20220513Reply Comments.pdf

CHRIS BURDIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
[phone]
IDAHO BARNO.9SIO
, 'r a' :' i-i i:ii i: 03
Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
,r-.j .. . 'i-1 IiiLi-"*-i I L*,
i. , v'./lvtr
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
AUTHORITY TO INCREASE ITS RATES
FOR ELECTRIC SERVICE TO RECOVER
COSTS ASSOCIATED WITH THE JIM
BRIDGER POWER PLANT
CASE NO.IPC-E-2I-I7
REPLY COMMENTS OF
THE COMMISSION STAFF
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STAFF OF the Idaho Public Utilities Commission, by and through its Attomey of
record, Chris Burdin, Deputy Attorney General, submits the following comments.
BACKGROUND
The Jim Bridger Power Plant ("Bridger") is located near Rock Springs, Wyoming
and consists of four generating units. Amended Application at 3. PacifiCorp owns two-
thirds of the facility and is its operator, while Idaho Power Company ("Company") owns
the other one-third. Id. The Company and PacifiCorp ("Co-Owners") work jointly to make
decisions regarding Bridger including required investments and the proposed retirement of
Bridger. /d Bridger is connected to the Borah West transmission path west of the Borah
Substation near American Falls, Idaho. Id. The Company's one-third share of energy flows
west over this path. Id The Idaho-Wyoming path ("Bridger West") consists of three 345
kV transmission lines. Id. at 4. The Company owns 800 MW of the 2,400 MW east-to-
1REPLY STAFF COMMENTS MAY 13,2022
west capacity which feeds into the Borah West path when power is moving east to west
from Bridger. Id.
PROCEDURAL HISTORY
On June 3,2021, the Company applied to the Commission for authorization to
accelerate the depreciation schedule for Bridger to allow the plant to be fully depreciated
and recovered by December 31,2030. Application at l.
Clean Energy Opportunities for ldaho, City of Boise City, Industrial Customers of
Idaho Power, Idaho Conservation League, Micron Technology, and Sierra Club all
intervened in this matter. Order Nos. 35094,35102, and 35119.
On November 17,2021, the Commission suspended the procedural schedule and
discovery until the Company filed an update or requested to set the procedural schedule
once more information was known, but no later than December 31,2021. Order No. 35222.
The Commission also suspended the effective date for 30 days and 5 months, or until May
31,2022, unless the Commission issued an earlier order accepting, rejecting, or modifuing
the Company's Application. Id.
On December 30, 2021, the Company filed a letter ("Update") with the Commission
stating that it filed its 2021Integrated Resource Plan ("IRP") with a preferred portfolio that
also identified the cessation of coal-fired generation in Bridger Units I and 2 in2023 with
a natural gas conversion of those units in2024. Update at l. The Company also stated that
the Environmental Protection Agency ("EPA") had not yet formally acted on PacifiCorp's
proposed alternative regional haze compliance plan for Bridger Units I and2. Id. at2. The
current PacifiCorp plan would require emission controls by December 31, 2021, for Unit 2
and December 31, 2022, for Unit l. Id. The Company stated that on December 27,2021,
Wyoming Governor Mark Gordon issued a temporary emergency suspension extending the
compliance date of Unit 2 through April 30, 2022, to give more time for the EPA to act on
the Wyoming State Implementation Plan ("SIP"). Id. The EPA remains in discussions with
PacifiCorp regarding this issue. 1d
On February 16,2022, the Company filed an Amended Application and requested
the Commission issue an order authorizing the Company to: (l) accelerate the depreciation
schedule for all coal-related Bridger investments to allow for full depreciation and recovery
by December 31, 2030, (2) establish a balancing account, and the necessary regulatory
2REPLY STAFF COMMENTS MAY 13,2022
accounting, to track the incremental costs and benefits associated with the Company'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, which would result in an overall rate increase of 2.12 percent. Id. at l.
The Company requested that its proposed rates take effect June l, 2022. Id. The
Company also requested that the Commission set a public comment deadline of April 29,
2022, a simultaneous reply comment deadline of May 13, 2022, and a Company reply
deadline of May 18,2022. Id. at 11.
THE APPLICATION
The Company represented that it has made numerous investments into Bridger to
ensure environmental compliance and routine maintenance and repairs are completed. Id.
at 4. The Company requested a prudence determination on the incremental Bridger coal-
related investments from January l,2}l2,through December 31,2020.1 Id. The Company
represented that its investments for environmental compliance make up nearly 50 percent
of the total Bridger investments made since January 1,2012. Id. at5. The Company also
represented that it funded 15 investments greater than $l million for operational
maintenance costs. See Id.
The Company represented that changing conditions have resulted in earlier than
expected exit from participation in Bridger operations. Id. The Company's 2019 IRP
proposed Bridger exits in 2022,2026,2028, and 2030.2 Id. at 5-6. The Company's2021
IRP3 included the conversion of Bridger Units I and 2 from coal to natural gas by the
summer of 2024 with a 2034 exit date, and the exit of coal-fired operations in Units 3 and 4
by year-end 2025 and 2028. Id. at 6. The Company claimed that the 2021 IRP indicates
that an earlier exit from coal-fired generation at Bridger would be more economical. Id.
The Company stated that a depreciable life of year-end 2030 for all Bridger Units is
appropriate'oas it [would] help minimize revenue requirement impacts to customers." Id.
The Company estimated that it would exit coal-fired operations of Bridger completely by
2028. rd.
I See Case No. IPC-E-l l-08
2 See Case No. IPC-E-19-19
3 See Case No. IPC-E-21-43
JREPLY STAFF COMMENTS MAY T3,2022
The Company estimated that Bridger would require incremental coal-related
investments to maintain operations prior to the decommissioning of the facility. Id.
However, because the specific timing and exact amounts of future investments are
unknown, the Company proposed that the Commission establish a balancing account to
allow flexibility for the recovery of the remaining Bridger investment revenue requirement.
Id. at 6-7. The Company stated that under the balancing account approach,
the Company replaces the base rate revenue recovery associated with [the
Company's] existing coal-related investment in Bridger with a levelized
revenue requirement and tracks it in the Bridger balancing account,
smoothing revenue requirement impacts associated with the exit of Bridger
coal-fired operations and allowing for full recovery of Bridger coal-related
costs near the time [the Company] ceases participation in coal-fired
operations.
Id. at7.
The Company represented that this approach aligns the cost recovery period with
the Company's remaining participation in coal-fired operations more closely and ensures
that Customers would "pay no more or no less than the actual coal-related O&M and capital
coal-related costs of the Bridger plant beginning June I,2022." Id. The Company further
believed that the balancing account approach would accelerate depreciation expenses
related to its Bridger-related investments. 1d. The Company proposed that the Commission
track the coal-related investment return and associated depreciation expenses, as well as the
decommissioning costs, through the balancing account. 1d.
The Company requested an accounting order that allows the Company to make
necessary accounting entries, including a regulatory asset account that would match
Generally Accepted Accounting Principles ("GAAP") revenue recognition with actual
monthly patterns of coal-related revenue requirement. Id. at 8. The Company stated that
regulatory accounts would be required to adjust the financial statement impacts resulting
from Bridger-related GAAP accounting and income tax results. Id.
The Company requested recovery of the coal-related levelized revenue requirement
that includes costs of accelerating the depreciation of Bridger, the retum associated with
coal-related capital investments net of accumulated depreciation forecasted through the
Company's participation in Bridger, interim decommissioning costs associated with
Bridger, and O&M savings associated with non-fuel coal-related O&M reductions. Id. T\e
4REPLY STAFF COMMENTS MAY 13,2022
Company totaled these costs to $27,127,333. The Company submitted the following table
to present the differences between each component as quantified in the Company's initial
request and the amounts that reflected Bridger's investment levelized revenue requirement:
The Company proposed to allocate the increase related to Bridger's balancing
account using the jurisdictional separating study method. Id. at 9. The Company requested
that the incremental revenue requirement increase of $27.13 million be recovered from all
customer classes through a uniform percentage increase to all base rate components except
the service charge. Id.
COMMENTS
On April 14,2022, Clean Energy Opportunities for Idaho ("CEO") filed comments.
On April 27,2022, Staff, City of Boise, Industrial Customers of Idaho Power ("ICIP"),
Micron Technology, Idaho Conservation League ("ICL"), and Siena Club filed comments.
A. CEO
CEO's comments took issue with the Selective Catalytic Reduction ("SCR") system,
noting that it was controversial, the process has been less that open, and that return on and
retum of capital with respect to the SCR system should be reviewed.
B. City of Boise
City of Boise's comments mentioned that the requested increase is significant,
prudency determination is critical to the case and, if rate making treatment is approved, the
Company should begin closure dates with PacifiCorp. City of Boise stated they would
support the Company requesting securitization to lower the rate impact on customers for the
early closure of Bridger.
5
June202l
Request
February 2022
Amended Request
oh Change
Plant Investment s73,470,945 $52,121,340 (2e.1)
Interim Decomm. Costs $59,318 $64,449 8.6
O&M Savings ($5,736,719)($4,391,349)(23.s)
Levelized Rev. Req.s67,793,544 s47,794,440 (2e.s)
Rev. Req. in Rates ($36,96,815)(s20,667,107)(44.1)
Net Change $30,825,729 $27,127,333 (12.0)
REPLY STAFF COMMENTS MAY 13,2022
C. ICIP
ICIP's comments stated that the Company's Application asked for a large increase
on top of other large increases. ICIP stated that the Company should be looking to
securitization to mitigate the costs of the early closure of Bridger. ICIP further stated that
the Company's financials support securitization.
D. Micron
Micron Technology stated its interest in the fuel mix the Company uses and reserved
the right for further comments.
E. ICL/Sierra Club
ICL and Sierra Club filed joint comments. They request the Commission deny the
Company recovery of costs prior to a firm commitment date for closing Bridger. They
stated that they believe the installation of the SCR was imprudent, and that the Company
should pursue securitization in order to recover any prudently incurred costs in Bridger.
STAFF REPLY COMMENTS
1. Securitization
Several intervenors commented that they supported securitization of the closure
costs and accelerated depreciation of Bridger. The City of Boise voiced support for the
Company pursuing securitization. ICIP reasoned that securitization for those costs and the
significant Power Cost Adjustment in Case No. IPC-E-22-ll would be a potentially viable
ratemaking tool to mitigate rate impacts. ICIP also believed that the Company's financials
were favorable to securitization and the Commission should initiate exploration of
securitization as an option.
The joint comments submitted by the ICL and Sierra Club provided additional
details of the option to securitize, stating that securitization of Bridger could offer $63.7
million in savings over somewhat more traditional rate making treatment. ICL and Sierra
Club believed there may be additional savings because those calculations are based on a
3.54% interest rate on the bonds, and the Company might be able to get more favorable
interest rates. ICL and Sierra Club stated that the Company would need to get a firm
timeline and cost for exiting Bridger before pursuing securitization. ICL and Siena Club
also submitted that the Company should explain why it has not considered securitization.
6REPLY STAFF COMMENTS MAY 13,2022
Staff echoes the concerns with respect to securitization mentioned in the joint
comments of ICL and Sierra Club. Staff believes that securitization could be an effective
tool to keep the Company whole from the closure costs of Bridger, while mitigating the rate
impacts to customers. However, at this point Staff believes there are too many uncertainties
involving the cost and date of the Bridger closure to allow securitization to be a viable
option. Staff believes that to conduct an analysis of the benefits of securitization, the date
and costs of closure must be known. As Staff previously mentioned in its Comments filed
on April 27,2022, Bridger Units I and2 could be shut down at the end of this year, or they
could last until 2030 or beyond. Without a confirmed closure date, future operating and
capital costs remain uncertain. At this time, there is no agreement for one Bridger partner
to exit the plant before the other; therefore, any exit costs that could be incurred by the
Company by leaving early are unknown. Staff believes that without any firm closure date,
all decommissioning costs will be estimates and have a potential error of up to 30oh.
However, Staff notes that its recommendation to establish a balancing account to
track the closure costs and accelerated depreciation of Bridger does not preclude a future
filing where securitization may be considered once the necessary information is known.
2. Prudence and Recovery of Bridger Units 3 and 4
Staff continues to support its original recommendations and conclusions regarding
the overall prudence of investments in Bridger during the period from January 1,2012,
through December 31,2020, as reflected in Stafls Comments submitted on April 27,2022.
However, regarding the investments in SCR technology in Units 3 and 4, Staff expands its
comments of the analysis it conducted by providing the Commission with additional
considerations and a timeline of events important to the case, especially as it pertains to the
Commission's decision to grant a Certificate of Convenience and Necessity ("CPCN") in
Order No.32929.
Before the Company can begin recovery of a capital investment, the Commission
provides two types of prudence determinations: decisional 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. Both prudence determinations need to be authorized by the Commission before
recovery of the investments can begin. These can occur simultaneously after the project
7REPLY STAFF COMMENTS MAY t3,2022
investments have been implemented or in two stages as in the case of Bridger SCR
investments. By authorizing a CPCN through Order No.32929, the Commission provided
the Company with decisional prudence and an authorization to proceed. Because decisional
prudence was already authorized, Staffs primary focus in this case was to evaluate
operational prudence and how cost-effectively the Company and owner-operator,
PacifiCorp, implemented the project, which came under the projected budget for both units.
Staff was aware of the Commission's concern regarding the risky nature of large
SCR investments in an aging coal plant and the caveats that were included with its
authorization of the CPCN. One caveat was to provide quarterly reports. The Commission
stated:
We admonish the Company to stay abreast of potential future environmental
regulations that could negatively impact its investment in the Bridger
upgrade. To that end, we direct the Company, as a condition of its CPCN
(Idaho Code $ 6l-528),to submit quarterly reports updating the Commission
on any changes to environmental policy or regulations as the Bridger
upgrades are installed and placed in service.
Order No 32929 at 11. The Commission also required the Company to continuously
evaluate the project economically, but again, within the scope of changing environmental
impacts.
Additional future environmental regulations are likely. It is not
inconceivable that, during the installation of the SCRs, a tipping point could
be reached making them uneconomic. It is in the best interest of the
customers, the Company, and the Company's shareholders for Idaho Power
to be continuously analyzing the impact of changing environmental
regulations on its upgrade project. As the project moves toward completion
over the next several years, we direct Idaho Power to retum to the
Commission if viable altematives to the Bridger Units 3 and 4 upgrades
become available.
Id,
After the fact determination of decisional prudence is usually complex and requires
judgement of competing facts. Staff utilized its judgement in its recommendation by
carefully examining the language used in the Commission's Order and by using criteria of
what was known at the time that a determination was made. As stated by the Commission
"The commission cannot speculate . . . upon the future availability of [a
resource], but must confine its determinations to facts susceptible of
demonstration within reasonable limits." Applications of Intermountain Gas
8REPLY STAFF COMMENTS MAY 13,2022
Co.,77Idaho 188, 199 289,933,940 (1955). Short-term reliability concerns
make the issuance of a CPCN the prudent decision at this point in time.
Id.
For these reasons, Staff has provided a list of items it considered as part of its
analysis to develop its recommendation and a timeline of the facts related to the evaluation
of SCR investments prior to the projects' completion.
Considerations
l. Once an owner issues a Limited Notice to Proceed ("LNTP"), the owner of the
project must provide payment for the work that is specified if the contractor performs the
work according to the agreement.
2. It is assumed that the Engineer, Procurement, and Construction ("EPC")
Contract contained early termination provisions. However, this right does not come without
its cost. Termination is very rarely not contentious and frequently results in significant
disputes given the consequences for contractors. The cost payable to a contractor on
termination will vary, but these can include:
a. Recovery for the value of work done at the date of termination.
b. Any other costs or liabilities reasonably incurred in the expectation of
completing the work which can range from paying unpaid overhead and profit
on the remainder of the work to costs properly incurred in anticipation of
completing the work and de-mobilization.
3. The only economic analysis comparing alternatives to the installation of SCRs
that are valid are those that are evaluated within Idaho Power's system. Any economic
evaluation that occurs within any other utility system is not relevant.
4. According to the Company's "tipping point" analysis requested by Staff, a 52%o
decrease in the Company's natural gas forecast used in its Aurora analysis would need to
occur to make the Company's next best altemative more economical. See M. Louis, Di,
Case No. IPC-E-13-16, pp. 13-16. EIA Henry Hub Natural Gas price forecasts published
in20l4 and 2015 did not show reductions in natural gas prices approaching that level of
reduction.
9REPLY STAFF COMMENTS MAY 13,2022
20tt
20t2
2013
Timeline of Events
January
o PacifiCorp, in conjunction with the Wyoming Department of Environmental
Quality, agreed to install SCRs on Units 3 and4 as part of RegionalHaze Federal
Implementation Plan.
August
o PacifiCorp filed a CPCN with the Wyoming Commission for the SCRs.
o PacifiCorp filed a voluntary request for approval of the SCRs with the Utah
Commission.
February
. Science Applications International Corporation study is completed.
April
o PacifiCorp issued an internal memo recommending the awarding of an EPC
Contract to Babcock and Wilcox Power Generation Group and the Perry Group.
May
o EPA approved and disapproved portions of the Wyoming Regional Haze SIP.
. Wyoming Commission approved CPCN for SCRs in docket No. 200000-418
(Record No. 13314).
o Utah Commission issued its final order approving SCRs (Docket No. 12-035-
e2).
o A LNTP contract was signed with the successful EPC bidder on May 31,2013.
See Application, Case No. IPC-E-I3-16,p.4.
June
o Idaho Power filed for a CPCN with the Idaho Commission seeking authorization
for investment in SCR controls.
November
o The EPA indicated it will sign a notice of final rulemaking on November 21,
2013, making emission reduction requirements at Jim Bridger Units 3 and 4
federally enforceable. If the environmental upgrades are not installed within the
time frame given by the state of Wyoming or the EPA, Idaho Power would be
forced to stop senerating from these units. See Application, Case No. IPC-E-
13-16, p. 4.
December
o A provision in the LNTP states that December l, 2013, which is defined as the
full notice to proceed (FNTP) Date, is the deadline by which the FNTP must be
issued in order for the EPC contractor to attain the project completion
REPLY STAFF COMMENTS t0 MAY 13,2022
a
guarantee dates without requiring a contract change. See Application, Case
No. IPC-E-13-16,p. 10.
Idaho Commission issued order in Case No. IPC-E-13-16 (Order No. 32929)
approving Idaho Power's application for a CPCN for the SCRs at Units 3 and
4.
Idaho Power gave PacifiCorp formal notice to support the issuance of a FNTP
with the SCRproject.
a
2014
20ts
2016
Technical Staff: Joe Terry
Rick Keller
i:umisc/comments I ipcr,2l.l7 cbjt rcply comments
Chris Burdin
Deputy Attorney General
Januar.v
o EPA issued final approval for the Wyoming strategy to install SCRs at Units 3
and 4 in 2015 and2016 respectively, and for Units I and 2 in202l and2022,
respectively.
June
o Idatro Power's 2015 Integrated Resource Plan is published with an updated SCR
study in Appendix C.
December
o EPA Compliance deadline for Unit 3 SCR.
o Construction on Bridger Unit 3 SCR completed.
December
o Compliance deadline for Unit 4 SCR.
o Construction on Bridger Unit 4 SCR completed.
Respectfully submiued this l3ll, day of May 2022
.l
REPLY STAFF COMMENTS 1l MAY 13,2022
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF MAY 2022, SERVED
THE FOREGOING REPLY COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-21-17, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
LISA NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL : [e-mail]
[e-mail]
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
5I5 N 27TH STREET
BOISE ID 83702
E-MAIL: [e-mail]
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
7IO N 6TH ST
BOISE ID 83702
E-MAIL: [e-mail]
ROSE MONAHAN
ANA BOYD
SIERRA CLUB
2IOI WBSTER ST STE I3OO
OAKLAND CA946I2
E-MAIL: [e-mail]
ana. boyd@sierrac lub. orq
KELSEY JAE
LAW FOR CONSCIOUS LEADERSHIP
920 N CLOVER DR
BOISE ID 83703
E-MAIL: [e-mail]
MATT LARKIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL : [e-mail]
ED JEWELL
DEPUTY CITY ATTORNEY
BOISE CITY ATTORNEYS OFF
PO BOX 500
BOISE ID 83701-0500
E-MAIL : BoiseCityAttorne),@cit),ofboi se. ors
ej ewel I @cit)rofboise. org
MICHAEL HECKLER
COURTNEY WHITE
CLEAN ENERGY OPPORTUNITIES FOR
IDAHO
3778 PLANTATION DR, SUITE IO2
BOISE ID 83703
E-MAIL:
mike@c leanenergyopportunit ies.com
courtney @cleanenergyopportunities. com
JIM SWIER
MICRON TECHNOLOGY INC
8OO SOUTH FEDERAL WAY
BOISE ID 83707
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE
AUSTIN RUESCHHOFF
THORVALD ANELSON
AUSTIN W JENSEN
HOLLAND & HART LLP
555 17TH ST STE 32OO
DENVER CO 80202
E-MAIL: [e-mail]
tnelson@hollandhart. com
awj e,nsen@ho llandhart. com
ac lee(Oho I landhart. com
gl gar ganoamari @.hollandhart. com
SECRETARY
CERTIFICATE OF SERVICE