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JOHN R.HAMMOND,JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE,IDAHO 83720-0074
(208)334-0357
IDAHO BAR NO.5470
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION TO )CASE NO.IPC-E-20-32
DECREASE ITS RATES FOR ELECTRIC
SERVICE FOR COSTS ASSOCIATED WITH
THE BOARDMAN POWER PLANT )COMMENTS OF THE
COMMISSION STAFF
)
COMES NOW the Staff of the Idaho Public Utilities Commission (“Staff’),by and
through its attorney of record,John R.Hammond,Jr.,Deputy Attorney General,and in response
to the Notice of Modified Procedure issued in Order No.34838 on November 18,2020,in Case
No.IPC-E-20-32,submits the following comments.
BACKGROUND
On August 21,2020,Idaho Power Company (“Idaho Power”or “Company”)applied to
decrease customer rates for the cessation of Boardman Power Plant (“Boardman”)operations that
will occur October 31,2020.Idaho Power owns a 10 percent interest,or 58.5 megawatts of net
dependable capacity from Boardman.Application at 2.
Idaho Power requests the Commission issue an order authorizing:1)investments made
through June 30,2020,were prudently incurred;and 2)a decrease in customer rates of
STAFF COMMENTS 1 DECEMBER 10,2020
RECEIVED
2020December 10, PM 3:53
IDAHO PUBLIC
UTILITIES COMMISSION
$3,902,622 or 0.33%to reflect the full depreciation of all Boardman investments with an effective
date of January 1,2021.
STAFF REVIEW AND ANALYSIS
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.Based on its review,Staff concludes:
1.Expenditures in the balancing account were properly recorded.
2.Capital investment made from June 1,2012 through June 30,2020 totaling
$4,984,584 is reasonably supported as being prudent.
3.The Company’s methodology and caiculations for spreading the reductions in rates
for customers are appropriate and accurate.
Based on these conclusions,Staff recommends the Commission approve the Company’s
Application to decrease the Company’s revenue by $3,902,622 effective January 1,2021 to
reflect full depreciation of all Boardman investments.Additionally,Staff recommends the
Commission find the Company’s investments in Boardman from June 1,2012 through June 30,
2020 were prudent.
Balancing Account and Levelized Revenue Requirement
In Commission Order No.32457,Idaho Power was authorized to establish a balancing
account to track the incremental costs and benefits for the early closure of Boardman in 2020.
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.These revenue requirement components are subsequently “levelized”by
calculating the present value of the individual items and converting the values into an annuity or
level payment stream from customers over the remaining life of Boardman using a return on
equity of 9.5 percent,as approved in Order No.32457.The Boardman balancing account
smooths the impact of the early retirement of Boardman over the remaining life of the plant.In
STAFF COMMENTS 2 DECEMBER 10,2020
addition,it provides an opportunity for full recovery of all prudently incurred actual costs,while
collecting estimated Boardman costs from customers who will benefit,matching the cost recovery
from the customers beneritting from Boardman’s operations and mitigating the risk of future
customers bearing the costs of a plant that will no longer provide service.
The Company is now requesting that the Commission find that actual Boardman
investments made through June 30,2020 were pmdently incurred and decrease customer rates
effective January 1,2021 to reflect full depreciation of all Boardman investment.The total of all
the adjustments on an Idaho jurisdictional basis is a decrease of S3,902,622 or 0.33%as shown in
Table No.I below.
Table No.1:Boardman Revenue Requirement Impact by Component
Removal of Boardman Levelized Revenue Requirement $(5,l35,872)
Removal of Additional Revenue Requirement Adjustments $1,019,333
TCJA Adjustment $213,918
Total Rate Adjustment $(3,902.622)
Board;zan Let’elized Revenue Requirement
In Case No.IPC-E-19-32,Order No.34519 approved the total Idaho jurisdictional
Boardman-related levelized revenue requirement of $5,135,872.The $5.14 million levelized
revenue requirement included:I)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.This is the amount that is currently built into rates.The Company does not
expect any additional Boardman-related plant investments to be made in 2020.The Company
continues to track changes in the balancing account,including deviations between the existing
levelized revenue requirement calculation and updated levelized revenue requirement
calculations,as well as the monthly deviations between forecast revenue collection and actual
revenue collection,and the future decommissioning costs.
Deconunissioning
Previously,the owners of Boardman requested an updated decommissioning cost study
from AECOM,the Updated Boardman Coal Plant Decommissioning and Demolition Plan,dated
October 16,2019.The results of the study did not change the decommissioning cost estimate
STAFF COMMENTS 3 DECEMBER 10,2020
enough to necessitate an update in the decommissioning costs the Company is currently collecting
from customers.
In addition,now that Portland General Electric (“PGE”)has determined they will
decommIssion the plant upon cessation of coal-fired operations,a Class II Decommissioning and
Demolition Study (“Study”)has commenced.Idaho Power received the Study in August 2020
and is evaluating the decommissioning costs and salvage estimates included in the study.Idaho
Power states that while initial results indicate expected decommissioning costs are higher than
levels currently reflected in rates,it is still reviewing the Study resuLts.
The Class II study includes actual bidder estimates for specific portions of the planned
demolition,resulting in smaller contingency adders.The previous study,a Class III study,
included an estimate of the costs as computed by AECOM,and a higher contingency amount in
light of the approximations.
As of December 31,2020,the Company will have collected from customers
decommissioning and salvage costs nearly equivalent to those estimated with the AECOM Class
Ill study,and the levelized revenue requirement associated with decommissioning and salvage
costs included in customer rates will be set to zero.As decommissioning costs are incurred,
amounts accrued in the balancing account will be used to pay the expenses.Because the
Boardman balancing account allows for the tracking of differences between actual
decommissioning costs and those forecasted,any over-or under-collection of costs will be
available for future collection from,or refund to,customers.
Dzflkre,ices Between Existing &Updated Revenue Requirement Calculations,and Forecast &
Actual Revenue Collections
Idaho Power is tracking: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.
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.The result is a true-up of $37,820 for the amount that would be an over
STAFF COMMENTS 4 DECEMBER 10,2020
collection.This amount is reflected on the True-Up of Levelized Revenue Requirement line of
Exhibit No.1.The Company is not requesting a rate change for this true-up.
The deviation between the forecast revenue collection and actual revenue collection for
June 1,2012,through August 31,2019,was included in the previous case.The true-up from
September 1,2019,through June 3,2020,is a total under collection of $5,625.The Company is
not requesting a rate change for this true-up.
Because the true-up would be a one-time refund to customers over a one-year period and
the sum of the two true-ups is negative $32,194,a decrease that would have a negligible impact
on rates,the true-ups will remain in the balancing account until the next adjustment to rates when
decommissioning costs are trued up.Further,at the time of filing there are still several months
remaining in 2020 that will also be included in the true-up calculation.
While the Company has quantified the Boardman annual levelized revenue requirement to
reflect the most current balancing account amounts,the plant is still online,and recovery of
Boardman-related investments will continue through year-end.Staff 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.
Additional Adjustments to the Rei’eizue Requirement Calculation
Order No.34519 approved three additional revenue requirement adjustments that resulted
in a rate reduction:1)a gain of $251,077 associated with the sale of shared facilities to POE;2)
$473,097 in over-collection of revenues from June 1,2012,through September 30,2019;and 3)
$295,158 in over-collection of revenue requirement amounts from June 1,2012,through
December 31,2019.Because these amounts have been refunded to customers during
January 1,2020,through December 31,2020,they have been removed from the annual revenue
requirement.
Tax Cuts and Jobs Act of 2017 (“TCJA “)Adjztsti’zent
The tax rates included in the levelized revenue requirement computation reflect the tax
rates in effect prior to the TCJA,and that benefits of the TCJA associated with the Boardman
levelized revenue requirement mechanism were calculated and determined in Case
STAFF COMMENTS 5 DECEMBER 10,2020
No.GNR-U-18-01.Sec Order No.34071.The Boardman levelized revenue requirement
amounts currently included in customer rates includes income tax expense based on provisions of
the Internal Revenue Code of 1986 prior to the TCJA,meaning the S5.14 million is greater than
the decreased revenue requirement Idaho Power will experience.The Company has included an
adjustment of $213,918 to reflect the TCJA benefits that will no longer exist upon cessation of
Boardman operations.Customers received benefits of the TCJA associated with Boardman
through the PCA.
Financial Andit
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 as well as the costs
closed to each project.The Company provided copies of the work order jackets for the sixteen
largest projects.In addition to reviewing all the financial information contained in these ]6 work
order jackets,and the additional information provided through discovery,Staff made a sample
selection 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 amounting to 81.4%of the total dollars,and 26.4%of the projects.
To assess the Company’s internal controls,Staff reviewed the internal audit reports with
supporting work papers relevant to Boardman and the results of the Sarbanes-Oxley Compliance
Reports specific to the Boardman plant.Overall,Staff found that the internal controls were
adequate and effective.
Each work order packet generally contained enough information to verify 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.
Prudence of Past Capital Investment
In its Application,the Company requested Boardman investments made from
June 1,2012,through June 30,2020,be determined as prudently incurred.During this period,the
Company made a total of $5,340,729 in capital investment,which is reflected in Exhibit No.3 of
the Application.During this same period,the Company sold its interests in certain Boardman
investments to the operating partner,PGE,in the amount of $356,145.As a result,the Company
STAFF COMMENTS 6 DECEMBER 10,2020
is requesting a determination of prudence and recovery of $4,984,584 in capital investment.The
Company’s net capital investment by year during this period is shown in Table No.2.
Table No.2:Boardman Net Company Capital Investment June 1,2012 through June 30,2020
Year Idaho Power Share of
In vestments
2012 $163,426
•‘2013 S1,3l0,858
2014 S2,8l3,816
2015 S229,563
2016 S286,7
2017 $26,499
2018 $153,222
2019 42,746
2020 (42,289)
TOTAL 4,984,584
Staff believes the decisions for making these capital investments are reasonable based on
the Company’s stated needs for safety,regulatory compliance,plant reliability,and plant
economic operation.For each of the sixteen Boardman capital projects over $40,000 within this
period,the Company provided a description of the project and its justification.These sixteen
projects totaled $4,312,111 or 87%of the Application’s prudence request.The remaining 113
capital projects are about 13%of the Company’s total request and show justification of need
consistent with the reasons stated above.
Upon review of Company provided documentation received through production requests,
Staff believes the Company’s operating partner PGE has implemented each project in a
reasonably prudent manner.As part of its review,Staff requested original documentation for
several major Boardman capital investments.Staff reviewed the provided documentation to
confirm:1)the need for each project;2)whether standard contractual practices were in place;and
3)whether standard construction procedures for project tracking and scheduling were used.
The largest single investment made by the Company was the installation of the Dry
Sorbent Injection System used to control sulfur emissions necessary for regulatory compliance.
The Company’s investment as a 10%owner of Boardman was $2,778,967,presented as Work
Order No.27363452 in Company Exhibit No.3.As part of the project,the operating partner PGE
developed bid specifications for the proposed work,requested and received multiple EPC
STAFF COMMENTS 7 DECEMBER 10,2020
(engineering,procurement,and construction)bids,and subsequently performed a bid evaluation
to select the overall least cost contractor based on contract scope.These steps are all consistent
with prudent contracting practices.In general,these practices were used for most major capital
projects at Boardman.
In contrast,smaller capital projects often used one or more onsite contractor(s)to perform
the work.The Company justified the use of these contractors by noting their familiarity with
operating practices and requirements at Boardman.Staff believes this familiarity could have
provided increased efficiency,by improving schedule performance and potentially reducing cost
for executing the projects.In other instances,the work was performed directly by POE personnel.
Staff believes,both approaches are reasonable depending on project circumstances and scope.
Determination of Prudency for In vestment Expense
Exhibit No.4 of Company witness Mr.Adelman’s testimony compared Boardman’s
project capital investment budget amounts to actual investment amounts over time (Adelman,DI
at 2).The Company provided Exhibit No.4 in response to the Company’s prior filing in Case
No.IPC-E-19-32,where Staff was unable to directly compare any actual project investment to
budget amounts (Adelman,DI at 20).Mr.Adelman noted that the information was not readily
available for Staffs review in the prior case because of difficulties compiling the data (Adelman,
Dl at 20).As a result,Staff was unable to recommend whether the capital investments in the
prior case were prudent due to a lack of sufficient and timely information while still trying to
meet the Company’s filing schedule.
Although Staff was able to perform a review in this case sufficient to determine the
prudence of the Company’s investments,it was not without difficulty.Staff believes the
Company has not addressed many of the shortcomings and lack of a robust process to clearly
document and track expenses and to show both the Company and its partner’s steps for approving
project expenses in a comprehensive and detailed manner.For example,Staff encountered the
following issues in its review this year:
I.Lack of documentation showing the Company’s due diligence or direct efforts in
limiting or reducing costs for the Boardman capital projects;
STAFF COMMENTS 8 DECEMBER 10,2020
2.Inconsistent project numbers used between Idaho Power’s accounting system and
the Boardman operating partner,POE’(Exhibit No.3 used Idaho Power’s
accounting project numbers;Exhibit No.4 used PGE Boardman project name or
POE project number,as available);
3.Inconsistent or not well-defined reference to dollar amounts attributed to POE
versus dollar amount attributed to the Company’s 10%ownership;
4.No historical documentation showing the steps made by POE or Idaho Power
within the Boardman capital project approval process;
5.Lack of consistent detailed tracking of PGE Boardman project dollars to amounts
paid by Idaho Power;
6.Lack of historical documentation tracking changes to project justification,scope,
and/or projected costs over time;and
7.No documentation showing tracking of budget-to-actual costs by a project task
breakdown.
Staff believes the Company is obligated to its customers to assure that capital investments
made at Boardman and at its other joint-venture,partner-managed plants are properly
documented,prudent,and reasonable.Without such a process in place,Staff believes it will be
difficult for the Company to meet its obligation and Staff will continue to have difficulty in
reviewing the prudence of investments in Boardman and in its other partner-plants.
Although it may appear that these issues are unique to Boardman and POE,similar issues
demonstrating a lack of a clear and robust process were raised in other prudence determinations.
For example,Staff raised issues in determining the prudence of development phase expenses for
the Selective Catalytic Reduction project for the Jim Bridger Coal Plant in Case No.IPC-E-l3-16
involving PacifiCorp as the managing partner.
The lack of a robust process to determine prudence of the Company’s capital projects,
especially when managing partners are involved,will become more important in the future given
final decommissioning of Boardman and capital projects associated with future Valmy and
Exhibit No.3 used Idaho Power’s accounting project numbers;Exhibit No.4 used PGE Boardman project name (or
PGE project number as available).No cross-index was provided.
2 Mike Louis,Dl at 32,in Case No.IPC-E-l3-l6 described the difflcuhy in reviewing PaciflCorp’s invoices that “cut
across multiple contracts,work-breakdown structure elements,and commitment cost item categories,effectively
removing the ability to trace the activity causing the cost.”
STAFF COMMENTS 9 DECEMBER 10,2020
Bridger plant closures.Because of these reasons,Staff recommends that the Company work with
Staff to address its process short-comings related to tracking and documenting expenses for
prudence determinations with its managing partners within 90 days of the Commission order in
this case.
Rate Verification
Staff has reviewed the Company’s proposed tariff changes and believes they appropriately
reflect cost changes resulting from cessation of Boardman operations and the reinvestment of the
savings into energy efficiency.The net impact of the Company’s proposed changes from both of
these filings on the monthly bill of a residential customer using 950 kWh per month is $0.02.
Customer Notice,Press Release,and Public Comments
The Company’s press release and customer notice were included with its Application.
Each document addresses two cases:this case (IPC-E-20-32)and Revise Energy Efficiency Rider,
Tariff Schedule 91 (IPC-E-20-33).Staff reviewed the documents and determined both meet the
requirements of Rule 125 of the Commissions Rules of Procedure.IDAPA 31.01.01.125.The
notice was included in bills mailed to customers beginning September 4 and ending
October 2,2020,providing customers with a reasonable opportunity to file timely comments with
the Commission by the December 10,2020,deadline.As of December 9,2020,no customer
comments had been filed.
STAFF RECOMMENDATIONS
Staff recommends:
1.The Commission approve the decrease in customer rates of $3,902,622 effective
January I,2021 to reflect full depreciation of all Boardman investments;
2.The Commission find that all actual Boardman investments made through
June 30,2020,are prudently incurred;and
3.The Commission 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 10 DECEMBER 10,2020
Respectfully submitted this /yof December 2020.
Jon t Hammond,Jr.
Depd’ty Attorney General
Technical Staff:Richard Keller
Kathy Stockton
Curtis Thaden
Bentley Erdwurm
i:umisc:commcnls/ipce2D32jhrkklscibe comments
STAFF COMMENTS 11 DECEMBER 10,2020
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 10IH DAY OF DECEMBER
2020,SERVED THE FOREGOING COMMENTS OF THE COMMISSION
STAFF,IN CASE NO.IPC-E-20-32,BY E-MAIUNG A COPY THEREOF,TO
THE FOLLOWING:
LISA D NORDSTROM MATT LARKIN
REGULATORY DOCKETS IDAHO POWER COMPANY
IDAHO POWER COMPANY P0 BOX 70
P0 BOX 70 BOISE ID 83707-0070
BOISE ID 83707-0070 E-MAIL:mlarkin@idahopower.com
E-MAIL:Inordslrorn@idahopower.com
dockets@idahopower.com
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-MAIL:botto@idahoconservation.org
SECRETARY
CERTIFICATE OF SERVICE