20230209Comments of Commission Staff.pdf

RILEY NEWTON O
DEPUTY ATTORNEY GENERAL .
PO BOX 83720 ilBOISE,IDAHO 83720-0074 SION
[phone]
IDAHO BAR NO.11202
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )COMPANY'S APPLICATION FOR REVIEW OF )CASE NO.IPC-E-22-27THECOMPANY'S CURRENT WILDFIRE )MITIGATION PLAN AND AUTHORIZATION )TO DEFER NEWLY IDENTIFIED )COMMENTS OF THE
INCREMENTAL WILDFIRE MITIGATION )COMMISSION STAFFCOSTS)
Staff of the Idaho Public Utilities Commission ("Staff"),by and through its attorney of
record,RileyNewton,Deputy AttorneyGeneral,submits the followingcomments.
BACKGROUND
On October 20,2022,Idaho Power Company ("Company"or "Idaho Power")filed an
Application for an order authorizing it "to defer through 2025-or until the Company's next
general rate case goes into effect-newly identified costs associated with expanded wildfire
mitigation efforts,as detailed in"the Company's updated Wildfire Mitigation Plan ("WMP"or
"Wildfire Plan").Application at 1.The Company filed its Application with Version 4.0 of the
WMP,which updated the WMP filed in Case No.IPC-E-21-01,Version 1.As supplement to its
Application,the Company filed Version 5.0 of its WMP with the Commission on January 4,
2023.
STAFF COMMENTS 1 FEBRUARY 9,2023
STAFF REVIEW
Staff reviewed the Company's Application,the WMP,responses to Production Requests,
the proposed accounting treatment and believes the Company's request is reasonable.Staff's
review,analysis,and recommendations are specific to the Company Version 4.0 of WMP filed
with its Application on October 20,2022.Staff recommends the Commission approve the
Company's Application to allow the deferral of newly identified costs associated with expanded
wildfire mitigation efforts,as detailed in the WMP.Staff recommends the Company be
authorized to defer the expenses identified in its WMP through 2025 or until the Company's next
general rate case goes into effect,whichever occurs first.
Wildfire MitigationPlan
Staff had extensively reviewed Version 4.0 of the Company's WMP prior to the filing of
Version 5.0.The key differences between the two versions are the plan changes and cost
updates.Version 4.0 contains changes and updates from the previously filed Version 1 for the
years 2022 through 2025.Version 5.0 does not contain the changes and cost updates to the year
2022,however it does include an executive summary of the 2022 wildfire season.The newly
identified additional incremental costs beginning January 1,2022,which the Company requests
to defer,are best reflected in Version 4.0.
Plan Updates and Changes
Between 2022 and 2025,the Company estimates it will incur approximately $16.2
million in additional incremental operation and maintenance ("O&M")expenses.The Company
grouped incremental expenses into these categories:(A)QuantifyingWildland Fire Risk;(B)
Situational Awareness;(C)Mitigation-Field Personnel Practices;(D)Mitigation-
Transmission and Distribution ("T&D");(E)Enhanced Vegetation Management;and (F)
Communications.
QuantifyingWildland Fire Risk
The Company's existing risk-based modeling is being utilized to identify areas in its
service territorythat may have increased wildfire risk.The Company calculates Wildfire Risk
STAFF COMMENTS 2 FEBRUARY 9,2023
by multiplyingFire Probability and Consequence'together.The Company's Risk Map,which
was developed with the aid of an external consultant,identifies service territory zones of
increased risk,with yellowzones representing moderate risk,and red zones reflecting highest
risk.Based on the Risk Map,the Company plans and prepares mitigation and management
strategies and implements preventative programs,practices,and measures.
The Company created the Fire Potential Index ("FPI")tool to input weather,fuel,and
topography data to project short-term wildfire potential across its service territory.The
Company updates the FPI tool annuallyto advance wildfire preparedness.The FPI tool produces
a score of 1-16,calculated daily during fire season,that represents a degree of expected fire
threat over a seven-day forecast.The FPI score2 provides Company personnel with information
needed for operational decision making.
Situational Awareness
In the WMP,3 the Company further enhanced its Situational Awareness plans beginning
in 2022.The Company estimates it will spend an additional $1,351,000on Situational
Awareness from 2022-2025.The largest expense is due to not only starting the planned Camera
Pilot programs in 2022 instead of 2024 but enhancing it as well.The Company estimates an
increase of approximately $555,000 for the Camera Pilot program,which includes an annual
subscription from the vendor for ongoing software upgrades and recurring services that would
otherwise need to be purchased outside of the annual subscription.The Company intends to
explore partnerships with other entities to try to decrease costs while maintaining the pilot's
objectives.Staff encourages the Company to include in its WMP a section addressing the
successes,failures,and lessons learned from the Camera Pilot program.
In addition to the Camera Pilot program,the Company estimates $250,000 of additional
cost for 2022 to 2025 for Pole Loading Assessment and Modeling,which assesses structural
integrity of poles.The Company states it will utilize a contract service for Pole Loading
i "Fire Probability"is defined as Fire volume (i.e.,spatial integral of fire area and flame length)."Consequence"isdefinedasnumberofstructuresthatmaybeimpactedbyawildfire.Wildfire MitigationPlan at 10.
2 Scores of l-11 are green "lower fire potential";scores of 12-14 are yellow "elevated fire potential";and scores of
15 or 16 are red "highest fire potential".
3 Referencing Version 4.0 of the WMP due to the inclusion of the 2022 costs and changes.
4 The Company previously mentioned,in its 2021 WMP deferral request,that it would explore the use of cameras in2024and2025,with a forecasted cost of $100,000.In the Matter ofIdahoPower Company's Applicationfor AnAccountingOrderAuthorizingtheDeferralof1ncrementalWildfireMitigationandInsuranceCosts,Case No.IPC-E-21-02,Application at 20 (January 22,2021).
STAFF COMMENTS 3 FEBRUARY 9,2023
Assessment and Modeling,which with the contracted workers having more expertise and tools,
would be a benefit to the Company's existing pole inspection program.
The Company plans to develop a new weather forecasting ensemble to its existing and
planned additional weather stations.The Company claims that its weather ensemble would
increase accuracy and precision of forecasts,which can aid in determining the probabilities of
significant weather events.The Company estimates the development and support for its weather
ensemble will be approximately $195,000.The Company will hire a temporary full-time
employee to aid with the weather forecasting ensemble development and support for 2022
through 2024.In 2025,the Company will then utilize contracted purchase services.The
Company will monitor the contracted personnel through Professional Service Agreements and
Statements of Work that contain expectations and milestones which can be reviewed.The
estimated cost for the additional personnel for 2022 through2025 is $272,000.
Mitigation -Field Personnel Practices
To enhance development of its wildfire mitigation strategies,the Company will join the
International Wildfire Risk Mitigation Consortium,a group where utilities share their expertise
and existing programs with one another.Involvement in this group will cost approximately
$150,000 from 2022 through 2025.Additionally,the Company will provide mobile weather kits
to Field Observers in remote locations to aid in the early detection of wildfires.6
Mitigation -Transmission and Distribution
To reduce wildfire risk,the Company is starting a covered wire evaluation pilotproject in
Public Safety Power Shutoff ("PSPS")zones.The Company will use covered conductors and
covered wires in this pilotprogram,allowing for line crews to get experience with the two
products and give feedback on which is preferred from an installation and maintenance
perspective.The Company estimates this project will be approximately $125,000 from 2022
through 2024.
Additionally,the Company intended to bring on a Wildfire Mitigation Program Manager
starting in 2022;however,hiring was delayed,and the Company now plans to hire in 2023.
Response to Staff Production Request No.14.The Company believes that it is important to have
*Mobile weather kits include a handheld wind meter,compass,and radio with satellite communication.Application
at 12.
STAFF COMMENTS 4 FEBRUARY 9,2023
a program manager due to significant and continuing wildfire concern in all aspects of the
Company's operations.The 2022 forecasted budget for a Wildfire Mitigation Program Manager
remains in the additional costs and will be approximately $679,000 through 2025.
VegetationManagement
As the largest component of the wildfire mitigation expenses,the vegetation management
program had an additional $11.7 million increase for the Transition to/Maintain a 3-year
Vegetation Management Cycle program.The Company is working to achieve a shorter 3-year
vegetation management cycle across the Company's entire service territorythat would reduce
overall costs and risks and minimize mid-cycle and special pruning cycles.The Company cited
that costs of labor contract rates went up approximately 27%in 2022 and are forecasted to be an
additional 5%year after year.Response to Production Request No.16.Staff understands there
are labor shortages and increased competition for skilled labor and is concerned that the
Company's labor expenses may continue to increase into the future.
To support vegetation management,the Company added a Vegetation Management
Satellite and Aerial Patrol pilot project.The Company is using this pilot to reduce ignition
potential and confirm the accuracy of information received from vendors.Different from the
already in use UnmannedAerial Vehicles ("UAVs"),which are used for line inspections,this
pilotwill give enhanced information on vegetation encroachment and potential hazard trees.The
Company states that UAVs have limited range and use due to the need for permits,whereas the
satellite and aerial patrols use artificial intelligence specifically looking at vegetation and don't
require permits.Response to Staff Production Request No.15.Additionally,the satellites in this
program are different than the satellites used for the FPI based on scale and context.The
satellites for the pilotuse a finer scale to examine the vegetation growth near Company lines and
facilities and use a time scale of weeks compared to the FPI's time scale of hours.Response to
Staff Production Request No.20.The Company estimates the pilotproject will be
approximately $900,000from 2022 through 2025.Staff encourages the Company to utilize the
pilotproject to optimize and adjust it vegetation management cycles as needed.
In addition to its satellite and aerial patrol project and other ongoing vegetation
management projects,the Company has joined the Fuel Reduction Program in partnership with
different federal,state,and local agencies.The National Forest Foundation ("NFF")is the
agency that will distribute funding to complete priority fuel reductions and forest health.The
STAFF COMMENTS 5 FEBRUARY 9,2023
Company is currentlydeveloping agreements with the NFF to outline requirements and
expectations.Staff recommends that the Commission require the Company to include details of
any partnerships or agreements benefitting the wildfire program,contributing to program costs,
or providing cost sharing opportunities in the Company's next WMP filing.
Communications
The Company introduced its PSPS plan in 2022.The PSPS plan guides the Company's
implementation and management of proactive de-energization events.A PSPS is a last-resort
action taken by the Company in extreme conditions.The Company would use a PSPS to
safeguard its customers,communities,employees,and equipment from wildfire.The Company
worked with a wildfire consultant to identify specific areas in its service area that have the
potential for extreme wildfire weather conditions that could require a PSPS event.The Company
has not issued a PSPS but has tested and exercised the plan with partners and stakeholders.In
some instances,the Company has shut off power lines independentof a PSPS to protect
individuals working in a fire area.In areas with a high probability of a PSPS event,the
Company reaches out to its partners and potentiallyaffected customers.
In preparation for a PSPS event,there is a more targeted communication with customers
to educate them on how to prepare for outages.The Company estimates $71,000 yearly to
communicate with customers by print,radio,connections,and direct mail.Staff notes that it is
necessary for customers to know about PSPS;however,Staff believes that costs associated with
communications should decrease over time as awareness increases.
InformationTechnology
In the WMP,the Company added an Information Technology section.In this section,the
Company included the Enterprise Omni-Channel Notification System ("EONS")communication
alert tool.This tool will send alerts to customers of outages,curtailments,and potential PSPS
event notifications.The Company estimates the development of EONS will be approximately
$163,000 in 2022.The developmentof EONS requires creating a PSPS outage map,identifying
potentiallyimpacted customers and facilities,developing ways to integrate customer data into
the system,tool configuration,and user training.The Company estimates $528,000 from 2022
through 2025 will be spent in support of the EONS tool,which includes access to software and
messaging allocations.Response to Production Request No.2.The Company does not plan to
STAFF COMMENTS 6 FEBRUARY 9,2023
use EONS in conjunctionwith other emergency management platforms.Staff encourages the
Company to pursue using the EONS in conjunction other emergency management platforms,
something which the Company does not currentlyplan to do.Staff believes an EONS tool could
benefit other areas outside of a WMP and encourages the Company to explore all cost saving
opportunities.
Forecasted Cost Summary
In response to Staff Production Request No.29,the Company provided an updated
forecast of the overall cost of the WMP for the years 2021-2025,as shown in Table No.1.All
amounts are shown in system dollars.
Table No.1 Cost Forecast
Expected Incremental Operating Expenses and Capital Costs of the Wildfire Mitigation Plan by Year (in
thousands of dollars)
2021 2022 2023 2024 2025 2021-2025
A.Quantifying Wildland Fire
Risk $65 -$67 -$69 $201
B.Situational Awareness 52 152 484 492 501 1,681
C.Mitigation -Field Personnel
Practices 5 55 55 45 45 205D.Mitigation -Transmission
&Distribution Programs 580 700 838 759 714 3,591
E.Enhanced Vegetation
Management 2,006 11,390 12,864 15,235 14,132 55,627
F.Communications 100 171 171 171 171 784
G.Information Technology -304 129 129 129 691
Total Forecast Incremental
O&M Expenditures Total $2,808 $12,772 $14,608 $16,831 $15,761 $62,780
Insurance Expense 4,561 6,934 8,034 --19,529
Depreciation Expense -191 414 750 1.010
_
2,365
Total Forecast for All
Incremental Expenses $7,369 $19,897 $23,056 $17,581 $16,771 $84,674
Capital Plant Closings $5,019 $7,283 $8,800 $11,085 $10,258 $42,444
The Company forecasted WMP capital expenditure costs to increase $7.7 million,from
$34.7 million in the previous case to $42.4 million.It also forecasted O&M expenditures,
insurance costs,and depreciation expense to increase $14.9 million,from $69.8 million in the
previous case to $84.7 million in this case.
STAFF COMMENTS 7 FEBRUARY 9,2023
As evidenced by this filing,the actual costs have and will change as the program
develops and the estimates to perform field activities are better understood.One item of note,
discussed in greater detail below,is the change in the forecast for the increase in incremental
insurance premiums.In the previous WMP case,the Company extended the insurance estimate
through 2025,while in this case,the Company only included an insurance premium estimate for
2023.
In this case,the estimated costs of the WMP for 2021-2025 increased by $16.2 million.
The estimated incremental insurance costs decreased by $2.3 million,and the estimated
depreciation expense increased by $1 million for the years 2021-2025.The depreciation expense
increase corresponds to the increase in capital expenditureestimates.
Review of 2021 Actual Costs
In response to Staff Production Request No.31,the Company provided the actual
incremental costs for the WMP for 2021.Staff's review of these expenses is not intended to
determine prudence;instead,it gives an overview of where costs may be headed.
Staff compared the estimated costs to the actual costs for 2021.The most significant
dollar increase was $1,073,491 for insurance expenses.Some WMP project costs were lower
than estimated,and some projects were pushed to 2022.
The 2021 incremental estimate for the elements of the WMP,along with insurance and
depreciation expense,was $6.3 million.The actual incremental amount was $6,386,508,an
increase of $91,508,or approximately a 1.5 percent increase from the estimated costs.
Insurance Premiums
The Company has experienced significant increases in insurance premiums due to the
magnitude,frequency,and costs associated with Western-state wildfires.It is reasonable to
believe that increasing fire insurance costs will continue.Staff continues to believe it is essential
that the Company and customers are protected with a policy to recover costs from damages
inflicted by wildfires.The Company's request in this Application is to continue to defer the
Idahojurisdictionalshare of actual incremental insurance costs over 2019 levels.
In the previous filing,the Company estimated the incremental insurance costs for 2021 to
be $3.5 million and the incremental insurance costs for 2022-2025 to be $4.5 million per year.In
STAFF COMMENTS 8 FEBRUARY 9,2023
this filing,the Company has included estimates for 2021 through 2023,with the forecasts for
2024 and 2025 unknown.
As shown in response to Staff Production Request No.30,there has been significant
increases in the Company's insurance premiums from 2020 to 2021.On a calendar basis,total
insurance costs were $12.1 million in 2021 and are expected to be $14.5 million in 2022 and
$15.6 million in 2023.The Company,in its response,converted the cost of each insurance
policy from policy year to calendar year.Althoughthe Company reported the insurance costs on
a calendar year in this Application,its actual costs are based on distinct policy years.The
Company's excess liability insurance,for example,renews every July.
The Company provided a letter from August 2021 from its third-partyinsurance broker,
explaining the challenges utilities have faced in recent years when securing insurance based on
wildfire risk.The letter stated,"In summary,there is reduced appetite amongst liability
underwriters to offer coverage to all electric utilities in wildfire-proneregions of the US,
including Idacorp,due to the perceived risk;in addition,the challenge is compounded by the fact
that there has been a significant reduction in the supply of liability insurance available in the
market in general."Response to Staff Production Request No.30,Attachment 2.
Staff expects the Company to continue to pursue the necessary insurance coverage to
reduce wildfire risk.Staff expects the Company to demonstrate that its insurance coverage costs
are reasonable and that the Company's allocation to wildfire expenses is supported by sufficient
evidence clearly identifyingthe costs associated with wildfire versus other insurance premiums,
and showing that other factors causing the increase in insurance costs have not been deferred in
the wildfire regulatory account.
Depreciation of CapitalInvestment
In Order No.35077,the Commission found it reasonable for Idaho Power to defer actual
depreciation expenses associated with incremental capital investments and record those
investments in the appropriate plant accounts as the assets are placed in service.At that time,the
Company focused on capital investments associated with system hardening.In this case,the
Company identified the need for capital investment associated with the hardware and software to
perform weather forecasting with the weather ensemble tool.The Company estimates it will
invest $1.1 million in hardware and software to enhance its forecasting capabilities.In this
STAFF COMMENTS 9 FEBRUARY 9,2023
filing,the Company requests the authorityto defer the depreciation expense of newlyidentified
incremental capital investments related to wildfire mitigation.
As stated above,the updated depreciation expense is estimated to be $2.4 million for
2022 through 2025,an increase from the previous filing of approximately $1 million.Staff
supports deferring,for later recovery,the additional depreciation expense related to the newly
identified capital investments.
Proposed Accounting Treatment
In the previous WMP case,the Company was authorized to defer,for future amortization,
the Idaho jurisdictional share of actual incremental O&M expense and depreciation expense of
certain capital investments necessary to implement the Company's wildfire mitigation measures.
The Company was also authorized to similarly defer the incremental insurance costs,as
measured from the 2019 base levels presented in the Company's application in that case.
In this case,the Company seeks additional authorization from the Commission to defer,
for future amortization,the Idaho jurisdictional share of actual incremental O&M expenses
associated with newly identified costs pertaining to the Company's wildfire mitigation efforts.
Staff continues to support the Company's efforts to mitigate the risks of wildfires and
therefore continues to support using a deferral mechanism for the O&M,Insurance,and
Depreciation expenditures,as authorized in Commission Order No.35077.The Company
proposes to track actual expenses beginning January 1,2022 and proposes to record the
incremental O&M and depreciation expense amounts in Federal Energy Regulatory Commission
("FERC")Account 182.3 (Other Regulatory Assets).The recovery of prudentlyincurred costs
and the recovery method would be addressed in a future regulatory proceeding.
Future Recovery of Deferred Costs
If the Company's requested deferral is approvedby the Commission,Staff's right to
audit,question or challenge the appropriateness and prudence of any costs deferred will not be
limited.Staff believes that it is necessary for the Company to maintain sufficient and detailed
records to support a determination of prudency when it seeks recovery of these costs in a
subsequent filing.
Staff is concerned with the Company's failure to describe the criteria and selection
processes used for projects or pilots.For example,it is unclear how locations for
STAFF COMMENTS 10 FEBRUARY 9,2023
undergrounding distribution lines detailed in the WMP were determined.Staff recommends that
the Company develop criteria and a selection process for projects or pilots.Specifically,for
undergrounding distribution lines,Staff recommends the Company develop project criteria,a
selection process,and provide a cost-benefit analysis for completed and future projects prior to
the Company's next general rate case.
Additionally,the Company did not include details of how it will evaluate each pilot
project and the process to carry out pilotprojects to implementation of a full program.Staff
recommends that the Company develop process guidelines,including a least cost least risk
analysis,for evaluation of pilotprojects and for converting pilotprojects to full programs.
Additionally,Staff recommends the Company provide an analysis and a comparison of
alternatives it considered for each project or program when recovery of costs are requested.
The Company did not include any alternative funding sources for project or pilots.Given
the current availability of federal infrastructure funds,Staff believes it would benefit the
Company and ratepayers to pursue all potential sources of funds.Staff recommends that the
Company describe all funding alternativespursued for each project or pilotwhen it seeks
recovery.
Engagement with Staff and Other Regulated Electric Utilities
As wildfire related activities continue to expand and utilities evolve their plans and
activities,Staff recommends the Company conduct semi-annual (pre-fire season and post-fire
season)wildfire updates with Staff and the Commission.Additionally,Staff encourages the
Company to work with the regulated electric utilities in Idaho to help develop and refine its
WMP.Also,Staff recommends that the Company file a copy of version changes to the WMP
with the Commission as they occur.
CUSTOMER COMMENTS
As of February 8,2023,no customer comments have been filed.
STAFF RECOMMENDATIONS
1.Staff recommends the Commission issue an order authorizing the deferral of the
Company's additional incremental wildfire mitigation costs into a regulatory asset account
through2025 or the effective date of the next general rate case,whichever occurs first.Recovery
STAFF COMMENTS 11 FEBRUARY 9,2023
of prudentlyincurred expenses,along with the amortization period,should be determined in the
next general rate case.
2.Staff recommends that the Commission issue an order requiring the Company to
include details of any partnerships or agreements formed that may benefit the wildfire program,
contribute to program costs,or provide cost sharing opportunities in the WMP.
3.Staff recommends that the Commission issue an order requiring the Company to
conduct semi-annual (pre-fire season and post-fire season)wildfire updates with Staff and the
Commission.
4.Staff recommends that the Commission issue an order requiring the Company to
provide details of all fundingalternatives and sources pursued within the WMP.
5.For undergrounding distribution line projects for wildfire mitigation,Staff
recommends the Commission issue an order requiring the Company develop project criteria,a
selection process,and provide a cost-benefit analysis for completed and future projects prior to
the Company's next general rate case.
6.Staff recommends that the Commission order the Company to file a copy of version
changes to the WMP with the Commission when they occur.
7.Staff recommends that the Company develop process guidelines,including a least
cost least risk analysis,for evaluation of pilotprojects and for converting pilotprojects to full
programs by the end of 2023.
8.Staff recommends the Company provide an analysis and a comparison of alternatives
it considered for each project or program when recovery of costs are requested.
Respectfullysubmitted this jÈ day of February 2023.
Riley Newton
Deputy AttorneyGeneral
Technical Staff:Kevin Keyt
Kimberly Loskot
Kathy Stockton
i:umisc/comments/ipce22.27rnsklscomments
STAFF COMMENTS 12 FEBRUARY 9,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 91"DAY OF FEBRUARY 2023,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,INCASENO.IPC-E-22-27,BY E-MAILING A COPY THEREOF,TO THEFOLLOWING:
LISA NORDSTROM ALISON WILLIAMSMEGANGOICOECHEAALLENIDAHOPOWERCOMPANYIDAHOPOWERCOMPANYPOBOX70
PO BOX 70 BOISE ID 83707-0070BOISEID83707-0070 E-MAIL:[e-mail]-MAIL:[e-mail]
[e-mail]
[e-mail]
SECRE R
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