20220518Response to Reply Comments.pdf

SIHHh
May 1 8,2022
VIA ELECTRONIC FILING
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A(83714)
PO Box 83720
Boise, ldaho 83720-0074
Re Case No. !PC-E-21-17
ln the Matter of ldaho Power Company's Application for Authority to
lncrease lts Rates for Electric Service to Recover Costs Associated with the
Jim Bridger Power Plant
Dear Ms. Noriyuki
Enclosed for electronic filing please find ldaho Power Company's Response to All-
Party Reply Comments in the above-referenced mafter.
lf you have any questions about the attached document, please do not hesitate to
contact me.
Very truly yours,
&; P.z("t't".^,
Lisa D. Nordstrom
LDN:sg
Enclosures
a
An DACORP C(mpany
LISA D. NORDSTROM
Lead Counsel
I [e-mail]
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I n ord strom@ id a h opower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
AUTHORIry TO INCREASE ITS RATES
FOR ELECTRIC SERVICE TO
RECOVER COSTS ASSOCIATED WTH
THE JIM BRIDGER POWER PLANT.
CASE NO. IPC-E-21-17
IDAHO POWER COMPANY'S
RESPONSE TO ALL.PARTY
REPLY COMMENTS
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Pursuant to Order No. 34053 ldaho Power Company ("ldaho Powe/' or
"Company") respectfully submits the following Response to the All-Party Reply
Comments filed by the City of Boise on May 12, 2022, and the ldaho Public Utilities
Commission ('Commission") Staff, ldaho Conservation League ("lCL") and Sierra Club,
and Micron Technology, lnc. ("Micron") on May 13,2022. ln the paragraphs that follow
ldaho Power wil! respond to concerns raised by these parties in their Reply Comments,
including the prudence of Jim Bridger Power Plant ("Bridger'') investments, securitization
of Bridger coa!-related revenue requirement amounts, and implementation of a Bridger
levelized revenue requirement mechanism.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS - 1
I. BACKGROUND
1. The Bridger plant, located near Rock Springs, Vlfroming consists of four
generating units. PacifiCorp has two-thirds ownership and is the operator of the facility.
ldaho Power owns one-third, or 771 megawafts ('M\M)1 of Bridger. ldaho Power's one-
third share of the units' nominal net (or .net reliable") generation capacities are 177 MW
180 MW 174MW and 175 MW respectively. The Company and Pacificorp (collectively,
the "Co-Owners") work jointly to make decisions regarding the plant, including required
investments and the retirement of the plant.
2. ldaho Power is required to file an updated depreciation study within five
years of the Company's previous depreciation study.2 Because nearly five years had
passed since the last update, the Company began preparations in early 2021to file a new
depreciation study. Through these preparations, ldaho Power recognized that the
Second Amended 2019 lntegrated Resource Plan ("lRP'1. identified significant changes
with regard to the economic life of the Bridger plant, warranting the need for specific
review separate from the Company's general depreciation filing. Changing conditions
have resulted in an expected exit from participation in operations of Bridger that is several
years earlier than what is currently reflected in customer rates; Bridger's currently
approved depreciable life is 2034. Given the complexity associated with the acceleration
of Bridger's depreciation schedule and the implementation of the proposed cost recovery
mechanism, the Company felt that a separate proceeding was appropriate.
I Generator nameplate rating.2 ln the Matter of the Application of ldaho Power Company to Revise lts Depreciafion Rafes for Plant in
Service, Case No. !PC-E-03-07, Staff Comments at 4 (Aug 29, 2003).3 ln the Matter of ldaho Power Company's 2019 lntegrated Resource Plan, Case No. IPC-E-19-19.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS .2
3. In its Application filed on June 2, 2021, and its Amended Application on
February 16, 2022, ldaho Power requested authorization to (1) accelerate the
depreciation schedule for all coal-related Bridger investments to allow forfulldepreciation
and recovery by December 31, 2030, (2) establish a balancing account, and the
necessary regulatory accounting, to track the incremental costs and benefits associated
with ldaho Power's cessation of participation in coal-fired operations at Bridger, and (3)
adjust customer rates to recover the associated incremental annual levelized revenue
requirement of $27.13 million with an effective date of June 1 ,2022, which equates to an
overall increase of 2.12 percent.
II. IDAHO POWER'S RESPONSE
A. The Commission Should Accept Gommission Staffs Prudence
Recommendation for Bridger lnvestments Made from January 1, 2012,
through December 31, 2020.
4. ln their Joint Reply Comments, ICL and Sierra Club state the "Commission
should carefully scrutinize ldaho Power's past expenditures, particularly its investment in
[Selective Catalytic Reduction] SCRs at Jim Bridger."r The Company agrees with this
assertion. One role of the Commission is to carefully examine expenditures for which
ldaho Power requests recovery to ensure the charges are just and reasonable.s ln the
case of the SCR controls for Units 3 and 4, which were required for compliance with the
Clean Air Act Regional Haze Rules and resulting Vlfroming Regional Haze State
lmplementation Plan ("hfooming SIP'), the Company filed a request for a Certificate of
Public Convenience and Necessity ('CPCN') with the Commission because of the
a lCUSierra Joint Reply Comments, p9.4.5 ldaho Code $ 61-301.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARTY REPLY COMMENTS - 3
magnitude of the investment.6 The request, filed in advance of the investment and
construction of the SCR controls, included an analysis supporting the upgrade of Units 3
and 4 to allow for the ongoing coal-fueled energy production as the least-cost, least risk
outcome for customers.T
5. Despite the Commission's OrdeF granting the CPCN, ICL and Sierra Club
maintain in their Joint Reply Comments that ldaho Power's investments were imprudent
at the time the decision was made to install the SCR controls.e However, Commission
Staff reiterated support of their "original recommendations and conclusions regarding the
prudence of investments in Bridger during the period from January 1,2012, through
December 31, 2020" in their Reply Comments.lo Further, regarding the SCR controls,
Commission Staff expanded upon the analysis conducted as well as a timeline of the
events important to ldaho Power's request for, and the considerations made regarding
the Commission's decision to grant, a CPCN. Commission Staff explained in their Reply
Comments that the Commission provides:
two types of prudence determinations: decisiona! prudence and operational
prudence. Decisional prudence of an investment is based on need, while
operational prudence is based on whether the Company implemented the
investment in a least cost manner... By authorizing a CPCN through Order
No. 32929, the Commission provided the Company with decisional
prudence and an authorization to proceed.ll
6. As a result, Commission Staff in this case, evaluated operational prudence
and how cost effectively the project was implemented, noting that both SCR controls
6 ln the Matter of ldaho Power Company's Application for a Ceftificate of Public Convenience and
Necessrfy forthe lnvestment in Selective Catalytic Reduction Controls on Jim Bidger Units 3 and 4, Case
No. IPC-E-13-167 d., Harvey DlTestimony, Exhibit Nos. 5 and 6.8 Case No. IPC-E-13-16, Order No. 32929 (Dec 2, 2013).e lCUSierra Joint Reply Comments, p9.4.
10 Commission Staff Reply Comments, pg. 7.11 /d., p9.8.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARTY REPLY COMMENTS -4
came in under budget.12 ln addition to the thirteen Quarterly Reports filed with the
Commission in Case No. IPC-E-13-16 between March 2013 and March 2017 providing
project schedule and cost updates, Commission Staff noted the Commission required
ldaho Power to continuously evaluate the investments within the scope of changing
environmental impacts. ln their Reply Comments, Commission Staff detailed the timeline
of facts relevant to the evaluation and items Staff considered as part of their analysis to
develop a recommendation, noting that, in their Order approving a CPCN, the
Commission stated they "cannot speculate . . . upon the future availability of [a resource],
but must confine its determinations to facts susceptible of demonstration within
reasonable limits" concluding that "[s]hort-term reliability concerns make the issuance of
a CPCN the prudent decision at this point in time."13
7. As evidenced by the record in this case, ldaho Power's investments in
Bridger during the January 1, 2012, through December 31, 2020, time period, including
the investments in SCR controls for Bridger Units 3 and 4, were prudently incurred and
have been used and useful in the subsequent years for energy generation, economic
sales, and system reliability.
B. The Commission Should Reiect Various Parties' Recommendation that
ldaho Power Must Request Authorization for Securitization of Bridger
Levelized Revenue Requirement Amounts.
8. A!! parties that submitted Reply Comments recommend the Company
evaluate securitization of Bridger revenue requirement amounts in some manner. The
City of Boise encourages the Company to consider the benefits of applying for
12 ld.13 ld., pg. 8-9, citing Order No. 32929 at 11 that quotes Applications of lntermountain Gas Co.,77 ldaho
188, 199 289,933, 940 (19s5).
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS - 5
securitization.l4 The Joint Reply Comments of ICL and Sierra Club indicate ldaho Power
should "fully evaluate securitization,"ls And while Micron "does nof assert that it is
necessarily the best approach for Bridge/' it believes the "Commission should at least
require ldaho Power to analyze and present all options.'16 The Commission does not
need to order the Company to perform this evaluation; ldaho Powe/s Reply Comments
include a detailed assessment of securitization of Bridger revenue requirement
amounts.lT
9. ldaho Power believes the benefits of debt securitization would not occur
without subsequent financial harm to the Company. Under ldaho's regulatory mandate
and model, the Company has an obligation to provide adequate, efficient, just, and
reasonable service on a nondiscriminatory basis to all those that request it within its
certificated service area.18 As part of the regulatory compact, the Company must serve all
customers in the service area, in exchange for its exclusive right to provide retail electric
service within the service area. ln return, the compact provides ldaho Power the
opportunity to earn a reasonable return by investing capital into the resources and
systems necessary to perform its service obligation. Consistent with the treatment of
Boardman and Valmy-levelized revenue requirement computations, the Company
voluntarily proposed to use a 9.5 percent Return on Equityle 1"ROE"), less than the
authorized ROE included in base rates, in the quantification of the Bridger coal-related
levelized reven ue req uirement.
( City of Boise Reply Comments, pg. 4.15 lCUSierra Club Joint Reply Comments, pg. 3.1o Micron Reply Comments, pg. 3.17 ldaho Power Reply Comments, pgs. 13-16 (May 13,2022)18 ldaho Code $$ 6'l-302,61- 315, 61-507.1e Larkin Dl Testimony, pg. 22, ll. 17-22.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS - 6
10. In their Reply Comments, Commission Staff incorrectly characterizes
securitization as an 'effective tool to keep the Company whole from the closure costs of
Bridgel."zo ln reality, securitization of prudently incurred capital investments lowers
revenue requirement amounts by not allowing the Company to earn a fair rate of return
on its investment, an investment that has already been financed in a traditional manner.
While the Commission has oversight to ensure the Company is prudently investing its
capita!, securitization of these costs after the investments were made would effectively
prevent ldaho Power and its investors from earning a fair rate of return on prudently-
incurred, used and useful investment at the Bridger plant that was financed with both debt
and equity. This result would negatively impact the Company's ability to attract capital,
and effectively restructure the utility industry in the state of ldaho.
C. The Commission Should Authorize Idaho Power's Proposed Bridger
Levelized Revenue Requirement Mechanism and the Gompany's Proposed
Rate Mitigation Alternative.
Levelized Revenue Requirement Mechanism
11. While the Joint Reply Comments of ICL and Sierra CIub and the Reply
Comments of the City of Boise reiterate support for ldaho Power's transition away from
coal-fired generation, they, along with Micron, continue to express concern about
implementing a levelized revenue requirement mechanism absent an agreement in place
to cease coal-fired operations with ldaho Power's operating partner, PacifiCorp, due to
differing exit dates of each unit between the co-owners. Yet, ICL and Sierra Club were
both parties to the Settlement Stipulation and Motion to Approve Settlement Stipulation
in Case No. IPC-E-16-24 ("Valmy Settlement Stipulation"), the Company's request to
20 Commission Staff Reply Comments, pg. 7
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS - 7
implement a levelized revenue requirement mechanism for the North Valmy power plant
approved with Order No. 33771.21 Similarto the circumstances existing with Bridger, there
was no contractual agreement that allowed for one party to exit operations of a Valmy
unit prior to both partners exiting. To remedy any potential concerns about ldaho Power's
efforts, the Valmy Seftlement Stipulation included provisions that ldaho Power use
prudent and commercially reasonable efforts to reach an agreement with co-owner NV
Energy to amend the ownership and operating agreements to provide for an exit of
participation in or cessation of coal-fired operations and report on the status of the
negotiations to the Commission.22
'12. A balancing account, implemented as proposed by Idaho Power, in fact,
addresses the concerns raised by parties because it allows for flexibility of the timing and
recovery of Bridger coal-related revenue requirement amounts, smoothing customer rate
impacts and ensures customers pay no more or no less than actual Bridger-related costs.
Similar to the provision in the Valmy Settlement Stipulation that required the Company to
continue to conduct ongoing analyses to evaluate the economics of a unit retirement as
part of its lRP,23 the economics of an earlier exit from participation in coal-fired operations
at Bridger will continue to be evaluated through the IRP process, which allows for any
costs and benefits associated with an earlier exit to be analyzed. Should a future IRP
suggest differing exit dates for Bridger units, the mechanism allows for incorporation of
21 ln the Matter of the Application of ldaho Power Company for Authoity to lncrcase /fs Rates for Electic
Service to Recover Cosfs Associafed with the North Valmy Plant, Case No. IPC-E-16-24, Order No.
33771 al5 (May 31,2017).22 Case No. IPC-E-16-24, Settlement Stipulation and Motion to Approve Settlement Stipulation, fl 11 and
12 (May 3,2017).23 ld.,1l'lo.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARTY REPLY COMMENTS - 8
the change and adjusts the levelized revenue requirement accordingly, reflecting any
future changes as if they had been in place since establishment of the mechanism.
13. As explained in detail in the Company's Reply Comments, Commission
Staff signaled support for ldaho Powefs proposed balancing account to track any
differences in the Bridger coal-related revenue requirements, however their proposal for
computing the differences is flawed and would cause considerable financialharm to ldaho
Power and ultimately its customers.2a Simply put, the resulting effect of applying Staffs
proposed method of computing balancing account differences would be to require the
Company to track differences between a 2020 base amount that is $34.9 million higher
than the $20.7 million currently included in customer rates associated with Bridger and
authorized by the Commission in the last general rate case. Consequently, ldaho Power
would have an obligation for future return to customers of $95.4 million -- amounts ldaho
Power never actually recovered from customers. ln fact, a complete denial of the
Company's proposed implementation of a Bridger balancing account would do /ess
financial harm to ldaho Power than implementing Staffs proposed methodology for
tracking Brid ger coa l-re lated reven ue req u irements.
Rate Mitioation Alternative
14. ldaho Power understands the concerns raised by parties throughout this
proceeding about a rate increase, particularly coincident to the Company's proposed rate
increase associated with the Power Cost Adjustment ('PCA'1.tu !n recognition of these
concerns, the Company offers an alternative recommendation that would avoid an
2a ldaho Power Reply Comments, pgs. 5-6.25 ln the Mafter of the ldaho Power Company's Application for Authoity to lmplement Power Cost
Adjustment (PCA) Rates for Electic Seruice frcm June 1, 2022 through May 31, 2023, Case No. IPC-E-
21-22.
IDAHO POIA'ER COMPANY'S RESPONSE TO ALL.PARW REPLY COMMENTS - 9
immediate adjustment to customer rates and instead utilize previously deferred non-cash
income tax benefits associated with Case No. GNR-U-18-01 to offset the incremental
annual levelized revenue requirement of $27.13 million. ln Case No. GNR-U-I8-01, the
Commission approved26 a Settlement Stipulation that provided for the annual deferral of
approximately $7.4 million of non-cash deferred tax benefits stemming from the federal
Tax Cuts and Jobs Act of 2017 ("TCJA"1.zz These non-cash tax benefits were envisioned
to accrue to offset other non-cash costs that customers would othenrise have to pay
through rates. These deferred TCJA non-cash benefits have accumulated each year to a
regulatory liability that ldaho Power estimates will be approximately $27.7 million as of
June 1,2022.
15. The Company believes that now is an opportune time to utilize these
deferred TCJA benefits to oftset the annual incremental levelized revenue requirement
proposed in this case, thereby avoiding an immediate impact to customer rates. Because
these non-cash TCJA benefits will continue to accrue until the Company's next general
rate case, there wi!! be sufficient benefits to ofbet the annual Bridger-related incremental
levelized revenue requirement, a component of which is related to the non-cash
acceleration of depreciation, until rates can be adjusted in the future. The Company
believes an appropriate time to reevaluate an adjustment to customer rates related to
recovery of the Bridger levelized revenue requirement could correspond with a future PCA
decrease or a future general rate case. ln any event, the Company would commit to only
seeking a rate adjustment to recover the Bridger levelized revenue requirement if such
2a ln the Matter of the lnvestigation lnto the lmpact of Fedenl Tax Code Revisions on Utility Cosfs and
Ratemaking, Case No. GNR-U-18-01, Order No. 34071 (May 31, 2018).27 Pub. L. No.115-97.
IDAHO POVVER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS - 1O
an adjustment could be implemented in a revenue neutral manner to customers (e.9.,
combined with a PCA decrease) or in a general rate case.
16. The Company proposes that any shortfal! in coverage of the Bridger
revenue requirement be tracked for future true-up in the proposed balancing account. By
implementing the Company's proposed rate mitigation alternative in this case, the
Commission would be able to establish a balancing account mechanism that has been a
proven and successful regulatory mechanism that benefited customers in the early exit
of the Boardman and North Valmy power plants,28 without an immediate impact to
customer rates. Further, implementation of the balancing account under the Company's
proposed mitigation alternative would a!!ow for known costs - costs that Staff has
concluded were prudently incurred and the associated accelerated depreciation - to be
paid for now with non-cash benefits rather than deferring recovery into the future which
would result in a larger impact to customer rates, as the same revenue requirement would
be recovered over a shorter time period. ldaho Power's proposed rate mitigation
alternative addresses concerns raised by parties in this proceeding about a rate increase,
particularly coincident with the proposed rate increase associated with the PCA.
ilr. coNcLUStoN
17. ldaho Power appreciates the opportunity to respond to Reply Comments
filed in this case and for Commission Staffs continued support for a prudence
determination of the Bridger investments. The Company respectfully requests the
Commission (1) accept Commission Staffs recommendation to find all Bridger capital
28 ln the Matter of ldaho Power Company's Request for Acceptance of lts Regulatory Plan Regarding the
Eady Shutdown of the Boardman Power Plant, Case No !PC-E-11-18, Order No. 32457 (Feb 15, 2012);
Case No. IPC-E-16-24, Order No. 33771.
IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARW REPLY COMMENTS . 11
investments through 2020 as prudent, (2) authorize ldaho Power to accelerate the
depreciation schedule for all coal-related Bridger investments to allow for full depreciation
and recovery by December 31, 2030, (3) allow for the establishment of a balancing
account, and the necessary regulatory accounting, to track the incremental costs and
benefits associated with ldaho Powe/s cessation of participation in coa!-fired operations
at Bridger, and (4) approve the Company's rate mitigation proposal to utilize non-cash
deferred tax benefits stemming from the 2017 TCJA to ofbet the incremental annual
levelized revenue requirementot$27.13 million until customer rates can be adjusted in a
future revenue requirement proceeding.
DATED at Boise, ldaho, this 18th day of May, 2022.
X*!.("1.t.^,
LISA D. NORDSTROM
Attorney for ldaho Power Company
IDAHO POIA'ER COMPANY'S RESPONSE TO ALL.PARW REPLY COMMENTS. 12
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 18th day of May 20221 served a true and correct
copy of IDAHO POWER COMPANY'S RESPONSE TO ALL-PARTY REPLY
COMMENTS upon the following named parties by the method indicated below, and
addressed to the following:
Commission Staff
Chris Burdin
Deputy Attorney General
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg No.8,
Suite 201-A(83714)
PO Box 83720
Boise, lD 83720-0074
lndustrial Customer of Idaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 N. 6th Street
Boise, ldaho 83701
City of Boise
Ed Jewell
150 N. Capito! Blvd.
P.O. Box 500
Boise, ldaho 83701 -0500
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IDAHO PO\A'ER COMPANY'S RESPONSE TO ALL-PARTY REPLY COMMENTS - 13
Clean Energy Opportunities for ldaho, lnc.
Kelsey Jae
Law for Conscious Leadership
920 N. Clover Dr.,
Boise, ldaho 83703
Michael Heckler
Courtney \Mite
Clean Energy Opportunities for ldaho
3778 Plantation River Drive, Suite 102
Boise, lD 83703
Sierra Club
Rose Monahan
Ana Boyd
2101 WebsterStreet, Suite 1300
Oakland, CA94612
Micron Technology, lnc.
Austin Rueschhoff
Thorvald A. Nelson
Austin W. Jensen
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, CO 80202
Micron Technology, lnc.
Jim Swier
8000 S. FederalWay
Boise, lD 83707
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IDAHO POWER COMPANY'S REPLY COMMENTS - 14