20180810Petition for Reconsideration.pdf

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August 10,2018
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'1407 West North Temple, Suite 330
Salt Lake City, Utah 84116
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise,ID 83702
Re:CASE NO. PAC.E.I7.O7
IN THE MATTER OF TIIE APPLICATION OF ROCKY MOUNTAIN POWER
FOR CERTITTCATES OF PI]BLIC COII'VEI\IIENCE AI\[D NECESSITY AI\[D
BII\DING RATEMAKING TREATMENT FOR NEW WIND AI\[D
TRANSMISSION FACILITIES
Attention: Ms. Hanian
Please find enclosed for filing an original and seven (7) copies of Rocky Mountain Power's petition
for clarification or, in the alternative, reconsideration of final Order No. 34104, dated July 20,
2018. In the above referenced matter the Company seeks clarification or reconsideration regarding
the overall project cost cap as outlined in the petition.
Informal inquiries may be directed to Ted Weston,Idaho Regulatory Manager at [phone].
Very truly yours,
,"M@""^-D
Vice President, R{rlation
Yvonne R. Hogle (#8930)
1407 West North Temple, Suite 320
Salt Lake City, Utah 84116
Telephone : [phone]
Facsimile : [phone]
Email : wonne.ho gle@oacifi com.com
Katherine McDowell
Adam Lowney (#10456)
McDowell Rackner Gibson PC
419 SW l lth Avenue, Suite 400
Portland, Oregon 97205
Telephone: [phone]
Facsimile: [phone]
Email : [e-mail]
[e-mail]
Attorneys for Rocky Mountain Power
BEFORE TIIE IDAHO PUBLIC UTILITTES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
CERTIFICATES OF PUBLIC
COI\TVENIENCE AI\ID NECES SITY
AI\ID BII\DING RATEMAKING
TREATMENT FOR WIND AI\D
TRANSIVISSION FACILITIES
CASE NO. PAC.E.I7-07
ROCKY MOUNTAIN
POWER'S PETITION FOR
CLARIFICATION OR, IN TIIE
ALTERNATIVE,
RECONSIDERATION OF
ORDER NO. 34104
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I. INTRODUCTION
In accordance with Idaho Code $ 6l-626, Rules 325 and 331-333 of the Idaho
Public Utilities Commission ("Commission") Rule of Procedure (IDAPA 31.01.01.325
and 31.01.01.331-333), Rocky Mountain Power ("Company") respectfully petitions the
Commission for clarification or, in the alternative, reconsideration of final Order
No.34104, dated July 20, 2018, issued in Case No. PAC-E-17-07 ("Order"). The
Company seeks clarification regarding the overall project cost cap.
PETITION FOR CLARIFICATION OR, IN TI{E ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 Page 1
PETITION FOR CLARIFICATION OR,IN TTIE ALTERNATIVE,
RECONSIDERATION OF ORDERNO. 34104 Page2
The Order granted a certificate of public convenience and necessity ("CPCN")
for the Company's proposed wind and transmission projects ("Combined Projects"), with
an overall cost cap for costs above the project estimate. While the Company recognizes
that the cost cap renders the CPCN inapplicable to costs above the project estimate, the
Company seeks clarification that the cost cap does not preclude future recovery of these
costs if the Company can demonstrate that: (l) the costs were reasonably incurred under
the circumstances; (2) the costs are prudent; and (3) recovery of the costs is in the public
interest. This interpretation of the project cost cap is consistent with the language of the
Order, and the Commission's past approach to CPCN filings.
In the alternative, the Company respectfully requests reconsideration on the
meaning and operation of the project cost cap. Specifically, a cost cap that categorically
precludes future recovery of certain costs is unreasonable in this case. Such a cap is
unnecessary because the Commission has broad authority to review and approve all costs
before recovery and the Order incorporates robust customer protections. The cap could
also operate in a punitive manner by disallowing future costs without regard to whether
the costs are reasonable, prudent, and in the public interest-and without regard to the
benefits to customers from the Combined Projects.
The Company requests clarification or reconsideration by written briefs. The
Company does not seek additional evidentiary proceedings to resolve this motion.
II. BACKGROUNI)
On July 3,2017, the Company filed an application with the Commission for an
order granting a CPCN for new Wyoming wind resources and transmission facilities,
including the 140-mile Aeolus-to-Bridger/Anticline 500-kilovolt ("kV") transmission
line, which is a part of the Company's Gateway West transmission project. The
Company also requested binding ratemaking treatment under ldaho Code $ 6l-54I.
Monsanto, PacifiCorp Idaho Industrial Customers, and the Idaho Irrigation Pumpers
Association intervened in the case.
After the Company filed its application, it updated its cost estimates, the impact
of federal tax law changes, overall analysis of the projects, and risk profiles. Order at2.
The Company also updated the scope of its request based on the results of the
competitive solicitation process, the 2017R Request for Proposals, used to select the
wind resources ultimately subject to the requested CPCN. Tr. 379-380.
On May 9,2018, the Company filed a settlement stipulation ("Stipulation") with
Staff. Order at l. Although intervenors fully participated in the settlement discussions,
they were not parties to the Stipulation. Id
The Stipulation included a request that the Commission grant a CPCN for the
Aeolus-to-Bridger/Anticline 500-kV transmission line; three new Wyoming wind
resources: Ekola Flats, TB Flats I and II, and Cedar Springs, totaling 1,150 megawatts;
and related network upgrades ("Stipulated Projects"). Id. at3.
The Stipulation also requested that the Commission approve the Company's
proposed Resource Tracking Mechanism ("RTM"), to track new investment, energy
production, and production tax credits associated with the Stipulated Projects, subject to
a cost cap until the Company's next general rate case where the RTM will be evaluated.
Id.;Tr. 101. The RTM would capture the Stipulated Projects'costs and benefits until
they are recovered in base rates through a general rute case. Id.
PETITION FOR CLARIFICATION OR,IN THE ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34I 04 Page 3
The Stipulation resolved all disputed issues between the Company and Staff
except one: whether the Commission should impose an overall cap on the costs the
Company would have an opportunity to recover. Id. at 4. Staff recommended that the
Commission impose a "hard" cap that would preclude the recovery of any costs above
the Company's overall project estimate regardless of the reasonableness of the cost or the
circumstances in which the costs were incurred. See Tr. 1920. The Company opposed
StafPs hard cap and recommended a cost cap that would still provide an opportunity to
recover costs above the project estimate, subject to an additional prudence review in a
general rate case. Tr. 82-83. Staff and the Company agreed to submit this issue to the
Commission.
The Commission held a technical hearing on May l0-l l, 2018. On July 20, 2018,
the Commission issued the Order. The Commission approved the Stipulation and granted
the requested CPCN as specified in the Stipulation. Order at 15-16. The Commission
also ordered "that an overall cost cap is set at the Company's project estimate." Order at
16.1
III. LEGAL STANDARI)
The Commission rules provide that "[a]ny person may petition to clariff any
order, whether interlocutory or frnal." RP 325. In addition, a "petition for clarification
may be combined with a petition for reconsideration or stated in the alternative as a
petition for clarification and/or reconsideration." Id.
I On June 22, 2018, after the technical hearing but before the Order was issued, the Public Service
Commission of Utah ('UPSC") issued its order approving the Combined Projects. The UPSC rejected
recommendations for a hard cap that "would preclude PacifiCorp from recovering an increase in [capital]
costs even where incurring the increase was prudentf.f" Application of RoclE Mountain Power for
Approval of a Significant Energt Resource Decision and Voluntary Request for Approval of Resource
Decision,UPSC DocketNo. 17-035-40, Order at 34 (June 22,2018).
PETITION FOR CLARIFICATION OR,IN TTIE ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 Page 4
A petition for reconsideration "must set forth specifically the ground or grounds
why the petitioner contends that the order or any issue decided in the order is
unreasonable, unlawful, erroneous, or not in conformity with the law, and a statement of
the nature and quantity of evidence or argument the petition will offer if reconsideration
is granted." RP 331. "The purpose of an application for rehearing is to afford an
opportunity to the parties to bring to the attention of the Commission in an orderly
manner any question theretofore determined in the matter and thereby afford the
Commission an opportunity to rectiff any mistake made by it[.]" Washington Woter
Power Co., v. Kootenai Environmental Alliance, 99 Idaho 875,879, 591P.2d 122,126
(1979) (citing ldaho Underground Water Users Assh v. Idaho Power Co., 89 Idaho
147,404 P.2d 859 (1965); Consumers Co. v. Public Utilities Comm'n, 40 ldaho 772,236
P.732 (1e2s).
The Commission may grant reconsideration by conducting an evidentiary
hearing, by reviewing the existing record, or by the submission of briefs, memoranda,
written interrogatories, or written statements. RP 332.
IV. ARGUMENT
A.The Company requests clarification that it may seek future recoverT of costs
above its overall project estimate, if the costs are reasonably incurred,
prudent, and recovery would be in the public interest.
In its Order, the Commission "impose[d] an overall cost cap set at the Company's
overall project estimate." Order at 13. The Company requests that the Commission
clari$ that it did not impose a "hard" cap as defined by Staff which would bar the
Company from seeking recovery of costs above the project estimates no matter how
reasonable the costs and irrespective of the public interest. The Company also requests
the Commission make clear that the Order does not bar recovery of costs over the project
PETITION FOR CLARIFICATION OR,IN Tt{E ALTERNATIVE,
RECONSIDERATION OF ORDERNO. 34104 Page 5
estimates if the Company demonsffates that: (1) it reasonably incurred the added costs
given changing facts and circumstances; (2) the costs are prudent; and (3) cost recovery
is in the public interest.
A straightforward reading of the Order supports the Company's understanding of
the overall project cost cap imposed by the Commission. In the Order, the Commission
described StafPs recommendation as an "overall project hard cap," which was consistent
with the language Staff used to describe its proposal. Order at 9 (emphasis added); Tr.
1920 ('Staff believes an overall Hard Cap is necessary. . .").Butwhen describing the
cost cap imposed by the Commission, the order does not refer to it as a hard cap. See,
e.g., Order at 16 ("IT IS FURTIDR ORDERED that an overall cost cap is set at the
Company's project estimate."). Moreover, nowhere in the Order did the Commission
state that it was adopting Staff s proposed cap, describe the cost cap as an absolute bar
on cost recovery, or explain why an advance disallowance of costs would be in the
public interest.
The Company's understanding of the overall project cost cap is also consistent
with the framework of the related cost cap imposed by the Commission for the RTM.
Under the RTM cost cap, any costs that exceed the benefits in a year will be deferred for
"potential recovery in the Company's next general rate case." Order at3; see also id. at
11 ("tlrough Stipulation, the Company has agreed to maintain a cap in the RTM until its
next general rate case where it may ask, if appropriate, to remove the cap."); see also Tr.
83-84 (describing soft RTM cap). Thus, the RTM cost cap does not categorically
preclude recovery of costs above the ca5rather it defers recovery until the Commission
can scrutinize the costs in a rate case.
PETITION FOR CLARIFICATION OR,IN TT{E ALTERNATIVE,
RECONSIDERATION OF ORDERNO. 34104 Page 6
In addition, the Commission's denial of binding ratemaking teatment supports
the Company's interpretation of the overall cost cap. Order at 16. Idaho Code $ 61-541
allows the Commission to provide binding ratemaking treatnent for the costs of new
generation facilities. The statute specifically authorizes the Commission to establish the
"maximum amount of costs that the commission will include in rates at the time
determined by the commission without the public utility having the burden of moving
forward with additional evidence of the prudence and reasonableness of such costs" and
the "method of handling any variances between cost estimates and actual costs." Idaho
Code g 6l-5alQ)@)(iii)-(iv); Tr. 83-84. Idaho Code $ 6l-5a1(a)(c) turther provides that
the ratemaking treatment "shall be binding in any subsequent commission proceedings
regarding the proposed facility that is the subject of the order[.]"
A hard cap would constitute binding ratemaking treatment because it establishes
the "method of handling variances between cost estimates and actual costs" that would
be "binding in any subsequent commission proceedings." A cost cap like the RTM cap,
on the other hand, is not binding because it allows a future Commission the opportunity
to review the reasonableness of costs above current project estimates and does not
categorically preclude recovery regardless of the circumstances. Because the
Commission did not provide binding ratemaking treatment, it is reasonable to infer that it
did not impose a hard cap.
Consistent with its denial of binding ratemaking treatment, in setting an overall
cost cap, the Order appears to be reinforcing the general principle that the Commission
retains the ability to review the reasonableness of the total costs of new resources
notwithstanding issuance of a CPCN. In the Matter of ldaho Power Co.'s Applicationfor
PETITION FOR CLARIFICATION OR,IN TI{E ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 PageT
a Certificate of Public Convenience and Necessity For the Evander Andrews Power
Plant, Case No. IPC-E-06-09, Order No. 30201 at 14 @ec. 15, 2006) (quoting Order
No. 23520 at 19) (when the Commission issues a CPCN, it "has not as a matter of law
authorized the utility to recover from ratepayers whatever costs are invested in the new
generation under all circumstances whatsoever."). The overall cost cap imposed in the
Order reflects the Commission's expectation that the Company will manage its costs to
meet its current budget; if the Company's costs exceed current estimates, then neither the
Order nor the Commission's general precedent on CPCNs creates any presumption of
cost recovery for the Company. In this circumstance, the Company would need to make
an independent showing that the public interest warrants recovery of these costs. Thus,
the "cost cap reduces ratepayer risk and compels the Company to rely on its models that
predict benefits," and "fairly balances risk between the Company and its customers."
Order at 13.
B. In the alternative, the Commission should grant reconsideration and allow
an exception to the overall cost cap for reasonable and prudent costs, the
recovely of which would be in the public interest.
A petition for reconsideration must describe why an issue decided in an order is
unreasonable and provide the argument that will be offered if reconsideration is granted.
RP 331. Here, it is unreasonable to impose a hard cap that categorically precludes the
opporhrnity to recover reasonable costs that are prudently incurred to advance the public
interest. The Company presented substantial and persuasive evidence that a hard cap, like
that proposed by Staff, is both (1) unnecessary because of the customer protections
included in the Stipulation and Commission's existing authority to scrutinize all costs
before they are included in rates, and (2) unreasonable because it categorically precludes
cost recovery without regard for the public interest. Therefore, the Commission should
PETITION FOR CLARIFICATION OR,IN THE ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 Page 8
provide an exception to the overall project cost cap to allow for future cost recovery of
costs above the cap if the Company prudently responds to a change in circumstances and
incurs reasonable costs that are in the public interest.
First, a hard cap is unnecessary because the Company bears the burden of
demonstrating the reasonableness of costs and prudent management of resource
development regardless of whether there is a hard cap. Tr. 84, 106-107, ll7 .Indeed, the
terms of the Stipulation specifically provide that the Company will bear the risks related
to construction cost overuns associated with the Stipulated Projects. Stipulation fl 17.
Thus, the Company will not be allowed to recover any imprudent costs or costs incurred
because of Company mismanagement. Tr. 106-107.
Second, a hard cap is unnecessary to motivate and incent the Company to
prudently manage and minimize project implementation costs. Tr. 84. The Company has
the obligation to prudently respond to changing circumstances, particularly if those new
and unforeseen circumstances increase costs. Order No. 30201 at 14 (quoting Order
No.23520 at 19) (a CPCN "does not guarantee recovery when investment is no longer
prudent because costs have escalated beyond reasonable expectation."). The Stipulation
also includes a cost cap that ensures that the RTM will not result in a customer
surcharge, which provides additional incentive to control costs. Tr. 83, 102-105,
114-115. The Company also committed to return to the Commission for review of
whether to proceed with the Stipulated Projects if an adverse change of circumstances
materially affects the economics of the projects. Tr. 85, 116; Stipulation !f 21.
Third, a hard cap could be unreasonably punitive. Tr. 117. Any cost above the
current estimate will be included in rates only after Commission review and approval in
PETITION FOR CLARIFICATION OR,IN THE ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 Page 9
a rate filing. Tr. 80, 83, ll7. In such a case, the Company will need to prove that the
costs above the current estimate are (l) reasonable, (2) were prudently incurred, and
(3) in the public interest. If the Commission concludes that the costs meet these
requirements, then, and only then, will the costs be included in customer rates. The
application of a hard cap would mean that even if the Company incurred costs that meet
each of these three requirements, the Company would bear the costs. Such an outcome is
contrary to well established ratemaking principles and unreasonably punitive.
Tr. 116-117; see also Tr. 1799-1800 (Staff acknowledging hard cap could preclude
recovery of prudently incurred costs even if customers still benefit from Stipulated
Projects).
Fourth, the Company presented evidence, which was confirmed by Staff that the
overall project costs can increase and still result in net customer benefits. Tr. 117,599,
1786. Indeed, under the medium natural gas, medium carbon dioxide price-policy
scenario, capital costs could increase by 11.1 percent and the Stipulated Projects still
produce net customer benefits. Tr. 599. Setting a hard cap now, without the opportunity
for the Company to provide evidence justiffing its actual costs, is unprecedented and
unfair, particularly in light of the Commission's findings that the Stipulated Projects are
in the public interest and the uncontroverted evidence that customer benefits could exist
even with higher costs. Order at 8; Tr. 599.
Fifth, the effect of a hard cap is that the Company bears the risk of increased
costs even for events outside of its control. Tr. 84-85. Staff testified that the Company
should not bear those costs, yet that is precisely the potential impact of a hard cap.
Tr. 1812. The Company has implemented measures to mitigate risks within its control.
PETITION FOR CLARIFICATION OR,IN THE ALTERNATIVE,
RECONSIDERATION OF ORDERNO. 34104 Page 10
The existing regulatory process, reflected in the Commission's past practice, together
with the customer protections included in the Stipulation, are sufficient to address risks
that are beyond the Company's control. Tr.740-741.
V. CONCLUSION
The Company requests the Commission clariff or grant reconsideration of Order
No. 34104. For the reasons stated above, the Commission should issue an order that the
Company is not categorically precluded from recovery of capital costs above the overall
project estimate if it can demonstate through a separate filing that the additional costs
are reasonable, prudent, and in the public interest. A hard cap that categorically precludes
recovery of excess costs is unnecessary because of the robust customer protections
included in the approved Stipulation and the Commission's existing authority to review
all costs before inclusion in rates. A hard cap could be unreasonably punitive,
disallowing costs without regard for whether the costs are reasonable, prudent, and in the
public interest.
Dated this 10ft of August 2018.
Respectfully submitted,
WestNorth Temple, Suite 320
Lake City, Utah 84116
: [phone]
Facsimile : (80 l) 220 -3299
Email : yvonne.hoele@oacifi corp.com
Attorney for Rocky Mountain Power
PETITION FOR CLARIFICATION OR, IN TIIE ALTERNATIVE,
RECONSIDERATION OF ORDER NO. 34104 Page l1
CERTIFICATE OF SERYICE
I hereby certiff that on this 10ft day of August,2018, I caused to be served, via E-mail a
true and correct copy of Rocky Mountain Power's PETITION FOR CLARIFICATION OR,
IN THE ALTERNATM, RECONSIDERATION OF ORDER NO.34104 in PAC-E-17-07
to the following:
Seruice List
IDAHO TRRTGATION PUMPERS ASSOCTATION, rNC.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6119
Pocatello, Idatro 83205
E-mail: [e-mail]
Anthony Yankel
12700 Lake Avenue, Unit 2505
Lakewood, Ohio 44107
E-mail: tony@)rankel.net
MONSAIYTO COMPAI\TY
Randall C. Budge
Racine,Olson, Nye & Budge, Chartered
P.O. Box l39l;201E. Center
Pocatello, Idaho 83204-l 391
E-mail : rcb@.racinelaw.net
Brubaker & Associates
16690 Swingley Ridge Rd., #140
Chesterfield, MO 63017
E-mail: [e-mail]
kiverson@consultbai. com
PIIC
Ronald L. Williams
Williams Bradbury, P.C.
P.O. Box 388
Boise ID, 83701
E-mail : [e-mail]
Jim Duke
Idahoan Foods
E-mail: [e-mail]
Kyle Williams
BYU Idaho
E-mail : williamsk@b),ui.edu
Val Steiner
Nu-West Industries, Inc.
E-mail : val.steiner@.aerium.com
Bradley Mullins
1750 SW Harbor Way, Suite 450
Portland, OR 97201
E-mail : [e-mail]
COMISSION STAFF
Brandon Karpen
Deputy Attorney General
Idaho Public Utilities Commission
47 2 W . Washington (E37 02)
PO Box 83720
Boise,ID 83720-0074
E-mail : [e-mail]. gov
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PACIFICORP, DBA ROCKY MOUNTAIN POWER
Ted Weston
PacifiCorp, dba Rocky Mountain Power
1407 WestNorth Temple
Suite 330
Salt Lake City, UT 84116
E-mail : ted.weston@nacifi corp.com
Yvonne Hogle
PacifiCorp, dba Rocky Mountain Power
1407 WestNorth Temple
Suite 320
Salt Lake City, UT 841l6
E-mail: vvonne.hog I e@nacifi corp.com
Data Request Response Center
PacifiCorp
825 NE Multromah, Suite 2000
Portland, OR97232
E-mail : datareq uest@pacifi corp.com
Dated this 10ft day of August,2018.
Operations
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