HomeMy WebLinkAbout20220228Waites Direct.pdf
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR A
DETERMINATION VALIDATING THE
NORTH VALMY POWER PLANT BALANCING
ACCOUNT TRUE-UP.
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CASE NO. IPC-E-22-05
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
COURTNEY WAITES
WAITES, DI 1
Idaho Power Company
Q. Please state your name, business address, and 1
present position with Idaho Power Company (“Idaho Power” or 2
“Company”). 3
A. My name is Courtney Waites. My business 4
address is 1221 West Idaho Street, Boise, Idaho 83702. I 5
am employed by Idaho Power as a Regulatory Consultant in 6
the Regulatory Affairs Department. 7
Q. Please describe your educational background. 8
A. In December of 1998, I received a Bachelor of 9
Arts degree in Accounting from the University of Alaska in 10
Anchorage, Alaska. In 2000, I earned a Master of Business 11
Administration degree from Alaska Pacific University. I 12
have attended New Mexico State University’s Center for 13
Public Utilities and the National Association of Regulatory 14
Utility Commissioners “Practical Skills for the Changing 15
Electric Industry” conference, the Electric Utility 16
Consultants, Inc.’s “Introduction to Rate Design and Cost 17
of Service Concepts and Techniques for Electric Utilities” 18
conference, Edison Electric Institute’s “Introduction to 19
Public Utility Accounting” course, Edison Electric 20
Institute’s “Electric Rates Advanced” course, SNL Knowledge 21
Center’s “Essentials of Regulatory Finance” course, and the 22
Financial Accounting Institute’s “Utility Finance and 23
Accounting” seminar. 24
WAITES, DI 2
Idaho Power Company
Q. Please describe your work experience with 1
Idaho Power. 2
A. I began my employment with Idaho Power in 3
December 2004 in the Accounts Payable Department. In 2005, 4
I accepted a Regulatory Accountant position in the Finance 5
Department where one of my tasks was to assist in 6
responding to regulatory data requests pertaining to 7
financial issues. In 2006, I accepted a Regulatory Analyst 8
position in the Regulatory Affairs Department and in 2014 9
was promoted to my current position, Regulatory Consultant. 10
My duties as a Regulatory Consultant include providing 11
support for the Company’s various regulatory activities, 12
including tariff administration, regulatory ratemaking, and 13
compliance filings, and the development of various pricing 14
strategies and policies. In January 2014, I was promoted to 15
Senior Regulatory Analyst where my responsibilities 16
expanded to include the development of complex cost-related 17
studies and the analysis of strategic regulatory issues. 18
I. OVERVIEW 19
Q. What is the purpose of this case? 20
A. The purpose of this case is to present to the 21
Idaho Public Utilities Commission (“Commission”), as 22
WAITES, DI 3
Idaho Power Company
directed by Order No. 34349,1 (1) the quantification of the 1
Valmy balancing account true-up with the inclusion of 2
actual costs through December 31, 2021, and forecasted 3
investments through December 31, 2025, and (2) an update 4
to decommissioning costs, if applicable. 5
Q. What specific action is the Company requesting 6
of the Commission in this case? 7
A. The Company is requesting the Commission: (1) 8
find that all actual North Valmy Power Plant (“Valmy”) 9
investments during the January 1, 2019, through December 10
31, 2021, time period were prudently incurred, (2) validate 11
that Idaho Power has accurately quantified the Valmy 12
balancing account true-up as a result of the inclusion of 13
actual costs through December 31, 2021, and updated 14
forecasted investments through December 31, 2025, and (3) 15
confirm this request satisfies the annual reporting 16
required by Commission Order No. 34349. Although Order No. 17
34349 requires the Company’s filing to include a rate 18
change effective June 1, 2022, for reasons discussed in my 19
testimony, the Company is not proposing to adjust customer 20
rates at this time. However, the Company’s filing includes 21
a quantification of the necessary rate change resulting 22
1 In the Matter of the Application of Idaho Power Company for Authority
to Increase Its Rates for Electric Service to Recover Costs Associated
with the North Valmy Power Plant, Case No. IPC-E-19-08, Order No. 34349
(May 31, 2019).
WAITES, DI 4
Idaho Power Company
from the updated incremental annual levelized revenue 1
requirement if the Commission ultimately determines that a 2
June 1, 2022 rate change is appropriate. 3
Q. How is the Company’s case organized? 4
A. My testimony begins with a quantification of 5
the true-up of the Valmy balancing account as a result of 6
the inclusion of actual costs through December 31, 2021, 7
and forecasted investments through December 31, 2025, as 8
required by Order No. 34349 issued in Case No. IPC-E-19-08. 9
My testimony summarizes the changes to the Valmy levelized 10
revenue requirement, including: (1) necessary actual 11
investments made through December 31, 2021, and forecasted 12
through December 31, 2025, and (2) savings resulting from 13
operations and maintenance (“O&M”) reductions that have 14
occurred and are expected through 2025. My testimony 15
concludes with a quantification of the resulting 16
incremental levelized revenue requirement and the Company’s 17
recommendation that customer rates are not changed at this 18
time. 19
The direct testimony of Company witness Lindsay 20
Barretto discusses the necessary actual investments made at 21
the Valmy plant that have added to the associated plant 22
balances since January 1, 2019, and those necessary future 23
investments at the plant to ensure Unit 2 continues to be 24
available for reliable load service through the end of 25
WAITES, DI 5
Idaho Power Company
2025. 1
Q. Do you have any exhibits? 2
A. Yes. Exhibit No. 1 to my testimony provides a 3
summary of the updated levelized revenue requirement 4
calculations by cost category as compared to the levelized 5
revenue requirement amounts included in customer rates 6
approved with Order Nos. 337712, 340713, and 34349, and as a 7
result of the true-up to the Valmy balancing account due to 8
the inclusion of actual costs through December 31, 2021, 9
and forecasted investments through December 31, 2025. 10
Q. Please summarize the Company’s last update to 11
base rates associated with Valmy. 12
A. With respect to base rates, Order No. 34349, 13
in Case No. IPC-E-19-08: (1) deemed all actual Valmy 14
investments through December 31, 2018, were prudently 15
incurred, (2) allowed investments at Valmy forecasted 16
through December 31, 2025, to be included in the levelized 17
revenue requirement mechanism, and (3) adjusted customer 18
rates to recover the associated Idaho jurisdictional 19
incremental annual levelized revenue requirement of $1.21 20
million effective June 1, 2019. 21
2 In the Matter of the Application of Idaho Power Company for Authority
to Increase its Rates for Electric Service to Recover Costs Associated
with the North Valmy Power Plant, Case No. IPC-E-16-24, Order No. 33771
(May 31, 2017).
3 In the Matter of the Investigation into the Impact of Federal Tax Code
Revisions on Utility Costs and Ratemaking, Case No. GNR-U-18-01, Order
No. 34071 (May 31, 2018).
WAITES, DI 6
Idaho Power Company
Q. Did Order No. 34349 direct Idaho Power to file 1
with the Commission any updates to the levelized revenue 2
requirement tracked in the Valmy balancing account? 3
A. Yes. Order No. 34349 required the Company (1) 4
file annual reports detailing the amounts recorded to the 5
Valmy balancing account, and (2) to submit a filing no 6
later than February 28, 2022, to true-up the balancing 7
account with forecast-to-actuals, with rates to become 8
effective June 1, 2022. 9
Q. Did the Company file Valmy Levelized Revenue 10
Requirement Balancing Account annual reports with the 11
Commission? 12
A. Yes. On December 31, 2020, Idaho Power filed 13
its Valmy Levelized Revenue Requirement Balancing Account 14
2019 Annual Review and on December 29, 2021, the Company 15
filed its Valmy Levelized Revenue Requirement Balancing 16
Account 2020 Annual Review. 17
Q. Does Idaho Power anticipate filing a separate 18
Valmy Levelized Revenue Requirement Balancing Account 2021 19
Annual Review? 20
A. No. Because the Company has included in its 21
request in this case a quantification of the Valmy 22
balancing account true-up with forecast-to-actuals, as well 23
as a detailed description of investments made at Valmy 24
during the January 1, 2019, through December 31, 2021, time 25
WAITES, DI 7
Idaho Power Company
period, Idaho Power is requesting the testimony and 1
exhibits in this case suffice as the Valmy Levelized 2
Revenue Requirement Balancing Account 2021 Annual Review. 3
II. THE VALMY LEVELIZED REVENUE REQUIREMENT MECHANISM 4
Q. Please provide an overview of the Company’s 5
balancing account mechanism associated with the Valmy plant 6
and approved with Order No. 33771, and updated with Order 7
No. 34349. 8
A. The balancing account mechanism approved in 9
Case No. IPC-E-16-24 is designed to smooth revenue 10
requirement impacts associated with the shutdown of Valmy 11
and allow for full recovery of Valmy-related costs near the 12
plant’s end-of-life. In addition, it more closely aligns 13
the cost recovery period with the remaining operating life 14
of the plant, resulting in a better matching of cost 15
recovery from customers who benefit from the plant’s 16
operations while mitigating the risk of future customers 17
bearing the costs of a plant that will no longer be 18
providing service. With Order No. 33771, to help mitigate 19
the rate impact to customers, the Commission approved a 20
Valmy-related revenue requirement collection through 2028, 21
three years longer than Idaho Power’s planned operational 22
life of the plant. 23
Q. What types of costs are recorded in the Valmy 24
balancing account? 25
WAITES, DI 8
Idaho Power Company
A. There are four types of costs the Company 1
records to the balancing account: (1) the accelerated 2
depreciation associated with existing Valmy plant 3
investments, (2) the return on the undepreciated capital 4
investments at Valmy, (3) non-fuel O&M reductions, and (4) 5
decommissioning costs related to the Valmy shutdown. Under 6
the balancing account approach, the Company replaces the 7
base rate revenue recovery associated with Idaho Power’s 8
existing investment in Valmy with a levelized revenue 9
requirement and tracks it in the Valmy balancing account. 10
Q. What is the current Valmy levelized revenue 11
requirement included in customer rates? 12
A. Order No. 34349 approved an Idaho 13
jurisdictional levelized revenue requirement of $29.90 14
million, including all Valmy-related plant investments as 15
of December 31, 2018, projected additions to the Valmy 16
plant through 2025, current and future non-fuel O&M savings 17
through December 31, 2025, and projected decommissioning 18
costs. 19
Q. What is the updated levelized revenue 20
requirement based on the Valmy balancing account true-up of 21
forecast-to-actuals and update to forecast investments? 22
A. Updating Valmy-related plant investment 23
balances and actual O&M savings through December 31, 2021, 24
as well as the forecast of investments and O&M savings 25
WAITES, DI 9
Idaho Power Company
through December 31, 2025, results in an annual levelized 1
revenue requirement of $31.68 million on an Idaho 2
jurisdictional basis, or an incremental increase to the 3
Idaho jurisdictional levelized revenue requirement of $1.78 4
million. Exhibit No. 1 summarizes the changes to the 5
levelized revenue requirement. 6
Q. Please describe the updates to the levelized 7
revenue requirement amount. 8
A. The levelized revenue requirement can be 9
separated into four components, (1) Component A – the 10
revenue requirement on actual existing investments at May 11
31, 2017, (2) Component B - the revenue requirement on 12
incremental investments after May 31, 2017,4 (3) Component C 13
- the revenue requirement associated with future 14
decommissioning costs, and (4) Component D - the revenue 15
requirement associated with non-fuel O&M savings. 16
Q. Were there any changes to Component A, the 17
revenue requirement on existing investments as of May 31, 18
2017? 19
A. No. The revenue requirement component related 20
to existing investments is based on the Valmy-related plant 21
balances in effect prior to the establishment of the Valmy 22
4 As presented on Exhibit No. 1, Component B consists of two
subcomponents: 1) the revenue requirement of incremental investments at
Unit 1 from June 1, 2017, through 2019, and 2) the revenue requirement
on Valmy incremental investments beginning January 1, 2020.
WAITES, DI 10
Idaho Power Company
balancing account, or existing investments as of May 31, 1
2017. Therefore, no update to the revenue requirement on 2
existing investments included in the levelized revenue 3
requirement calculation, which is $32.28 million on an 4
Idaho jurisdictional basis, is required. 5
Q. Please describe the changes made to Component 6
B, the levelized revenue requirement on incremental 7
investments. 8
A. Component B, the levelized revenue requirement 9
on incremental investments can be summarized in two 10
subcomponents: (1) the revenue requirement on incremental 11
investments at Unit 1 from June 1, 2017, through December 12
31, 2019, and (2) the revenue requirement on Unit 2 and 13
common facility investments after May 31, 2017, including 14
the revenue requirement of Unit 1 beyond 2019. The first 15
update made was to subcomponent (1) to include actual Unit 16
1 investments for the January 1, 2019, through December 31, 17
2019, time period. Actual investments were slightly lower 18
than the forecast of investments. The resulting revenue 19
requirement of subcomponent (1) is $91,923, or $34,055 20
lower than the amounts currently included in customer 21
rates. 22
Q. What changes were made to Component B, the 23
levelized revenue requirement on incremental investments 24
subcomponent (2)? 25
WAITES, DI 11
Idaho Power Company
A. Subcomponent (2) was updated to include actual 1
Unit 2 and common facility investments for the January 1, 2
2019, through December 31, 2021, time period, as well as 3
the Unit 1 investments of approximately $47,000 that closed 4
to plant in 2020 for work performed in 2019 and therefore 5
is reflected in the revenue requirement of subcomponent 6
(2). In addition, subcomponent (2) was updated to include 7
the latest forecast for Unit 2 and common facility 8
investments for the January 1, 2022, through December 31, 9
2025, time period. The resulting revenue requirement of 10
subcomponent (2) is $2,768,045, or $1.56 million higher 11
than the levelized revenue requirement on incremental 12
capital from 2020 through 2025 currently included in 13
customer rates. 14
Q. What is driving the increase in the 15
incremental levelized revenue requirement of capital 16
investments made from 2020 through 2025? 17
A. The increase in the incremental levelized 18
revenue requirement of capital investments made at Valmy 19
between 2020 and 2025 is primarily driven by the forecast 20
for which rates were based in Case No. IPC-E-19-08. At the 21
time, forecasted expenditures at the plant were anticipated 22
to be approximately $3.49 million. However, in 2021 23
forecasted expenditures totaled $9.44 million. 24
Confidential Exhibit No. 3 to Company witness Ms. 25
WAITES, DI 12
Idaho Power Company
Barretto’s testimony details the Valmy forecasted 1
investments anticipated between the January 1, 2022, and 2
December 31, 2025 time period. In addition, in her 3
testimony, Ms. Barretto discusses the projects necessary to 4
ensure Valmy continues to provide safe, reliable service 5
through the end of 2025. 6
Q. Have any changes been made to Component C - 7
the revenue requirement associated with future 8
decommissioning costs? 9
A. No. Idaho Power continues to monitor and 10
review cost estimates for decommissioning activities 11
associated with the cessation of operations at Valmy. The 12
Company believes the decommissioning cost estimate included 13
in the levelized revenue requirement computation is the 14
best-known estimate at this time. 15
Q. Did Idaho Power update Component D - the 16
revenue requirement associated with O&M savings including 17
non-fuel O&M reductions? 18
A. Yes. Idaho Power has updated the revenue 19
requirement associated with O&M savings to include actual 20
Valmy-related non-fuel O&M amounts for the January 1, 21
2019, through December 31, 2021, time period, and updated 22
the forecast of non-fuel O&M savings for the January 1, 23
2022, through December 31, 2025, time period. O&M savings 24
over the life of the plant are less than originally 25
WAITES, DI 13
Idaho Power Company
estimated, resulting in a reduction of approximately 1
$342,000 to the expected O&M savings for a total Idaho 2
jurisdictional revenue requirement reduction of $4.45 3
million. 4
Q. Did Idaho Power make any additional 5
adjustments to the Valmy levelized revenue requirement 6
quantification? 7
A. Yes. In addition to the four components 8
described above, the Company has computed the true-up 9
resulting from collections of levelized revenue requirement 10
amounts for the January 1, 2019, through December 31, 2021, 11
time period. Actual Idaho jurisdictional sales volumes were 12
higher than forecasted resulting in a total over 13
collection, including applicable carrying charges, of 14
$703,749. The result is an over collection to be refunded 15
over the remaining recovery period through 2028 of $110,501 16
per year. Adding this to the load variance true-up of 17
$9,183 included in the June 1, 2019, rate change, results 18
in a refund of $101,318 associated with the load variance 19
true-up of the levelized revenue mechanism. 20
Q. What is the resulting total levelized revenue 21
requirement? 22
A. The Company’s proposed update to the levelized 23
revenue requirement associated with Valmy includes $32.28 24
million associated with existing investments, $2.86 million 25
WAITES, DI 14
Idaho Power Company
related to incremental investments, $1.10 million in 1
decommissioning costs, $4.45 million in non-fuel O&M 2
savings, and a load variance over-collection of $101,318, 3
for a total levelized revenue requirement of $31,682,765 on 4
an Idaho jurisdictional basis. 5
Q. What is the existing revenue requirement 6
associated with Valmy that is currently included in the 7
Company’s base rates? 8
A. The Idaho jurisdictional levelized revenue 9
requirement approved with Order Nos. 33771, 34071, and 10
34349 is $29.90 million. 11
Q. How does the total levelized revenue 12
requirement compare to the existing levelized revenue 13
requirement currently in customer rates? 14
A. The total Idaho jurisdictional levelized 15
revenue requirement of $31.68 million less the Idaho 16
jurisdictional share of the existing revenue requirement of 17
$29.90 million, results in an incremental annual levelized 18
revenue requirement of approximately $1.78 million on an 19
Idaho jurisdictional basis. 20
WAITES, DI 15
Idaho Power Company
III. RECOMMENDED RATEMAKING TREATMENT 1
Q. Is Idaho Power proposing a rate adjustment to 2
reflect the incremental increase of $1.78 million to the 3
levelized revenue requirement mechanism as a result of the 4
Valmy balancing account true-up of forecast-to-actuals? 5
A. No, not at this time. Order No. 34349 6
directed the Company to submit a filing no later than 7
February 28, 2022, to true-up the Valmy balancing account, 8
with a corresponding rate change effective June 1, 2022. 9
However, because the update reflects an increase of $1.78 10
million in the levelized revenue requirement, and because 11
any such differences are tracked through the Valmy 12
balancing account, Idaho Power is not requesting to adjust 13
base rates at this time. Instead, the Company requests 14
that the Commission validate its quantification of the 15
Valmy balancing account true-up and recommends that the 16
difference in the annual revenue requirement remain in the 17
balancing account to offset potential future refunds or 18
add to future positive differences. Idaho Power will 19
continue to file the Valmy Levelized Revenue Requirement 20
Balancing Account annual reports following year-end 2022, 21
keeping the Commission apprised of changes to the Valmy 22
levelized revenue requirement as a result of forecast-to-23
actuals updates. 24
WAITES, DI 16
Idaho Power Company
IV. CONCLUSION 1
Q. Please summarize your testimony. 2
A. As required by Order No. 34349, in Case No. 3
IPC-E-19-08, Idaho Power has quantified the Valmy balancing 4
account true-up as a result of the inclusion of actual 5
costs through December 31, 2021, and forecasted investments 6
through December 31, 2025, reflecting an increase in the 7
Valmy levelized revenue requirement of approximately $1.78 8
million. The Company does not believe an adjustment to 9
customer rates to recover the incremental annual levelized 10
revenue requirement resulting from the Valmy balancing 11
account true-up is necessary at this time and is not 12
proposing an update to base rates. In addition to 13
validating the quantification of the Valmy balancing 14
account true-up, Idaho Power is requesting the Commission 15
find that all actual Valmy investments during the January 16
1, 2019, through December 31, 2021, time period were 17
prudently incurred. 18
Q. Does this complete your testimony? 19
A. Yes, it does. 20
21
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WAITES, DI 17
Idaho Power Company
DECLARATION OF COURTNEY WAITES 1
I, Courtney Waites, declare under penalty of perjury 2
under the laws of the state of Idaho: 3
1. My name is Courtney Waites. I am employed 4
by Idaho Power Company as a Regulatory Consultant in the 5
Regulatory Affairs department. 6
2. On behalf of Idaho Power, I present this 7
pre-filed direct testimony and Exhibit No. 1 in this 8
matter. 9
3. To the best of my knowledge, my pre-filed 10
direct testimony and exhibit are true and accurate. 11
I hereby declare that the above statement is true to 12
the best of my knowledge and belief, and that I understand 13
it is made for use as evidence before the Idaho Public 14
Utilities Commission and is subject to penalty for perjury. 15
SIGNED this 28th day of February 2022, at Boise, 16
Idaho. 17
18
Signed: 19
20
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-22-05
IDAHO POWER COMPANY
WAITES
TESTIMONY
EXHIBIT NO. 1
Component A Component C Component D True-Up
TOTAL SYSTEM
Existing @
5/31/2017 2019
Incremental
Capital 2020-2025
Decommissioning
Costs
O&M Savings
2017-2025 Load Variance SYSTEM Total
Annual Levelized Revenue Requirement in Rates effective June 1, 2019 33,951,978 100,941 1,274,034 1,152,182 (5,046,137)-31,432,998
Incremental Change -(4,265)1,637,143 -360,071 -1,992,950
New Levelized Revenue Requirement effective June 1, 2022 33,951,978 96,676 2,911,177 1,152,182 (4,686,066)-
IDAHO JURISDICTIONAL
Existing @
5/31/2017 2019
Incremental
Capital 2020-2025
Decommissioning
Costs
O&M Savings
2017-2025 Load Variance
Annual Levelized Revenue Requirement in Rates effective June 1, 2019 32,282,687 95,978 1,211,394 1,095,534 (4,796,353)9,183 29,898,422
Incremental Change -(4,055)1,556,651 -342,248 (110,501)1,784,343
New Levelized Revenue Requirement effective June 1, 2022 32,282,687 91,923 2,768,045 1,095,534 (4,454,106)(101,318)
1. On June 1, 2018, customer rates were reduced to reflect the impact of the federal Tax Cuts and Jobs Act of 2017, as directed by Order No. 34071. The computation of the incremental
change in the levelized revenue requirement amounts are based on the corporate tax rate in effect in the respective years presented.
Levelized Revenue Requirement for the Valmy Plant
2021 Annual Update
Idaho Power ceased participation in U1 12-31-19; NV Energy operates U1 through 12-31-25; Both parties operate U2 through 12-31-25
Component B
Component B
IDAHO Total
Exhibit No. 1 Case No. IPC-E-22-05
C. Waites, IPC Page 1 of 1