20121120Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
RECEIVED
012:$0V 20 AM 10: 20
IDAHO PUBLJ(
UTILITIES cCMMI•SiON
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorneys for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN ) CASE NO. PAC-E-12-8
POWER FOR A DEFERRED ACCOUNTING )
ORDER. ) COMMENTS OF THE
) COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, submits the following
comments inresponse to the Notice of Modified Procedure issued on September 21, 2012, Order
No. 32648.
BACKGROUND
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 deferred accounting order would authorize 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. It is anticipated that the Carbon plant would
be retired in early 2015 to comply with recently finalized Environmental Protection Agency (EPA)
standards. The Company reports that, as of December 31, 2011, the Carbon plant had a net book
STAFF COMMENTS 1 NOVEMBER 20, 2012
value of approximately $55 million, with a depreciable life running through 2020, and an annual
depreciation expense of 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 (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 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.
STAFF ANALYSIS
Staff has reviewed Rocky Mountain Power's filing and generally supports the Company's
proposed deferred accounting treatment. In forming its recommendation, Staff considered several
items including the need to retire the plant, reasonable alternatives to retirement, transmission
issues, and customer impact of the Company's proposal.
Rocky Mountain Power maintains that the current emissions profiles of the Carbon units do
not meet the EPA's recently finalized Mercury and Air Toxics Standards (MATS) limits for all
regulated pollutants. In addition, 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.
Generally, a power plant may be retrofitted with scrubbers, baghouses, or other significant
emissions control equipment investments that would foster the plant's ability to comply with
environmental regulations. The Carbon plant is unique in its mountainside location at the mouth of
the narrow Castle Gate Canyon in Utah, and has no room to install significant environmental
STAFF COMMENTS 2 NOVEMBER 20, 2012
retrofits. Staff believes that even if economically feasible abatement technologies emerge in the
near term, Rocky Mountain Power still may lack the physical ability to retrofit the Carbon plant.
An alternative to retirement of the coal-fired Carbon plant is to repower the plant using
natural gas, as the Company intends to do with its Naughton plant. Repowering the Carbon plant to
natural gas may provide benefits to both the Company and to its customers as the plant would still
remain in service, providing capacity and energy while potentially extending the plant life through
2030. However, there are concerns with repowering the plant. Though current natural gas prices
are at relatively historic lows, gas prices have been very volatile in the past, thus introducing risk in
fuel prices with conversion.
In addition there is a risk that even with the conversion to natural gas, the plant will still not
meet emissions standards and will still have to be shut down. The Company states that it previously
assessed converting the Carbon plant to natural gas as a fuel resource in 2010, and found it to be
economically beneficial. However, at the time of the analysis, Rocky Mountain Power did not
consider current environmental constraints, and has since concluded that a conversion would not
achieve an acceptable emissions profile for long-term environmental compliance. The Company
has not provided supporting analyses conducted to reach this conclusion, though it plans to continue
to assess viable compliance solutions. Staff believes that the Company should demonstrate that
natural gas conversion is not a feasible solution for the Carbon plant no later than its next general
rate case.
Rocky Mountain Power maintains that it will continue to assess compliance solutions
including assessing whether emerging technologies could save the Carbon plant from
decommissioning. Staff believes it is unlikely that a technical solution can be found in the near
future, but supports the Company's willingness to identify a least-cost option, accounting for risk
and uncertainty, for extending the life of the Carbon plant. Staff expects the Company to explore
these options and keep the Commission informed of any potential solutions it comes across as
result of its continued assessment.
The Company also states that retiring Carbon may pose a complication with potential
transmission reliability impacts. Rocky Mountain Power is in the process of studying to what
extent these impacts may occur and has agreed to provide its assessment to Staff when completed.
Should there be any detrimental impacts to the system reliability; EPA has provisions in its MATS
ruling to extend operations of the plant beyond the initial April 2015 compliance deadline. Staff
expects the Company to fully explore opportunities to extend the deadlines and to provide Staff
STAFF COMMENTS 3 NOVEMBER 20, 2012
with reports regarding the outcome of these efforts. Given the limited flexibility in the MATS
ruling, Staff views the assumed shutdown date of April 2015 as the earliest the Carbon plant would
be retired. Staff recommends that any retirement prior to 2015 require a filing with the Commission
by Rocky Mountain Power to demonstrate the prudency of such a decision.
Staff has audited the remaining plant balances proposed to be transferred to the regulatory
asset account, including the capital additions made in 2008 and 2009 previously reviewed by Staff.
The audit found that those additions are reasonable to keep the plant functioning at an acceptable
level until its planned retirement in 2020 and should be included in the amount to be transferred.
The Application requests that the transferred amount be amortized over the remaining depreciable
life of the Carbon plant as if it had remained in service. Staff believes this is reasonable and would
have minimal impact on customers.
The Company currently estimates the cost of decommissioning the facility and remediating
the site to be approximately $57 million, though it will continue refining that estimate over the
coming months as its compliance assessment continues. Rocky Mountain Power has not included
decommissioning costs or any other additional costs related to the Carbon plant in this filing.
Staff s endorsement of the proposed accounting treatment does not imply prudency of any costs
associated with the Carbon plant beyond what is currently included in rate base. If additional costs
are incurred, Staff expects the Company to justify the expenditures in the context of a general rate
case.
STAFF RECOMMENDATION
Staff recommends that the Commission approve Rocky Mountain Power's Application for
deferred accounting treatment of the remaining net plant balance of the Carbon plant at the time of
the plant's retirement. Doing so would transfer remaining plant balances from electric plant in
service and accumulated depreciation to establish a regulatory asset for recovery over the current
life of the plant. Staff will review any additional costs incurred associated with the shutdown of the
Carbon plant when the Company seeks recovery.
STAFF COMMENTS 4 NOVEMBER 20, 2012
Respectfully submitted this day of November 2012.
"A - me A. Sasser
Deputy Attorney General
Technical Staff: Bryan Lanspery
Joe Terry
i:umisc:comments/pacel I .8ksbljt comments
STAFF COMMENTS 5 NOVEMBER 20, 2012
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 20TH DAY OF NOVEMBER 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. PAC-E-12-08, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
TED WESTON
ID REGULATORY AFFAIRS MANAGER
ROCKY MOUNTAIN POWER
201 5 MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datareguestpacificorp.com
YVONNE HOGLE
SENIOR COUNSEL
ROCKY MOUNTAIN POWER
201 5 MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: Yvonne.hog1e(pacificor2.com
SECRETARY
CERTIFICATE OF SERVICE