20170705Application.pdf

ROCKY MOUNTAIN
POWER
A DIVISION OF PACIFICORP
1407 W.North Temple,Suite 310
Salt Lake City,Utah 84116
June 30,2017
VIA OVERNIGHT DELIVERY
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 W.Washington
Boise,ID 83702
Attention:Diane Hanian
Commission Secretary
RE:CASE NO.PAC-E-17-07
IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER
FOR A CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY AND
O BINDING RATEMAKING TREATMENT FOR NEW WIND AND
TRANSMISSION FACILITIES.
Please find enclosed for filing an original and nine (9)copies of Rocky Mountain Power's
application,direct testimony,and exhibits in the above-referenced matter.Also enclosed is are
confidentialand non-confidentialCDs containing the application,testimony,exhibits.Workpapers
are being provided electronically.
Rocky Mountain Power is currently preparing pro hac vice motions on behalf of its counsel at
McDowell Rackner Gibson PC.
Informal inquiries may be directed to Ted Weston,Idaho Regulatory Manager at [phone].
V
Jeffrey K.Larsen
Vice President,Regulation
O
R.Jeff Richards (#7294)
Yvonne R.Hogle (#8930)
1407 West North Temple,Suite 320
Salt Lake City,Utah 84116
Telephone:[phone]
Facsimile:[phone]
Email:[e-mail]
[e-mail]
Katherine McDowell (OR #890876)
Adam Lowney (OR #053124)
McDowell Rackner Gibson PC
419 SW l16 Avenue,Suite 400
Portland,Oregon 97205
Telephone:[phone]
Facsimile:[phone]
Email:[e-mail]
[e-mail]
Attorneys for Rocky Mountain Power
BEFORE THE PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ROCKY )CASE NO.PAC-E-17-07
MOUNTAIN POWER FOR )
CERTIFICATES OF PUBLIC )APPLICATION
CONVENIENCE AND NECESSITY )
AND BINDING RATEMAKING )
TREATMENT FOR WIND AND )
TRANSMISSION FACILITIES )
COMES NOW,Rocky Mountain Power,a division of PacifiCorp ("Rocky Mountain
Power"or "Company"),in accordance with Idaho Code §§61-526 and 61-541,and Rule 112 of
the Idaho Public Utilities Commission ("Commission")Rules of Procedure ("RP"),and hereby
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respectfully applies to the Commission for an order granting certificates of public convenience and
necessity ("CPCNs")to construct or approval to acquire four new Wyoming wind resources with
a total capacity of 860 megawatts ("MW")(collectively,the "Wind Projects").
The Company also requests CPCNs for the following transmission facilities,significant
portions of which are associated with the Company's Energy Gateway West transmission project:
(1)the 140-mile,Aeolus-to-Anticline 500 kV line,which includes construction of the new Aeolus
and Anticline substations;(2)the five-mile Anticline-to-Jim Bridger 345 kV line,which includes
modifications at the existing Jim Bridger substation to allow termination of the new 345kV line;(3)
installation of a voltage control device at the Latham substation;(4)a new 16-mile 230kV
transmission line parallel to an existing 230kV line from Shirley Basin substation to the proposed
Aeolus substation,including modifications to the existing Shirley Basin substation;(5)the
reconstruction of four miles of an existing 230 kV transmission line between the proposed Aeolus
substation and the Freezeout substation,including modifications as required at the Freezeout
substation;and (6)the reconstruction of 14 miles of an existing 230 kV transmission line between
the Freezeout substation and the Standpipe substation including modifications as required at the
Freezeout and Standpipe substations (collectively,"Transmission Projects").Items 1-3 above are
collectively referred to as the "Aeolus-to-Bridger/Anticline Line,"and items 4-6 above are
collective referred to as the "230 kV Network Upgrades."The Transmission Projects and the Wind
Projects are collectively referred to as the "Combined Projects."
The Combined Projects present a time-limited opportunity to obtain cost-effective
generation and construct the necessary transmission facilities with minimal impact on customer
rates.The Transmission Projects are necessary to relieve existing congestion and will enable
interconnection of the proposed Wind Projects into the Company's transmission system.The Wind
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Projects produce zero-fuel-cost energy and federal production tax credits ("PTC"),which provide
significant economic benefits for the Company's customers when combined with the Transmission
Projects.
The Company also requests approval of its proposal for binding ratemaking treatment for
the investment in the Combined Projects,in accordance with Idaho Code §61-541.The ratemaking
proposal,known as the Resource Tracking Mechanism ("RTM"),is designed to capture customer
benefits resulting from the Combined Projects and match those benefits with the costs of the
Combined Projects.The RTM would operate until the costs and benefits of the Combined Projects
are fully included in base rates.The RTM would be included as a component of the Energy Cost
Adjustment Mechanism ("ECAM").The Company recommends that the full costs and benefits of
the new wind and transmission facilities flow through its ECAM until the costs ofthe new facilities
are reflected in the Company's base rates.
The Combined Projects are time-sensitive because they must be in commercial operation
by the end of 2020 to fully achieve the PTC benefits.To complete construction of all facilities by
December 31,2020,the Company requests that the Commission issue the requested CPCNs by
March 30,2018.
In support of this Application,Rocky Mountain Power states as follows:
I.NAME AND ADDRESS OF APPLICANT
l.PacifiCorp provides retail electric service under the name Rocky Mountain Power
in the states of Wyoming,Utah,and Idaho,and under the name Pacific Power in the states of
Oregon,Washington,and California.Rocky MountainPower is a public utility in the state of Idaho
subject to the Commission's jurisdiction with respect to its prices and terms of electric service to
retail customers in Idaho pursuant to Idaho Code §61-129.Rocky Mountain Power is authorized
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to do business in the state of Idaho providing retail electric service to approximately 75,400
customers in the state.
2.Formal correspondence and requests for additional information regarding this
matter should be addressedto:
By e-mail (preferred):[e-mail]
By regular mail:
Data Request Response Center
PacifiCorp
825 NE Multnomah,Suite 2000
Portland,Oregon 97232
With copies to:
Ted Weston
Idaho Regulatory Affairs Manager
Rocky Mountain Power
1407 West North Temple,Suite 330
Salt Lake City,Utah 84116
E-mail:[e-mail]
Yvonne Hogle
Assistant General Counsel
Rocky Mountain Power
1407 W.North Temple,Suite 320
Salt Lake City,Utah 84116
E-mail:[e-mail]
3.Informal inquiries related to this Application should be directed to Ted Weston,
Idaho Regulatory Affairs Manager,at [phone].
II.SUPPORTING TESTIMONY
4.This Application is supported by the pre-filed written direct testimony and exhibits
of the followingCompany witnesses:
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Cindy A.Crane,President and Chief Executive Officer of Rocky Mountain Power,
provides an overview of the Company's Application,outlines the policy
considerations supporting the Company's decision to invest in the Combined
Projects,explains why these additions are prudent and in the public interest,and
describes the financial ability of the Company to invest in the Combined Projects.
Chad A.Teply,Vice President of Strategy and Development,provides a detailed
description of the Company's proposed development and acquisition of the Wind
Projects.Mr.Teply describes the Wind Projects,addresses the impact and timing of
PTCs,and provides information to respond to the requirements of RP 112 for the
Wind Projects.
Rick A.Vail,Vice President of Transmission,outlines the need for the
Transmission Projects,and provides a detailed description of the transmissionOfacilities.Mr.Vail addresses the requirements of RP 112 for the Transmission
Projects.
Rick T.Link,Vice President of Resource and Commercial Strategy,testifies
regarding the economic analysis that supports the prudence of the Combined
Projects,and describes the customer benefits resulting from the timely acquisition
and construction of the Combined Projects.Mr.Link explains the planning and
analysis ofthe Combined Projects in the Company's 2017 Integrated Resource Plan
("IRP").He also provides background on the pending 2017R request for proposals
("2017R RFP")for the wind resources.
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JeffreyK.Larsen,Vice President of Regulation,explains the Company's proposal
for binding ratemaking treatment of the costs and benefits of the Combined
Projects,and the inter-jurisdictional allocationof costs.
III.OVERVIEW OF THE COMBINED PROJECTS
5.The Company requests CPCNs for the construction of the Wind Projects,which
have a nominal aggregate capacity of 860 MW,along with the construction of the Transmission
Projects.The Combined Projects are time-limited opportunities and inextricably linked-the
Transmission Projects relieve congestion in eastern Wyoming,and the Wind Projects will rely on
the new Transmission Projects for interconnection and allow the Company to realize the benefits
of zero-fuel-cost energy and the associated PTCs.
6.The economics of the Combined Projects rely on PTCs,and the Company must
complete all construction by the end of 2020 to fully qualify for the PTC benefit.To achieveOoperationby2020,the Company needs CPCNs from the Commission by March 30,2018,as set
forth in the proposed procedural schedule included in the Application.
7.To support the critical-path schedule of the Transmission Projects,the CPCN
process must run concurrently with the Company's 2017R RFP process for wind facilities.The
Company anticipates issuing its 2017R RFP to the market in August 2017,and expects to identify
the winning bids in January 2018.The Wind Projects will be submitted into the 2017R RFP as
Company benchmark resources.The Company requests CPCNs for the Wind Projects so the
Company can move forward expeditiouslyto capture the time-limited opportunity discussed above
if the projects are selected in the 2017R RFP.Once the Company identifies the winning bids from
the 2017R RFP,it will provide that information as soon as practicable to the Commission.If
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facilities other than,or in addition to,the Company's benchmarks provide incremental value and
are ultimately selected,the Company will update its filing accordingly.
A.Proposed Facilities
1.Wind Projects
8.The Company's 2017R RFP will seek the acquisition of up to approximately 1,270
MW of new wind resources capable of interconnecting to,or delivering energy and capacity across,
the Company's transmission system in Wyoming.In this Application,the Company requests
CPCNs for the four Wind Projects,which are comprised of three nominal 250 MW facilities
(referred to as Ekola Flats,TB Flats I,and TB Flats II)and a fourth nominal 110 MW facility
(McFadden Ridge II),all located in Wyoming.For each of these facilities,the Company currently
either has control over the site,or has secured access to the development and implementation
rights.
9.The Wind Projects will be submitted into the 2017R RFP as Company benchmark
resources.The Company recognizes,however,that these resources may not ultimately be selected.
If these resources are not selected in the 2017R RFP,they will be replaced by an economically
superior resource.
10.The Company's assessment of Combined Projects benefits has also incorporated
known qualifying facilities ("QFs")that hold preferential interconnection queue positions and
executed contracts,and are reasonably expected to be in service by year-end 2021.
11.The substantial customer benefits resulting from the acquisition of the Wind
Projects assumes those facilities qualify for 100 percent of federal PTCs.Each of the Wind Projects
can demonstrate eligibility for 100 percent of the PTC benefits if the Wind Projects (and the
Transmission Projects discussed below)are commercially operational by December 31,2020.To
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facilitate construction of the facilities,the Company must obtain CPCNs no later than March 30,
2018,so that equipment and engineering,procurement,and construction ("EPC")contracts can be
executed shortly thereafter.
12.The estimated cost for the Wind Projects is outlined in Mr.Teply's testimony.
2.Transmission Projects
13.The Transmission Projects include the six major elements outlined in the first
section of the Application,which comprise the Aeolus-to-Bridger/Anticline Line and the 230 kV
Network Upgrades.The Transmission Projects will allow the Company to implement system
improvements,relieve existing congestion,and interconnect incremental Wyoming wind
resources,including the Wind Projects,to support customer needs and deliver benefits to
customers in the most cost-effective way.
14.First,the Transmission Projects will increase transfer capability out of easternOWyoming.Currently,the Company's transmission system in eastern Wyoming is operating at
capacity,which limits transfer of existing resources from eastern Wyoming and precludes the
ability to interconnect additional resources east of where the new Anticline substation will be
located.The Transmission Projects will increase the transfer capability from east to west by 750
MW.When the Transmission Projects are complete,they will allow up to l,270 MW of
incremental wind resources to be interconnected into the system east of the proposed location for
the new Anticline substation-includingthe 860 MW Wind Projects.
15.Second,the Transmission Projects will provide critical voltage support to the
transmission system in southeastern Wyoming.Under certain operating conditions,voltage control
issues have limited the ability to add additional resources,particularly wind resources.Addition
of the Transmission Projects will solve the voltage control issues.
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l6.Third,the Transmission Projects will increasereliability,relieve congestion,reduce
capacity and energy losses on the transmission system,and provide greater flexibilitymanaging
existing generation resources.Currently,outages on the existing 230 kV system in eastern
Wyoming result in deration of the transfer capacity out of eastern Wyoming and some outage
scenarios require significant generation curtailment.The new Aeolus-to-Anticline Line will
significantly reduce,if not eliminate,many of the impacts caused by the 230 kV outages.Reduced
capacity and energy losses on the transmission system have the potential to provide significant
cost savings over time.
17.The estimated cost for the Transmission Projects is outlined in Mr.Vail's
testimony.
18.As of the filing of this Application,the Company has obtained a federal right-of-
way permit from the Bureau of Land Management ("BLM")for the portion of the Aeolus-to-O Anticline line that crosses BLM lands,which covers approximately half of the 140 miles.Once
CPCNs have been issued by this Commission and the Wyoming Public Service Commission,the
Company will obtain the additional rights-of-way and state and local permits necessary to
construct the Transmission Projects.
B.The Combined Projects Provide Substantial Customer Benefits and Advance
the Public Interest
19.The Company's 2017 IRP,which was filed with the Commission on April 4,2017,
identified the Combined Projects as least-cost,least-risk resources.The Company's 2017 IRP is
designed to ensure,on a long-term basis,an adequateand reliable electricity supply at a reasonable
cost and in a manner that is consistent with the long-term public interest.To that end,the IRP's
primary objective is to identify the best mix of resources to serve customers over the short-and
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long-term,based on the analysis of the costs and risk associated with various resource portfolios.
The IRP identifies the preferred portfolio as the least-cost,least-risk portfolio that can be delivered
through specific action items at a reasonable cost and with manageable risks,while ensuring
compliance with state and federal regulatory obligations.The preferred portfolio in the 2017 IRP
included the acquisition of additional Wyoming wind resources,like the Wind Projects,and the
Transmission Projects.
20.Assuming the Combined Projects are operational by the end of 2020,and thus
eligible for 100 percent of the PTC benefits,the Company's economic analysis in support of this
Application demonstrates that the Combined Projects will provide substantial customer benefits.
The Company's economic analysis includes multiple electricity and natural gas price and carbon-
risk scenarios,measured over several different time periods.In virtuallyall cases,the Combined
Projects result in significant net customer benefits.For example,with medium natural gas andOmediumCO2priceassumptionsoverthelifeofthefacilities,the present-value reduction in the
change to the revenue requirement due to the Combined Projects is $137 million.Because the
Company did not quantify the added benefits associated with RECs,the economic analysis is
conservative.
21.In the first full year of operation of the Combined Projects,2021,the rate impact to
customers is less than 1.9 percent.While this percentage change reflects the year-one impact to
customers,it does not fully reflect the value of the Combined Projects due to costs avoided over
time.
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C.To Meet the 2020 PTC Deadline,the Company is ConcurrentlyConducting its
2017R RFP Process
22.The Combined Projects are mutually dependent.The Wind Projects are not
economic without the Transmission Projects,which are needed to relieve existing congestion and
to interconnect new PTC-eligible wind resources in high-wind areas of Wyoming.The
Transmission Projects are not economic if there are no incremental cost-effective wind resources
generating zero-fuel-cost energy and the associated PTCs.This interdependence requires that the
Combined Projects be developed together.The lead time to construct the Transmission Projects is
longer than the lead time to construct the Wind Projects,but the Company recognizes the need for
review and approval of its competitive market procurement of the Wind Projects and their impact
on overall Project economics before it commits to move forward with construction of the
Transmission Projects.This dictates the need for the CPCNs by March 30,2018.O 23.The Company has already initiated the processto obtain approval of its 20l7R RFP
from the states of Utah and Oregon.Following the necessary regulatory approvals,the Company
anticipates issuing the 2017R RFP to the market in August 2017.Responses to the 2017R RFP will
be due by October 2017,and in November and December,the Company will complete the initial
shortlist bid evaluation.The Company plans to complete its fmal shortlist bid evaluation in early
January 2018,and execute contracts in April 2018.
24.To facilitate review of this Application before the conclusion of the 20l7R RFP
process and the selection of winning bids,the Company has included the Wind Projects,which
will be submitted into the 2017R RFP as benchmark resources.Upon completion of the 2017R
RFP shortlist determination,the Company will provide the Commission with updated information,
as soon as practicable,related to the Wind Projects and the outcome of the solicitation process.
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D.Proposed Binding Ratemaking Treatment
25.The Company proposes the RTM to capture customer benefits resulting from the
Combined Projects and match those benefits with the costs of the Combined Projects.The RTM
would operate until the costs and benefits of the Combined Projects are fully included in base rates.
The RTM would be included as a component of the ECAM.Once the full costs and benefits are
included in base rates,only the incremental fluctuations associated with production levels of
energy and PTCs would continue to be tracked in the ECAM,as they are today,since these are
entirely dependent on the variable output of the Wind Projects.The Company would begin
deferring the costs and benefits associated with each Project in the month it goes into service.
26.The Company's recommendation to recover the costs of the Combined Projects
through the ECAM until the costs are reflected in base rates is consistent with the ratemaking
i
treatment of the Company's Lake Side II gas-fired generation plant,which was approved by theOCommissioninOrderNo.32910.In the Matter of the Application of PacifiCorp dba Rocky
Mountain Power to lnitiate Discussions with interested Parties on Alternative Rate Plan
Proposals,Case No.Pac-E-13-04,Order No.32910 (Oct.24,2013).The proposed resource adder
is also similar to the renewable resource adder approved by the Commission in Order No.31033.
In the Matter of the Application of PacifiCorp dba Rocky Mountain Power for Authority to
Implement Power Cost Adjustment Ratesfor Electric Service from April 1,2010 Through March
31,2011 Through the Energy Cost Adjustment Mechanisms,Case No.PAC-E-10-01,Order No.
31033 (Mar.31,2010).In that case,the resource adder "recognize[d]that the Company has made
significant investments in renewable generation projects that are not yet being recovered in Idaho
rates,even though these projects provide significant benefits to customers."Id.at 2.The resource
adder allowed the ECAM to include a cost for renewable resources that had come on-line since
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base power costs were set in the Company's last rate case.Id.at 6.By including the costs of new
renewable resources in rates,the resource adder appropriatelymatched the costs with the benefits.
27.Mr.Larsen's testimony provides greater detail regarding the proposed ratemaking
treatment.
IV.LEGAL STANDARD
A.Certificates of Public Convenienceand Necessity
28.Before constructing a line,plant,or system,Idaho Code §61-526 requires that a
public utility obtain a "certificate that the present or future public convenience and necessity
require or will require such construction[.]"When considering an application for a CPCN,the
"public interest is the paramount consideration of the commission[.]"In the Matter of1daho Power
Co.&Application for a Certificate of Public Convenience and Necessity for the Investment in
Selective Catalytic Reduction Controls on Jim Bridger Units 3 and 4,Case No.I PC-E-13-16,OrderONo.32929 at 10 (Dec.2,2013)(quoting Application ofKootenai Natural Gas Co.,78 Idaho 621,
627,308 P.2d 593,596 (1957)).To determine the public interest,the "primary focus"of CPCN
proceeding is the examination of two questions:"Does the present or future public convenience
and necessity require additional resources,and is the [proposed resource]a reasonable means of
meeting this need?"In the Matter of Idaho Power Co.9 Application For a Certificate of Public
Convenience andNecessity For the Evander Andrews Power Plant,Case No.I PC-E-06-09,Order
No.30201 at 4 (Dec.15,2006).
29.To answer the first question,the Commission relies on the utility's IRP to
demonstrate that additionalresources are necessaryto serve present or future customer needs.See
Order No.30201 at 4;Order No.29410 at 7.Importantly,the Commission has not limited its
consideration to only acknowledged IRPs.In 2006,Idaho Power requested a CPCN for the
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Evander Andrews gas plant,and demonstrated the need for the plant using its 2004 IRP.Order No.
30201 at 5.While the CPCN application was pending,Idaho Power filed its 2006 IRP.In the
Matter of Idaho Power Co.'s 2006 Integrated Resource Plan,Case No.IPC-E-06-24,Order No.
30281 (Mar.26,2007)(2006 IRP filed on September 24,2016).Staff and intervenors argued that
Idaho Power must demonstrate need using the pending IRP because it represented the most up-to-
date information.Order No.30201 at 5-7.The Commission ultimately relied on the 2006 IRP even
though it was filed more than five months after the application for a CPCN and was not
acknowledged until after the CPCN was granted.Order No.30201 at 8.
30.To answer the second question,the Commission relies on the utility's RFP process.
Order No.30201 at 4;Order No.29410 at 10 (the proposed resource "is a reasonable response to
meet the near-term needs of the Company and its customers"and is the "most cost-effective
proposal in the RFP process and was the winning bid").O 31.Here,the Company's 2017 IRP preferred portfolio includes the proposed Wind
Projects (and others)and Transmission Projects as least-cost,least-risk resources to serve long-
term customer needs and provide substantial customer benefits.The time-sensitive opportunity
presented by the renewal of the PTCs allows the Company to provide cost-effective,emission-free
generation to serve Idaho customers,while providing the cost savings necessary to construct the
required Transmission Projects and provide economic benefits for customers.
32.In addition,the Company will rely on its 20l7R RFP process to select the resources
that will be used to implement the action plan from the 2017 IRP.Included in this Application are
the benchmark resources that will be submitted into the 20l7R RFP.If,however,the RFP results
differ from the Wind Projects included here,the selected resources will be economically superior
to the Wind Projects.In either case,the Wind Projects represent the most cost-effective resources,
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based on what is known today.The Company will supplement this filing followingthe conclusion
of the 2017R RFP process so that before the Commission issues the CPCNs,it will know the
specific resources that will be constructed or acquired are reasonable to implement the 2017 IRP
action plan.
33.Regarding CPCNs for transmission lines,the Commission has also considered the
relationship of the transmission line to "current or planned renewable wind projects"located far
from load.In the Matter ofthe Application ofRocky Mountain Power For a Certificate of Public
Convenience and Necessity Authorizing Construction of the Populus-to-Terminal 345 kV
Transmission Line Project,Case No.PAC-E-08-03,Order No.30657 at 5 (Oct.10,2008).When
granting a CPCN to the Company for the Populus-to-Terminal transmission line,the Commission
acknowledged that the Company's "2007 IRP filing signaled the Company's intent to acquire
additional transmission capacity in order to transfer energy from current or planned renewableOwindprojectslocatedinremoteareasofWyomingandIdahotoloadcentersthroughout
PacifiCorp's service territory."Order No.30657 at 5 ("It is a reality that a majority of viable wind
projects are located some distance from the metropolitan areas that often represent an electric
utility's primary load centers.").The Commission therefore analyzed the proposed transmission
line as an "'integral part'of the Company s preferred resource portfolio"that included the addition
of significant new renewable resources.Order No.30657 at 5.The Commission also
acknowledged that the new transmission line has the "potential to upgrade the Company's overall
transmission capacity and thereby improve the flexibility and reliability of electrical service for
Idaho customers during peak demand times."Order No.30657 at 5-6.
34.Here,the proposed Transmission Projects are also an "integral part"of the
Company's plans to acquire additional renewable resources,primarily in eastern Wyoming.This
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Application and the accompanying testimony of Ms.Crane and Messrs.Teply,Vail,Link,and
Larsen,demonstrate that the Combined Projects are the least-cost,least-risk resource option for
the Company and will provide substantial customer benefits.Indeed,as discussed above,the
Combined Projects will save customers money over the long-term.
35.The Commission has also previously provided expedited review to meet
construction deadlines and preserve favorable pricing.In the Matter ofthe Application of Idaho
Power Co.For a Certificate of Public Convenience and Necessity For the Ratebasing of the
Bennett Mountain Power Plant,Case No.IPC-E-03-12,Order No.29410 (Jan.2,2004)(granting
CPCN in just over three months because delay "may jeopardize the bid price").Here,the Company
will likewise require expedited review once the 2017R RFP is finalized to allow the construction
of the transmission line to commence so that the Combined Projects will be commercially
operational by the end of 2020 to maximize the PTCs for customer benefit.O 36.Finally,the Commission has also granted CPCNs even when one is not strictly
required by the statute.Order No.30657 at 5 (granting CPCN for Populus-to-Terminal
transmission line even though the Company was "not required to apply for a CPCN ...").Here,it
is unclear whether a CPCN is strictly required for wind and transmission facilities located outside
of Idaho.The Company has made this request,however,due to the scope of the Combined Projects
and to allow the Commission and Idaho parties to have a meaningful opportunity to review the
Combined Projects.
B.Binding Ratemaking Treatment
37.Idaho Code §§61-541(2)provides that a public utility that proposes to construct or
purchase an electric generation facility or transmission facility "may file an applicationwith the
commission for an order specifying in advance the ratemaking treatments that shall apply when
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the costs of the proposed facility are included in the public utility's revenue requirements for
ratemaking purposes."The "requested ratemaking treatments may include nontraditional
ratemaking treatments or nontraditional cost recovery mechanisms."Idaho Code §§61-541(2).
When reviewing an applicationfor binding ratemaking treatment,the Commission "shall maintain
a fair,just and reasonable balance of interests between the requesting utility and the utility's
ratepayers."Idaho Code §§61-541(4).The Commission must also determine whether:
(1)The utility has in effect a Commission-accepted IRP;
(2)The services and operations resulting from the facility are in the
public interest and will not be detrimental to the provision of
adequate and reliable electric service;
(3)The public utility has demonstrated that it has considered other
sources for long-term electric supply or transmission;O (4)The addition of the facility is reasonable when compared to
energy efficiency,demand-side management and other feasible
alternative sources of supply or transmission;and
(5)The public utility participates in a regional transmission
planningprocess.
38.The Company's request for binding ratemaking treatment fairly and reasonably
balances the interests of customers and satisfies each of these five requirements.First,the
Company has a Commission-accepted IRP and its 2017 IRP is currently pending.The Company
anticipates that the Commission will accept and acknowledge the 2017 IRP prior to ruling on the
request for binding ratemaking treatment.Mr.Link's testimony describes the 2017 IRP and the
analysis that supports the inclusion of the Combined Projects in the preferred portfolio.
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39.Second,the Combined Projects will serve the public interest and provide substantial
benefits for Idaho customers.The substantial customer benef'its are described in Mr.Link's
testimony.
40.Third,the Company's 2017 IRP demonstrates that the proposed Wind Projects and
Transmission Projects are the least-cost,least-risk resources when compared to other resources for
long-term electric supply or transmission.The 2017 IRP compared the preferred portfolio,which
included the Combined Projects,to numerous other resource options.As explained in Mr.Link's
testimony,the Combined Projects were consistently least-cost and least-risk compared to potential
alternative resource decisions.
41.Fourth,the acquisition of the Combined Projects remain reasonable when
compared to energy efficiency,demand-side management and other feasible alternatives.The 20l7
IRP anticipates energy efEciency will offset 88 percent of forecasted energy demand growth over
the next 10 years and continue to limit the need for new power plants.But even with substantial
investments in energy efnciency and other demand-side resources,the Combined Projects remain
a reasonable investment.
42.Fifth,the Company participates in regional transmission planning processes,as
described in Mr.Vail's testimony.Moreover,the proposed 500 kV transmission facility is an
integral component of the long-term regional transmission plan.
43.The Company's proposed ratemaking treatment ensures that rates reflect both the
costs and the benefits ofthe new Wind and Transmission Projects and is consistent with established
Commission precedent.See Order No.32910;Order No.31033.
44.The Company's request for binding ratemaking treatment is also consistent with
Commission precedent.The binding ratemaking statute is relatively new,the Commission has
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provided binding ratemaking treatment only one time-when Idaho Power requested and received
binding ratemaking treatment related to its $427 million investment in the Langley Gulch gas-fired
generating plant.In the Matter of Idaho Power Co.&Application for a Certificate of Public
Convenience andNecessityfor the LangleyGulch Power Plant,Case No.IPC-E-09-03,Order No.
30892 (Sept.1,2009).
45.In a subsequent case,Idaho Power requested a CPCN and binding ratemaking
treatment for the investment in selective catalytic reduction systems ("SCR")at the Jim Bridger
plant.In the Matter ofIdahoPower Co.1Application for a Certificate ofPublic Convenience and
Necessityfor the Investment in Selective Catalytic Reduction Controls on Jim Bridger Units 3 and
4,Case No.IPC-E-13-16,Order No.32929 (Dec.2,2013).In that case,the Commission granted
the CPCN,but denied binding ratemaking treatment.In doing so,the Commission explained that
it provided binding ratemaking treatment for the Langley Gulch because the "economy andOfinancialmarketswereriskaversetolargeinvestmentswhenIdahoPowerwasattemptingtoraise
capital to build Langley Gulch,"the Langley Gulch investment was "exponentially larger than
what is required for the Bridger upgrades,"and the "balance of interests weighed in favor of partial
pre-approval because,in addition to the assurances that pre-approval provided for the Company,
favorable financing terms ultimately inured to the benefit of the ratepayers."Id.at 12.
46.Here,the Company's proposed investment is "exponentially larger"than the
LangleyGulch investment that received binding ratemaking treatment,which was,in turn,roughly
three times greater than Jim Bridger SCRs.The cost of the Company's Combined Projects-
approximately $2 billion-is more than four times greater than the Langley Gulch investment.
The magnitude of this investment supports the need for binding ratemaking treatment.
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47.In addition,approval of binding ratemaking treatment provides important
regulatory support for the Company's current credit rating while it makes the significant capital
investments set forth in the IRP.Ratings agencies consider the Company's regulatory treatment
when establishing its credit rating,and particularly focus on the treatment of capital investments.
Supportive treatment through preapproval of an investment of this magnitude provides assurance
to ratings agencies and helps maintain the Company's credit rating.A solid credit rating directly
benefits customers by ensuring access to capital markets,reducing immediate and future
borrowing costs related to the financingneededto support regulatory operations,and strong ratings
will often allow the Company to avoid having to meet costly collateral requirements that are
typically imposed on lower-rated companies when securing power in the market.If the Company
does not have consistent access to the capital markets at reasonable costs,its debt issuances and
the resulting costs of constructing the new facilities become more expensive than they otherwiseOwouldbe.
48.In this case,approval of binding ratemaking treatment is warranted because of the
magnitude of the proposed investment and the significant customer benefits resulting from the
Combined Projects.Providing binding ratemaking treatment here "comports with the purpose of
Idaho Code §61-541 to facilitate the acquisition and construction of major generation or
transmission facilities while balancing the interests of the utility and ratepayers."In the Matter of
the Application ofIdaho Power Co.for Authority to Increase Rates and its Rate Base to Recover
its Investment in the Langley Gulch Power Plant,Case No.IPC-E-l2-l4,Order No.32585 at 16
(June 29,2012).
49.When balancing customer and utility interests in the Jim Bridger SCR case,the
Commission also found that granting a CPCN,while denying binding ratemaking treatment,
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"maintains a fair,just and reasonable balance of interests between the Company and the
Company's ratepayers."Order No.32929 at 12.A CPCN provides assurances that "in the ordinary
course of events,prudently incurred costs of construction ...will later be recognized in the
Company's revenue requirement."In the Matter of the Application of Idaho Power Co.for a
Certificate of Public Convenience and Necessity for the Ratebasing of the Mountain Home
Generating Station,Case No.IPC-E-01-12,Order No.28773 at 13 (July 10,2001)(internal
quotations omitted).If the Commission denies the Company's request for binding ratemaking
treatment,the Company requests that the Commission grant the CPCNs and provide the same
assurances regarding rate recovery that have typicallyattached to a CPCN.
V.REQUIREMENTSOF RP 112
A.Statement and Explanation.A statement or prepared testimony and exhibits
explaining why the proposed construction or expansion is or will be in the
public convenience and necessity.
50.This Application,along with the attached testimony,explain why the Combined
Projects will be in the public convenience and necessity.
B.Description of Construction or Expansion.A full description of the proposed
construction or expansion,includingthe manner of construction or expansion,
and if an expansion,the names of all public utilities,corporations,or persons
with whom the expanded utility is likely to compete.
51.The Wind Projects consist of four wind facilities located in eastern Wyoming:
Ekola Flats--a nominal 250 MW facility that will interconnect to the
Company's system at the new Aeolus Substation.
TB Flats I--a nominal 250 MW facility that will interconnect to the
Company's system at the existing Shirley Basin-Freezeout Line.
TB Flats II--a nominal 250 MW facility that will interconnect to the
Company's system at the existing Shirley Basin Substation.
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McFadden Ridge II--a nominal 110 MW facility that will interconnect to
the Company's system at the existing Foote Creek Substation.
Additional details related to the Wind Projects is provided in the testimony of Mr.Teply.The
Company will supplement this Application after the RFP process has concluded in January 2018.
52.The Transmission Projects consist of six major elements:(1)the 140-mile,Aeolus
-to-Anticline 500 kV line,which includes construction of the new Aeolus and Anticline
substations;(2)the five-mile Anticline-to-Jim Bridger 345 kV line,which includes modifications
at the existing Jim Bridger substation to allow termination of the new 345kV line;(3)installation
of a voltage control device at the Latham substation;(4)a new 16-mile 230kV transmission line
parallel to an existing 230kV line from Shirley Basin substation to the proposed Aeolus substation,
including modifications to the existing Shirley Basin substation;(5)the reconstruction of four
miles of an existing 230 kV transmission line between the proposed Aeolus substation and the
Freezeout substation,including modifications as required at the Freezeout substation;(6)the
reconstruction of 14 miles of an existing 230 kV transmission line between the Freezeout
substation and the Standpipe substation including modifications as required at the Freezeout and
Standpipe substations.
53.The Aeolus-to-Anticline line is a 140-mile-long,500 kV transmission line.Roughly
half of the line will be sited on BLM land.The proposed 500 kV transmission line will begin at
the proposed Aeolus substation located approximately ll miles northwest of Medicine Bow,
Wyoming,on a parcel of land owned by the Company and will run through Carbon and Sweetwater
Counties to the Company's Jim Bridger power plant,located approximately24 miles northeast of
Rock Springs,Wyoming.The line will largely cross alternating sections of federal and private
lands and will mostly cross open rangeland.After leaving the Aeolus substation the transmission
line will run west across the Medicine Bow River past the Hanna Draw and will continue
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southwesterly to Walcott Junction and then west across the Platte River and south of Sinclair and
Rawlins where it will then largely follow an existing 230 kV transmission line to Company-owned
parcel for the proposed Anticline substation,and finally to the Jim Bridger power plant
approximately five miles north of the Anticline substation.
54.The Company also proposes construction of a five-mile Anticline-to-Jim Bridger
345 kV line,and the installation of a voltage control device at the Latham substation,located
approximately 12 miles southeast of Wamsutter,Wyoming.
55.The proposed 230 kV Network Upgrades will begin at the Company's existing
Shirley Basin substation,located approximately 1.5 miles east of the south junction of state
highways 77 and 487.A new 230 kV line will parallel an existing 230 kV transmission line running
southwesterly along the western side of the Freezeout Mountains and will connect into the Aeolus
substation.South of Aeolus substation to Standpipe substation,via the Freezeout substation,theO230kVprojectisareconstructionoftheexisting230kVline.The line continues south out of the
Aeolus substation across the Medicine Bow River and connects into the Company's existing
Freezeout substation located between the Pine and South Pine Draws.The 230 kV line then
continues in a southwesterly direction to the Company's existing Standpipe substation,which is
located approximately two-and-a-half miles southeast of Hanna,Wyoming.All of the 230 kV
segments are in Carbon County and will cross areas of mountainous terrain reaching elevations of
approximately 7,500 feet.
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C.Map.A map of suitable scale showing the location of the construction or
expansion and its relation to other public utilities in the area(s)that offer or
provide similar utility service.
56.A map of the Wind Projects is found in Mr.Teply's testimony.A map of the
proposed route for the Transmission Projects is found in Mr.Vail's testimony.
D.Financial Statement and Construction Timelines.A statement of the manner
in which the applicant proposes to finance the construction or expansion,the
time when the applicant proposes to begin the construction or expansion,and
the time when the applicant proposes to complete the construction or
expansion.
57.The Company intends to finance the Combined Projects through its normal sources
of capital,both internal and external,including net cash flow from operating activities,public and
private debt offerings,the issuance of commercial paper,the use of unsecured revolving credit
facilities,capital contributions and other sources.Although the Combined Projects are a significant
investment on the part of the Company,the financial impact will not impair the Company's ability
to continue to providesafe and reliable electricity service at reasonable rates.In addition,approval
of the Company's resource decision provides important regulatory support for the Company's
current credit rating.Project financing is described in Ms.Crane's testimony.
58.The Company expects to execute engineering,procurement,and construction
("EPC")contracts for the Wind Projects in April 2018,shortly after receiving the CPCNs from the
Commission.The equipment contracts for the Wind Projects are expected to be executed in May
2019,and construction is expected to begin in June 2019.
59.The Company expects to provide a limited notice-to-proceed for the Transmission
Projects by the end of 2018,to acquire the necessary rights-of-way by March 30,2019.The final
notice-to-proceed for the Transmission Projects is expected to be issued by April 1,2019,to initiate
construction.
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60.The Company expects the Combined Projects to become commercially operational
by December 31,2020.Additional details of the estimated construction timelines for each facility
are provided in Mr.Teply's and Mr.Vail's testimony.
E.Cost Estimates and Revenue Requirements.Estimates of the cost of the
construction or expansion,the number of additional customers to be served by
the construction or expansion,the revenues to be derived from the
construction or expansion,and of the effects of the construction or expansion
on revenue requirements.
61.The costs of the proposed Wind Projects and Transmission Projects are discussed
in the testimonies of Mr.Teply and Mr.Vail,respectively.The impact of the Combined Projects
on the Company's revenue requirement and the Company's proposed ratemaking treatment are
characterized above,and described in detail in the testimony of Mr.Larsen.
VI.PROPOSED PROCEDURAL SCHEDULEO62.To achieve commercial operation of the Combined Projects by 2020,the Company
requests that the Commission adopt the following schedule,with a final decision by March 30,
2018:
June 30,2017 Application Filed
July 10,2017 Staff's Decision Memo
July 17,2017 Notice Application
August 7,2017 Intervenor Period Complete
August 10,2017 Technical Conference
August 25,2017 RFP Issued to Market
October 7,2017 RFP Bids Due
November 17,2017 Intervenor Testimony Due
December 8,2017 RMP Rebuttal
January l6,2018 RMP Supplemental RFP Results
January 26,2018 Intervenor testimony on RFP Results
February 14,2018 RMP RFP Rebuttal
February 19,2018 Hearings Begin
March 30,2018 IPUC Order
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VH.REQUEST FOR RELIEF
63.Rocky Mountain Power respectfully requests that the Commission issue an order
granting CPCNs for the Combined Projects.The Company also requests that the Commission
approve the proposed binding ratemaking treatment for these investments.These resources will
provide substantial customer benefits,are an integral component of the Company's long-term plans
to provide stable,reliable electric service at justand reasonable rates,and serve the public interest.
Respectfully submitted this 30thday of June,2017.
R.Jeff Richards
Yvonne R.Hogle
1407 West North Temple,Suite 320
Salt Lake City,Utah 84116
Telephone:[phone]
Facsimile:[phone]
Email:[e-mail]
Attorneys for Rocky Mountain Power
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