20220809Final_Order_No_35494.pdf

ORDER NO. 35494 1

Office of the Secretary
Service Date
August 9, 2022
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

ORDER NO. 35494

On February 28, 2022, Idaho Power Company (“Company”) applied to the Idaho Public
Utilities Commission (“Commission”) for an order: (1) finding that all actual North Valmy Power
Plant (“Valmy”) investments from January 1, 2019, through December 31, 2021, were prudently
incurred; (2) validating that the Company had 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 Company’s request
satisfied the annual reporting required by Commission Order No. 34349.
Valmy is a coal-fired power plant that consists of two units and is located near
Winnemucca, Nevada. NV Energy co-owns the plant with the Company and is Valmy’s main
operator. The Company exited coal-fired operations of Unit 1 on December 31, 2019. Order No.
33983. The Company anticipates that it will exit from Valmy Unit 2 by end of 2025. Application
at 2; see also Case No. IPC-E-21-43.
In Order No. 34349, the Commission approved a balancing account mechanism designed
to smooth revenue requirement impacts associated with the shutdown of Valmy and allow for full
recovery of Valmy-related costs near the plant’s end-of-life. The Commission also approved
Valmy-related investments forecasted through December 31, 2025, to be included in the levelized
revenue requirement mechanism. Order Nos. 34349 and 33771. In Order No. 34349, the
Commission directed the Company to file annual reports detailing the amounts recorded to the
Valmy balancing account, and to submit a filing to true-up the balancing account with forecast-to-
actuals no later than February 28, 2022. Order No. 34349 at 4.
The Company stated that “there have been a number of investments required to operate
Valmy in a safe, efficient, and reliable manner, including investments required to ensure
environmental compliance as well as a number of investments for routine asset replacement.”
Application at 3. The Company represented it completed 57 projects totaling $4.66 million
ORDER NO. 35494 2

between January 1, 2019, and December 31, 2021. The Company stated that since 2018, the largest
expenditures were those made for reliability purposes, $2.04 million. The Company represented
that the largest single investment made at Valmy for the same time-period was for repair of the
Unit 2 turbine high pressure/intermediate pressure section shell steam leak, $1.24 million. The
Company also provided its spending and investment forecast for 2022 through 2025.
The Company stated that there were four costs included in its balancing account: (1) the
accelerated depreciation associated with existing Valmy plant investments; (2) the return on the
undepreciated capital investments at Valmy; (3) nonfuel operations and maintenance (“O&M”)
reductions; and (4) decommissioning costs related to the Valmy shutdown. In Order No. 34349,
the Commission approved an Idaho jurisdictional levelized revenue requirement of $29.90 million
that included all Valmy-related plant investments as of December 31, 2018, projected additions to
the Valmy plant through 2025, current and future non-fuel O&M savings through December 31,
2025, and projected decommissioning costs.
The Company represented that updating the levelized revenue requirement based on the
Valmy balancing account true-up with plant investment balances and actual O&M savings through
December 31, 2021, as well as future investments and O&M savings through December 31, 2025,
resulted in an annual levelized revenue requirement of $31.68 million on an Idaho jurisdictional
level, including $32.28 million associated with existing investments, $2.86 million related to
incremental investments, $1.10 million in decommissioning costs, $4.45 million in non-fuel O&M
savings, and a load variance overcollection of $101,318; all representing an increase of $1.78
million from the revenue requirement approved in Order No. 34349.
The Company did not request an adjustment to customer rates at this time; however, if the
Commission determined that a June 1, 2022, rate change was appropriate, the Company stated that
its filing included the necessary quantifications for the Commission to calculate a rate change
resulting from the annual levelized revenue requirement.
COMMENTS
1. Staff Comments
Staff reviewed the Application, testimony, and responses to production requests. Based on
its review, Staff recommended the amounts for the investments made between January 1, 2019,
through December 31, 2021, as shown in Company Exhibit No. 2, be maintained in the balancing
account, but without a determination of prudence at this time. Staff believed the Company
ORDER NO. 35494 3

accurately quantified the Valmy balancing account true-up, that the Company’s filing satisfied the
annual reporting requirement, and that a change in customer rates was not necessary.
The Valmy balancing account true-up with plant investment balanced, actual O&M savings
through December 31, 2021, as well as future investments and O&M savings through December
31, 2025, resulted in an annual levelized revenue requirement of $31.68 million on an Idaho
jurisdictional level as shown in Table No. 1 below.
Table No. 1: Valmy Levelized Revenue Requirement
Existing Capital Investments as of Dec. 31, 2021 $ 32,282,687
Incremental Capital Investments through 2025 $ 2,859,968
Decommissioning Costs $ 1,095,534
Non-Fuel O&M Savings $ (4,454,106)
Load Variance Overcollection $ (101,318)
Total Levelized Revenue Requirement $ 31,682,765

The $31.68 million levelized revenue requirement was an increase of $1.78 million over the
levelized revenue requirement approved in Order No. 34349.
Staff recommended that the $1.78 million difference in the annual revenue requirement
remain in the balancing account, and an adjustment to customer rates to recover the incremental
annual levelized revenue requirement resulting from the true-up was not necessary. Staff believed
the Application satisfied the annual reporting required by Commission Order No. 34349.
To determine prudence needed for the Company to begin recovery for its capital
investments, Staff analyzed two types of prudence: decisional prudence and operational prudence.
Staff explained that 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.
As a result of its review, Staff concluded that the investments made at the North Valmy Plant
during the 2019 through 2021 timeframe as shown in Exhibit No. 2, were needed to continue safe
and reliable operation of the facility. As such, Staff recommended that the amounts for these
investments be maintained in the balancing account.
However, Staff could not recommend that the investments were operationally prudent due
to a lack of sufficient evidence documenting that the projects were done in a least-cost manner.
Staff further recommended the Company provide the information needed by Staff six months after
the Commission’s order in this case through a compliance filing. Staff recommended the Company
ORDER NO. 35494 4

meet with Staff prior to the Compliance filing to determine the information required to determine
prudence of its capital investments. Staff believed this was consistent with Order No. 35423, which
provided that the Company meet with Staff to identify the “process by which the Company
documents the decision-making aspect of its capital investments…[and] to develop a more
comprehensive future documentation process.” Order No. 35423 at 13.
The Company included forecasted capital investments and projected decommissioning
costs in the balancing account in order to facilitate rate stability by including these costs and
levelizing their impact. Staff reviewed the Company’s forecast and believed the costs were within
the bounds of the Framework Agreement and were reasonable given the Company’s early exit
plan. Staff recommended those adjusted costs be included in the balancing account, and the actual
investments be reviewed for prudency and trued-up prior to being recovered in rates.
Staff reasoned that the Company was requesting Commission approval to include the
incremental Idaho jurisdictional revenue requirement of $1,556,651 for actual and forecasted
investments projected through December 31, 2025, in the balancing account. Further the Company
had characterized those investments as necessary and routine capital expenditures needed to
operate the facility safely and reliably through the end of its life. Staff verified that the Company’s
investments included expenditures for future plant maintenance outages as well as equipment
replacement and upgrades for Unit No. 2 and common facilities to ensure reliable operation
through the end of its life. Staff reviewed, and would continue to review, any planned investments
that could be avoided given the facility’s end of life. To ensure that any unnecessary future
expenditures are minimized, Staff recommended the Company include any updates to forecasted
expenditures as part of the annual reporting as circumstances change.
Staff audited a sample of Valmy O&M expenses. Based on the audit, Staff believed the
update to actual O&M expenses was accurate, and Staff believed the forecast of the O&M expenses
through December 31, 2025, was reasonable.
Ultimately, Staff recommended:
• the Commission find the amounts for the investments made between January 1, 2019,
through December 31, 2021, as shown in Company Exhibit No. 2, be maintained in the
balancing account, but without a determination of prudence at this time;
• the Commission validate that Idaho Power has accurately quantified the Valmy
balancing account true-up as a result of the inclusion of actuals through December 31,
2021, and updated forecasted investment through December 31, 2025;
ORDER NO. 35494 5

• the Commission confirm the Company’s Application satisfies the annual reporting
required by Commission Order No. 34349;
• the Commission confirm that although Order No. 34349 requires the Company’s filing
to include a rate change effective June 1, 2022, that customer rates not be adjusted at
this time;
• the Company work with Staff to develop available documentation for actual expenses
for audit and prudence review prior to a compliance filing; and
• the Commission direct the Company to provide the information needed by Staff within
six months after the Commission’s order in this case through a compliance filing after
meeting with Staff to determine the information needs required to determine prudence
of its capital investments.
2. Company Reply Comments
After reviewing Staff’s Comments, the Company stated that it was open to working with
Staff to develop the documentation necessary for Staff’s audit and prudence review prior to any
future filing for which a prudence determination is requested. The Company believed 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, but Idaho
Power would provide additional information for Staff to make a prudence determination and was
open to working with Staff to identify its information needs.
However, the Company proposed a different procedural approach, under which the
information to further support prudence of the investments made during the January 1, 2019,
through December 31, 2021, time period would be submitted as part of the Valmy Levelized
Revenue Requirement Balancing Account 2022 Annual Review (“2022 Annual Review”),
providing the Commission the opportunity to make a prudence determination in conjunction with
Staff’s recommendation following its review of the additional documentation. The Company
envisioned filing that report as a new case that would include the 2022 Annual Review and the
prudence determination for those investments in the first quarter of 2023, resulting in
administrative efficiency for both the Commission and Staff.
The Company requested the Commission issue an order: (1) finding that all actual Valmy
investments made between January 1, 2019, through December 31, 2021,were prudently incurred
or, in the alternative, accept Staff’s recommendation that the Company file additional
documentation to support a prudence determination but as part of the 2022 Annual Review; (2)
validating that Idaho Power accurately quantified the Valmy balancing account true-up as a result
ORDER NO. 35494 6

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.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company’s Application and the issues in this
case under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, -502, and -503. The
Commission is empowered to investigate rates, charges, rules, regulations, practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order. Idaho Code
§§ 61-501, -502, and -503. The Commission may enter any final order consistent with its authority
under Title 61.
The Commission has reviewed the Company’s Application including all submitted
materials, Staff comments, and Company reply comments. Based on its review of the record, the
Commission finds that the amounts for the investments made between January 1, 2019, through
December 31, 2021, as shown in Company Exhibit No. 2 of the Application, shall be maintained
in the balancing account; however, the Commission makes no finding as to the prudence of those
investments at this time.
The Commission finds it fair just and reasonable for the Company to file additional
documentation to support a prudence determination as part of the Company’s 2022 Annual
Review. The Commission believes that the process by which the Company documents and submits
such documentation to support a prudence determination can be strengthened by working with
Staff to develop a more comprehensive documentation process for actual expenses for audit and
prudence review prior to the Company’s filing of its 2022 Annual Review.
The Commission finds that Idaho Power has accurately quantified the Valmy balancing
account true-up as a result of the inclusion of actuals through December 31, 2021, and updated
forecasted investment through December 31, 2025. The Commission finds that the Company’s
Application satisfies the annual reporting required by Commission Order No. 34349 and finds that
no rate change will be made at this time.

ORDER NO. 35494 7

ORDER
IT IS HEREBY ORDERED that the amounts for the investments made between January
1, 2019, through December 31, 2021, as shown and identified in the Application shall be
maintained in the balancing account.
IT IS FURTHER ORDERED that the Company shall file additional documentation to
support a prudence determination as part of the Company’s Valmy Levelized Revenue
Requirement Balancing Account 2022 Annual Review after meeting with Staff to expand the
documentation process.
IT IS FURTHER ORDERED that Idaho Power has accurately quantified the Valmy
balancing account true-up as a result of the inclusion of actuals through December 31, 2021, and
updated forecasted investment through December 31, 2025.
IT IS FURTHER ORDERED that the Company’s Application satisfies the annual
reporting required by Commission Order No. 34349.
IT IS FURTHER ORDERED that no rate change will be made at this time.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code §§ 61-
626 and 62-619.

ORDER NO. 35494 8

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 9th day of
August 2022.

ERIC ANDERSON, PRESIDENT

JOHN CHATBURN, COMMISSIONER

JOHN R. HAMMOND JR., COMMISSIONER
ATTEST:

Jan Noriyuki
Commission Secretary

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