20110916acceptance_of_filing_order_no_32351.pdf

Office ofthe Secretary
Service Date
September 16,2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING BY )
PACIFICORP DBA ROCKY MOUNTAIN )CASE NO.PAC-E-1i-10
POWER OF ITS 2011 INTEGRATED )
RESOURCE PLAN )ACCEPTANCE OF FILING
)
_________________________________
)ORDER NO.32351
On April 1,2011,PacifiCorp dba Rocky Mountain Power (“Rocky Mountain”or
“Company”)filed its 2011 Integrated Resource Plan (IRP)with the Commission pursuant to the
Commission’s rules and in compliance with the biennial IRP filing requirements mandated in
Order No.22299.
On May 13,2011,the Commission issued a Notice of Filing and Modified Procedure
with a comment deadline of July 11,2011.The Commission received written comments from
Commission Staff (“Staff’),Monsanto Company (“Monsanto”),Renewable Northwest Project
(“RNP”),and Idaho Conservation League (“ICL”).
ROCKY MOUNTAIN’S INTEGRATED RESOURCE PLAN
Rocky Mountain serves approximately 70,000 customers in southeastern Idaho.The
Company provides electric service to more than 1,000,000 customers in Utah,Wyoming and
Idaho.Rocky Mountain’s 2011 IRP is its “1 ith plan submitted to state regulatory commissions.
•..“Rocky Mountain 2011 IRP at 1.The Company states that it was developed with
participation from numerous public stakeholders,including regulatory staff,advocacy groups,
and other interested parties.Id.The 2011 IRP focuses on a 10-year period,201 1-2020.Id.
The Company states that the preferred portfolio in the new IRP contains a large
relative increase in energy efficiency measures,new gas-fired combined-cycle combustion
turbines (CCCT5),firm market purchases,and renewable resource additions beginning in 2018,
presumably new wind resources.Id.
The following is a summary of the Company’s 2011 IRP Action Plan:
1.Renewables/Distributed Generation:
a.Acquire 800 MW of wind resources by 2020;
b.Identify and obtain up to 100 MW of geothermal resources;
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c.Acquire additional solar resources,including 30 MW of solar hot
water heating resources by 2020,and strive to meet the Company’s 8.7
MW compliance obligation in Oregon;
d.Identify and obtain up to 52 MW of combined heat and power (CHP)
resources,through the PURPA qualifying facility contracting process,
for the 201 1-2020 period;
e.Develop studies regarding the incremental capacity value and ancillary
service benefits of energy storage;and
f.Continue to work toward Renewable Portfolio Standard (RPS)
compliance in Washington and California.
2.Intermediate/Base-load Thermal Supply-side Resources:
a.Acquire a CCCT resource (Lake Side)in Utah in 2014;and
b.Issue an RFP for a peaking/intermediate/baseload resource in late 2011
or early 2012 for acquisition no later than the summer of 2016.
3.Firm Market Purchases:
a.Acquire up to 1,400 MW via front office transactions or power
purchase agreements (PPAs)through 2014,unless more economical
long-term resources become available for acquisition.
4.Plant Efficiency Improvements:
a.Coal plant turbine upgrade projects for 2011 and 2012,totaling 31
MW;and
b.Complete remaining upgrade projects by 2021,totaling 34.2 MW and
subject to economic review.
5.Class 1 DSM:
a.Acquire up to 250 MW,including 80 MW of commercial curtailment
products for 2012-2013 (remaining 170 MW to be obtained through
additional curtailment and irrigation/residential load control in the
20 12-2020 time period and subject to economic review).
6.Class 2 DSM:
a.Acquire up to 1,200 MW by 2020,including programs acquired
through the Energy Trust of Oregon,through active and subsequent
RFPs.
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7.Class 3 DSM:
a.Continue to monitor and evaluate program opportunities based on
cost-effectiveness.
8.Planning and Modeling Process Improvements:
a.Continue to refine its system optimizer modeling approach;
b.Continue to work with the Company’s transmission planning
department using the IRP modeling process;
c.Incorporate plug-in vehicles and Smart Grid technologies for
discussion and consideration during the development of the
Company’s next IRP;and
d.Continue to refine its wind integration modeling approach,including
the establishment of a technical review committee and plan for the
Company’s next wind integration study.
MONSANTO COMMENTS
Monsanto objected to various conclusions pertaining to the preferred resource
portfolio identified in Rocky Mountain’s IRP filing.Monsanto Comments at 1.Monsanto
criticized Rocky Mountain for failing to “address the critical question of whether the selected
resource path is affordable for ratepayers and for the states in which the economic burden will be
placed.”Id.According to Monsanto,the Company’s present value revenue requirement
(PVRR)analysis is flawed because “future and highly uncertain benefits are used to justify the
very real and immediate rate impacts to customers today.”Id,at 2.
Monsanto pointed out “the Company’s assumptions regarding continuation of the
Production Tax Credits for renewables clearly increase the perceived economic investment of
that class of resources.”Id.Rocky Mountain’s assumption “provides an advantage to
developing more renewables compared to the case where these credits are either eliminated or
phased out in the emerging fiscal debate in Congress....“Id.
Rocky Mountain’s “implied assumptions”regarding a nationwide RPS led the
Company to include the entirety of the Gateway Transmission Project in its IRP.Id.at 3.“[TJhe
emergence of a more conducive government policy toward renewable development ...is,
however,little justification for a massive transmission build-out that is,first and foremost,aimed
at the delivery of Wyoming wind to markets scattered throughout various western states.”Id.
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Monsanto does not believe that a “green resource future,”see IRP at 82,“is
affordable to the ratepayer today.”Id.Monsanto cites to an alleged controversy and difficulties
experienced by Los Angeles Department of Water and Power during the current incorporation of
its “aggressive integration of renewable acquisition program.”Id.
Monsanto opines that the Company has adjusted the configuration of its Gateway
South segment because the market for renewables,as originally conceived by the Company,has
not materialized.Id.Monsanto criticizes Rocky Mountain for utilizing the “most aggressive set
of assumptions”to develop its infrastructure and resource acquisition plans.Id.“Monsanto
believes it is critically important that resource acquisitions not simply pass a least-cost PVRR
test,but pass a more critical test of the affordability.”Id.at 4.
“Monsanto also draws the Commission’s attention to a reduction of 46 MW [327
MW in 2008 IRP Update and 281 MW in the current IRP]in the Company’s assumption of
Monsanto’s existing interruptible resource.”Id.“Monsanto recommends that the Commission
reject the Company’s faulty assumption of a decline in existing interruptible resources in any
ruling on this IRP.”Id.Monsanto protests Rocky Mountain’s use of specific language in the
parties’2007 Electric Service Agreement,per the Company’s request,to “reduce [,by 46 MW,]
existing resources in order to unnecessarily boost future resource needs.”Id.In Monsanto’s
opinion,if Rocky Mountain wants to use “the contractual language ...as the basis for their
reduction,then the prudent and least-cost course of action would be to advise Monsanto of its
desire to revert to pre-2007 language in order to preserve the existing resource.”Id.at 5.
RNP COMMENTS
RNP began its comments by expressing approval of “the Company’s use of
sophisticated transmission investment analysis in Chapter 4 of its IRP and its recognition of the
diverse benefits of transmission investments....“Id.at 1.“[C]areful planning for a robust,
efficient transmission system will be a good bet for customers in any future—and especially in a
future that prefers clean,renewable energy sources.”Id.
RNP asserts that “the Company’s [IRP]path is inconsistent with the very regulatory
vision that it postulates.”Id.at 2.“[T]he Company fails to provide any comprehensive,
forward-looking economic analysis of continuing to upgrade aging,inefficient coal plants.”Id.
RNP believes that the Company’s investment in pollution control upgrades “to prop up aging
coal plants”are not a good investment “when viewed along with a reasonable forecast of the
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compliance costs associated with likely future regulation.”Id.RNP argues that Rocky
Mountain’s analysis “does not evaluate the full picture of the ratepayer investment required to
keep individual coal plants on line.”Id.
RNP challenges Rocky Mountain’s modeling assumptions which may have
influenced the Company’s decision to include a “paucity of renewable resources”in its preferred
portfolio.Id.RNP noted Rocky Mountain’s adjustment in its preferred portfolio to include
more renewables but challenges what it referred to as “skewed assumptions about renewable
resources [which may have]prevented the Company’s model itself from reaching appropriate
outcomes for renewable energy.”Id.
RNP specifically objects to the Company’s removal of geothermal resources.Id.at 3.
RNP claims that Rocky Mountain abandoned inclusion of geothermal in its portfolio “because of
a desire to obtain legislative cost-recovery guarantees....“Id.RNP assumes that “the utility is
only considering a self-build resource,and not PPAs [power purchase agreements]from
geothermal developers.”Id.RNP does not believe that “self-build”should be the only option
and that the Company should follow the example of Idaho Power and negotiate PPAs with
geothermal developers.Id.RNP believes that before Rocky Mountain is permitted to exclude
an entire resource,one favored by the model,from consideration “the Company should at least
be required to demonstrate that it has made a strong effort to find least cost,least risk geothermal
resources through contracts and self-build opportunities.”Id.
RNP stated that it was “pleased that the Company evaluated distributed generation
resources,including solar PV and solar hot water.”Id.RNP looks forward to the inclusion of
“30 MW of solar hot water heating resources by 2020 Id.RNP encourages the
Commission to order the Company to expand its Utah solar PV incentive program into Idaho.
Id.at4.
Finally,RNP urges the Commission to immediately,in this docket,“require the
Company to provide,as a supplement to its IRP,a comprehensive regulatory analysis of past,
present,and future investments in coal plants on a plant-by-plant basis.”Id.The Company
should “include a risk analysis that comprehensively compares the regulatory compliance costs
•.with alternative power supply options ••.examin[ing]the possibility that regulatory
compliance costs will be greater than those forecasted.”Id.
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ICL COMMENTS
ICL has serious questions with both the substance and process of the IRP and
advocates that the Commission “defer accepting this IRP until further details are available.”ICL
Comments at 1.“Despite RMP’s laudable treatment of DSM,the 2011 IRP fails to adequately
analyze several other resource types.”Id.at 2.“RMP assumes unabated coal plant use despite
requiring billions of dollars in pollution control upgrades.”Id.True integrated resource
planning should “consider all options to meeting RMP’s resource needs,including changes to
existing resources.”Id.
ICL also lamented that “the public did not have a meaningful chance to participate in
developing this IRP.”Id.RMP conducted public meetings but failed “to incorporate public
comments and factual information.”Id.ICL believes that the Commission should wait until
after the Utah and Oregon Commissions finish their “review proceedings before issuing any final
order on this IRP.”Id.at 3.’
“Deferring any final order on this IRP will not negatively affect RMP because the
Idaho review process does not result in any specific endorsement or approval of any of the action
items.”Id.Based on the foregoing,ICL recommends that the Commission not accept the
Company’s 2011 IRP filing.Id.
STAFF COMMENTS
In its comments,Staff acknowledged “the Company’s sustained efforts in developing
a sophisticated,thorough planning document amid an uncertain economic backdrop.”Staff
Comments at 3.The document “provides stakeholders with a more transparent view of the
planning process.”Id.Staff prefaced its comments by mentioning that it “does not intend for its
comments to be all-inclusive of the document,but rather will focus on a number of issues it
deems important to the Company’s ten-year action plan.”Id.
Rocky Mountain’s “system peak and system load are projected to grow at an annual
rate of 2.1 %over the ten-year planning horizon.”Id.at 4.This rate of growth is “high when
compared to other utilities within the state and around the nation.”Id.However,there are signs
that Rocky Mountain’s forecasted load and peak is “softening”throughout its service territory,
“relative to the previous IRP filing.”Id.Growth in the residential and commercial classes,
Rocky Mountain’s IRP filing is currently pending before the Utah Public Service Commission,with reply
comments due on October 5,2011.The Company’s IRP filing is also pending before the Oregon PUC,with final
comments due October 13,2011.
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particularly on the east-side of the Company’s service territory,is cited as the main culprit for
continued moderate system growth.Id.
With regards to new resources,Staff expressed some concern that “given long lead
times on large generation facilities,such as the Lakeside 2 (CCCT)currently under construction,
the Company may find itself long on capacity in the near-term”if the current economic climate
continues.Id.Staff determined that “the 2011 forecast,developed in October 2010,nearly
mimics that of the 2009 IRP update forecast,developed in November 2009.”Id,“Both forecasts
are lower than that used in the 2009 IRP throughout the timeframe.”Id.Rocky Mountain
predicts “system coincident peak to be roughly 2.6%,or 328 MW,below that projected in the
2009 IRP,and system load to be roughly 1.2%lower than the 2009 IRP forecast.”Id.Staff
believes the reductions “may affect the timing of resource additions.”Id.
Staff concurred with the Company “that it is appropriate to consider the possibility of
federal climate change legislation in its portfolio evaluation process,and is satisfied that the
Company has adequately addressed the issue.”Id.at 5.Other considerations,including EPA
regulations on its coal-fired facilities,have “prompted expenditures in pollution control
equipment.”Id.
Price Forecasts
The planning process for the 2011 IRP differs significantly from the 2009 IRP due to
the decrease in natural gas and wholesale electricity prices.Id.The strong correlation between
market prices and natural gas prices is expected to continue into the foreseeable future.Id.Even
though natural gas prices have experienced decline,“the fuel has shown significant volatility
over the past ten years.”Id.Day-ahead prices have fluctuated between a low of $1.72 per
MMBtu (November 16,2001)to a high of $18.41 per MMBtu (February 25,2003)but have
recently somewhat settled below $5.00 per MMBtu.Id.This may be a result of lower demand
and the increase in domestic supplies from shale.Id.
Staff expresses caution toward the sentiment “that expansion of unconventional
domestic supplies will continue to put downward pressure on gas prices,”noting the recent
failure of liquefied natural gas to “fill the supply-demand gap.”Id.The expansion of natural gas
generation,predicted by the U.S.Energy Information Agency to account for 60%of electric
generation by 2035,could expose customers to the price volatility tied to variable fuel costs.Id.
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Resource Options
Staff believes that Rocky Mountain has done an “admirable job”of screening and
selecting resource options.Id.at 6.Staff encouraged the Company to retrofit “its gas and coal
facilities with a solar hybrid design in its future IRPs.”Id.Staff endorsed certain wind model
adjustments made by the Company which “provides greater flexibility ...to select additional
wind should it prove to be a preferred resource.”Id.Staff believes that Rocky Mountain is
“well-positioned to integrate wind given its resource diversity and geographic footprint.”Id.
Staff supports the Company’s overall description of “supply and demand-side
resources,as well as transmission options and market transactions,which leads to equitable
treatment in the resource selection process.”Id.at 7.
Portfolio Modeling and Selection
Staff was somewhat critical of Rocky Mountain’s portfolio modeling and selection
process.Id.at 8.Staff stated that “the Company needs to do a better job explaining its portfolio
decisions when there does not appear to be clear best options.”Id.Staff cited the Company’s
removal and replacement of geothermal resources with wind resources due to what Rocky
Mountain asserted was uncertainty of rate recovery.Id.at 9.In Staffs opinion,this decision did
not accurately capture the relative dissimilarities between the two types of resources.Id.
Nevertheless,while its decisions could have been more transparent,Staff agrees that the
Company made appropriate decisions regarding its preferred portfolio.Id.at 10.
2011 Action Plan
Staff noted that Rocky Mountain’s plans to issue Request for Proposals (RFP)for
baseload facilities,Class 1 and Class 2 DSM,and renewable resources corresponds with the
resources identified by the Company in its preferred portfolio.Id.Additionally,Rocky
Mountain includes a transmission expansion action plan in its 2011 IRP,detailing “the
continuing efforts toward completion of the Gateway Project.”Id.at 10-11.The transmission
project is broken down into eight (A-H)segments.Id.at 11.Rocky Mountain is currently
partnering with Idaho Power on segments D and E of the project.Id.Staff states that it “will
continue to monitor the Company’s progress toward completion of the Gateway Project,and
fully expects the Company to continue to evaluate the economics of the endeavor.”Id.
Staff noted that a “prudency assessment or approval of specific resources cited in
either action plan is beyond the scope of the IRP review”and will take place “in a more suitable
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forum,such as a general rate case.”Id.While declining to specifically endorse the Company’s
preferred resource options outlined in its IRP Action Plan,Staff “nonetheless believes the
identified course of action seems reasonable given the assumptions,analysis and conclusions of
the Company as presented in the IRP.”Id.Staff recommended that the Commission
acknowledge the Company’s 2011 IRP filing.Id,at 13.
COMMISSION DECISION
The Commission has reviewed the filings of record in Case No.PAC-E-ll-lO,
including Rocky Mountain’s 2011 Integrated Resource Plan,appendices and addendums,and
related comments.We find that the Company’s 2011 IRP is in the appropriate format and
contains the necessary information outlined by the Commission in Order No.22299.The
Commission reiterates that a standard IRP is a utility planning document that incorporates many
assumptions and projections at a specific point in time.It is the ongoing planning process that
we acknowledge,not the conclusions or results.
The Commission accepts Rocky Mountain’s IRP filing.However,the Commission
cautions the Company to avoid becoming too reliant upon gas-fired supply resources.
Historically,natural gas markets have been volatile.While it is true that new methods of
extracting natural gas have resulted in lower prices,there is no guarantee that current market
prices will persist into the future.These lower prices should be viewed as the result of increased
supply and the potential for the production of an even greater supply through the utilization of
controversial extractor techniques such as hydraulic fracturing or “fracking.”The use of
hydraulic fracturing has engendered environmental concerns regarding water quality.Not unlike
the Company’s evaluation regarding the effect that future climate change legislation may have
upon available resources,Rocky Mountain should seriously consider the potential for the
enactment of tighter rules and disclosure requirements for “fracking”from federal and state
environmental agencies.
Additionally,it is not clear to the Commission that the Company has adequately
examined the effect of the elasticity of demand upon gas prices.While the current economic
climate remains depressed it will undoubtedly improve over time.Marginal economic growth
will inevitably create additional demand and counteract the current downward pressure caused
by increased supply.Thus,a prudent course of action for the Company moving forward would
take these factors into account in the development of its preferred resource portfolio.
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The Commission believes that RNP’s comments regarding Rocky Mountain’s
investment in upgrades to its coal plants are well-placed.They are particularly relevant in a
regulatory environment that includes federal legislation restricting carbon emissions.
Nevertheless,that is not Rocky Mountain’s current regulatory environment.The Commission
finds that the Company’s 2011 IRP filing represents an effort by the Company to continue to
develop renewable resources retro-fit its current generation resources so they are able to
operate more efficiently and comply with existing air quality standards.
The Commission will continue to scrutinize Rocky Mountain’s capital expenditures
in the context of a general rate case.As noted by Monsanto in its comments,resource
acquisitions should be scrutinized on a case-by-case basis to determine whether they merit
recovery through rates,The Commission clearly demonstrated in the Company’s last general
rate case,PAC-E-10-07,our commitment to thoroughly review resources and infrastructure
investments.See Order No.32196 at 37-38.
Finally,the Commission acknowledges the concerns regarding PacifiCorp’s
contemporaneous IRP filings with the Utah and Oregon Commissions.Nevertheless,we do not
believe that a ruling on the instant filing with this Commission should be delayed or deferred
until Utah and Oregon Commissions have rendered their findings.However,the Commission
orders the Company to advise the Commission of any changes made to its system-wide IRP
methodology or IRP results emanating from the review conducted by another state utility
Commission.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Rocky
Mountain Power,an electric utility,pursuant to Title 61 of the Idaho Code and the Commission’s
Rules of Procedure,IDAPA 31.01.01.000 et seq.
ACCEPTANCE OF FILING
Based upon our review,we find it reasonable to accept for filing Rocky Mountain’s
2011 Electric IRP.Our acceptance of Rocky Mountain’s 2011 IRP should not be interpreted as
an endorsement of any particular element of the plan,nor does it constitute approval of any
resource acquisition contained in the plan.
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ORDER
IT IS HEREBY ORDERED that PacifiCorp’s 2011 Integrated Resource Plan is
accepted for filing.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September2011.
ATTEST:
,/•
________________________________
MACK A.REDFOID.COMMISSIONER
Ok
MARSHA H.SMITH,
‘JL
COMMISSIONER
JIah D.JewellJ
C’mmission Secretary
O:PAC-E-I 1-lOnp2
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