HomeMy WebLinkAbout20201231Final_Order_No_34885.pdfORDER NO. 34885 1
Office of the Secretary
Service Date
December 31, 2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION TO
DECREASE ITS RATES FOR ELECTRIC
SERVICE FOR COSTS ASSOCIATED WITH
THE BOARDMAN POWER PLANT
)
)
)
)
)
)
CASE NO. IPC-E-20-32
ORDER NO. 34885
On August 21, 2020, Idaho Power Company (“Idaho Power” or “Company”) applied
to decrease customer rates to reflect the Boardman Power Plant (“Boardman”) ceasing operations.
The Idaho Conservation League (“ICL”) was granted intervention on September 29,
2020. See Order No. 34791. On November 18, 2020, the Commission issued Notice of Modified
Procedure and set comment and reply comment deadlines for interested persons and parties and
the Company.
The Commission Staff (“Staff”) filed Comments on December 10, 2020, and was the
only party to do so. The Company filed reply comments on December 23, 2020.
Having reviewed the record, we now approve the Company’s Application as discussed
below.
BACKGROUND
Boardman is a pulverized-coal plant in north-central Oregon that has operated since
1980. Idaho Power owns a 10 percent interest, or 58.5 megawatts (net dependable capacity), in
Boardman.1 Application at 1. After certain adjustments, the Company’s annual share of the output
of Boardman is approximately 50 average megawatts. Id. In 2010 and 2011, federal and state
regulators approved ending coal-fired operations at Boardman on December 31, 2020. Id.
Boardman ceased operating on October 31, 2020.
In February 2012, the Commission authorized the Company to establish a balancing
account to track the incremental costs and benefits associated with an early shutdown of
Boardman. Order No. 32457. In May 2012, the Commission authorized an incremental increase
in the Company’s annual revenue requirement of $1,525,501, effective June 1, 2012, to align cost
recovery for the plant with its useful life. Order No. 32549. Idaho Power has filed its Boardman
Power Plant Annual Review each year since. Id. at 5.
1 Portland General Electric (“PGE”) operated Boardman and owns the other 90 percent. Id.
ORDER NO. 34885 2
The Commission authorized the Company to establish a balancing account (also called
a levelized revenue requirement) for Boardman to “stabilize customer rates and increase the
likelihood that the customers who benefit from Boardman's continuing operation will pay the
associated costs.” Order No. 32457 at 4. The balancing account was originally composed of: (1)
all plant investments as of May 31, 2012, which included actual investments through December
31, 2011, and forecasted investments from January 1, 2012, through May 31, 2012; (2) projected
additions to Boardman from June 2012 through 2020; and (3) estimated decommissioning and
salvage costs. See Order Nos. 32549 and 34519.
In December 2019, the Commission approved an incremental levelized revenue
requirement decrease of $38,922, for a total Idaho jurisdictional Boardman-related levelized
revenue requirement of $5,135,872. See Order No. 34519. The $5.14 million levelized revenue
requirement included (1) all Boardman-related plant investments as of December 31, 2018, (2)
projected additions to the Boardman plant for 2019, and (3) estimated decommissioning and
salvage costs. Id. In addition, the Company recorded $1.02 million in the balancing account to
benefit customers for three one-time revenue requirement adjustments. Id.
APPLICATION
Idaho Power represents that one of the three components of levelized revenue
requirement—the revenue requirement associated with incremental investments made after May
31, 2012—has changed since Order No. 34519 issued. Application at 4. The Company asserts
updating the Boardman levelized revenue requirement results in an annual amount of $5,131,466
on an Idaho jurisdictional basis, or an annual decrease to the Idaho jurisdictional levelized revenue
requirement of $4,406. Id.; see also Exhibit No. 1 to the Direct Testimony of Matthew T. Larkin.
The Company represented that the Idaho jurisdictional Boardman-related levelized
revenue requirement of $5,135,872, included approximately $750,000 for new plant investments
made from June 1, 2012, through December 31, 2018, and a forecast of investments for 2019. Id.
Updating the levelized revenue requirement associated with incremental investments to include
actual plant investments made through June 30, 2020, results in an Idaho jurisdictional levelized
revenue requirement of $749,045, or a decrease of approximately $4,400. Id. The Company stated
the update to the levelized revenue requirement for Boardman includes the $3,936,546 for existing
investments, $749,045 for incremental investments, and $445,875 in decommissioning and
salvage costs, for a total levelized revenue requirement of $5,131,466 on an Idaho jurisdictional
ORDER NO. 34885 3
basis. Id. The total Idaho jurisdictional levelized revenue requirement of $5.13 million, less the
Idaho jurisdictional share of the existing revenue requirement of $5.14 million, results in an
incremental annual levelized revenue requirement of negative $4,406 on an Idaho jurisdictional
basis. Id.
The Company states it continues to track: (1) deviations between existing levelized
revenue requirement calculations and updated levelized revenue requirement calculations and (2)
the monthly deviations between forecast revenue collection and actual revenue collection. Id. at
5. The updated levelized revenue requirement is $4,406 lower than what the Company is currently
collecting from customers. Thus, the Company asserted that customers have paid $4,406 per year
more than the updated levelized revenue requirement. The Company represented this results in a
true-up of $37,820. Id.
The Company asserted it made investments at Boardman from June 1, 2012, to June
30, 2020, and has been involved in the capital spend decision-making process. Id. Idaho Power
requests that the Commission find the Company’s Boardman-related investments made between
June 1, 2012, through June 30, 2020, to be prudent. Id.
The Company proposes to remove the $5,135,872 in Boardman levelized revenue
requirement from customer rates, effective January 1, 2021, to reflect full depreciation of all
Boardman investments. Id. at 6. The Company quantified the Boardman annual levelized revenue
requirement to reflect the most current balancing account amounts. Id. However, because
Boardman is still online, and recovery of Boardman-related investments will continue through
year-end, it is likely a final annual levelized revenue requirement computation will be required to
ensure customers pay no more or no less than actual Boardman-related costs. Id.
The Company asserted that the removal of $5,135,872 in levelized Boardman revenue
requirement, less the expiration of the one-time credit of $1,019,333, less the adjustment of
$213,918 to reflect in the levelized Boardman revenue requirement income tax expense amounts
resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”), results in a total decrease to customer
rates of $3,902,622 effective January 1, 2021. Id.
The Company proposed to allocate the decrease related to the Boardman balancing
account using the jurisdictional separation study methodology used to determine the Idaho
jurisdictional revenue requirement in Case No. IPC-E-11-08. Id. at 7. The Company requested
that the approximately $3.90 million decrease for Boardman levelized revenue requirement
ORDER NO. 34885 4
collections be applied to all customer classes through a uniform percentage decrease to all base
rate components except the service charge. The proposed change equates to an overall decrease
of 0.33 percent. Id. at 7.
The Company provided a copy of proposed IPUC No. 29, Tariff 101, in both clean and
legislative formats, containing the tariff sheets for proposed rates for providing retail electric
service to its customers following the removal of the Boardman levelized revenue requirement
amounts from January 1, 2021, through December 31, 2021, resulting in a rate decrease. Id.
Idaho Power asserted that the Application was brought to the attention of the
Company’s customers by a press release to media in the Company’s service area, and a customer
notice distributed in customers’ bills. Id. at 8. The Company represented that the customer notice
was distributed over Idaho Power’s billing cycles, with the last notice being sent by October 12,
2020. Id.
COMMENTS
A. Staff’s Comments
Staff recommends the Commission: (1) approve the decrease in customer rates of
$3,902,622, effective January 1, 2021, to reflect full depreciation of all Boardman investments; (2)
find that all Boardman investments made from June 1, 2012, through June 30, 2020, are prudently
incurred; and (3) require the Company to provide a proposal within 90 days to address the
Company’s approach and method for documenting and supporting any future prudency review
filings for capital investment with its joint-venture projects. Staff Comments at 2. Staff reviewed
the Company’s Application, focusing on: (1) a review of the balancing account, including a review
of the inputs to the levelized revenue requirement and an audit of the actual capital investments;
(2) prudence review of actual Boardman capital investments made from June 1, 2012, through
June 30, 2020; and (3) verification that any change in rate would be properly distributed to
customers.
The balancing account tracks the incremental costs for the accelerated Boardman end-
of-life date, including: (1) the return on undepreciated capital investments at Boardman until its
shutdown; (2) the accelerated depreciation associated with Boardman investments; and (3)
estimated Boardman decommissioning costs. Id. Staff stated the Boardman balancing account
smooths the impact of the early retirement of Boardman over the remaining life of the plant. Id.
Staff also asserted that the balancing account provides an opportunity for full recovery of all
ORDER NO. 34885 5
prudently incurred actual costs, while collecting estimated Boardman costs from customers who
will benefit, matching the cost recovery from the customers benefitting from Boardman’s
operations and mitigating the risk of future customers bearing the costs of a plant that will no
longer provide service. Id. at 2-3.
Staff verified that the total of all adjustments to the balancing account on an Idaho
jurisdictional basis is a decrease of $3,902,622 or 0.33%. Id at 3. Staff noted that the Company
expects no additional Boardman-related plant investments to be made in 2020. Id. Further, Staff
recognized that the Company continues to track changes in the balancing account, including
deviations between the existing levelized revenue requirement calculation and updated levelized
revenue requirement calculation, as well as the monthly deviations between forecast revenue
collection and actual revenue collection, and the future decommissioning costs. Id.
Staff stated that because PGE will decommission Boardman on cessation of coal-fired
operations, a Class II Decommissioning and Demolition Study has commenced. Id. at 4. Staff
stated Idaho Power received this study in August 2020 and is in the process of reviewing it. Id.
The Company represented this study indicates higher decommissioning costs, but Idaho Power’s
review of this study is still ongoing. Id. Staff noted that as decommissioning costs are incurred,
amounts accrued in the balancing account will be used to reflect the level of expenses already
recovered. Id. Because the Boardman balancing account tracks difference between actual
decommissioning costs and those forecasted, any over collection or under collection of costs will
be available for future refund to, or collection from, customers. Id.
Staff noted the deviation between the existing and updated revenue requirement
calculation true-up is computed by converting the annual incremental levelized revenue
requirement to a monthly amount and multiplying it by the 103-month collection period from June
1, 2012, through December 31, 2020. Id. The result is a true-up of $37,820 representing the
overcollection. Id. at 4-5. Staff stated the Company is not requesting a rate change for this true-
up. Id. at 5. Staff also stated the true-up for forecast revenue collection and actual revenue
collection from September 1, 2019, through June 3, 2020, is an under collection of $5,625 and the
Company is not requesting a rate change for this true-up either. Id. Staff asserted that because the
two true-ups of negative $32,194 would be a one-time benefit to customers over a one-year period,
a decrease that would have a negligible impact on rates, the true-ups should remain in the balancing
account until the next adjustment to rates when decommissioning costs are trued up. Id. Staff also
ORDER NO. 34885 6
noted several months remained in 2020 when the Company filed the Application, and these months
would be included in the true-up calculation. Id. Staff also anticipates that a final, annual levelized
revenue requirement computation will be necessary, and an adjustment will be required to true-up
actual decommissioning and salvage costs with those amounts collected from customers when
decommissioning of Boardman is complete. Id.
Staff also noted that three revenue requirement adjustments that resulted in a previous
rate reduction, approved in Order No. 34519, have been refunded to customers from January 1,
2020, through December 31, 2020, and have been removed from the annual revenue requirement.
Id.
Staff noted the Boardman levelized revenue requirement amounts currently in customer
rates include income tax expense based on the Internal Revenue Code of 1986 prior to the TCJA,
meaning the $5.14 million exceeds the decreased revenue requirement Idaho Power will
experience. Id. at 5-6. Staff verified the Company included a $213,918 adjustment to reflect the
TCJA benefits that will end when Boardman operations cease. Id. at 6. Staff stated customers
received Boardman-related TCJA benefits through the Power Cost Adjustment. Id.
Staff represented that Company Exhibit No. 3 provided all the Boardman Plant
Additions from June 1, 2012 through June 30, 2020, by Project Number, with a description of the
project and the costs closed to each project. Id. The Company provided copies of the work order
jackets for the sixteen largest projects. Staff reviewed these materials and selected a sample of the
remaining representative projects for further review. Staff reviewed $4,348,580 of work orders
out of the total capital investment from June 1, 2012, through December 31, 2018, of $5,340,729.
Staff’s sample amounted to 81.4% of the total dollars, and 26.4% of the projects. Id. Staff stated
the projects’ work order packets generally contained enough information for Staff to verify that
PGE had billed Idaho Power for the capital investment, that Idaho Power had correctly applied its
Allowance for Funds Used During Construction, and that the Company had recorded the capital
project to the correct Federal Energy Regulatory Commission account. Staff also reviewed the
Company’s internal audit reports and work papers for Boardman and the results of the Sarbanes-
Oxley Compliance Reports specific to Boardman. Id. Overall, Staff represented that the
Company’s internal controls were adequate and effective. Id.
Staff recognized that the Company requested Boardman investments from June 1,
2012, through June 30, 2020, be determined as prudently incurred. Id. The Company’s total
ORDER NO. 34885 7
capital investment was $5,340,729. Id. Staff stated the Company also sold $356,145 of the
Company’s interests in certain Boardman investments to PGE. Id. As a result, the Company seeks
a prudence determination and recovery of $4,984,584 in capital investment. Id. at 6-7. Staff
believed the Company reasonably decided to make these capital investments based on the
Company’s stated needs for safety, regulatory compliance, plant reliability, and plant economic
operation. Id. at 7. After reviewing Idaho Power’s documentation, Staff also believed the
Company’s operating partner, PGE, prudently implemented each Boardman project. Id.
Although Staff was able to make a prudency recommendation after its review of the
Company’s investments, the review process was not without difficulty. Id. at 8. Staff believed
the Company has not addressed many shortcomings and lacks a robust process to clearly document
and track expenses and to show the Company’s and its partner’s steps for approving project
expenses. Id. In its comments, Staff listed seven problems that made reviewing the Company’s
Application difficult. Id at 8-9. Staff believed the Company is obligated to its customers to assure
that capital investments at Boardman and other joint-venture, partner-managed plants are properly
documented and prudent. Id. at 9. Staff asserted that without such a process, it would be difficult
for the Company to meet its obligation and Staff would continue to have difficulty reviewing the
prudency of the Company’s investments. Id. Staff noted similar problems while reviewing the
prudency of expenses in other cases, including the development-phase expenses for the Selective
Catalytic Reduction project for the Jim Bridger Coal Plant, which involved PacifiCorp as the
managing partner. Id. (citing Case No. IPC-E-l3-16). Accordingly, Staff recommended that the
Company work with it, within 90 days of the Commission’s order in this case, to address the
Company’s process shortcomings related to tracking and documenting expenses for prudence
determinations with its managing partners. Id. at 10.
Staff believed the Company’s proposed tariff appropriately reflects cost changes
resulting from ending Boardman operations and reinvesting the savings into energy efficiency. Id.
Staff stated the monthly net impact of the Company’s proposed changes from this case and Case
No. IPC-E-20-33 (In the Matter of Idaho Power Company’s Authority to Revise the Energy
Efficiency Rider, Tariff Schedule 91) on the bill of a residential customer using 950 kWh per
month is a $0.02 decrease. Id.
The Company included its press release and customer notice with its Application. Each
document addresses two cases: this case (IPC-E-20-32) and Revise Energy Efficiency Rider, Tariff
ORDER NO. 34885 8
Schedule 91 (IPC-E-20-33). Application at 8. Staff determined the press release and customer
notice comply with Rule 125 of the Commission’s Rules of Procedure (IDAPA 31.01.01.125).
Staff Comments at 10. Staff verified the Company included the customer notice in customer bills
mailed from September 4 through October 2, 2020, which Staff believed gave customers a
reasonable opportunity to file comments with the Commission by the December 10, 2020,
deadline. Id. As of December 28, 2020, no customer comments had been filed. Id.
B. Company Reply Comments
Idaho Power appreciated Staff’s recommendation that the Commission find the
Company’s Boardman investments from June 1, 2012, through June 30, 2020, were prudent and
that a proposed $3.90 million rate decrease be approved. Company Reply Comments at 1.
The Company reiterated its role in decision-making at the plant and the adequate
oversight it claims to provide on project expenses. Id. at 3. Idaho Power believed the Company
sufficiently documented its oversight of the approval of Boardman project expenses. Id. at 5-6.
But the Company stated it welcomes working with Staff within 90 days of the Commission’s order
to address Staff’s concerns and the Company’s approach and method for documenting its processes
for approving project expenses from capital investments in other joint-venture projects. Id.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-501, 502,
and 61-503. The Commission is “vested with power and jurisdiction to supervise and regulate
every public utility in the state and to do all things necessary to carry out the spirit and intent of
the provisions of this act.” Idaho Code § 61-501. The Commission is empowered to investigate
rates, charges, rules, regulations, practices, and contracts of public utilities and to determine
whether they are just, reasonable, preferential, discriminatory, or in violation of any provision of
law, and to fix the same by order. Idaho Code §§ 61-502 and 61-503.
The Commission has reviewed the record, including the Application, the Comments of
Commission Staff, and the Reply Comments of the Company. The Commission finds it fair, just
and reasonable to approve the Company’s request to reduce customer rates by $3,902,622,
effective January 1, 2021, to reflect full depreciation of all Boardman investments, and to spread
the rate decrease to all customer classes on a uniform basis.2
2 The rate decrease does not apply to the Company’s service charge.
ORDER NO. 34885 9
The Commission first addressed Idaho Power’s plan to close Boardman in 2012 when
the Company requested that we accept the Company’s accounting and cost recovery plan for the
early shutdown of Boardman and allow the Company to establish a balancing account to track
shutdown-related costs and benefits. See Order No. 32457. The Commission approved these
requests and found this would help “stabilize customer rates and increase the likelihood that the
customers who benefit from Boardman's continuing operation will pay the associated costs.”
Order No. 32457 at 4. The Commission also directed the Company to file annual reports detailing
amounts booked to the balancing account and to submit a sample report when it files for rate
recovery. Id.
This case is the culmination of a multi-year process on the part of the Company and the
interested parties. The Commission appreciates the parties’ efforts in the instant prudency review,
which the Company accurately described as “a time and data intensive exercise.” Company Reply
Comments at 5. The Commission has reviewed the record and finds that the capital investments
to close Boardman were necessary and prudent. Idaho Power’s documentation sufficiently
supports this finding. The Commission thus finds the Company prudently incurred its expenses
in Boardman capital investments made from June 1, 2012, through June 30, 2020.
Although the Company has met its burden in this case, we recognize the concerns
voiced by Staff that the Company’s processes and documentation were not without issues. See
Staff Comments at 8-9. We understand that Idaho Power has spent significant time and resources
in this multi-year effort, and the Commission acknowledges that undertaking. But, ultimately, the
Company must assure that capital investments, like those made at Boardman or at its other joint-
venture plants, are properly documented, prudent and reasonable. We reiterate our concern that
the Company may not be taking an active enough role in overseeing the capital investments and
other expenditures of its plants that are joint ventures. We appreciate the Company’s stated
willingness to work with Staff to address concerns about documentation, specifically the
Company’s approach and method for documenting its processes for approving project
expenditures from capital investments in other joint-venture projects. We encourage this and look
forward to an update of these processes as the issue develops.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Application is approved, as noted
above. Customer rates associated with the Boardman are decreased by $3,902,622, effective
ORDER NO. 34885 10
January 1, 2021, to reflect full depreciation of all Boardman investments. The Company’s
proposed Tariff Schedule 101 is approved effective January 1, 2021.
IT IS FURTHER ORDERED that the decrease in rates is spread to all customer classes
through a uniform percentage decrease to all rate base components except the service charge.
IT IS FURTHER ORDERED that all Boardman capital investments made from June
1, 2012, through June 30, 2020, were prudently incurred.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 31st
day of December 2020.
PAUL KJELLANDER, PRESIDENT
KRISTINE RAPER, COMMISSIONER
ERIC ANDERSON, COMMISSIONER
ATTEST:
Jan Noriyuki
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-20-32\ORDERS\IPCE2032_final_jh.docx