19901123Brief.pdf

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LARRY D. RIPLEY
clo Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
[phone]
STEVEN L. HERNDON
I DAHO POWER COMPANY
P.O. Box 70
Boise, Idaho 83707
[phone]
Attorneys for Idaho Power
Street Address for Express Mai 1 :
1220 West Idaho Street
Boi se, Idaho 83702
FAX Telephone No. [phone]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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INTRODUCTION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TORATEBASE THE INVESTMENT
REQUIRED FOR THE REBUILD OF THE SWAN
FALLS HYDROELECTRIC PROJECT
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE RATEBASING OF
THE MILNER HYDROELECTRIC PROJECT
OR IN THE ALTERNTIVE A DETERMINATION
OF EXEMPT STATUS FOR THE MILNER
HYDROELECTRIC PROJECT
Case No. IPC-E-90-2
Case No. IPC-E-90-8
BRIEF OF IDAHO
POWER COMPANY
On October 12,1990, the Idaho Public Utilities Commission (the
"Commi 5sioo") requested that the Parties address the following legal issues
regarding the construction of hydroelectric generation facilities at Swan Falls
and Milner:
IDAHO POWER BRIEF 1
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1. What is the legal authority for the Commission to approve
ratebasing of the Swan Falls rebuild before the rebuild is in service? What is
the legal authority for the Commission to approve ratebasing for the Milner
project before the project is in servi ce.
2. What is the legal authority or propriety as a matter of pol icy
of using avoided costs as a cap for ratebasing the Swan Falls rebuild? What is
the legal authority or propriety as a matter of pol icy of using avoided costs as
a cap for ratebas i ng the Mi 1 ner project?
3: Does the Commission have authority to declare in the abstract
that a certified plant or a plant by statute exempt from certification may be
ratebased without yet knowing the cost of ratebasing the plant in retail rates?
Does the Commission have authority to declare in the abstract that a certified
plant or a plant by statute exempt from certification may be excluded from
ratebasing for a fixed period in the future without yet knowing the cost of
ratebasing in retail rates? How are the rights of utility investors affected in
the implied interval created by such a decision?
Before specifically addressing the above issues, a brief review of
applicable Federal law, the statutory authority of the Commission, and pertinent
Idaho Supreme Court decisions discussing the Commission's authority in this area,
is beneficial.
1.
FEDERAL ENERGY REGULATORY COMMISSION (FERC) JURISDICTION
Since the Swan Falls and Milner projects are both hydroelectric
facilities located on navigable waters of the United States, the construction and
operation of these projects is subject to the Federal Power Act. The Federal
Power Act clearly states that it is unlawful to construct, operate or maintain
IDAHO POWER BRIEF 2
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a hydroelectric project in any of the navigable waters of the United States
except under and in accordance wi th the terms of ali cense from the FERC. 16
U.S.C.S, § 817 Additionally, the Federal Power Act mandates that all licenses
issued are subject to the condi t i on that the FERC determi ne that the project best
adapted to a comprehensive plan for improving or developing beneficial publ ic
uses be selected. 16 U.S.C.S. § 803 The projects, plans, and specifications,
when approved by the FERC are a part of the 1 icense conditions and thereafter
cannot be changed without approval. 16 U.S.C.S. § 802 Failure to comply with
any rule, regulation, term, or condition of a license can subject the licensee
to revocat i on of the 1 i cense and c i vi 1 penal ties in an amount not to exceed
$10,000 for each day that such violation or failure or refusal continues. 16
U.S.C.S. § 823(b)
2.
STATUTORY AUTHORITY
In 1970 the legislature of the State of Idaho amended I.C. § 61-526
by striking the provision that permitted power companies to develop new
generat i ng pl ants and market the products thereof wi thout a Cert i fi cate of Pub 1 i c
Convenience and Necessity (CPC&N). I.C. § 61-526 now requires that a public
utility subject to jurisdiction of the Commission must obtain a CPC&N if it
desires to construct a new generating plant, although it is permitted to increase
the capacity of existing generating plants without the issuance of CPC&N. A
copy of the applicable 1970 Session law is attached for the convenience of the
Commission and parties. It should also be noted that in Idaho Power Co. v.
Idaho Publ ic Util ities, 703 P.2d 707, 108 Idaho 943 (1985) the Idaho Supreme
Court upheld the Commission's authority to disallow a portion of Idaho Power
Company's investment in the Boardman facility noting that the boiler "had been
IDAHO POWER BRIEF 3
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purchased prior to the issuance of a certi ficate of convenience and necessi ty,
I.C. § 61-526, as amended in 1970."
3.
SUPREME COURT DECISIONS
In 1983 the Idaho Supreme Court issued its decision in Utah Power &
Light v. Idaho Pub. Util. Com'n, 673 P.2d 422, 105 Idaho 822, (1983), wherein the
Supreme Court ruled that construction work in progress could be included in a
ut il i ty' s ratebase for purposes of determi ni ng the uti 11 ty' s revenue requi rement.
In 1984 the idaho legislature enacted I.C. § 61-502A to provide that construction
work in progress coul d not be included in ratebase for revenue requ i rement
purposes, but that the Commission must allow a reasonable allowance for funds
used during the construction of utility plant. A copy of the applicable 1984
Session law is attached for the convenience of the Commission and parties. In
short, if a utility has obtained a Certificate of Public Convenience and
Necessity authorizing the construction of plant, the Commission is required to
permit a return on that plant during construction and cannot retroactively
disallow the return or the investment upon which that return has been calculated.
For the Commission to act otherwise would allow the Commission to prohibit the
util ity from earning a return on an investment which had previously been approved
by the Commi ss i on.
In Citizens Util. Co. v. Idaho Public Util. Comm., 164 P2.d 1l0, 115
99 Idaho 169,579, (1978), the Court stated: "A utility's 'rate base' represents
the original cost minus depreciation of all property justifiably used by the
utility in providing services to its customers. Utilities are allowed to charge
customers rates which will yield a certain percentage return on the utility's
tot a 1 investment."
IDAHO POWER BRIEF 4
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The Idaho Supreme Court has determi ned that the Commi ss i on's
authority to establish avoided cost "rates" for a utility arise out of the
Commission's obligation to establish a procedure for the purchase of power by
utilities from cogenerators and small power producers under § 210 of the Public
Utility Regulatory Policies Act of 1978 (PURPA) 16 U.S.C. § 824a-3. A discussion
of the Commi ss i on's authority to set avo i ded cost "rates" and the purpose for
setting such rates is discussed in Afton Energy, Inc. v. Idaho Power Co. 693 P.2d
427, 107 Idaho 781, (1984). As noted by the Idaho Supreme Court in Afton the
intention of C'ongress in enacting PURPA and the avoided cost rate methodology is
set forth in the House-Senate conferee's report:
"The House and Senate conferees explicitly stated in
thei r report on the PURPA bi 11 that thi s 1 anguage was
not to be interpreted to permit pervasive regulation by
state utility commissions over the avoided cost rates
paid CSPPs by utilities:"
"The conferees intend that the phrase 'just and
reasonable to the electric consumers of the util ity' be
interpreted in a manner which looks to protecting the
interests of the electric consumer in receiving electric
energy at equitable rates. It is not the intention of
the conferees that cogenerators and sma 11 power
producers become subject, by virtue of this language,
and the rules promulgated under this section, to the
type of examination that is traditionally given to
e 1 ectri c ut i 1 i ty rate app 1 i cat ions to determi ne what is
the just and reasonable rate that they should receive
IDAHO POWER BRI EF 5
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for their electric power. The conferees recognize that
cogenerators and small power producers are different
from electric util ities, not being guaranteed a rate of
return on their activities generally or on the
activities vis a vis the sale of power to the utility
and whose risk in proceeding forward in the cogeneration
or small power product ion enterpri se is not guaranteed
to be recoverable.
"The conferees wish to make clear that
cogeneration is to be encouraged under this section and
therefore the examination of the level of rate which
should apply to the purchase by the util ity of the
cogenerator's or small power producer's power should not
be burdened by the same examination as are util ity rate
app 1 i cat ions, but rather ina 1 ess burdensome manner.
The establ ishment of uti 1 ity type regulation over them
would act as a significant disincentive to firms
interested in cogeneration and small power production. H
1978 U.S. Code Congo & Ad. News 7831-32 (emphasis in
ori gina 1 Afton Energy, Inc. 693 P. 2d 427, 433 (Idaho
1984). "
COMMISSION lEGAL ISSUES
1. What is the legal authority for the Commission to approve
ratebasing of the Swan Falls rebuild before the rebuild is in service? What is
the 1 ega 1 authori ty for the Commi ss i on to approve ratebas i ng for the Mil ner
project before the project is in servi ce.
IDAHO POWER BRIEF 6
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The Commission in Case No. IPC-E-89-8, Order No. 22412 (a copy is
at tached to th is Bri ef) set forth the requ i rements for the Company's App 1 i cat ions
in these proceedings. Based upon the discussion set forth above it is clear that
the FERC has authority to issue a 1 icense for a hydroelectric facil ity located
on the navigable waters of the United States. Clearly, the Swan Falls and
Milner projects are located on such navigable waters, and as such must be
1 icensed by the FERC. In issuing the 1 icense the FERC determines the
specifications and conditions of construction. The authority of the Commission
must be read in harmony with the Federal statutory requirements. As set forth
above, the Commission, upon the issuance of a certificate of public convenience
and necess i ty has authori zed the construction of the faci 1 i ty pursuant to the
license issued by the FERC. While the Swan Falls and Milner projects are being
constructed, Idaho Power is ent it 1 ed by statute to an allowance for funds used
during construction. Upon completion of the facilities these facilities will be
included in Idaho Power's ratebase for revenue requirement purposes so long as
Idaho Power Company has uti1 ized reasonable and prudent construction practices.
If during the construction of the facilities circumstances should change, the
burden to demonstrate that the construction of the facilities should cease, is
upon those parties that would request that construction cease. Of course this
Commission on its own motion could also commence such an investigation as it did
in earlier Orders involving the Swan Falls project. The statutory scheme set
forth in the above discussion and the pertinent Idaho Supreme Court decisions are
clear in this regard.
2. What is the 1 ega 1 authori ty or oropri ety as a matter of pol icy
of using avoided costs as a cap for ratebasing the Swan Falls rebuild? What is
IDAHO POWER BRIEF 7
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the 1 ega 1 authori ty or propri ety as a matter of pol icy of us i ng avoi ded costs as
a cap for ratebasing the Milner project?
The statutory scheme for the establishment of a utility's revenue
requirement is totally different than the establishment of rates a utility will
pay for purchased power from cogenerators and small power producers. The
determination of avoided costs for purposes of establishing the rates a util ity
wi 11 pay for purchased power from cogenerators and small power producers is made
for a totally unre1 ated purpose and is not designed for the establ i shment of
ceilings on th~ original costs of facilities that a utility has dedicated to the
pub1 ic use.
3. Does the Commission have authority to declare in the abstract
that a certified plant or a plant by statute exempt from certification may be
ratebased wi thout yet knowi ng the cost of ratebas i ng the plant in retail rates?
Does the Commission have authority to declare in the abstract that a certified
plant or a plant by statute exempt from cert ifi cat i on may be excluded from
ratebasing for a fixed period in the future without yet knowing the cost of
ratebasing in retail rates? How are the rights of util ity investors affected in
the implied interval created by such a decision?
Idaho Power Company's submission of the Milner Application in the
alternative was an attempt by the Company to reconcile the jurisdictional
conflicts between the FERC and this Commission if this Commission determined that
it would not issue a Certificate of Public Convenience and Necessity (CPC&N) for
the Milner project. Recognizing that the Commission had the statutory authority
to refuse to issue a CPC&N for the Milner project, and that the FERC had
statutory authority to issue a license, the Application reconciles the potential
confl ict between the two jurisdictions. The denial of the CPC&N by the Idaho
IDAHO POWER BRIEF 8
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Commission would result in the Milner project not being included in Idaho Power's
investment for revenue requi rement purposes.I n other words, the Mi 1 ner
investment would not be ratebased. Idaho Power's Application in the alternative
is nothing more than a recognition of the Commission's existing authority to
issue or to refuse to issue a CPC&N which authorizes the construction of a
generating plant. This determination, whether the facility should receive a
CPC&N, is made at the beginning of the project (as the Commission requires) and
not at the completion of the construction of the project.
::~Of November,
larr
Counsel for Idaho Power Company
1990
IDAHO POWER BRIEF 9
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CHAPTER 134
(I. B. No. 543)
AN ACT
AMENDING SECTION 61.516, IDAHO CODE, RELATING TO THE
GRA1'IING OF CERTIFICATES OF PUBLIC CONVENIENCE AN
NECESSITY TO PUBLIC UTILITIES, BY PROVIDING THT ON
THE EXTENSION OR CONSTRUCTION OF THE PUBLIC
UTILmES' LINE, PLAJ'I OR SYSTEM A HEARING MAYBE HELD
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION TO
DETERMINE IF PtJBLIC CONVENIENCE AND NECESSITY
REQUIRE THE EXTENSION OR CONSTRUCTON; AND STRIKIG
THE PROVISION THAT PERMITS POWER COMPAi'liES TO
DEVELOP NEW GENERATING PLAJ'IS Ai'lD MARKT TH
PRODUCTS THEREOF WITHOUT A CERTIFICATE OF
CO~'VENIENCE AND NECESSIT.
Be It Enacted by the Legilature of the State of Idaho:
SECTION 1. That Section 61-526, Idaho Code, be, and the same is
hereby amended to read as follows:
61-526. CERTIFICATE OF CONVENIENCE AJm NECESSITY. - No
street raoad corporation, gas corporation, electrcal corporation, telephone
corporation or water corporation, shal henceforth begi the construction of
a street raiad, or of a lie, plant, or system or of any extension of suh
street raoad, or lie, plant, or system. without havig firt obtaied from
the commisson a certifcate that the present or futu public convenience
and necessity requie or wi requie such construction: provided, that th
section shal not be construed to require such corporation to secure such
certificate for an extension withi any city or county, ef iK'' Sf tew,,;
withi which it shal have theretofore lawfully commenced operation, or for
an extension into terrtory whether withi or without a city or county, er
e~t) or to ¡1ft, contiguous to its stret raroad, or lie, plant or system. an
not theretofore served by a public utiity of lie chacter, or for an
extension with or to terrtory aleady served by' it necess in the
ordinar cour of its busiess: and provided furer, that if any public
utity in constrctig or extending its lies, plant or system, shal interfer
or be about to interfere with the operation of the lie, plant or system of
any other public utiity alrady constructed, or if public convenience and
necesit doe not require or wil require such consction or extension, the
commison on complait of the public utiity claiming to be injuriousy
affected. or on the commission's own motion, may, after hearg. make such
order and prescrbe such terms and conditions for the locatig or type of the
lie, plant or system affected as to . it may seem just and reasnable:
provided, tht power companies may, without such certifcate, increas the
capacity of their existig generatig plants 9r èe..eio~ fte.. geftera~Íf: ,lelS
mè mare~ ~he I'foèøe~s thefief.
Approved March 9, 1970.
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24 IDAHO SESSION LAWS C.21 '84
CHTE 21
(S.B. No. 1214)
AN ACT
RELATING TO PUBLIC T..TILITY RATES; AMNDIYG CHAR 5, TITL 61, IDAHO
CODE, BY TH ADDITION OF A NEW SECTION 61-S02A, IDAHO CODE, TO
PROHIBIT TH IDAHO PUBLIC UTILITIES COMMISSION FROM SETTING RATES
THT GRA A RETU ON CONSTRUCTION wORK IN PROGRESS, EXCEPT UPON
TH COMMISSION' S FINDING OF AN EX EMEGENCY, OTR TH
SHORT-TE CONSTRUCTION WORK IN PROGRESS, OR PROPER HELD FOR
Fù'TUR USE, AN DECLAING RATES GRAING A RETù'R!~ ON SUCH PROPE
IN TH ABSENCE OF TH FINDING OF' AN EXTME EMEGECY TO BE
UNJUST, UNASONABLE AN UNAIR, AN TO ALLOW FOR FUS USED
DtJ'RING CONSTRUCTION; DECLAING LEGISLATIVE IN1i.'T; AN DECLAING
AN EMERGE'lCY.
Be It Enacted by the Legislature of the State of Idaho:
SECTION 1. That
is hereby amended
known and designated
follows:
Chapter 5, Title 61, Idaho Code, be, and the sam
by the addi tion thereto of a NEW SECTION, to be
as Section 61-50~~, Idaho Code, and to read as
61-50ZA. RESTRICTION ON RATES AUTHORIZING RETù'RI~ ON PROPERTY NOT
PROVIDING L~ILITY SERVICE. Except upon its finding of an extreme emer-
gency, the commission is hereby prohibited in any order issued after
the effective date of this act from setting rates for any utility that
grants a return on construction work in progress (except short-term
construction work in progress) or property held for future use andwhich is not currently used and useful in providing utility service.
As used in this section, short-term construction work in progress
means construction work that has begun and will be completed in not
more than twelve (12) months. Except as authorized by this section,
any rates granting a return on construction work in progress (except
short-term construction work in progress) or property held for future
use are hereby declared to be unjust, unreasonable, unfair, unlawful
and illegal. When construction work in progress is excluded from the
rate base, the commission must allow a just, fair and reasonable
allowance for funds used during construction or similar account to be
accumulated, computed in accordance with generally accepted accounting
principles.
SECTION 2. It is hereby declared to be legislative intent thtthis act should overrule that portion of the decision of the Suprem
Court of Idaho entitled Utah Power & tight Company v. Idaho Public
Utilities Comission, issued December 14, 1983, which authorized or
required construction work in progress or property held for future use
to be included in a utility's rate base or otherwise authorized or
required the cODlission to grant a return on such property, and tht
the commission be prohibited from following the precedent of tht case
in any order issued after the effective date of this a~t to the extent
that such precedent authorizes construction work in progress or prop-
erty held for future use which is not currently used and useful in
providing utility service to be included in rate base or authorize or
require the commission to allow a return on such property,
SECTION 3. An emergency existing therefor, which emergency is
hereby declared to exist, this act shall be in full force and effect
on and after its passage and approval.
Approved Februar¡ 29, 1984.
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, ..'.-.cm cf tt SetaryS~ce D4t..
MAR 301989
BEFORE TH IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA'r OF TH REIEW UPN )
THE COMMISSION' S OW MOTION OF )
IDAHO POWER COMAN'S PL TO )
REBUILD ITS SWAN FALLS HYRO- )ELECTRIC FACILITY. )
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CASE NO. IPC-E-89-8
ORDER NO. 22412
For the reasons stated in the text of this Order, the
Commiss ion initiates on its own motion an investigation into,
Idaho Power Company's plans to rebuild its hydroelectric genera-
t ion f aci li ty at Swan Fa.i.is. The purpose of this investigation
is to determine the Company' s plans, not only wi th regard to
reconstruction of the Swan Falls facility, but also its future
ratemaking proposals for Swan Falls.
HISTORY OF TH SW FALS PROJECT
The Swan Falls project occupies a unique position in
this state's hydrologica 1 and legal history.In 1901, Trade
Dollar Consolidated Mining Company constructed the first
hydroelectric dam on the Snake River at Swan Falls. By 1919,
its successors to the project had secured water rights at Swan
Falls for 9,450 clLic feet per second with priority dates
ranging from 1900 to 1919, although it is undisputed that the
hydraulic capacity of the project was 8,400 cfs. The nameplate
capaci ty of the project. s generators was about 12 megawatts.
Swan Falls' construction preceded Congress's enactment
fJn 1920 of the Federal Water Power Act. Swan Falls was not
ORDER NO. 22412 -1-
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licensed by the Federal Power Commission until 1928, after Idaho
Power Company had succeeded to the project and its rights. The
original license for the project e:pired in 1970, and it was
annually renewed for a number of years thereafter.
Beginning in 1977 the validity and the priority of
Idaho Power' s water rights for that project became the focus of
a complaint that began the most far-reaching water rights li tiga-
tion in this state i s history. See Idaho Power Company v. State
of Idaho, 104 Idaho 575, 661 P.2d 741 (1983). In the meantime,
Idaho Power applied to the Federal Energy Regulatory Commission
(the FPC's successor agency) to relicense the Swan Falls
project. In 1982, FERC issued License No. 503 for the project,
which will e:pire in 2010 (forty years after the expiration of
the original license).
When the project was relicensed, Idaho Power was autho-
rized to build a new powerhouse and increase the capacity of the
proj ect to 25 megawatts. The license also recited that reports
from FERC's engineering staff found that the spillway at the
project was in poor condition and that major rehabilitation was
needed. !'ollowing receipt of the project license, Idaho PQwer
began reconstruction of the spillway. It had intended to re-
bui ld the powerhouse and increase the generation as well.
On August 27, 1984, this Commission initiated Case No.
U-1006-240, an investigation into Idaho Power' s plans to rebuild
ORDER NO. 22412 -2-
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its generation facility at Swan Falls. The purpose of the inves-
tigation was "to determine whether the Swan Falls rebuild is con-
sistent wi th the least-cost energy future for Idaho Power rate-
payers." That Order noted Idaho Power did not need a certifi-
cate of public convenience and necessity to "increase 'the
capacity of (its) existing generating plants,. I.C. §61-526, but
further referred to the recently completed investigation of
Idaho Power' s future plans in Case No. U-1006-197 and said:
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We concluded Order No. 18189 (the final Order in
Case No. U-1006-1971 by putting Idaho Power on
formal notice that it could no longer expect
automatic rate base treatment of construction
expendi tures that went significantly beyond
original cost estimate or that were not competi-t i ve wi th the cost ratepayers would have to pay
for power from alternative resources. . . .
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The Commission finds that this is the appropriate
time to initiate a review of the Swan Falls
rebui Id. . . .
The Company should . . . explain the history of
.. its decision to rebui ld an expand production at
Swan Falls rather than simply to refurbish the
existing site, including a narrative of alterna-
tive studies the Company performed in deciding
that a total rebuild and expansion. of the si tewas the least-cost alternative. Further, the
status of the Company's license and water right
at the Swan Falls site should be presented.
Finally, a comparison with the cost of poweravai lable from al ternati ve resources should bepresented to show that the Swan Falls rebui 1d is
consistent with the least-cost energy scenario
for Idaho Power ratepayers.
In clarification of this ini tia1 Order, the Commission
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issued Order No. 19129 on September 20, 1984. That Order said:
ORDER NO. 22412 -3-- ..
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We put Idaho Power on formal notice that it acts
under its own peril for costs associated with the
Swan Falls rebuild until such time as the Company
is prepared to submit its definitive cost esti-
mate and to demonstrate that the project will be
cost-effective. As we stated in the -197 case,
the era of "hell-or-high-water-financing" is
over. The ratepayers should not be at risk if
management commences construction before it re-ceives a definitive cost estimate, or before it
has an approved water right, or if it fails to
study reasonable alternative projects, or if the
project itself is not cost-effective compared to
power that is readily available from competitors.
~he -240 case did not proceed further, however, because
Idaho Power postponed its plan to upgrade the plant. s generating
capacity.Accordingly, the Commission closed the case, but
advised the Company that further proceedings would be ini tiated
if the Company revived its construction plans. Order No. 19623,
issued Apri 1 24, 1985, said:
(W) e have been informally notified that Idaho
Power Company does not plan to upgrade the
capacity of the Swan Falls dam from 12. to 25
megawatts in the near future, as it earlier had
planned, but has scaled back the bulk of its work
on the project to improvement of the spillway ofthe existing dam. If that be the case, then it
is unnecessary to proceed to an investigation of
the economics of the Swan Falls rebuild at this
time, andi t is appropriate to dismiss the case.
We put Idaho Power on explicit notice, however,
that before it undertakes any substantial recon-
struction or replacement of the Swan Fallsfaci 1i ty, other than improvement or reconstruc-
tion of the existing spillway, it must first
demonstrate to this Commission in a formal
proceeding that the project is the least-cost
method of acquiring a new resource for its system.
ORDER NO. 22412 -4-
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On February 21, 1989, this Commission received a cover
letter accompanying the 1989 Supplement to Idaho Power's Second
Amended Application for New License: Project No. 503, for the
Swan Falls rebuild. That cover letter said:
When the Swan Falls project, FERC No. 503, was
relicensed in 1981, the license contained the
authorization to build a new powerhouse and
upgrade the capacity to l5 mw. However, Idaho
Power chose to defer installation of the addition-
al capacity at that time. Recently, concerns
have arisen surrounding the structural integrity
,of the old powerhouse. Thus safety and operation
considerations dictate that Idaho Power now con-sider completion of the project as originally
relicensed in 1982. To this end, the Company
will be asking the FERC for permission to proceedwi th construction as soon as possible.
The 1989 Supplement to the Second Amended Application
contains revised cost estimates for the project in 1988
dollars:$53,814,800 total cost, $7,683,000 levelized annua 1
costs, and 4 6.3 mills/kwh cost of generation. The Supplement
contrasts these estimates of the average cost of generation from
Swan Falls with 56.8 mills/kwh system avoided costs and 86.9
mills/kwh cost for replacement thermal generation.
Idaho Power l s 1989 Supplement to Second Amended
Application leaves a numer' of important questions unanswered.
We list them below and direct the Company to submi t wri tten
responses to them within 28 days of the service date of this
Order.
1. Does the Company intend to initiate a formal
proceeding before this Commission before it undertakes any
ORDER NO. 22412 -5-
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recons t ruct ion on the Swan Fa 1 Is proj ect. s powerhouses and
generating facilities? If so, when does it anticipate filing
its application or petition, and when does it anticipate
beginning construction? If not, why not?
2. Does the Company intend to propose that this plant
be included in its rate base? If so, is this based upon the
Company's expectation that the plant will be used to serve its
load (either retail or firm wholesale) under its own planning
cri teria'? Is Swan Falls a nonavailable resource if the Company
will not be in load/resource balance when the project is
completed.
3. If the Company does not plan to include this
rebuild in rate base, why not? Does the Company intend to keep
new or increased hydroelectric facilities for an unregulated
division or subsidiary?
4. The cost estimates contained in the Company's 1989
Supplement to its Second Amended Application appear to show a
1988 levelized cost of production from Swan Falls significantly
lower than similar calculations would show costs for the Compa-
ny's investment in the Valmy or Boardman thermal plants. Is
this the case? If so, is it the Company's proposal that the
Valmy and Boardman plants will continue to be rate based at a
higher unit cost of generation than Swan Falls? How will this
upgrade and ratemaking treatment benefit the ratepayers'?
ORDER NO. 22412 -6-
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5. What is the status of the Company's water rights at
Swan Falls? In making estimates of the amount of hydroelectric
generation that would be available from Swan Falls, what assump-
tions did the Company use with regard to increased, similar, or
decreased flows at Swan Falls from those available to the Compa-
ny in the mid-1970s through mid-1980s1 How do changes in those
water rights affect generation upstream and downstream from Swan
falls?
6. What is the status of the Company' s license at Swan
Falls beyond 2010? Have the Company's cost es-timates assumed
the retention of the project beyond 20101
7. Are the cost estimates in the Company's application
based on detai led designs and critical path scheduling? I f so,
please submit the- plan and a critical path chart. If not,
please explain and document the basis of the estimates.
The Commission at this time is not scheduling a prehear-
ing conference or hearings in this investigation. Instead, fol-
lowing the Company's written answers to the questions posed by
this Order, the Commission will decide whether or what further
investigation is appropriate.
o R D B R
IT is THREFORE ORDERED that Idaho Power Company answer
the questions posed by the text of this Order wi thin 28 days of
the service date of this Order.
ORDER NO. 22412 -7-
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IIIII
IIIII
IIIII
IIIII
I1111
II111
DONE by Order of the Idaho Public Uti li ties Commission
, '
at Boise, Idaho, this ~ ~day of March, 1989.
~'PÜSIOENT
.~:; . ," .: .. '.c-~ ç '~O.", PERRÝŠii, COMMISSIONER
-
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.4- "~. ..£kJ t t' 4 ~d,*i-:-RAPH H SOH, COMMISSIONER
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ATTST: . ,!,;. .
~,~-- (J A ~ ¿, -./i J _ Whms, SECUARY
MG: dc/O-4SS
ORDER NO. 22412 -8-
.
!I
EVANS, KEANE, KOONTZ, BOYD, SIMKO & RIPLEY
clo Idaho Power Company
1220 W. Idaho Street
P. O. Box 70
Boi se, Idaho 83707
[phone]
STEVEN l. HERNDON
IDAHO POWER COMPANY
1220 W. Idaho Street
P. O. Box 70
Boise, ID 83707
[phone]
Attorneys for Idaho Power Company
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T t. ¡ TiE S C () r/ l!~ ~ ::;; :) t ~) t J
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AUTHORITY
TO RATE BASE THE INVESTMENT REQUIRED
FOR THE REBUILD OF THE SWAN FALLS
HYDROELECTRIC FACILITY
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY FOR
THE RATE BASING OF THE MILNER HYDRO-
ELECTRIC PROJECT OR IN THE ALTERNATIVE
A DETERMINATION OF EXEMPT STATUS FOR
THE MILER HYDROELECTRIC PROJECT
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CASE NO. IPC-E-90-2
CERTIFICATE OF MAILING
CASE NO. IPC-E-90-8
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 23rdday of November, 1990, I Federal
Expressed a true and correct copy of the within and foregoing REBUTTAL TESTIMONY
OF JAN B. PACKWOOD and BRI EF OF IDAHO POWER COMPANY, addressed as fo 11 ows:
James N. Roethe
Pi 11 sbury Madi son & Sutro
P.O. Box 7880
San Francisco, CA 94120
..
Grant E. Tanner
DAVIS WRIGHT TREMAINE
2300 Fi rst Interstate Bank Tower
1300 S. W. Fi fth Avenue
Portl and, OR 97201
and service by hand del ivery was made upon the following on this 23rd day of
November, 1990:
Peter J. Ri chardson
DAVIS WRIGHT TREMAINE
Jefferson P1 ace, Su i te 400
350 N. Ninth
Boi se, ID 83702
Michael S. Gilmore
Brad M. Purdy
Idaho Public Utilities Commission
Statehouse Ma i 1
Boise, ID 83720-0001
Davi d H. Hawk
Di rector, Energy Natural Resources
J. R. Simplot Company
P. O. Box 27
Boi se, ID 83707-0027
Afton Energy, Inc.
c/o Owen H. Orndorff
Orndorff & Peterson
1087 W. River Street, Suite 230
Boi se, ID 83702
R. Michael Southcombe
CL emons, Cosho & Humphrey
815 W.Washington
Boi se, ID 83702-5590
R. Scott Pasl ey
Ass i stant General Coun
J. R. Simplot Company
P. O. Box 27
Boise, ID 83707-0027
and service by regular mail made upon:
Harold C. Miles
Energy & Natural Resources
Committee
316 Fifteenth Ave. South
Nampa, Idaho 83651 ~
2