IPCE978.docx

BRAD PURDY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO  83720-0074
[phone]
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID  83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER COMPANY’S 1997 INTEGRATED RESOURCE PLAN UPDATE.
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CASE NO. IPC-E-97-8
COMMENTS OF THE
COMMISSION STAFF
COMES  NOW  the Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Brad Purdy, Deputy Attorney General, and in response to the Notice of Filing and Notice of Modified Procedure issued on June 12, 1997, submits the following comments.
On June 2, 1997, the Idaho Power Company (Idaho Power, Company) filed its 1997 Integrated Resource Plan (IRP) with the Idaho Public Utilities Commission pursuant to Commission Order No. 22299 issued in Case No. U-1500-165.  Important elements of the plan are summarized below, followed by Staff’s recommendation on the plan.
GOALS OF THE PLAN
Idaho Power has designed the 1997 IRP as a transition plan because of the changing electric utility environment in which it has been prepared.  The goal of the plan, as stated by the Company, is to maintain Idaho Power’s ability to serve the growing service territory demand for electricity for whatever period its role as an exclusive supplier of electricity continues, while also ensuring that any resources acquired for service territory loads will also be cost effective in the competitive market.  This goal has been pursued by designing the plan to both (1) supply the electric power requirements of Idaho Power’s present service territory from resources having the least cost to customers in the present regulated environment, and (2) provide the resource flexibility which the Company will require in competition by giving preference to resources which may be acquired for short periods of time and with short lead times.
PLANNING PERIOD
One difference between this plan and previous plans is a shorter planning period.  National and state restructuring of the electric utility industry for competition will almost certainly change the way, and by whom, electric power resources are planned, developed and acquired in the future, Idaho Power states.  Therefore, in contrast to the 20-year planning period used in previous resource plans, a shorter planning period of 10 years has been selected for the 1997 IRP.  The short lead times for resources acquired through the competitive wholesale power market will enable utilities to await restructuring decisions expected during the next few years before planning the new resources which will be needed in the period beyond 2006.
NEED FOR ADDITIONAL RESOURCES
Idaho Power prepared three load forecasts for the planning period.  In the base case forecast, total load growth rate averages 1.27 percent per year over the ten years of the planning period.  A high and a low forecast were also prepared with growth rates of 0.57 percent and 2.05 percent, respectively.
RESOURCE ADEQUACY
Monthly demand and energy requirements from the sales and load forecast were compared throughout the planning period against the generating capability of the power supply system to assess Idaho Power’s future need for additional capacity and energy resources.  The peaking capacity requirement of the power supply system includes a six percent short-term operating reserve margin in addition to total peak load.  Under the median water conditions used in resource planning, Idaho Power’s existing resources plus a current level of monthly energy and capacity purchases in July, August, November, and December amounting to approximately 100 average megawatts per year, are sufficient to meet load growth until 2001.
TEN YEAR RESOURCE PLAN
Least-cost resource plans were developed by Idaho Power for each of four resource strategies using an economic analysis based on computer simulation of power system operation with existing and new resources throughout the planning period.  Uncertainty in the load forecast and in future gas and electric power market prices were incorporated in the analytical process.  Finally, the plans derived for all four resource strategies were tested for sensitivity to three uncertain variables:  (1) the impact of potential load loss due to deregulation and elimination of exclusive utility service territories; (2) the inclusion of a range of societal costs attributed to thermal generating plant emissions, and (3) the discount rate used for determining resource plan costs.
RESOURCE OPTIONS
Idaho Power included purchases of energy and capacity among the resource options throughout the planning period to meet deficits expected to occur in July, August, November, and December.  Amounts in increments of 100 megawatts to 150 megawatts were placed in the resource plan, although in practice they would be acquired each year in amounts reflecting actual load requirements at that time.  Seasonal purchases formed the basis of one of the resource strategies evaluated, while year-around purchases formed another strategy.  Two plant efficiency upgrade projects were evaluated.  One is an upgrade to the Boardman coal plant boiler which would increase plant capacity by 25 megawatts.  The other is installation of an advanced capacitor control system which would reduce seasonal distribution system losses by 6.3 average megawatts annually.  Eight generic generating resources using currently available technologies for gas, coal, solar, and wind-power generation complete the list of resource options from which the 1997 IRP has been developed.  Two of these, a 224 -megawatt combined cycle gas-fired combustion turbine and a 340-megawatt pressurized fluidized-bed coal fired unit were selected as the core resources for the third and fourth resource strategies evaluated.
LEAST-COST PLAN
The seasonal market purchase strategy has been determined through system simulation modeling and decision tree analysis to be Idaho Power’s least-cost strategy for resource additions during the next ten years.  Subsequent sensitivity analysis on all four resource strategies for various degrees of load reduction due to deregulation, externality emission cost adders, and varying discount rates indicated that, although resource plan costs are highly sensitive to these three uncertain variables, the seasonal purchase strategy produced the least-cost resource plan in all cases.
Distribution system and Boardman plant efficiency upgrades totaling 9 average megawatts are planned for implementation beginning in 1997 and 1998, respectively.  In 1997, planned purchases of 150 average megawatts of energy in the months of July, August, November, and December together amount to 50 annual average megawatts.  These monthly energy purchases are expected to increase in 2001, 2004, and 2005 to reach a level of 150 annual average megawatts.  Even while relying on energy purchases to fill seasonal deficits, Idaho Power will maintain annual surpluses of approximately 230 megawatts throughout the 10-year planning period.
TWO YEAR ACTION PLAN
The following actions will implement Idaho Power’s 1997 Integrated Resource Plan during the next two years and increase the Company’s ability to respond to expected changes in the electric power industry as they affect the Company’s resource requirements:
Purchase seasonal capacity and energy on a year by year basis as needed to serve additional customer load requirements.
Purchasing and selling energy and capacity is a normal and continuing course of action within Idaho Power’s marketing department.  In addition to acquiring power for system firm load requirements, economy purchases are also routinely made to displace higher cost system resources and lower power supply operating costs.  During the next two years, it is expected that energy and capacity will be readily available from the power market at reasonable cost.
Expand Idaho Power’s power marketing activity and capability.
The new power trading floor recently established by Idaho Power will enable increased trading efficiency and a higher volume of power purchases and sales in the future.  In addition, development of forward pricing and risk management tools are expected to provide new support to the trading function.  Together, these efforts to increase the power marketing capabilities will insure the Company’s ability to carry out the seasonal market purchase strategy for resource acquisition called for by the 1997 IRP.
Implement system efficiency improvements included in the least cost resource plan.
Idaho Power will participate with Portland General Electric to implement the proposed upgrade to the Boardman plant boiler beginning in 1997.  The upgrade project will be managed by PGE, the majority partner in the Boardman plant.
Installation of new series capacitors and the automated control system for distribution voltage regulation improvement and loss reduction will begin in 1997 and continue for several years until all cost effective upgrades have been completed.
Provide support for economic analyses within Idaho Power’s hydro relicensing process to insure evaluation of hydroelectric resources on a consistent basis with other resource options.
An important aspect of the relicensing process for Idaho Power’s hydroelectric facilities is identifying the present and future value of power generation at a facility.  The IRP will provide a continuing basis and methodology to evaluate the Company’s hydroelectric generating facilities for relicensing consistently with other resource options.  Any proposed modifications or expansions of generating capacity at existing hydroelectric facilities will be evaluated within the relicensing process.
Participate actively in the IndeGO project to facilitate independent operation of the regional transmission grid.
Idaho Power will continue to exercise a significant role in the process of creating IndeGO as a means to insure nondiscriminatory access to and efficient operation of the regional power grid.  Open transmission access is expected to increase the Company’s opportunities to participate in the power market and acquire market-based resources to meet customer load growth in accordance with the integrated resource plan.
Participate in regional conservation efforts through the Northwest Energy Efficiency Alliance.
As a member of the Northwest Energy Efficiency Alliance (NEEA), Idaho Power is moving away from traditional demand-side (DSM) programs and toward promoting regional market transformation efforts and market-driven energy efficiencies in the region.  The Company is currently seeking establishment of a public services charge which would fund participation in NEEA.
In addition, Idaho Power intends to continue the Low Income Weatherization Assistance program in Idaho.  Two ongoing programs, the Agricultural Choices Program and the Commercial Lighting Program, are currently undergoing extensive review and are expected to be modified during 1997 to reduce cost deferral and improve their cost effectiveness.  Other current DSM programs will be ended in 1997.
Annually update the 1997 IRP planning assumptions and conclusions pending regulatory review of current planning requirements.
From one perspective, the rapidity of change in the electric power industry today provides an argument that utility resource planning should be conducted more quickly and frequently in order to provide useful planning input to resource decisions.  From another perspective, the IRP in anything like its present form may have no purpose in a competitive environment following restructuring.  Until the fate of the current resource planning requirements has been resolved, Idaho Power proposes to prepare limited updates to the 1997 IRP for submission to the Idaho and Oregon public utility commissions annually.
STAFF RECOMMENDATION
Staff has actively participated in meetings held by the Company throughout the development of the 1997 IRP, as well as previous IRPs.  Consequently, nearly all of Staff’s comments on the plan have been made and addressed by the Company during the course of this process.
Staff notes that Idaho Power has reduced the planning period for the 1997 IRP from 20 years to 10 years.  Order No. 22299, the order requiring integrated resource planning for electric utilities, still requires a 20 year planning period.  The Commission has not formally changed the requirements contained in this order.  However, Staff agrees that a 10-year planning period is appropriate, given the current level of uncertainty about the future of the electric industry.
The load forecasts made by the Company are reasonable Staff believes.  The resource alternatives evaluated are the ones most likely to prove cost effective in meeting expected load at least cost.  The analysis used to plan future resource acquisitions was fair and thorough in Staff’s opinion.  The Company has appropriately assessed uncertainties.
The Company’s future activities, as laid out in the two year action plan, are reasonable and appropriate.  Staff wishes to point out, however, that any proposal to either significantly change or eliminate existing DSM programs is subject to review by the Commission.  Staff notes that the Company has recently terminated several DSM programs, and states its intent to participate in NEEA in the future.  Whether existing or recently eliminated programs will be replaced with new Company-sponsored programs or whether the Company will only pursue DSM through regional efforts has not been addressed in the IRP; however, the Company’s Conservation Plan (Appendix C of the IRP) shows a level of annual spending for DSM in future years of $3.5 million.  Of that amount, only a portion would be spent on NEEA participation.  Most of the remainder, however, is not identified as going to any specific program.  Staff believes Idaho Power should continue to assess conservation opportunities and solidify its future DSM plans.
Idaho Power has also indicated its intent to file limited annual updates to the 1997 IRP.  Although Staff supports the Company’s proposal, any decisions to change current IRP requirements rest with the Commission.
Staff recommends Commission acknowledgment of Idaho Power’s 1997 Integrated Resource Plan as properly filed.
DATED  at Boise, Idaho, this            day of July 1997.
_______________________________
Brad Purdy
Deputy Attorney General
_______________________________
Rick Sterling
Engineer
BP:RPS/jo/umisc\comments\ipce978.bp