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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. ) ) ) ) ) ) ) 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 22 23 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 21 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