectrum, a unit entering its planned last decade of
operations may face operational, maintenance, environmental and infrastructure issues
that could necessitate a detailed review to assess the remaining life span. Regardless of
the nature of the review, the key steps of the Reassessment Protocol are as follows:
. Unit Assessment. EnvironmentalAssessmento InfrastructureAssessmento Development of Options. Options Input to Resource Planning and Financial Analysiso Final Decision on Life Span Assessment and Implementation Plan
Per the approved LSAP, the following reassessment criteria have been met, triggering
an evaluation of the operating life for the Valmy Units: they are within l0 years of their
7 The Life Span Analysis Process ("LSAP") was approved by the Public Utilities Commission ofNevada
in Docket Number 08-08002.
Page ll of 26
North Valmy LSAP 2018
last-approved retirement dates, and the Commission has ordered a reassessment.
The following provides a brief explanation of the above triggers and determines the
criticality of each trigger for the LSAP analysis.
Units are Within 10 Years of Last Annroved Retirement Date
In2012, Sierra filed8 a LSAP for Unit I with the Commission that used a 40 year life
for the Unit and concluded that uncertainty surrounding coal-fired generation at the time
led to recommending no changes to the retirement date of 2021. ln that docket, the
Commission ordered additional information be provided in a revised Valmy Unit 1
LSAP that was to be filed as part of Sierra's 2013 Depreciation study.
The revised LSAP for Unit I was filed in Sierra's 2013 Depreciation Study Dockete.
Sierra reaffirmed the 2021 retirement date in its filing; however, the Commission
ordered that a 2025 retirement date be used to coordinate its retirement with Unit 2's
2025 retirement date.
In its 201 6 IRP 10, Sierra completed an additional cursory review of the Valmy retirement
dates, as the units were now within l0 years of the Commission-approved retirement
dates. The cursory review was completed because there were no major investments or
regulatory changes that would drive an in-depth analysis and Sierra recommended
maintaining the 2025 retirement dates for both units. As noted previously in this
document, the Commission ordered Sierra to file this updated LSAP.
Commission Ordered Reassessment
At Paragraphs 207 and 208 of the Commission's Order in Sierra's 2016 IRP, the
Commission ordered Sierra to file an updated LSAP within twelve months. Sierra sought
reconsideration of a portion of the Order addressing Valmy and the rejected acquisition
of the South Point combined cycle unit. A final order was issued in February 16,2017.
This LSAP is intended to satisfy the LSAP portion of that Order. The "system
reliability" study and plan are being filed with, but are not incorporated into, this LSAP.
The results of that analysis are provided in a separate concurrently filed report,
Transmission Impaots: Valmy Life Span Analysis & Retirement Study.
8 Docket No. 12-08009
e Docket No. l3-06004
ro Docket No. l6-07001
Page 12 of26
North Valmy LSAP 2018
3.1 Unit Condition Considerations
North Va Unit 1
Unit I is 36 years old. The unit was designed to be a base-loaded unit. The unit is within
10 years of the last Commission approved retirement date, 1213112025.
2011 Major Overhaul. A major overhaul was completed in the first half of 2011 that
focused on reliability and included the following in the scope of work:
o A turbine major overhaul was performed on the high pressure, intermediate
pressure and low pressure sections where the turbine was disassembled and
damaged components were repaired or replacedo An upgrade was completed on the turbine valves.
o The generator rotor was removed and testing was performed. Minor repairs were
completed on the generator.
o The low NOx burners were refurbished, including replacing the coal nozzles.
o The reheater and secondary superheater tube sections in the boiler were replaced.o The baghouse reverse air fans and motors were replaced.
o Modifications were made to the soot blowing system.
o A new cooling tower was erected to replace the original cooling tower.
o The voltage regulator and exciter were replaced.
2014 Overhaul. A dry sorbent injection (DSI) system was installed in Unit 1 in2014.
The control systems for the plant were replaced and updated. No significant additional
control systems work is considered necessary at this time.
2016 Major Overhaul. A major overhaul was completed in the first half of 2016 that
focused on reliability. Baghouse filter bags and baghouse doors were replaced. The
circulating water line was refurbished and recoated. Arc flash protection devices were
installed in Unit I as well as the coal yard thawing shed. The clarifiers in both units were
refurbished. New continuous emissions monitoring system ("CEMS") equipment was
installed in both units. New ceramic lined coal piping was installed.
North Valmy Unit 2
Un\tZ is 33 years old. The unit was designed to be a base-loaded unit. The unit is within
l0 years of the last Commission approved retirement date, 1213112025.
2010 Major Overhaul. A major overhaul was completed at Unit 2 in the first half of
2010 that focused on reliability. A turbine major was performed on the high pressure,
intermediate pressure and low pressure sections where the turbine was disassembled and
damaged components were repaired or replaced. During the 2010 outage, an upgrade
also was completed on the turbine valves. The generator rotor was removed and tested.
Minor repairs were completed on the generator. The reheater tube sections in the boiler
were replaced. Modifications were made to the soot blowing system. In addition, the
voltage regulator and exciter were also replaced.
Page 13 of26
North Valmy LSAP 2018
2015 Major Overhaul. A major overhaul was completed in the first half of 2015 that
focused on reliability. The Unit 2 cooling tower was replaced along with the circulating
water pumps. The circulating water piping was refurbished and recoated. The Bumer
Management System (BMS) and plant control systems were upgraded. An arc flash
protection system was installed. The existing low NOx bumers and the bottom ash
system were refurbished. The primary air duct system was upgraded. The air pre-heater
baskets were replaced. The existing scrubber had an extensive refurbishment performed
to upgrade the scrubber systems. The fly ash dry unloader was replaced as well.
3.2 Environmental Considerations
Both Valmy units are in compliance with all environmental agency issued permits and
associated emissions limits, including those required by MATS. Other than the Coal
Combustion Residuals ("CCR") rule described below, no other specific environmental
regulations are known at this time that would directly impact the operations of either
unit at Valmy.
The United States Environmental Protection Agency ("EPA") finalized national
regulations to provide a comprehensive set of requirements for the safe disposal of
CCRs, commonly known as coal ash, from coal-fired power plants. See, 40 CFR Part
257.The final rule is the culmination of extensive study on the effects of coal ash on the
environment and public health, and became effective on October 14,2015. The rule
establishes technical requirements for CCR landfills and surface impoundments under
subtitle D of the Resource Conservation and Recovery Act ("RCRA"), the nation's
primary law for regulating solid waste. Only the landfill at Valmy is subject to the CCR
rule. The final rule makes a number of changes from the proposal including providing
greater clarity on technical requirements in response to questions received during the
comment period.
These regulations address the risks from coal ash disposal -- leaking of contaminants
into ground water, blowing of contaminants into the air as dust, and the catastrophic
failure of coal ash surface impoundments. Additionally, the rule sets out recordkeeping
and reporting requirements as well as the requirement for each facility to establish and
post specific information to a publicly-accessible website. This final rule also supports
the responsible recycling of CCRs by distinguishing safe, benefrcial use from disposal.
In conformance with the CCR rule, Valmy maintains continuous compliance with all
sections and deadlines including the following:
. General Provisionso LocationRestrictionso Design Criteria. Operating Criteria. Groundwater Monitoring and Corrective Actiono Closure and Post-Closure Care, and. Recordkeeping, Notification, and Posting of Information on the Internet
Page 14 of26
North Valmy LSAP 2018
3.3 lnfrastructure Considerations
Infrastructure for a unit includes all those support systems that allow it to generate and
deliver power to the customer. They include land, roads, railways, fuel supply, water
supply, transmission access and other features.
The LSAP analysis focuses on current and forecasted changes to the infrastructure
elements. Contracts govem many of these infrastructure components and at any time
during the life span of a unit, the renewal, expiration or negotiation of such contracts
may result in impacts t the economic viability of the Unit. Similarly, market conditions
are associated with some infrastructure components, with fuel being a prime example.
Currently no generation infrastructure concerns have been identified for Valmy.
However, impacts of retiring Valmy on the electrical system are discussed in the
Transmission Impacts: Valmy Life Span Analysis & Retirement Study.
Page 15 of26
North Valmy LSAP 2018
4 O OPTION DEVELOPIVIENT
The alternatives identified for the future utilization of Sierra's share of Units I & 2
represent different options of capital investments in the facility to allow safe and reliable
operation of the unit in accordance with environmental regulations. Because Sierra does
not control IPCo's share of Units 1 and 2, it is not considered in the analysis._These
scenarios do not consider any purchase by Sierra of IPCo's share of either unit.
4.1 Base Case, Retire both Units l and 2 as of 12/3112025
This alternative assumes that Sierra's share of both units will operate through December
31,2025. This altemative does not require significant investment in capital for the
remaining life of the units. The units can be expected to continue operating during the
summer to support customers and the transmission grid as necessary in addition to
providing energy until their retirement. At retirement on December 31, 2025,bolh Sierra
and IPCo retire their interests in the units.
4.2 Option A - Early Retirement, Retire Unit 1 Early, as of t2/31120t9 and Unit 2
1.2/31./2025
This alternative assumes that Sierra's share of Unit I will operate through December 31,
2019, and Unit 2 will operate through December 31, 2025 as planned. This altemative
does not include any significant investment in capital for the remaining life of the units.
The units can be expected to continue operating during the summer to support customers
and the transmission grid as necessary in addition to providing energy until their
retirement. Upon retirement of Unit 2 on December 31,2025 both Sierra and [PCo retire
their interests in the units.
4.3 Option B- Extend operation to 2035 (Coal), Retire Unit 1 t2/31/2025 and Unit 2
1,2131.12035
This alternative assumes that Sierra maintains its current share of Valmy's output through
December 31,2025 through operation of both units, after which, Sierra maintains its
current share of Valmy's output through operation of Unit 2 only until 2035. This
altemative does not require any significant investment in capital for the remaining life of
the units. The units can be expected to continue operating during the summer to support
the transmission grid as necessary in addition to providing energy until their retirement.
Page 16 of 26
North Valmy LSAP 2018
4.4 Option C- Extend Operation to 2030 (Coal/Gas), Retire Unit 1 12/3U2025 and Unit
2 L2131./2035
This alternative assumes that Siena maintains its current share of Valmy's output through
December 31,2025 through operation of both units, after which, Sierra maintains its
current share of Valmy's output through operation of Unit 2 only until 2035. This
altemative would include major investments in a gas pipeline and burner equipment to
convert Unit 2 to natural gas no later than December 31,2025. The units can be expected
to continue operating during the summer to support the transmission grid as necessary in
addition to providing energy until their retirement.
PagelT of26
North Valmy LSAP 2018
5.0 PLANNING ASSUVIPTIONS
The following Planning Assumptions are used in the PROMOD analysis and in Sierra's
business planning.
5.1 Summer Only Operation
Following a production forecast in April of 2016, the NV Energy Management Team
revisited the operations plan for Valmy. In conjunction with IPCo, Sierra modified the
operational philosophy at Valmy. Like most coal-fired generation, the units at Valmy
had traditionally been baseload operations on a year-round basis. Based on market
conditions and forecasts at that time, that operating philosophy was modified, and going
forward both Valmy units are forecasted to operate at modest capacity factors in the
summer months and to not operate at all in the shoulder and winter months unless
required for longer term system reliability concerns. This summer-only operation results
in lower O&M costs for Valmy and lower capital replacement expenses as a result of
the lower operation level. The following factors are expected as a result of the summer-
only operation:
. LABOR - Reduction is based upon attrition of headcount. Overtime was not
changed.
. MAINTENANCE - Reduction of fixed maintenance is due to contractor
displacement and deferred maintenance. The reduction in variable maintenance
was based upon the lower production forecast.
. CONSUMABLES - Reduction is based upon the production forecast.
. PLANNED OUTAGES - Reduction is due to the lower production forecast, and
the completion of planned outages in 2015 and2016.
. OPERATIONS - Reductions in fixed and variable costs
. LINPLANNED OUTAGES - Reduction is due to the lower capacity factor
5.2 La bor
The change in Valmy's operating mode from base load operations to seasonal operations
has already resulted in adjustments to staffing, operational and maintenance practices.
Seasonal operation has reduced wear and tear on machinery thus delaying the need for
major planned outages through 2025. Under the current operating mode, contractors
who have traditionally performed maintenance have been displaced by Valmy plant
operations and maintenance personnel during the off-peak months, thereby providing
year-round work for Valmy personnel and reducing costs. Operations and maintenance
teams continue to optimize this model through cross training. Traditional maintenance-
only personnel will continue to learn and qualify to operate Valmy's units and during
the off peak season, traditional operations-only personnel train to perform necessary
Page 18 of26
North Valmy LSAP 2018
maintenance. Valmy is large and complex, and it is essential to ensure the utmost
performance in safety and environmental stewardship. Training and qualifying
personnel to keep pace with attrition, and ensuring that all personnel are capable of
displaying necessary knowledge, skills and abilities to perform essential operational and
maintenance tasks, are of great importance. The continued costs of training and
qualifying operators using this operational mode has been spread out through the
assumed remaining life of the plant.
Moreover, the team continues to investigate opportunities to redeploy labor to other
aspects of NV Energy's operations to capture efficiencies. If these efforts prove
successful, the efficiency gains would further the impact of retaining Units 1 and 2 for
summer-only operations.
The following table shows the budgetary estimates of labor for the Valmy Station
assuming a 2025 retirement date. If operation is continued through 2030 with Unit 2,
the 2025 staffing level would be maintained through 2030:
Figure 5 - Estimated Heodcount
5.3 2017 and 201-8 Operations
Valmy has made a successful transition from year-round operations to summer-only
operations. Sierra and IPCo intend to operate both units as dispatched from June I to
September 30 each year. At the conclusion of each peak season, Units I and 2 will be
considered unavailable until the next year summer operation peak season unless a
longer-term reliability concern in the transmission system requires a return to service In
the off-peak season, Valmy has displaced all support contractors, with the exception of
the landfill maintenance contractor during off-peak months.. The majority of operations
and maintenance shift personnel will be moved from shiftwork and assigned to training
and maintenance duties during off-peak months. The control room will continue to be
staffed 24 hours a day, with plant personnel as deemed necessary by Valmy
management.
5.4 Expected Operations Strategy:
Unit I - Unit I will be laid up for freeze protection purposes and considered unavailable
from November I to May 3l each year unless a longer-term reliability concern in the
transmission system requires a return to service. Valmy will start the restoration process
for summer peak operations each April and will be fully available for generation June I
Current 201 8 2019 2020 2021 2022 2023 2024 2025
Estimated
Headcount 8l 8l 78 72 66 62 58 54 40
Page 19 of26
North Valmy LSAP 2018
through September 30, during which period the unit will be subject to dispatch in
accordance with the existing operating agreements between Sierra and IPCo.
Unit 2 - Unit 2 will be laid up for freeze protection purposes and considered unavailable
from November I to May 31 each year unless a longer-term reliability concern in the
transmission system requires a return to service. Valmy will start the restoration process
for summer peak operations each April and will be fully available for generation June 1
through September 30, during which period the unit will be subject to dispatch in
accordance with the existing operating agreements between Sierra and IPCo.
5.5 Reserve Readiness
During peak periods when a unit is readily available for cold start; the boiler will be
flash dried and emptied, turbine generator will be on tuming gear, generator is gassed,
cooling tower is filled and circulating water system is in service, closed cooling system
is in service, prestart- up checks are in progress or reoccurring and scheduled and non-
scheduled maintenance is performed.
During off peak periods; turbines are taken off turning gear, the boilers are drained and
flash dried, cooling towers are drained, generators are degassed ofhydrogen, and dry air
is circulated through the boilers. Units are laid up for freeze protection and heaters
installed throughout plant. Scheduled and non-scheduled maintenance continues to
ensure readiness.
Page20 of26
North Valmy LSAP 2018
6.0
6.1
OPTION ANALYSIS
Economic Analysis
Case Development
Cases developed for the economic analysis did not include any changes to Sierra current
transmission import capability. It was assumed that the Clark Mountain 3 & 4, Fort
Churchill 1 & 2, and Tracy 3 would continue operation until 2030. Even with this
change to the long-term supply plan, Sierra will continue to be short of capacity once
Valmy retires. A summer-only tolling agreement, assumed to be intemal to the Sierra's
system, was modeled as a replacement resource in each case once both units were
retired. This additional resource maintained a consistent level of reliability between the
cases. Transmission system upgrades were included in the economic analysis once both
Valmy units retired. The costs are taken from the Transmission Impacts: Valmy Life
Span Analysis & Retirement Study.
For the option retiring Unit I early, two cases were developed. One case replaced Unit
I capacity with market purchases and the other case replaced Unit 1 with a new PV
resource within the northern system.
A brief description of each case is given below
a BASE
Described in Section 4.1 of this document. Summer-only (June - September) operation
of both units, with no change in ownership or retirement dates (2025). Transmission
upgrades are required by 2026 estimated to cost $27.5M in 2017 dollars.
a V1 in 2019 - ]VIARKET
Described in Section 4.2 of this document. Summer-only operation of both units. Both
S ierra and IPCo retire Unit 1 on December 3 1 , 2019 and Unit 2 on Decemb er 3l , 2025 .
Market purchases are used to replace Valmy I capacity and energy. Transmission
upgrades are required by 2026 estimated to cost $27 .5m in 2017 dollars.
o Vl in 2019 - PV
Described in Section 4.2 of this document. . Summer-only operation of both units.
Sierra and IPCo retire Unit 1 on December 3 I ,2019 and Unit 2 on December 31,2025.
A new purchased power agreement ("PPA") for 35 MW of PV beginning Jantary 2021.
Additional PPA(s) for 295 MW of PV are modeled beginning January 2022.
Transmission upgrades are required by 2026 estimated to cost $27 .5m in 2017 dollars.
Page2l of26
North Valmy LSAP 2018
a Y2to 2035 on coal
Described in Section 4.3 of this document. Summer-only operation of both units. Both
Sierra and IPCo retire Unit I on December 31, 2025. After December 31, 2025 Sierra
receives 100%ofitscurrentshareofValmyfromUnit2only.Unit2continuessummer-
only operation on coal until itretires on December 31,2035. Transmission upgrades
would be required by 2036 estimated to cost $27.5m in2017 dollars.
o V2 to 2035 on eas
Described in Section 4.4 of this document. Summer-only operation of both units. Both
Sierra and IPCo retire Unit I on December 31, 2025. After December 31,2025 Sierra
receives 100% of its current share of Valmy from Unit2 only. Conversion of Unit2to
natural gas operation with investment in a natural gas pipeline and new burners. Unit
2 continues summer-only operation on gas until it retires on December 31, 2035.
Transmission upgrades would be required by 2036 estimated to cost $275m in 2017
dollars.
A brief summary of the changes to the supply plans for each case is shown in Figure 6
below.
Page22 of26
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Page 23 of 26
It should be noted that the case 'Vl in20l9 -PV' (third in the above table), is different
from all other cases. The renewable placeholders were changed so the case met - but
did not exceed - Sierra's compliance with its renewable portfolio requirement. This
case is not intended to be a low-carbon-intensity case.
A detailed loads and resources table for each case is included in Appendix C.
6.2 Assumptions
Each case was analyzed using PROMOD for the production cost modeling tool, the
Nevada Power and Sierra load forecasts which were submitted for approval as part of
Sierra's 2nd Amendment to its 2016 Integrated Resource Plan (Docket 17-11003, and
the market fundamentals forecast from Sierra's Energy Supply Plan (Docket 17-09002).
The operating and maintenance (O&M) costs associated with each operating
configuration of Valmy is included in Appendix D. There was no continuing capital
modeled for any of the cases.
The 330 MW of PV was modeled to resemble the expected responses to the renewable
RFP issued January 2018. The model is not the same data used for placeholder PV in
the renewable buildout. The 330 MW of PV has a lower price and a small amount of
annual degradation in the expected output. The model of the PV can be found in
Appendix E. The cost data labeled "high" was used in this analysis because it was
similar to the pricing of existing PPAs and the assumed in-service date was later than
suggested in Appendix E.
Additional capital was modeled for the conversion of Unit 2 from coal to gas operation.
An estimated $2m would be needed for the change out of the burners. The gas lateral
needed to serve Valmy was estimated at922.5m. Both estimates were assumed to be in
2017 dollars. The gas priced used in this case was Malin.
6.3 Results
The economic analysis considers capital costs and fixed and variable O&M costs, as
well as system dispatch cost when calculating PWRR. Five, ten, twenty and thirty year
PWRR impacts were calculated. The total PWRR (plant capital * production*
transmission upgrade) costs for the cases are shown below.
Page 24 of 26
North Valmy LSAP 2018
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The case replacing Unit I in20l9 with 330 MW of PV has the lowest cost over all years
in the study. The most expensive option in every PWRR scenario is the early retirement
of Unit I in2019 and relying on the market for replacement energy. The cost difference
between the lowest cost option and the base option in the five year PWRR equates to
approximately $3.4 million per year in increased cost. That cost difference only climbs
to $10.9 million per year in the 10 year PWRR. In both cases, Unit2 would continue to
operate until2025, then retire.
Workpapers associated with these results below can be found in Appendix F.
6.4 Risk Discussion
The plan that retires Unit 1 in20l9 and replaces it with solar PV has the lowest cost, but
carries some unique risks that must be considered. Cases in which Unit I is retired early
have the largest open positions among the cases studied (refer to Figure 6.1), and
therefore the greatest exposure to market price fluctuations and potential for energy
shortages. The least-cost plan assumes that the necessary amounts of solar PV can be
available in the timeframe modeled. Even small delays in the construction of new solar
resources could change the least-cost into a much more expensive plan.
The advantage to keeping Valmy operational is the surety of the resource. It is an
existing resources with a long operating history and a fuel supply on site. Other energy
and capacity resources are modeled as less expensive but without the certainty of a
constructed facility - or at least an executed contract - it is only an estimate of the actual
cost.
Valmy also has the potential to provide system reserve readiness. As described in
Page21 of26
North Valmy LSAP 2018
Section 5.5, Valmy could be called on in times of natural gas high prices or low
availability. It could be made available in times of system emergencies.
7 O LSAP RETIREIVIENT DATE RECOIVITVIENDATION
The recommendation of this LSAP is to continue operating Units I and 2 in seasonal
mode through2025. Considering the very small system benefit of early retirement of
Unit I presented in the PWRR analysis and the risks noted above, continued operation
provides a lower risk option at a minimal cost. Continued operation of the unit provides
some risk mitigation with respect to natural gas volatility in the short term. Additionally,
with the unknown results of the Energy Choice Initiative to be voted on in November of
2018 and the impact on the price of new solar PV resources as a result of the Solar
Module Tariffs instituted in January 2018, the prudent direction at this point in time is
to maintain the existing retirement dates until more information is known on these
issues.
Though there are no other known approved or pending environmental regulations that
would materially affect the Valmy Units, given the general uncertainty concerning coal
plants, Sierra currently believes there would be a high level of uncertainty forecasting
environmental capital requirements to operate Unit 2 past2025 on coal.
Page26 of26
CERTIFICATE OF SERVICE
I hereby certify that on this 30th day of March2018 I delivered true and correct copies of the
foregoing Comments to the following persons via the method of service indicated.hk='
Hand delivery:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise, ID 83702-5983
(Original and seven copies provided)
Electronic Mail
Idaho Power
Lisa D. Nordstrom
Matt Larkin
Idaho Power Company
P.O. Box 70
Boise,Idaho 83707
lnordstrom@idahopower. com
mlarkin@idahopower. com
dockets@idahopower. com
IIPA
Eric l. Olsen
ECHOHAWK & OLSEN, PLLC
[e-mail]
Anthony Yankel
[e-mail]
ICIP
Peter J. Richardson
Richardson Adams, PLLC
peter@richardsonadams. com
Dr. Don Reading
[e-mail]
Benjamin J. Otto
Micron
Pete Bennett
Micron Technology, Inc.
[e-mail]
Thorvald A. Nelson
Frederick J. Schmidt
Emanuel T. Cocian
Brian T. Hansen
Holland & Hart, LLP
[e-mail]
fschmidt@hollandhart. com
etcocian@hollandhart. com
bhansen@hollandhart. com
[e-mail]
klhall@hollandhart. com
kmtrease @ho llandhart. com
DOE
Steven Porter
Office of the General Counsel
Steven.Porter@hq. doe. gov