20220708Reply Comments.pdf

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An IDACOnP ComDdny
LISA D. NORDSTROf,
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Encloeures
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Ju$ E,2022
VIA ELECTROI{IC FILING
Jan Noriyuki, Secretary
ldaho Public lrtilitit s Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A(83714)
PO Box 83720
Boise, ldaho 83720sl074
Re: Case No. IPC-E-22-05
ln the Matter of the Application br a Determination ValHating th6 North
Valmy Power Plant Balanclng AcoountTrue-Up
Dear Ms. Noriyuki:
Enclosed fur elec{ronic filing, please find ldaho Power Company's Reply Comrnents
in the above matter.
lf you have any questions about the attached documentE, please do not hesitrate to
contiact me.
Very firly youn,
LiBa D. Nordsbom
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221 Wbst ldaho Str€s,t (83702)
P.O. Box 70
Boise, ldaho 837t1
Telephone: (208) 388€1 17
Facsimile: (208) 3886936
lnordstrom@idahooower. com
Attomey fur ldaho Pouer Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MAfiER OF IDAHO POWER
COMPANY'S APPLICANON FOR A
DETERMI }.IATION VALI DATI NG THE
NORTH VALMY POVI'ER PI.ANT
BALANCING ACCOUNT TRUE-UP.
cAsE NO. !PGE-22{5
IDAHO POWER COMPANYS
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ldaho Pouer Conrpany ('ldaho Porvef or'Company[ respectfrrlly submits those
Reply Comments in response to the Comments filed by the ldaho Publb l,niliticls
Commission ('Commission) Staff on June 22,2022. The Company acknorledges and
appreciates SffFs review of the North Valmy Power Plant (Vahy{ investnente made
during the January 1, 2019, through December 31, 2021, time period and the
quantification of the Valmy balancing accounttrue-up as a rcsult of the inclusion of actual
cosE through Deember 31,2021. ln the paragraphs that bllor, ldaho Poryer will
respond to sqne @noems naised by Sffi in their Comments:
I. BACKGROUND
1. Valmy is a coal-fired power plant that consistB of two unlb and ls located
near Winnemuoca, Nevada. Unit 1 went into servie in 1981 and Unit 2 bllofled in 1985.
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ldaho Power owns 50 percent of Valmy. NV Energy is the @wner of the plant with the
remaining 50 percent ownership and operates the Valmy facility. The Company exited
coal-fircd operations of Unit 1 December 31, 2019, as accepted by the Commission in
Order No. 33983 as part of ldaho Powe/s 2Afi lntegrated Resource Plan. The Preferred
Portfolio identifred in the 2021 lRP, filed in Case No. IPC-E-2143, includes an exit from
Valmy Unit 2 in2025, concluding that the 2025 exit ftom Valmy provides a more favorable
economic outcome when compared to an earlier exit.1
2. \Mth Order No. 33771 in Case No. IPC-E-16-24, and updated by Order No.
34349 in Case No. IPC-E-19-08, the Commission approved a balancing account
mechanism designed to smooth revenue requirement impacts associated with the
shutdown of Valmy and allowforfullrecovery of Valmy-related costs nearthe plants end-
of-life. ln addition, it more closely aligns the cost recovery period with the remaining
operating life of the plant, resulting in a betbr matching of cost recovery from customers
who benefit from the planfs operations while mitigating the risk of future customers
bearing the costs of a plant that will no longer be providing service. To help mitigate the
rate impact to customers, the Commission approved a Valmy-related rcvenue
requirement collection through 2028, three years longer than ldaho Pore/s planned
operational life of the plant.
3. The Company's last update to base rates associated with Valmy was
approved with Order No. 34349, in Case No. IPC-E-19-08. The Gommission (1) deemed
all ac'tual Valmy investments through December 31, 2018, were prudently incuned, (2)
allowed investments at Valmy forecasted through December 31,2025, to be included in
the levelized revenue requirement mechanism, and (3) adiusted customer rates to
recover the associated ldaho jurisdictional incrementat annual levelized revenue
requirement of $1 .21 million effective June 1 , 2019. ln addition, Order No. 34349 required
12021lRP, pp. 151-153.
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the Company (1) to file annual reports detailing the amounts rccorded to the Valmy
balancing account, and (2) to submit a filing no later than February 28,2022, to true-up
the balancing account with forecast-to-ac'tuals, with rates to become effective June 1,
2022.
4. Therefore, on February 28,2022, ldaho Power filed a request with the
Commission for an order (1) finding that all actua! Valmy investments made during the
January 1,2019, through December 31,2021, time period were prudently incuned, (2)
validating that ldaho Power has accurately quantified the Valmy balancing account true-
up as a result of the inclusion of actual costs through December 31,2021, and updated
forecasted investments through December 31, 2025, and (3) confirming the request
satisfies the annual reporting required by Commission Order No. 34349. Although Order
No. 34349 requires the Company's filing to include a rate change effective June 1 ,2022,
ldaho Power is not proposing to adjust customer rates atthis time.
II. IDAHO POWER'S REPLY
5. The quantification of the Valmy balancing account true-up consisted of
updating plant investment balances and actual non-fuel operations and maintenan@
expense ('O&M) savings through December 31, 2021, as well as the forecast of
investments and O&M savings through December 31,2021, and the load variance true-
up resulting from collections of Ievelized revenue requirement amounts. ldaho Power
appreciates Staffs finding that the Company has accurately quantified the Valmy
balancing acmunt true-up.2
6. ldaho Power funded fifly-seven (57) difierent investments totaling $4.66
million that were required to operate Valmy in a safe, efricient, and reliable manner,
including investnents required to ensure environmentalcompliance as well as a number
of investnents for routine asset replacement made at the plant between January 1,2019,
2 StaffCommenb, p.8.
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and Deember 31 ,2021. Of the 40 projects forwhich ldaho Powe/s ownership share is
over $20,000, or was associated with Unit 1 , twenty-three (23) were for continued reliable
plant operations, four (4) were rcquired fur environmental complian@, one (1) was for the
safe operations of the plant, and twelve (12) were for a combination of either reliability,
environmental compliance, or safety.
7. ldaho Power validates and approves ostrs incuned by its operating partner,
NV Energy, on a monthly basis, at a minimum. The first review is performed as part of
the Ownership Meetings, which are held twice a year and include discussions regarding
capital expenditures, among other items. Beginning in 2021, the Company requested
monthly meetings with plant and corporate personnelto discuss the items on a more for
frequent basis. The North Valmy Monthly Budget Reviewand Update provide a furum for
an open dialog discussing capital proiect budgetrs, variances, scope and need, and year-
end forecasts. Also on a monthly basis, NV Energy uploads the prior month preliminary
cost data file to the Company's secure FTP site for ldaho Powe/s accrual entry. At this
time, total costs are oompared to budget and budget update amounts and any significant
variances are discussed with NV Energy. This same review is performed later in the
month when the prior month actual costs are finalized.
8. ln their audit, Staff analized two types of prudence, decisional prudence,
which is baeed on need, and operational prudence, which is based on whether or not the
Company implemented the investment in the least-cost manner. Staffconcluded that the
investments were needed to continue safe and reliable operation of the facility, or
decisional prudenoe, but indicated they cannot "re@mmend that the investments were
operationally prudent due to lack of sufficient evidence documenting that the projects
were done in a least-cost way.'3 As such, Staff recommends ldaho Power provide Staff
3SffiCommenB, p.4.
REPLY COMMENTS.4
with additional information via a compliance filing within six months of the Commission's
order in this case ne@ssary to determine prudence.
9. ln their Comments, Staff described their audit consisted of a detailed
analysis of ten projects that were either the highest cost projects or projects Staff felt "had
unusual circumstances."4 Staff discussed three of the projecrts, highlighting the
documentation provided by ldaho Power did not provide any type of budget-to-actual
performane, failing to prove the project was implemented in the least-cost manner.
During the discovery and audit process, ldaho Power focused on explaining the prooess
undertraken by the Company to ensure the Valmy projects are managed to achieve least
cost but did not include an analysis for each capital project verifring the costs incurred.
10. After reviewing StafPs Comments and gaining a better understranding of the
type of information Staff needs to make a recommendation regarding operational
prudence, ldaho Power is able to prepare a reconciliation of budget-to-actual costs br
each Valmy proiect for which the Company seeks prudence, including a summary of the
charges capitalized and an explanation of any variances. The Company is open to
working with Staff to develop the documentation ne@ssary for Staffs audit and prudence
review prior to any firture filing for which a prudence determination is requested.
11. \tVhile the Company believes the investments made at Valmy between
January 1, 2019, through December 31,2021, were prudent and that the documentation
provided to Staff in response to their audit was sufficient, ldaho Power will provide
additional information for Staffto make a prudence determination and is open to working
with Staffto identify their information needs. However, the Company proposes a slightly
difierent proceduralapproach, underwhich the information to furthersupport prudence of
the investments made during the January 1,2019, through December 31, 2021, time
period is submitted as part of the Valmy Levelized Revenue Requirement Balancing
l StaffComments, p. 5.
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Account 2022 Annual Review ("2022 Annual Revieu/), providing the Commission the
opportunityto make a prudence determination in conjunction with Staffs recommendation
following their review of the additionaldocumentation. The Company envisions filing this
report as a new case that will include the 2022 Annual Revieur and the prudence
determination forthese investnents in the first quarter o12023, resulting in adminishative
efiicienry for both the Commission and Sffi.
il!. coNcLustoN
12. ldaho Power appreciates the opportunity to respond to Staffs Comments
filed in this case and their review of the documentiation supporting 57 differcnt Valmy
investments made between January 1, 2019, and Deoember 31,2021, totaling $4.66
million. The Company respectfrrlly requests the Commission issue an order (1) finding
that all actual Valmy investments during the January 1,2019, through December 31,
2A21, time period were prudently incUned, or, in the altemative, accept Straffs
reoommendation that the Company file additional documentation to support a prudence
determination but as part of the 20z2Annua! Review, (2) validating that ldaho Power has
accurately quantified the Valmy balancing account true-up as a result of the inclusion of
actual costs through December 31,2021, and updated forecasted investments through
December 31, 2025, and (3) confirming his request satisfies the annua! reporting
required by Commission Order No. 34349.
DATED at Boise, ldaho, this 8th day of July 2022.
fr;!.("*t..*,
LISA D. NORDSTROM
Attorney for ldaho Power Company
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I HEREBY CERTIFY that on the 8th day of Juty 2022,I served a true and coned
copy of ldaho Porrer Company's Reply Comments upon the fullowing named partbe by
the method indicabd below, and addressed to the fulloving:
Gommlrslon Stafr
Chrb Burdin
DeputyAttomey General
ldaho Public t tilities Commiseion
11331 W. Chinden Bhrd., Bldg No.8,
Suite 2014.(83714)
PO Box 83720
Boise, lD 83720-0074
Hand Delivered
U.S. Mail
Ovemight Mail
FN(
FTP SitsX [e-mail]
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Sandra Hdmee
Legal Adminlstrative Assbtant
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