20180824Cross Petition for Reconsideration.pdf

ROCKY MOUNTAIN
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1407 West North Temple, Suite 330
Salt Lake City, Utah 841 '16
August 24,2018
VA HAND DELIVERY
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise,ID 83702
Re cAsE NO. PAC-E-17-07
IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER
FOR CERTIFICATES OF PUBLIC CONVENIENCE AIYD NECESSITY AI\TD
BINDING RATEMAKING TREATMENT FOR NEW WII\D AND
TRANSMISSION FACILITIES
Attention: Ms. Hanian
Please find enclosed for filing an original and seven (7) copies of Rocky Mountain Power's
Answer to Cross Petitions for clarification or, in the alternative, reconsideration of final Order No.
34104, dated July 20,2018.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at [phone]
Very truly yours,
! t,^Ll\Jr..ttQ
""^-DJSteward
Vice President,
Yvonne R. Hogle (#8930)
1407 West North Temple, Suite 320
Salt Lake City, Utah 841 l6
Telephone : (80 l) 220-47 3 4
Facsimile: [phone]
Email : Lvonne.ho gle@pac i fi corp.corn
Katherine McDowell
Adam Lowney (#10456)
McDowell Rackner Gibson PC
419 SW I lth Avenue, Suite 400
Portland, Oregon 97205
Telephone : [phone]
Facsimile: [phone]
Email: [e-mail]
[e-mail]
Attorneys for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
CERTIFICATES OF PUBLIC
CONVEMENCE AND NECESSITY
AND BINDING RATEMAKING
TREATMENT FOR WIND AND
TMNSMISSION FACILITIES
CASE NO. PAC.E-I7-07
ROCKY MOI]NTAIN
POWER'S REPLY ANI)
ANSWER TO CROSS.
PETITIONS FOR
RECONSIDERATION
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I. INTRODUCTION
On August 10,2018, Rocky Mountain Power ("Company"), filed a petition for
clarification or, in the altemative, reconsideration of final Order No. 34104, issued on
July 20, 2018, in Case No. PAC-E-I7-07 ("Order") by the Public Utilities Commission
of Idaho ("Commission"). On August 17, 2018, Monsanto Corporation ("Monsanto"),
the PacifiCorp Idaho Industrial Customers ("PI[C"), and the Idaho Irrigation Pumpers
Association, Inc. ("IIPA") filed answers and cross-petitions for reconsideration under
Rule 331 of the Commission's Rule of Procedure (IDAPA 31.01.01.331). Three days
REPLY AND ANSWER TO CROSS.PETITIONS FOR
RECONSIDERATION Page I
later, on August 20,2018, Commission Staff filed its answer.
In accordance with Idaho Code 5 6l-626, and Commission Rules of Procedure
325 and 331-333 (IDAPA 31.01.01 .325 and 31.01.01.331-333), the Company submits
this answer and reply to the cross-petitions for reconsideration. The Commission's rules
are silent about the right to file an answer and reply in this context, so the Company
requests leave to make this filing. The Company's reply and answer provides the
Commission with a more complete record on which to grant clarification or
reconsideration and outlines the Company's arguments if reconsideration is granted.
First, the Company's request for reconsideration is not prohibited by the
stipulation by and between the Company and Staff, dated May 8,2018 ("Stipulation"), as
Staff alleges in its answer, because the Stipulation specifically provides that each party
reserved all rights to argue for or against the imposition of a cost cap.
Second, while the other parties disagree with the Company's interpretation of the
Order, they appear generally supportive of the Company's request that the Commission
clariff the Order.
Third, a reasonable reading of the Order, together with the testimony, supports
the Company's interpretation that the Commission did not intend to impose a hard cap
that would bind future Commissions and categorically preclude recovery of prudent costs
incurred in the public interest.
Fourth, PIIC requests reconsideration of the imposition of an overall cost cap,
rather than individual cost caps for the discrete projects. PIIC provides no evidence or
other justification for this position. The Company's economic analysis addressed the
overall project costs and any cost cap should therefore apply to overall project costs.
REPLY AND ANSWER TO CROSS-PETITIONS FOR
RECONSIDERATION Page2
Finally, the Commission should reject the conditional cross-petitions for
reconsideration from Monsanto, IIPA, and PIIC, asking the Commission to deny the
certificate of public convenience and necessity ("CPCN") for the Company's proposed
wind and transmission projects ("Combined Projects") unless a hard cap is imposed. The
extensive record demonstrates that the Combined Projects are the least-cost, least-risk
resources to meet the Company's resource needs. There is no basis for the Commission
to reconsider its conclusion that the "evidence shows that the future need for new
generation facilities is most efficiently, effectively and reasonably met with the proposed
projects (as modified herein) because the economic benefit captured through the
[production tax credits] is in the public interest." Order at 8.
II. ARGUMENT
A. The Commission should clariff that the cost cap does not preclude recovery
of prudently incurred costs that advance the public interest.
1. The Company's petition for clarification and/or reconsideration was
consistent with the Stipulation.
Staff argues that the Company's petition is prohibited by paragraph 26 of the
Stipulation. Staff s Answer to Rocky Mountain Power's Petition for Clarification or, in
the Alternative, Reconsideration ("Staff Answer") at 5. That paragraph provides if the
Commission "imposes any additional material conditions on approval of this
Stipulation," the Company can seek reconsideration only after providing formal notice
within 15 days of its intent to withdraw from the Stipulation. Staff claims that the cost
cap was imposed as a condition of approving the Stipulation, invoking the l5-day notice
requirement. Staff Answer at 6.
Staffs position ignores one of the central provisions of the Stipulation, in which
the "Stipulating Parties reserve all rights to argue in this case for or against an overall
REPLY AND ANSWER TO CROSS-PETITIONS FORRECONSIDERATION Page 3
capital cost cap for construction of the Stipulated Projects." Stipulation, fl 16. This
provision excluded the cost cap from the Stipulation-including paragraph 26-and
ensured that the Company "reserve[d] all rights" to dispute the imposition of such a cap.
The specific reservation of rights on the cost cap issue applies here, not the general,
boilerplate language on which Staff relies. Put another way, the Company's petition
addresses an issue specifically carved out of the Stipulation and cannot, therefore, violate
the terms of that Stipulation.
2. The parties' answers demonstrate the need for clarification of the overall
cost cap imposed by the Commission.
Staff argues that when parties described an "overall cost cap," they "generally
referred to it as a 'hard cap."' Staff Answer at 3. Staff supports this argument with
citations to the record that largely confirm the opposite conclusion. That is, when parties
described Staff s proposed cost cap, they described it as a "hard" cap. For example, Staff
cites Cindy Crane's cross-examination testimony as evidence that parties used the term
"overall project cost cap" to mean a hard cap. Tr. 790. But in that testimony, when Ms.
Crane was asked about an "overall project cost cap," she requested clarification on
whether the question addressed the soft or hard cap at issue in the case. This example
demonstrates that the term "cost cap" was generally used to describe both Staffs
proposed hard cap and the Company's proposed soft cap.
The Commission specifically described Staffs position as a hard cap in the
Order, and then imposed an overall project cost cap without describing it as a hard cap.
This, combined with the Commission's rejection of binding ratemaking treatment (which
is what a hard cap is), creates the reasonable inference that the Commission intended to
impose a cap that does not categorically preclude recovery of prudently incurred costs
REPLY AND ANSWER TO CROSS-PETITIONS FOR
RECONSIDERATION Page 4
regardless of the circumstances.
Staff and PIIC claim that the Stipulation itself indicates that the "overall capital
cost cap" means Staff s proposed hard cap because that is how the agreement describes
the outstanding dispute between the Company and Staff. Staff Answer at 4; PIIC's
Cross-Petition for Clarification and Reconsideration at 2 ("PIIC Cross-Petition"). But the
testimony supporting the Stipulation provides greater clarity regarding how that term was
intended. Staff s pre-filed testimony states that the "only issue not resolved between the
Company and Commission Staff in the Stipulation relates to an overall cost cap."
Tr. 1920. Staffls testimony then states that "Staff believes an overall Hard Cap is
necessary to reduce the risk that these economic projects do not provide benefits to
customers," while the Company "has proposed a soft cap." Tr. 1920; see also Tr. 1923
(Staff testimony at hearing describing that the Stipulation "caps" the costs at the benefits
for the resource tracking mechanism ("RTM"), but Staff also recommends "hard cap").
Staff also claims that the Commission's denial of binding ratemaking treatment
applied only to the RTM, implying that the Commission did grant binding ratemaking
treatment when it imposed the cost cap. Staff Answer at 4,7 (suggesting the cost cap is
authorized by Idaho Code $ 6l-541). But without an express statement in the Order
binding future Commissions, it is unreasonable to interpret the cost cap as a hard cap
authorized by Idaho Code $ 6l-541.
Staff also claims that there is precedent for a hard cap set at the Company's
estimates because the Company agreed to a hard cap in Wyoming. Staff Answer at7.ln
fact, the Wyoming settlement includes a hard cap that is I I percent above the current
estimate and is part of a larger overall settlement that included additional issues. Tr.l42-
REPLY AND ANSWER TO CROSS.PETITIONS FOR
RECONSIDERATION Page 5
144. And, as noted in the Company's Petition, the Utah Commission rejected proposals
for a hard cap that "would preclude PacifiCorp from recovering an increase in [capital]
costs even where incurring the increase was prudent[.]"I Staff did not identifu any
precedent from this Commission or elsewhere for a hard cap at the current cost estimate.
B. The Commission should deny the cross-petitions for reconsideration.
If the Commission grants the Company's request for reconsideration, it may also
address the parties' cross-petitions for reconsideration. Idaho Code $ 6l-626. If the
Commission denies the Company's request, however, it must also deny all of the cross
petitions. 1d The Company requests that the Commission grant its request for
reconsideration but deny the cross-petitions.
1. If a cost cap is imposed, it should be an overall cap applied to the
Combined Projects.
PIIC requests that the Commission reconsider the imposition of an overall cost
cap, and instead impose individual caps on each of the components of the Combined
Projects (i.e., one cap for the wind projects, one for the network upgrades, and one for
the transmission line). PIIC simply refers to its pre-filed testimony to support this request
and provides no other justification in its cross-petition. PIIC Cross-Petition at 9. But
PIIC's pre-filed testimony provides no rationale for the recommendation. See Tr. l57l
(describing but not justiffing project-specific cap recommendation). Thus, PIIC has
provided no substantive explanation for its proposal to impose project-specific cost caps.
For the same reasons that an overall cost cap is unreasonable, specific individual cost
caps are also unreasonable. Moreover, the Company's economic analysis was based on
I Application of RoclE Mountain Power for Approval of a SigniJicant Energt Resource Decision and
Voluntary Request for Approval of Resource Decision, UPSC Docket No. l7-035-40, Order at 34 (Jtne 22,
201 8).
REPLY AND ANSWER TO CROSS.PETITIONS FOR
RECONSIDERATION Page 6
overall project costs, not the individual components. Therefore, to the extent that the cost
cap is intended to better ensure the realization of customer benefits, there is no basis for
imposing project-specifi c cost caps.
2. The Commission should not reconsider its approval of the CPCN.
a. The Combined Projects meet a resource need.
Monsanto, PIIC, and IIPA request that the Commission reconsider granting the
CPCN because they claim there is no present need for the Combined Projects.
Monsanto's Response to Rocky Mountain Power's Petition and Cross-Petition for
Reconsideration at 6 ("Monsanto Cross-Petition"); see also PIIC Cross-Petition at 8. On
the contrary, the record demonstrates that the Company has an immediate and sustained
need for system capacity (Tr. 253, 263, 335-337) and the Combined Projects were
identified as integral components of the least-cost, least-risk resource portfolio in the
2017 lntegrated Resource Plan ("IIU"';, which analyzed all methods of meeting
customers' near and long-term resource needs, including energy efficiency, demand-side
management, front-office transactions ("FOTs"), new supply-side resources, and changes
in use of or upgrades to existing resources. Tr. 156-170,249-273; see In the Matter of
Idaho Power Co. 's Applicotion for a Certificate of Public Convenience and Necessity for
the Langley Gulch Power Plant, Case No. IPC-E-09-03, Order No. 30892 at 2l (Sept. l,
2009) ("Idaho Power's [IRP] is a planning document that constitutes the baseline against
which the utility s performance and acquisition of supply-side and demand-side
resources are ordinarily measured.").
Moreover, the Commission found that the Combined Projects will meet a future
resource need, which Monsanto appears to concede. Order at7-8; Monsanto Cross-
Petition at 6 ("There being no present necessity for new capacity . . .") (emphasis added).
REPLY AND ANSWER TO CROSS-PETITIONS FORRECONSIDERATION Page 7
So even if there is no present need for the Combined Projects (which the Company
disputes), the Commission's finding that the Combined Projects meet a future need is
sufficient to support a CPCN. ,See Idaho Code $ 6l-526 (requires that the "present or
future public convenience and necessity will require" the new resource).
b. The Combined Projects are least-cost,least-risk.
Monsanto, PIIC, and IIPA also argue that the Combined Projects are not least-
cost, least-risk resources and will not produce customer benefits. See Monsanto Cross-
Petition at 7; PIJC Cross-Petition at 7-8; IIPA's Answer in Oppositions to RMP's
Petition and Joinder in Monsanto's Cross Petition at 2. The Company's extensive and
conservative economic analysis demonstrates the Commission correctly concluded that
the Combined Projects will "most efficiently, effectively and reasonably" meet the need
for new generation resources. Order at 8.
The Company's modeling shows the Combined Projects are expected to provide
substantial benefits to customers and reduce market risk. Tr. 152-153, 195-196, 401, 407,
586-87, 597, 668-669. The Commission relied on that modeling and reasonably
concluded that "displacing FOTs with the Combined Projects[] is fair, just and
reasonable because the costs passed on to the utility's customers will likely be
demonstrably less." Order at 8.
The Company also demonstrated that it is in the public interest to pursue the
Combined Projects now and defer consideration of competing solar options. Tr.438-440,
527-528,555, 559-561. The Commission analyzed the evidence and concluded that the
Company's "sensitivity analysis is convincing and demonstrates that solar resources
cannot displace the Combined Projects." Order at 10. Moreover, the "record supports the
Company's modeling assumptions, including projected benefits of pursuing both wind
REPLY AND ANSWER TO CROSS-PETITIONS FOR
RECONSIDERATION Page 8
and solar at a future date." Order at 10.
The Commission also found that the Company will "need the transmission
projects in the future." Order at 8. By constructing the line now, when its costs are offset
by PTC-eligible wind resources, customers will receive a net benefit. Tr. 571-572;942-
944,966-971.
3. The Company has not increased its overall project cost estimate.
PIIC argues that if "RMP now believes that its project costs are going to be
higher than it anticipated, there is reason to conduct additional analysis and process to
determine whether it continues to make economic sense for ratepayers to invest in the
combined projects." PIIC Cross-Petition at 8. The flaw in this argument, however, is that
the Company has not, in fact, changed its overall project cost estimate. Contrary to
PIIC's implication, the Company has simply requested the opportunity to demonstrate in
the future that costs incurred above its current estimate-if any-are prudent and in the
public interest.
III. CONCLUSION
For the reasons stated in the Company's Petition for Clarification or, in the
Alternative, Reconsideration, the Company respectfully requests that the Commission
clarifr or grant reconsideration of Order No. 34104 to make clear that the overall cost
cap does not categorically preclude the future recovery of prudent costs incurred in the
public interest. In addition, for the reasons set fomh above, if the Commission grants the
Company's petition for reconsideration, it should deny Monsanto's, PIIC's, and IIPA's
cross-petitions for reconsideration. The Company's economic analyses demonstrates that
the Combined Projects are in the'public interest, have beneficial near- and long-term
customer impacts, and are lower risk than a do-nothing resource strategy across a broad
REPLY AND ANSWER TO CROSS.PETITIONS FOR
RECONSIDERATION Page 9
range of potential future market and system conditions.
Dated this 24t of August, 2018.
Respectfully submitted,
West North Temple, Suite 320
Lake City, Utah 841l6
[phone]
Facsim ile : (80 1) 220-3299
Email: yvonne.hogle@pacifi corp.com
Afforney for Rocky Mountain Power
REPLY AND ANSWER TO CROSS-PETITIONS FOR
RECONSIDERATION Page l0
CERTIF'ICATE OF SERVICE
I hereby certiff that on this 24ft day of August, 2018, I caused to be served, via E-mail a
true and correct copy of Rocky Mountain Power's REPLY AND ANSWER TO CROSS-
PETITIONS FOR RECONSIDERATION in PAC-E-17-07 to the following:
Service List
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6l l9
Pocatello, Idaho 83205
E-mail : [e-mail]
Anthony Yankel
12700Lake Avenue, Unit 2505
Lakewood, Ohio 44107
E-mail: tony(@yankel.net
MONSANTO COMPANY
Randall C. Budge
Racine, Olson, Nye & Budge, Chartered
P.O. Box 1391;201E. Center
Pocatello, Idaho 83204-1391
E-mail : [e-mail]
Brubaker & Associates
16690 Swingley Ridge Rd., #140
Chesterfield, MO 63017
E-mail: bcol I [e-mail]
[e-mail]
PIIC
Ronald L. Williams
Williams Bradbury, P.C.
P.O. Box 388
Boise ID, 83701
E-mail : ron@wil I iamsbradburv.conr
Jim Duke
Idahoan Foods
E-mail: i duke@i dahoan.com
Kyle Williams
BYU Idaho
E-mail : [e-mail]
Val Steiner
Nu-West Industries, Inc.
E-mail : [e-mail]
Bradley Mullins
1750 SW Harbor Way, Suite 450
Portland, OR 97201
E-mail : brmul I [e-mail]
COMISSION STAFF
Brandon Karpen
Deputy Attomey General
Idaho Public Utilities Commission
472 W . Washington (83702)
PO Box 83720
Boise, lD 83720-0074
E-mail : brandon.karpen@puc. i daho. gov
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PACIFICORP, DBA ROCKY MOUNTAIN POWER
Ted Weston
PacifiCorp, dba Rocky Mountain Power
1407 West North Temple
Suite 330
Salt Lake City, uT 84116
E-mail : ted.weston@paci fi corp.com
Yvonne Hogle
PacifiCorp, dba Rocky Mountain Power
1407 West North Temple
Suite 320
Salt Lake City, UT 84116
E-mail: vvonne.hos I e@pacifi corp.com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR97232
E-mail: datarequest@pacifi corp.com
Dated this24n day of August,2018.
Operations
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