20210430Application.pdf

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LISA D. NORDSTROM
Lead Counsel
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Attachments
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Lisa D. Nordstrom
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April 30,2021
VIA ELECTRONIC FTLING
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331W. Chinden Blvd., Bldg 8,
Suite 201-A (83714)
PO Box 83720
Boise, ldaho 83720-0074
Case No. !PC-E-21-12
In the Matter of ldaho Power Company's Application for a Determination
Acknowledging its North Valmy Power Plant Unit 2 Exit Date
Dear Ms. Noriyuki:
Attached for electronic filing, pursuant to Order No. 34781, is ldaho Power
Company's Application and a redacted version of the Direct Testimony of Jared L. Ellsworth
with Exhibit Nos. 1-3. Mr. Ellsworth's unredacted testimony will be transmitted separately
via encrypted emailwith a proposed protective agreement.
lf you have any questions about the attached documents, please do not hesitate to
contact me.
Very truly yours,
Re
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702\
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I nord [e-mail]
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
DETERMI NATION ACKNOWLEDGI NG
lTS NORTH VALMY POWER PLANT
EXIT DATE.
CASE NO. tPC-E-21-12
APPLICATION
ldaho Power Company ("ldaho Powe/'or "Comp?[y"), in response to the ldaho
Public Utilities Commission's ("Commission") directive in Order No. 343491, hereby
respectfully makes application to the Commission for an order acknowledging its
appropriate exit date from the North Valmy Power Plant ("Valmy") Unit 2 as December
31, 2025, based on information known today. The Company respectfully requests a
Commission order no later than September 29, 2021, to a!!ow adequate time for
notification to plant operator NV Energy should the Commission determine an earlier exit
date of Valmy Unit 2 is appropriate.
!n support of this Application, ldaho Power asserts as follows:
1 ln the Matter of the Application of ldaho Power Company for Authority to lncrease /ts Rafes for Electric
Service to Recover Cosfs Assocrated with the North Valmy Power Plant, Case No. IPC-E-19-08, Order
No. 34349 at 4-5 (May 31, 2019).
APPLICATION-1
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I. BACKGROUND
1. Valmy is a coa!-fired power plant that consists of two units and is located
near Battle Mountain, Nevada. Unit 1 went into servlce in 1981 and Unit 2 followed in
1985. ldaho Power owns 50 percenl, or 284 megawatt.z 1"MW') (generator nameplate
rating), of Valmy. NV Energy is the co-owner of the plant with the remaining 50 percent
ownership and operates the Valmy facility. NV Energy and ldaho Power (collectively, the
"Parties") work jointly to make decisions regarding Valmy. The plant is connected via a
single 345 kilovolt ('kV') transmission line to the ldaho Power control area at the Midpoint
substation. ldaho Power owns the northbound capacity and NV Energy owns the
southbound capacity of this line.
2. The ownership and operation of Valmy is dictated by three agreements: the
Agreement for the Ownership of the North Valmy Power Plant Project ("Ownership
Agreement"), the Agreement for the Operation of the North Valmy Power Plant Project
("Operation Agreement"), both of which are dated December 12, 1978, and the North
Valmy Station Operating Procedures Criteria, dated as of February 11, 1993, between
ldaho Power Company and Sierra Pacific Power Company, as amended by Amendment
No. 1 to the Operating Procedure Criteria for Valmy Coa! Diversion Procedures and
Usage, dated as of January 1, 2012. Additionally, the Parties entered into the North
Valmy Project Framework Agreement between NV Energy and ldaho Power dated as of
February 22,2019 ("Framework Agreement"), memorializing the terms and conditions
under which either partner may elect exit of participation of Valmy by means of a 15-
month notice.
3. ldaho Power, in the Settlement Stipulation approved by the Commission
with Order No. 33771 in Case No. IPC-E-16-24, agreed to use prudent and commercially
2 For planning purposes, ldaho Power uses the net dependable capability of 262 MW. lt should
also be noted that the remaining capacity available to ldaho Power is 134 MW due to the Company's exit
of coal-fired operations at Unit 1 at year-end 2019.
APPLICATION-2
reasonable efforts to end its participation in the operation of Unit 1 by year-end 2019, and
Unit 2 by year-end 20253. On December 31 ,2019, the Company's participation in coal-
fired operations at Unit 1 concluded. The remaining capacity available to Idaho Power
from Valmy Unit 2 is 134 MW.
4. Subsequent to Order No. 33771, the Company filed an application to
increase its rates to recover costs associated with Valmy in Case No. !PC-E-19-08.
During review of ldaho Power's Application in Case No. IPC-E-19-08, Commission Staff
indicated that they reviewed the Company's Unit 2 closure analysis but did not have
adequate information from ldaho Power at the time to determine whether the Company
had completed a thorough review of a unit withdrawal date of December 31 , 2025.
Therefore, Order No. 34349 directed the Company to use best efforts to file within 21
days of the service date of the order: (1) an analysis validating the December 31 , 2025,
economic retirement date of Unit 2, or (2) an analysis supporting a different economic
retirement date of Unit 24.
5. On June 27,2019, the Company filed a request for acknowledgement that
it had sufficiently validated the economic retirement date of Valmy Unit 2 as year-end
2025 in Case No. IPC-E-19-185. However, during processing of the case, the Company
determined that further review of ldaho Power's 2019 lntegrated Resource Plan ("lRP")
modeling was necessary. Because the 2019lRP modeling was also used to develop the
Valmy Unit 2 closure analysis, the case schedule was suspended while the review was
performed6. The review of the 2019 IRP modeling ultimately resulted in the filing with the
3 ln the Matter of the Application of ldaho Power Company for Authority to lncrease /fs Rafes for Electric
Servrbe to Recover CosfsAssociated with the North Valmy P/ant, Case No. IPC-E-I6-24, Order No.
33771 (May 31 ,20171.
a Order No. 34349 at 4-5.
5 ln the Matter of the Application of ldaho Power for a Validated Economic Closure Date for North Valmy
Power Plant Unit 2, Case No. IPC-E-19-18.
6 /d., Notice of Vacated Comment Deadlines, Order No. 34724 (July 16, 2020).
APPLICATION-3
Commission of ldaho Power's Second Amended 20191RP7.
6. After performing a revised analysis based on adjustments stemming from
the IRP review, certain modeling runs indicated the potential for additional savings from
a Valmy Unit 2 exit date as early as year-end 2022. However, the potential savings
included a key assumption that firm market purchases south of ldaho Power's service
area would be available to replace Valmy Unit 2 capacity. This key assumption warranted
further examination with regard to economics and reliability. As such, ldaho Power
withdrew its Application in Case No. IPC-E-19-18 to perform the additional evaluation of
both the economic and reliability impacts of an early Valmy Unit 2 closure. As initially
directed by Commission Order No. 343498, the Company is presenting the results of the
additiona! evaluation in this case.
II. THE SECOND AMENDED 2019 IRP
7. Historically, as part of the development of the lRP, the Company developed
portfolios to eliminate resource deficiencies identified in a 2O-year load and resource
balance. Underthis process, ldaho Powerdeveloped portfolios which were demonstrated
to eliminate the identified resource deficiencies. However, beginning with the Second
Amended 20191RP, the Company began using AURORA's long-term capacity expansion
("LTCE") modeling capability to develop portfolios. As part of this robust method of
assessing future resource options over a twodecade time frame, the AURORA modeling
of the Preferred Portfolio consistently showed an economic exit of Valmy Unit 2 in 2025
in WECC-optimized runs. Following the refinement of these analyses specific to ldaho
Power's service area, the potential for additional savings from earlier exit dates existed.
7 ln the Matter of ldaho Power Company's 2019 lntegrated Resource Plan, Case No. IPC-E-19-19. Filed
on Oct. 2,2020, the Second Amended 2019 IRP was acknowledged on March 16,2021 by Commission
Order No. 34959.
8 Order No. 34349 at 4.
APPLICATION4
8. As presented in the Second Amended 2019 lRP, ldaho Power does not
believe that the potential savings based on a Iong-term analysis should be the sole
consideration in the decision to exit Valmy Unit 2. A key component of the Second
Amended 2019 IRP that allowed for the exit of Valmy Unit 2 at year-end 2022 was the
availability of firm market purchases to the south over the transmission path cunently
utilized by ldaho Power's share of the Valmy plant output. As described below, ldaho
Power subsequently evaluated this assumption in light of recent changes in regional
transmission availability as well as the economic and reliability impacts of an earlier Unit
2 exit.
III. VALMY UNIT 2 EXIT ANALYSIS
9. The Company conducted focused system reliability and economic analyses
to assess the appropriate timing of a Valmy Unit 2 exit between 2022 and 2025. The
intent of these analyses is to ensure customer reliability, while considering more current
operating budgets and up-to-date economics, to inform a decision that will minimize costs
for customers while also maintaining system reliability. ldaho Power began the analysis
with an evaluation of system reliability, as the Company must first ensure dependable
capacity resources exist to meet expected load. Next, ldaho Power analyzed the
economics of various portfolios with resources that could replace the Company's existing
134 MW at Valmy Unit 2. The result of the reliability and economic evaluations is the
most reliable and economic path toward an exit from coal-fired operations of Valmy Unit
2.
10. Reliabilitv Evaluation. To analyze the reliability impacts associated with an
early exit from coal-fired operations at Valmy Unit 2, ldaho Power (1) refined the load and
resource balance to determine any resource deficiencies, (2) enhanced the approach to
computing the planning margin, and (3) identified multiple options to replace the 134 MW
of firm capacity in the absence of Valmy Unit 2. The load and resource balance, which
APPLICATION.s
ensures ldaho Power has sufficient resources to meet projected customer demand plus
a margin to account for extreme conditions and resource outages, was updated to include
modifications to existing resource availability. The Company identified changes to its
market purchase assumptions and revised the existing resource availability to include
updated thermal capacity and reduced demand response capacity determined through
the refinement of the planning margin calculation.
11. ln the Second Amended 2019 lRP, the Company assumed Valmy Unit 2
could be replaced with capacity purchases from south of its service area. However, as
explained in the direct testimony of Mr. Jared Ellsworth that accompanies this Application,
market conditions have changed dramatically in the south because of ripple effects
stemming from the energy emergency event in California in August2020. Understanding
the importance of transmission availability during times of high electricity demand, third-
party marketing firms began reserving transmission capacity just outside the Company's
border, significantly limiting Idaho Power's access to market hubs. Soon after the event,
ldaho Power's own transmission service queue was flooded with multi-year requests.
The transmission service requests have added to an already constrained market limiting
the Company's access to the Mid-Columbia market hub ("Mid-C'). As a result, ldaho
Power is testing the market availability with a market request for proposals ("RFP"),
issued Apri! 26, 2021, to further assess these transmission system constraints. Upon
conclusion of the RFP, the Company wil! evaluate the various proposals received and
supplement its filing in this case in June 2021 to inform stakeholders of proposals
received.
12. Economic Analvsis of Resource Options. Any number of resources can be
added to a resource portfolio, and, provided the resource portfolio meets or exceeds the
reliability threshold, the costs of the various portfolios can be compared. As described
APPLICATION-6
more fully in Mr. Ellsworth's testimony, ldaho Power analyzed four portfolios. Each
portfolio added a different resource in 2023 to replace the exit from Valmy Unit 2 atyear-
end 2022, and compared the cost of each to the portfolio cost of exiting Valmy Unit 2 at
year-end 2025: (1) a Valmy Unit 2 exit in 2022 with the addition of solar plus battery
storage in2023, (2) a Valmy Unit 2 exit tn2022 with the addition of only battery storage
in 2023, (3) a Valmy Unit 2 exit in 2022 with an expansion of ldaho Power's existing
demand response programs in2023, and (4) a Valmy Unit 2 exit in 2022 with a delayed
Bridger unit exit from2022to2025.
13. Using AURORA, the Company's electric modeling forecasting and analysis
software, ldaho Power quantified the total portfolio costs of each of the portfolios for the
2022 through 2025 time period. As depicted below, the results are portfolio costs in the
range of approximately $15.89 - $30.78 million more than the base portfolio, the Valmy
Unit 2 exit of 2025.
Economic Analvsis Results
Modeled Scenarios -Adjustments from the Second Amended 2019 IRP Preferred Portfolio
Results as
Compared to
2025 Valmy
Unit 2 Exit
2025 Valmy 2 Exit $-
2022Valmy 2 Exit - Capacity Replaced with Solar + Battery e123),$28.09 million
2022Yalmy 2Exil- Capacity Replaced with Battery e9?3)$30.78 million
2022Yalmy 2 Exit - Capacity Replaced with Expanded Demand Responsee (2023)$23.70 million
2022Yalmy 2 Exit- Capacity Replaced with Delayed Bridger Exit(2022 --20251 $15.89 million
e Assumes 134 MW of demand response program expansion at existing cost-effectiveness levels. ldaho
Power is uncertain if this amount of program expansion at assumed cost effectiveness levels is
achievable. Further, the ability for demand response under current program parameters to meet peak
load capacity need is diminishing over time making it increasingly challenging to maintain existing
demand response capacity.
APPLICATION-7
These results indicate that the modeled scenarios are not more economically beneficia!
to meet ldaho Power's reliability needs through 2025 than retaining Valmy Unit 2.
IV. MODIFIED PROCEDURE
14. ldaho Power believes that a hearing is not necessary to consider the issues
presented herein, and respectfully requests that this Application be processed under
Modified Procedure; i.e., by written submissions rather than by hearing. RP 201, ef seg.
lf, however, the Commission determines that a technical hearing is required, the
Company stands ready to present its testimony and support the Application in such
hearing.
V. COMMUNICATIONS AND SERVICE OF PROCEEDINGS
15. Service of pleadings, exhibits, orders, and other documents relating to this
proceeding should be served on the following:
Lisa D. Nordstrom
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
I nordstrom @idahopower. com
Matt Larkin
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
m [e-mail]
dockets@ idahopower.com
VI. REQUEST FOR ACKNOWLEDGEMENT
16. The Company conducted focused, near-term system reliability and
economic analyses on the timing of a Valmy Unit 2 exit between 2022 and 2025. After
refining the load and resource balance, it is clear that ldaho Power is unable to meet
reliability requirements if participation in coal-fired operations of Valmy Unit 2 ceases in
2022 without procuring an alternate source of peak capacity. The Company identified
four alternatives to delaying a Unit 2 exit of Valmy until 2025 and performed an economic
analysis on the resulting portfolio costs. The results indicate that operating Valmy Unit 2
APPLICATION-8
through 2025 costs approximately $15.89 million less on a net present value basis than
the least-cost feasible alternative.
17. ldaho Power respectfully requests that the Commission issue an order
acknowledging that, based on information known at this time, the appropriate exit date
from Vafmy Unit 2 is December 31, 2025. A Commission order issued no later than
September 29,2021, will allow ldaho Power adequate time to notify NV Energy should
the Commission direct ldaho Power to pursue an earlier exit date of Valmy Unit 2.
DATED at Boise, ldaho, this 30h day of Apnl2021.
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LISA D. NORDSTROM
Attorney for ldaho Power Company
APPLICATION-g