20210408Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-03t2
IDAHO BARNO.9917
-"-: f,! f.. !)., U t,l -t. 16.
,J
Street Address for Express Mail:
1I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR AN
ACCOUNTING ORDER AUTHORIZING THE
DEFERRAL OF INCREMENTAL WILDFIRE
MITIGATION AND INSURANCE COSTS
CASE NO. IPC.E-21.02
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On January 22,202l,Idaho Power Company ("Company") applied for an accounting
order authoizing it to defer Idaho's jurisdictional share of incremental costs associated with its
wildfire mitigation and insurance costs. The Application included a comprehensive overview of
the Company's efforts to assess wildfire risk, discussion of necessary actions and measures to
mitigate wildfire risk, and identification and examination of incremental operations and
maintenance costs associated with implementing and completing wildfire mitigation efforts
("Wildfire Plan").r
I The Company's Application includes a copy of the 2021 Wildfire Mitigation Plan.
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ISTAFF COMMENTS APRIL 8,2021
The Company has identified incremental operations and maintenance ("O&M") expenses
related to mitigating wildfire risk as set forth in the Wildfire Plan, with expenses that are grouped
into these categories: (A) quantifuing Wildland Fire Risk; (B) Situational Awareness; (C)
Mitigation-Field Personnel Practices; (D) Mitigation T&D; (E) Enhanced Vegetation
Management; and (F) Communication. In the next five years, the Company estimates it will
incur approximately $46.6 million in incremental O&M expenses to implement these measures.
The Company seeks to defer Idaho's jurisdictional share of incremental expenses.2
STAFF REVIEW
Staff reviewed the Company's Wildfire Plan to reduce the risk posed by wildfires and the
proposed accounting treatment and believes they are reasonable. Staff recommends the
Commission approve the Company's Application to allow the deferral of prudently incurred
incremental O&M costs and depreciation expenses associated with wildfire mitigation. Staff
recommends the defenal period end the earlier of the Company's next general rate case or five
years.
Wildfire Mitigation Plan
The Wildfire Plan was developed to ensure continued safe and reliable delivery of
electricity. Objectives of the Wildfire Plan include the reduction of wildfire risk and improved
resiliency of Company assets and associated operations. The Company's wildfire mitigation
strategy includes internal procedural measures to prevent accidental ignition and spread of
wildfires. The Wildfire Plan includes operational mitigation practices for deploying temporary
operating procedures for transmission lines during fire season; developing operational strategies
for management of distribution lines during periods of elevated fire risks and during fire season;
and evaluating a Company-specific approach to Public Safety Power Shutoffs ("PSPS") to
determine the appropriateness and operation of PSPS as a tool.3 The Company's Wildfire Plan
also includes management of certain conditions related to its transmission and distribution
("T&D") facilities. The Company proposes to implement and achieve a consistent three-year
2 The Company proposes to continue to pay for baseline levels of O&M escalated annually for inflation out of its
existing budget and does not seek deferral ofthose costs.
3 PSPS is generally defined as the proactive and planned de-energization of lines when extreme risk conditions are
forecasted.
2STAFF COMMENTS APRIL 8,2021
vegetation management cycle across its entire service area. The Company will review and
update its wildfire risk assessment biennially.
A consultant assisted the Company in assessing and quantifuing wildfire risk within the
Company's service area and transmission corridors. The Company used risk-based modeling
that considers aspects including weather, wildfire spread, simulations, and additional inputs for
the Fire Probability and Consequence formula.a Geographic risk tiers were calculated and
represented in a Risk Map (Attachment B to the Application) using this modeling. The Risk
Map identifies service territory zones of increased risk, with yellow zones representing moderate
risk and red reflecting highest risk. Based on the Risk Map, the Company will plan and prepare
mitigation and management strategies and implement preventative programs, practices, and
measures. While the assessment of potential wildfire costs did not precisely quantifr benefits
specific to having a Wildfire Plan and implementing mitigation strategies, Staff supports the
Company's conclusion that potential human and capital costs and damage caused by wildfires
vastly exceed costs to implement the proposed Wildfire Plan.
Situational Awareness
The Wildfire Plan uses the Fire Potential Index ("FPI") to support operational decision
making to reduce wildfire threats and risks.5 Meteorological data and fuel condition forecasts
are key aspects of the Company's wildfire mitigation strategy. The Company created the FPI
tool to input weather, fuel, and topography data to project short-term wildfire potential across its
service territory. The FPI produces a score, calculated daily during fire season, that represents a
degree of expected fire threat over a seven-day forecast. The FPI score provides personnel with
the information needed for operational decision making. The Company plans to update the FPI
tool annually to advance wildfire preparedness.
Over the next five years the Company proposes to spend $385,000 on Situational
Awareness, with primary expenses being the cost of additional personnel to manage the FPI and
for the cost of cameras installed at strategic locations to inform wildfire mitigation efforts.
4 The Fire Probability and Consequence formula is defined as: Wildfre Risk : Fire Probability x Consequence
5 The FPI produces a score from l-16. Scores of l-l I are green "lower fire potential;" scores of 12-14 are yellow
"elevated fire potential;" and scores of l5 or l6 are red "highest fire potential."
aJSTAFF COMMENTS APRIL 8,2021
Wildfire Mitigation Strategies
A component of the mitigation strategy is to reduce wildfire risk while continuing safe
and reliable operations. The Company assessed existing operations and developed best practices
in operations for wildfire mitigation, which include: 1) temporary operating procedures for
transmission and distribution lines during fire season and periods of elevated wildfire risk; 2)
Wildland Fire Preparedness and Prevention and Field Personnel Practices; and 3) Development
of a public safety power shutoff ("PSPS") strategy for planned de-energization during extreme
wildfire risk conditions.
Wildland Fire Preparedness and Prevention Plan
Field Personnel Practices
As part of the wildfire mitigation strategy, the Company developed the Wildland Fire
Preparedness and Prevention Plan (Appendix A to the Application) to provide personnel and
contractors guidance for preventing the ignition and spread of wildfires as they perform work in
locations where risk is high. Personnel practices include ensuring fire tools and equipment are
available at job sites, daily situational awareness for locations of heightened fire risk and weather
conditions, and wildfire ignition prevention actions and reporting in the event of fire.
T&D Operational Strategt and Hardening
To reduce wildfire risk from within Load Serving Operations, the Company updates and
issues Fire Season Temporary Operating Procedures to serve as guidelines for operating
transmission lines during fire season. For transmission lines that are scheduled to be replaced,
the Company is considering converting wood poles to steel. In distribution operations, a daily
FPI informs personnel how to operate lines located in Red Risk Zones and the Company intends
to implement an overhead distribution hardening program in these zones of extreme risk.
Further, after comparing options to protect poles the Company determined it is cost effective to
install mesh pole wraps to fireproof wood poles in Red and Yellow Risk Zones.
4STAFF COMMENTS APRIL 8,2021
Public Safety Power Shutoff Plan
The Company assessed the use of PSPS in Califomia and will evaluate if a strategy for
planned de-energization during extreme wildfire risk conditions is warranted in the Company's
service territory.
T&D Asset Management Program
The Company's asset management programs include visual inspections, line protection,
asset replacement, and system hardening. Under the Wildfire Plan, the Company will continue
to visually inspect its transmission lines using helicopter (aerial), on-the-ground, wood pole
inspection treatment, cathodic protection and inspection, and thermal imaging inspection
methods. The Company will use unmanned aerial vehicles (drones) with high-definition
cameras in certain situations. For distribution lines, the Company will use visual inspections,
distribution wood pole inspection and treatment, and line equipment inspection.
Vegetation Management Program
The costs associated with enhanced vegetation management are the largest incremental
wildfire mitigation expense. The Company estimates spending approximately $42.7 million on
incremental vegetation management expenses over five years. The Company noted that its
actual expenses for vegetation management have been increasing faster than authorized amounts
in recent years.
The Company requests deferral authority for Idaho's jurisdictional share of incremental
vegetation management costs above a base level using 2019 actual costs. They also provided
actual expenses from 2010 to 2019. Table 3, Application at 22. In Table 3, the Company
illustrated the current gap in authorized and actual costs, and also demonstrated a steady cost
increase over time. With the pandemic and regional wildfire challenges in2020 driving a
shortage of qualified labor,6 a high demand for vegetation management, and an increase in labor
rates, Staff believes 2019 is more representative of normal fire mitigation efforts, expenses, and
record of actual costs.
6 The Company's Application cites two factors contributing to the shortages in labor: (l) special requirements to
trim trees near power lines and equipment that require special certifications and training; and (2) increased demand
for vegetation management services in the western US-including California where labor rates are higher.
5STAFF COMMENTS APRIL 8,2021
The Company states enhanced vegetation management is the most critical aspect of their
Wildfire Plan. The previous plan for vegetation management included a six-year pruning cycle
for transmission circuits in mountain locations and a three-year cycle for transmission circuits in
valley locations, with all vegetation being pruned to maintain a minimum line clearance
envelope. Response to Staff Production Request No. I l. After the Company considered
escalating costs associated with off cycle pruning and projects and weighed the costs, risks, and
trends of vegetation and vegetation management across its entire system, it was determined that a
shorter three-year vegetation management cycle across the Company's entire service territory
would reduce overall costs and risks and minimize mid-cycle and special pruning projects.
Response to Staff Production Request No. 4. Further, the Company proposes to implement mid-
cycle pruning and enhanced vegetation management practices in Red and Yellow Risk Zones as
an added component to the three-year pruning cycle. Response to Staff Production Request
No. 10. Enhanced vegetation management practices include:
o Annual patrols to identifr immediate pruning needs,
o Mid-cycle pruning during year two for fast growing species,
o [ncreased incentives for customers who own trees that regrow ahead of the three-
year trimming cycle,
. Clearing and sterilizing the soil around certain distribution poles, and
o Post-trimming audits on all pruned trees in FPI yellow and red zones.
The Company proposes testing the three-year enhanced vegetation management cycle for
four or five years to verify that the shorter cycle can be maintained, and expected benefits are
realized.
Although proposed vegetation management enhancements represent a sizeable increase
in program expense, Staff believes it is reasonable for the Company to shift their vegetation
management approach to achieve both reliability and wildfire risk mitigation objectives. Staff
supports the enhanced and expanded vegetation management program presented by the
Company and the use of 2019 for base level costs.
Wildfire Response and Communications
The Company responds to active fire situations and takes steps to protect facilities from
fire damage and restore electrical service. Field crews monitor wildfires and will extinguish
6STAFF COMMENTS APRIL 8,2021
small fires if they are capable, but in fire events they are instructed not to put themselves in
harm's way. Company personnel will communicate with customers during wildfire caused
outages. Using an Emergency Response and Communications Plan, the Company will provide
both intemal and external communications in outage and emergency situations. Over the next
five years, the Company projects $500,000 in new communications expenses related to
customers and community educational outreach. Recognizing the best time to communicate
emergency plans and put procedures in place is when there is no emergency. Staff supports the
Company's Emergency Response and Communications Plan outreach and expanded
communications efforts for informing customers and communities.
Staff notes that in Order No. 34883, Case No. AVU-E-20-05 in reference to Avista's
Wildhre Plan (WF Plan), the Commission stated, "the Commission anticipates that the Company
will continue to work and communicate effectively with all relevant stakeholders and SMEsT
(inside and outside of the Company), including, but not limited to, the Idaho Department of
Lands, Idaho fire districts, Idaho tribes, and other Idaho entities, so the objectives of the WF Plan
are realized. The Commission also encourages the Company to evaluate what benefits and
efficiencies might be gained from joint fire safety training opportunities with these
stakeholders." Order at 10.
In Section 9.2"Idaho Power External Communications" if its Wildfire Mitigation Plan
2021 document, the Company describes its communication plans for both the Idaho and Oregon
Public Utilities Commissions, as well as other government agencies including the Bureau of
Land Management and U.S. Forest service and other stakeholders including customers. Staff
recommends Idaho Power continue to work and communicate with all relevant stakeholders in
its response to and communication about wildfires.
Forecasted Cost Summary
The Company provided a forecast of the overall cost of the Wildfire Plan for years202l-
2025, as shown in Table No. l. The Wildfire Plan cost forecast consists of $34,746,000 for
capital expenditures and 569,776,000 for O&M expenditures, insurance costs, and depreciation
expense. The actual costs will change as the program develops and the estimates to perform
field activities are better understood.
7 SME - Subject-Matter-Experts
7STAFF COMMENTS APRIL 8,2021
Table No. 1.
Notable changes in expenses include an increase in the Situational Awareness expenses
in the years 2024 and2025 due to the installation of cameras planned for those years, in addition
to the ongoing Fire Potential Index Personnel expenses. Depreciation expense increases follow
the increase in Capital Plant Closings. Distribution plant averages about $5.4 million per year,
with transmission plant closing to plant, mainly in2023 and2025, $3.4 million and $4.2 million,
respectively.
The costs of the Wildfire Plan elements for the years 2021-2025 are estimated to be
$46.625 million. The incremental insurance costs for the years 2021-2025 are estimated to be
$21 .7 55 million. The depreciation expense for the years 2021-2025 are estimated to be
$1.396 million.
8
Expected Incremental Operating Expenses and Capital Costs of the Wildfire Mitigation Plan
by Year (in thousands of dollars)
202r 2022 2023 2024 2025 202r-2025
A. Quantifuing Wildland
Fire Risk $6s $67 $6e $201
B. Situational Awareness 52 55 57 109 tt2 385
C. Mitigation - Field
Personnel Practices 5 5 5 5 5 25
D. Mitigation -
Transmission & Distribution
Programs 580 585 597 513 5t2 2.787
E. Enhanced Vegetation
Management 2,006 9,465 r0,239 11,060 9,957 42,727
F. Communications 100 100 100 100 100 500
Insurance Expense 3.487 4.567 4,567 4.567 4,567 21,755
Depreciation Expense 124 238 452 582 1.396
Forecast Incremental
Operatins Exoense Totals $6.29s $14,901 $ 1s.870 $16.806 $1s.904 $ 69.776
Capital Plant Closings $5,570 $ 5,139 $ 9,017 $ 5,782 $ 9,238 $ 34,746
STAFF COMMENTS APRIL 8,2021
Insurance Premiums
With heightened wildfire risk in the region, the Company has experienced significant
increases in insurance premiums due to the magnitude, frequency, and costs associated with
Western-state wildfires. It is reasonable to believe the trend of increasing fire insurance costs
will continue, however it remains difficult to predict. Staff believes it is important that the
Company and customers are protected with a policy to recover costs from damages inflicted by
wildfires.
The Company is requesting the authority to defer the Idaho jurisdictional share of actual
incremental insurance costs over 2019 levels. The Company is estimating202l costs based on
current premiums through mid-year 2021 when renewals occur, and then applying an increase
based on broker-provided high-level estimates. In addition, the Company is applying the new
wildfire loads of $1 million also at mid-year 2021. For 2022,Idaho Power is estimating the cost
based on a full year of these increased premiums. Due to the volatile nature of the insurance
market, the Company didn't forecast estimates beyond 2021but simply showed the flat
annualized estimate for 2022 through 2025. The Company estimates the incremental insurance
costs for 2021 to be $3,487,000, and the incremental insurance costs for the years2022-2025 to
be $4,567,000 per year.
Depreciation Expense
Based on the types of activities and property units anticipated for the Wildfire Plan
related to capital expenditures and current project schedules, the Company estimated its
depreciation expense by year for its distribution and transmission projects. Depreciation expense
is estimated to be $ 1,396,000 for the years 2022 through 2025.
Proposed Accounting Treatment
The Company seeks authorization to defer, for future amortization and recovery, the
Idaho jurisdictional share of actual incremental O&M expense and depreciation expense of
certain capital investments necessary to implement the Company's wildfire mitigation measures,
8 The National Wildfire Coordinating Group, of which both The Bureau of Land Management & USDA Forest
Service are members, defines fire load as, "The number and size of fires historically experienced on a given unit
over a given period (usually one day) at a given index offire danger."
9STAFF COMMENTS APRIL 8,2021
as well as the incremental insurance costs, as measured from the 2019 base levels presented in
the Application. Because vegetation management is already included in the Company's current
revenue requirement, the Company is requesting to defer the Idaho jurisdictional share of
incremental vegetation management costs above the base level using 2019 acttnl costs that will
be escalated annually for inflation.
The Company intends to track actual expenses and incremental wildfire-related capital
incurred on or after the filing date of the Application and proposes to record the incremental
O&M and related depreciation expense amounts to Federal Energy Regulatory Commission
("FERC") Account 182.3 - Other Regulatory Assets. The prudence of costs and options for
recovery will be addressed in a future regulatory proceeding. The Company has not requested a
carrying charge on the deferral balance.
Staff supports the Company's efforts to mitigate the effects of wildfires and therefore
supports the use of a deferral mechanism for the O&M, insurance, and depreciation expenditures.
The Commission should have the opportunity to review any Wildfire Plan costs prior to
recovery. In Order No. 33706 (Case No. IPC-E-16-19), the Commission stated, "Our normal
practice is to review actual costs to determine whether they were prudently incurred and thus
recoverable in rates. Providing pre-approvalfor estimated costs would remove the incentive for
the Company to implement the project in a prudent, least-cost manner." Staff believes that
defening incremental costs for future recovery allows the Commission to review the costs and
determine that they are prudent and least-cost, consistent with past practices.
Staff is concemed about having an open-ended deferral into perpetuity when it is still
unknown when the Company will file its next general rate case. The deferral balance is
estimated to be approximately $70 million after five years. Limiting the deferral period to either
five years or when rates go into effect following the Company's next general rate case
(whichever happens first) will provide Staff the opportunity for timely review of the expenses
while also providing protections to customers from a growing regulatory asset.
Customer Comments
As of April7,202l, six customer comments have been received. All have been in
support of the Company's wildfire mitigation plan.
STAFF COMMENTS l0 APRIL 8,2021
STAFF RECOMMENDATIONS
Staff recommends the Commission issue an order authorizing the deferral of the
incremental O&M, insurance, and depreciation expenses associated with the Company's
Wildfire Plan into FERC Account 182.3 - Other Regulatory Assets. Recovery of prudently
incurred expenses, along with the amortization period, should be determined in a fufure rate
proceeding. Staff further recommends that the deferral of the expenses cease after five years, or
until the effective date of rates in the Company's next general rate case, whichever comes first.
s&Respectfully submitted this day of Aprilz0zl.
Dayn
Deputy Attorney General
Technical Staff: Kathy Stockton
Rachelle Farnsworth
i:umisc/commentVipce2 l.2dhklsrf comments
STAFF COMMENTS l1 APRIL 8,202I
CERTIFICATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE THIS 8ft DAY OF APRIL 2021,
SERVED THE FOREGOING COMMENTS OF TIIE COMMISSION STAFF, IN
CASE NO. IPC-E.21-02, BY E.MAILING A COPY THEREOF, TO THE
FOLLOWING:
DONOVAN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
dockets@idahopower. com
ENERGY CONTRACTS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
Y
CERTIFICATE OF SERVICE