20120518Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: MAY 17, 2012

SUBJECT: APPLICATION OF ROCKY MOUNTAIN POWER FOR A DEFERRED
ACCOUNTING ORDER, CASE NO. PAC-E-12-08

On May 3, 2012, PacifiCorp dba Rocky Mountain Power filed an Application with
the Commission seeking a deferred accounting order authorizing the creation of a regulatory
asset associated with the remaining book value of its Carbon plant. The Company requests that
the Application be processed by Modified Procedure.
THE APPLICATION
Rocky Mountain Power requests a deferred accounting order authorizing the
Company to transfer the remaining plant balances from electric plant in service and accumulated
depreciation and establish a regulatory asset to recover these costs when the Carbon plant is
retired. The Company anticipates retiring the Carbon plant in early 2015 to comply with recently
finalized Environmental Protection Agency (EPA) standards. The Company would amortize the
regulatory asset through 2020 – the current assumed life of the plant.
Rocky Mountain Power anticipates that once the plant is retired, the Company will
book the net plant balance to be recovered to the regulatory asset account, along with any other
associated costs. Rocky Mountain Power maintains that the costs associated with alternatives to
comply with the EPA’s recently finalized Mercury and Air Toxics Standards (MATS) are not
expected to be cost-effective. The current emissions profiles of the Carbon units do not meet
MATS limits for all pollutants regulated under that rule. The Carbon units have not been, and
cannot economically be, retrofitted with scrubbers, baghouses, or other significant emissions
control equipment investments that would foster the Carbon plant’s ability to comply.
DECISION MEMORANDUM 2
In addition to the MATS rules, Rocky Mountain Power has considered other
regulations in its long-term planning decisions for the Carbon plant, including National Ambient
Air Quality Standards (NAAQS) and long-term Regional Haze Rule planning. The Company
anticipates that the Carbon plant will not be able to demonstrate attainment of the 1-hour
nitrogen oxides or 1-hour sulfur dioxide NAAQS, as would be expected to be required under any
major plant modification permitting process, primarily due to the unique geographic location of
the plant. The Carbon plant is located in the mouth of a canyon with no room to install
significant environmental retrofits.
The Company states that it previously assessed converting the Carbon plant to natural
gas as a fuel resource. However, a conversion would not achieve an acceptable emissions profile
for long-term environmental compliance. Rocky Mountain Power’s economic analysis also
showed that it was not a viable least cost option, after accounting for risk and uncertainty.
Rocky Mountain Power maintains that it continues to assess compliance solutions,
including assessing whether emerging technologies could save the Carbon plant from
decommissioning. The Company states that it will continue to assess the commercial viability
and cost of emerging technologies, as well as the ability of said technologies to support
compliance with other emissions regulations such as NAAQS and long-term Regional Haze Rule
planning to which Carbon would be subject. However, Rocky Mountain Power does not expect
to identify a least-cost option, accounting for risk and uncertainty, other than retiring the Carbon
plant.
The Company states that retiring Carbon may pose a complication with potential
transmission system impacts. Depending on the impacts, the Company may need to request an
extension of the initial April 2015 compliance deadline for the Carbon plant. If there is a need
for requesting an extended compliance schedule, Rocky Mountain Power will work within the
conditions included in the MATS regulations and seek administrative guidance to request an
appropriate compliance extension.
The Company reports that, as of December 31, 2011, the Carbon plant had a net book
value of approximately $55 million, with a depreciable life running through 2020. Rocky
Mountain Power reports its annual depreciation expense at approximately $3.7 million. The
Company requests that the Commission approve the transfer of the remaining plant balances for
the Carbon plant from FERC Account 101 (Electric Plant in Service) and FERC Account 108
DECISION MEMORANDUM 3
(Accumulated Depreciation) and record a regulatory asset for the net amount in FERC Account
182.3 (Other Regulatory Assets) on the date the plant is removed from service. The Company
also requests that the Commission approve the amortization of the newly created regulatory asset
beginning with the transfer date over the remaining depreciable life of the Carbon plant, or 2020.
Rocky Mountain Power states that Idaho’s share of the regulatory asset would be established
based on the system generation (SG) allocation factor for the calendar year prior to the date the
plant is removed from service.
Rocky Mountain Power maintains that the transfer of the net plant balance of the
Carbon plant to a regulatory asset with amortization of the regulatory asset over the remaining
depreciable life of the plant will result in the continuation of equivalent levels of rate base and
annual expense and have minimal impact on customer rates.
The Company currently estimates the cost of decommissioning the facility and
remediating the site to be approximately $57 million. The Company states that it will be refining
that estimate over the coming months as its compliance assessment continues. Rocky Mountain
Power maintains that it will file a recommendation for amortization and recovery of these costs
in a future general rate case or other proceeding.
STAFF RECOMMENDATION
Staff has reviewed the Application and recommends that the case proceed by
Modified Procedure.
COMMISSION DECISION
Does the Commission find that the public interest may not require a hearing to
consider the issues presented, and that this proceeding may be processed under Modified
Procedure?

M:PAC-E-12-08_ks