20180820Answer to PacifiCorp Petition for Reconsideration.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-00]4
(208) 334-0u3sl
IDAHO BAR NO. 7956
IN THE MATTER OF THE
APPLICATION OF ROCKY MOUNTAIN
POWER FOR A CERTIFICATB OF
PUBLIC CONVENIENCE AND
NECESSITY AND BINDING
RATEMAKING TREATMENT FOR
NEW WIND AND TRANSMISSION
FACILITIES
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Street Address for Express Mail:
4]2W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. PAC.E.I7.O7
STAFF'S ANSWER TO ROCKY
MOUNTAIN POWER'S PETITION FOR
CLARIFICATION OR, IN THE
ALTERNATIVE, RECONSIDERATION
On August 10, 2018, Rocky Mountain Power petitioned the Commission to clarify or
reconsider Order No. 34104. See Rocky Mountain Power's Petition for Clarification or
Reconsideration. In that Order, the Commission granted the Company a certiflcate of public
convenience and necessity for its proposed wind and transmission projects as set forth in the
Company and Staff's settlement stipulation (the "Stipulation"). The Commission also set an
overall project cost cap at the Company's project estimate. See Order No. 34104. In its petition,
the Company asked the Commission to clarify if that cost cap precludes the Company from
recovering more than its estimated costs in a future proceeding. Petition at 2. Alternatively, should
the Commission clarify that the cap precludes future recovery of costs above the Company's
estimates, the Company asked the Commission to reconsider the imposition of such a cap because
an overall cap on future recovery is unreasonable, unnecessary, and punitive. Id.
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 1
In answer to the Petition, Staff agrees in part and disagrees in part with the Company's
request. As discussed below, Staff agrees that the Commission should clarify its order. But unlike
the Company, Staff urges the Commission to confirm that the Order absolutely caps the
Company's ability to recover a greater amount of project costs than the amount the Company
estimated it would incur on the project. Staff disagrees that the Commission should reconsider the
overall project cost cap, or hard cap, because the cap is reasonable under the facts, lawful, and
consistent with the Company and Staff's agreement in the Commission-approved Stipulation.
Staff requests its answer to the Company's petition be decided by written briefs. Because
the Company brings no new argument or evidence in support of its position, not additional
evidentiary proceedings are necessary.
STANDARD OF REVIEW
Idaho Code $ 6l-626 authorizes interested persons to petition the Commission to
reconsider any matter determined in a final order. Reconsideration allows a person to bring to the
Commission's attention any question previously determined, and thereby affords the Commission
an opportunity to rectify any mistake or omission. Washington Water Power Co. v. Kootenai
Environmental Alliance,59l P.2d I22,126 (1979); IDAPA 31.01.01 .325.The petition must: (1)
specify why "the order ... is unreasonable, unlawful, erroneous or not in conformity with law; (2)
state "the nature and quantity of evidence or argument the petitioner will offer if reconsideration
is granted;" and (3) "state whether the petitioner ... requests reconsideration by evidentiary
hearing, written briefs, comments, or interrogatories." Rule 331.01 and.03.
Within 28 days after the petition is filed, the Commission must enter an order stating
whether or not it will reconsider the matter and, if so, how the matter will be reconsidered. . If
reconsideration is granted, the reconsideration process must be completed (i.e., any hearings,
briefs, comments, etc.) within thirteen weeks after the date for filing petitions for reconsideration.
The Commission then has 28 days to issue its final order on reconsideration. See Idaho Code $ 61-
626(2).
ARGUMENT
The Commission should grant the Company's request to clarify the term "overall project
cost cap." More specifically, the Commission should elucidate that the overall project cost cap is
ANSWER TO PETMION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 2
a "hard cap" that prohibits the Company from recovering any amounts above the Company's
project cost estimates.
The Commission should then deny the Company's request to reconsider the Order because,
by agreement, the Company is time-barred from such an action, and its exclusive remedy is
withdrawal from the stipulation. Further, the Company offers no new evidence or argument for
reconsideration that has not already been submitted and considered by the Commission. Rather,
the cap appropriately limits the amount of ratepayer risk in the Company's economic decision to
pursue the new wind and transmission facilities. The Company fails to show the decision is
unreasonable, unlawful, erroneous, or not in conformity with law. The Commission's setting of
the overall cost cap is well-reasoned, supported by the record, is fair, just and reasonable, and in
the public interest. Likewise, the Commission should deny the Company's request to reconsider
Order No. 34104.
Staff's arguments for why the Commission should clarify that Order No. 34104 imposed a
"hard cap," and why the Commission should refuse to reconsider that Order, are detailed below.
1. The Commission Should Clarify that Order No.34104Imposing an Overall Project
Cost Cap Prohibits the Company from Recovering Amounts Above the Company's
Project Cost Estimates.
In its Petition, the Company argues the Commission should clarify that the overall project
cost cap does not actually bar the Company from recovering costs that exceed the Company's
project estimates. Rather, the Company reasons that because the Commission did not use the term
"hard cap," the "overall cost cap ... at the Company's project estimate" allows the Company to
later request further recovery for cost overruns. Thus, according to the Company, the Commission
intended to mean cap as used in the annual RTM cap, which relate to annual costs flowing through
the Company's Energy Cost Adjustment Mechanism that are eligible for later recovery. Finally,
the Company states that the Commission's denial of binding ratemaking treatment supports the
Company's position.
The Company's view that the overall cost cap is not a "hard cap" is belied by the context
of what has taken place and a straightforward reading of the Commission's Order. Throughout
these proceedings, the parties used various terms to describe what the Commission labels as an
"overall cost cap." The parties generally referred to it as a "hard cap." See Tr. 136, 779, 1,239. But
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION J
they also called it a "fixed cap on all capital costs" (Tr. 155), "an overall capital cost cap" (Tr.790,
1238), or simply a "cost cap" (Tr. ll43). In fact, the Company said the "overall cost cap" and
"hard cap" were interchangeable terms. Tr. 108. Additionally, the Company and Staff's Stipulation
stated: "The Stipulating Parties reserve all rights to argue in this case for or against an overall
capital cost cap for construction of the Stipulated Projects." Stipulation at 6. In this regard, the
Company specifically opposed the setting of an "overall cost cap." Tr. 108 ("Staff believes that
the Commission should impose an overall cost cap, and the Company believes that a cost cap is
unprecedented and unnecessary."). This context clarifies that the Commission used "overall cost
cap" to mean an overall cap that limits the amount the Company can recover from customers to
the amount of the Company's project cost estimates. The Commission should clarify its Order to
reflect this.
The Company claims the overall cost cap is like the annual RTM cap. However, as the
Commission is well aware, the annual RTM cap involves the pairing of costs and benefits
associated with the projects on an annual basis. The overall cost cap imposed by the Commission
is just that: an overall cap on project costs. The Commission's Order specifically refers to the
RTM's cost recovery mechanism. See Order No. 34104 at Il-12. On the other hand, the Order
never mentions cost deferral or recovery mechanisms when discussing the overall cost cap. This
is because those provisions are unnecessary: the Commission's "overall cost cap" precludes the
Company from recovering costs that exceed project estimates.
Finally, the Company claims the Commission broadly denied binding ratemaking
treatment because the Commission did not intend to place a true cap on the Company's costs.
Rather, the Company asserts that "the Order appears to be reinforcing the general principle that
the Commission retains the ability to review the reasonableness of the total costs [at a later time]."
Petition at 1. The Company's claim is insupportable. The Commission plainly denied binding
ratemaking treatment relating to the annual RTM cap. The Commission clarifies this, stating: "Our
approval of the RZM does not constitute approval of binding ratemaking treatment." Order No.
34104 at 12 (emphasis added). The Commission never mentions binding ratemaking treatment in
connection with the overall cost cap.
The Commission set an overall project cost cap because the Company justified its proposal
"based on economics rather than a need for generation and capacity)' Id. at ll, 13. If the
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 4
Commission intended a route for further recovery of costs from customers it would have made
such a route clear in its Order. It did not. The lack of such language highlights the Commission's
intent that the Company, not customers, bear the risk of paying for cost overruns.
For the above reasons, the Commission should clarify its Order to spell-out the
Commission's intent to set an overall cost cap that limits the amount the Company can recover to
the amount of the Company's project cost estimates.
2. The Commission Should Deny the Company's Request to Reconsider the Order.
The Commission should deny the Company's request for reconsideration for several
reasons. First, the request for reconsideration is an appeal of the Stipulation, and the Company has
waived it rights to appeal the Stipulation. Second, the Company has presented no new evidence or
argument or otherwise shown the Order is unreasonable, unlawful, erroneous, or not in conformity
with law. Staff's arguments against reconsideration are discussed further below.
a. Under the terms of the approved stipulation, the Company is barred from
bringing this petition for reconsideration, because it failed to timely withdraw
from the Commission-approved stipulation.
The Commission imposed the overall cost cap as a condition of approving the Staff and
Company's Stipulation. Order No. 34104 at 13. (stating "we condition our acceptance of the
Stipulation upon the setting of an overall capital cost cap at the project estimate."). The Company
undermines its argument that the cost cap is unreasonable, given that it voluntary agreed to allow
the Commission to make that determination. In fact, the Company knew such a cap was possible
when it signed a Stipulation that explicitly waived its right to appeal and limited its rights relating
to reconsideration. Specifically, the approved Stipulation states:
25. The Stipulating Parties hereby waive any right they may have to appeal any
portion of this Stipulation or the Order approving the same. If this Stipulation is
challenged by any person not a party to the Stipulation, the Stipulating Parties
reserve the right to file reply comments as they deem appropriate to respond fully
to the issues presented, including the right to raise issues that are incorporated in
the settlement embodied in this Stipulation. Notwithstanding this reservation of
rights, the Stipulating Parties to this Stipulation agree that they will continue to
support the Commission's adoption of the terms of this Stipulation.
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 5
26. ln the event the Commission rejects or modifies any part or all of this
Stipulation, or imposes any additional material conditions on approval of this
Stipulation, each Party reserves the right, upon written notice to the Commission
and the other Stipulating Parties to this proceeding, within 15 days of the date of
such action by the Commission, to withdraw from this Stipulation. In such case, no
Party will be bound or prejudiced by the terms of this Stipulation, and each Party
will be entitled to seek reconsideration of the Commission's order, file testimony as
it chooses, and do all other things necessary to put on such case as it deems
appropriate.
Stipulation at 9. The Company did not provide written notice to the Commission and Staff that it
was withdrawing from the Stipulation within 15 days. Rather, 21 days after the Commission's final
order, the Company filed the pending petition for reconsideration of the Commission-imposed cost
cap condition. Because the Company did not withdraw from the Stipulation prior to seeking
reconsideration, it unequivocally violates the approved agreement of the stipulating parties. The
Stipulation is clear: the Company's sole remedy to the Commission's condition of approval is to
withdraw from the Stipulation within 15 days of the Commission Order. Only after withdrawing
from the Stipulation with proper written notice will "[the Company not be] bound or prejudiced
by the terms of this Stipulation, and ... be entitled to seek reconsideration...." The Company did
not exercise its right to withdraw from the Stipulation, but instead chose to only seek
reconsideration of the Commission's Order approving the agreement. The terms agreed to by the
stipulating parties and approved by the Commission should be enforced by denying the Company's
petition for reconsideration. The failure to withdraw from the Stipulation within l5 days binds the
Company to the terms of the Stipulation and Commissions conditions of approval.
b. The Commission has considered and rejected the Company's arguments about
an overall cost cap.
Notwithstanding the proscribed nature of the petition for reconsideration, the Company
argues that the Commission should reverse its decision to impose an overall cost cap as
unnecessary and unreasonable. In support of its request, the Company restates arguments it has
made throughout these proceedings.
Pursuant to Commission rule, a petition for reconsideration must show the Commission's
order is "unreasonable, unlawful, erroneous, or not in conformity with the law." Rule 331.
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 6
First, the Company states the cap is unnecessary for two reasons: ( I ) because the Company
bears the burden of demonstrating the reasonableness of costs; and (2) a hard cap is unnecessary
to motivate and incent the Company to prudently manage and minimize project implementation
cost. Petition at 9. Regardless of the veracity of these positions, a lack of necessity is not a basis
for appealing a Commission ruling. Furthermore, the Commission's well-reasoned order finds the
cap is appropriate given the economically-driven nature of the project. The Commission articulates
that the overall cost cap appropriately assigns and balances risk, and compels the Company to
adhere to its modeling. The Company's argument is simply that the Commission is wrong; that no
such balancing is required. This assertion was extensively litigated by the parties, considered by
the Commission, and rejected. The Commission should likewise reject the Company's argument
again in sustaining its order.
The Company also argues, again, that an overall cost cap is unreasonably punitive, contrary
to well-established ratemaking principles, and unfair. Petition at 10. This is simply not true. The
record supports the Commission's determination that an overall project hard cap is not
"unprecedented." SeeTr. 1655. In fact, the Company agreed to such a cap in this very matter in
Wyoming. SeeTr.136-137,795. Furthermore, as the Company highlights, Idaho law contemplates
the imposition of such a cap. See Petition at 7 (stating that Idaho Code $ 6l-541 "specifically
authorizes the Commission to establish the maximum amount of costs that the commission will
include in rates...."). Additionally, Idaho Code $ 6l-528 states that "[t]he commission shall have
power, after hearing involving the financial ability and good faith of the applicant and necessity of
additional service in the community to issue [a CPCN], and may attach to the exercise of the rights
granted by said certificate, such terms and conditions as in its judgment the public convenience
and necessity may require.
The Company expresses fear that "the effect of a hard cap is that the Company bears the
risk of increased costs even for events outside of its control." Petition at 10. The Company submits
that such a lack of control should persuade the Commission to shift costs above estimates to
customers. The Company appears to ignore that it controls every manageable aspect of the
projects, including the project timing estimates, construction estimates, contingency plans, and
alternatives. It further controls estimates related to cost/benefits modeling. It has sole control of
planning, execution and potential off-ramps should its calculations change. PacifiCorp customers
ANSWER TO PETMION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 7
have zero control. Unlike typical capital projects, the new wind/transmissions projects here are
based on economics rather than a need for generation and capacity. Order No. 34014 at 13 (stating,
"the justification is economic in nature, as opposed to purely reliable and safe service....").
After considering the nature of the Company's "business decision," the Commission
unambiguously found that an overall cost cap is a fair way to balance risk in the economic project.
Id. The Commission also considered and rejected the Company's arguments about precedent,
fairness, and balancing risk. The Company offers nothing new in its petition beyond a restating of
its previous positions. The Commission should reject them again.
Staff supports the Commission's decision to set an overall cost cap at the Company's
project estimate. The Commission's ruling is reasonable, lawful and without error. The
Commission should thus reject the Company's groundless attempt to shift the risk of its
economically motivated projects from shareholders to customers.
c. Order No.34014 is based on Substantial Evidence
Proper Commission authority should be based upon competent and substantial evidence.
Boise Water Corp. v. Idaho Public Utilities Comm'n,555 P.2d 1,63,169 (1976); Hartwig v. Pugh,
542P.2d 10 (1975). The Commission's authority is valid if it "has not abused or exceeded its
authority or made findings unsupported by substantial evidence or improperly employed its own
methods of rate determination." Intermountain Gas Co. v. Idaho Publtc
Utilities Comm'n,540P.2d775,789 (1975). "Substantial evidence is that which affords a
substantial basis in fact from which the fact in issue can be reasonably inferred." Boise Water
Corp, 555 P.2d at tll.
"In making its determinations the Commission must present in its order the basic (not
merely "ultimate") facts necessary to support reasonably its conclusion regarding facts in issue."
Id. An ultimate fact is generally expressed in the language of a statutory standard, such as the "rate
is reasonable." Id. Basic facts are those upon which the ultimate facts rest - they are more detailed.
Id.
Order No. 34014 unmistakably meets the substantial evidence test regarding the overall
cost cap. In fact, the Order elaborates the Commission's deliberative process in concluding that
the economic nature of the proposal makes the setting of a cost cap appropriate. Considering all
the testimony on this subject, the Commission was persuaded and placed the greater weight on that
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNAT[VE,
RECONSIDERATION 8
testimony arguing for the overall cost cap called for by Staff and supported by the intervenors.
Order No. 34014 at 13 ("The thorough argument and analyses of the issues assisted in our ultimate
decision to impose an overall cost cap set at the Company's overall project estimate.").
CONCLUSION
For the above reasons, the Commission should accept the Company's Petition for
Clarification, clarify that the Order set a "hard" overall cost cap that prohibits the Company from
charging its customers for any costs beyond the Company's estimated project costs, and deny the
Company's Petition for Reconsideration.
Respectfully submitte d thir&uyof Augusr 2018
Brandon
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS ruDAY OF AUGUST 2018, SERVED THE
FOREGOING ANSWER TO PETITION FOR CLARIFICATION OR,IN THE
ALTERNATIVE, RECONSIDERATION, IN CASE NO. PAC-E-17-O'7, BY MAILING A
COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL: ted. u estr';n @) pac i l'icorp.cont
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest @ pacifi corp. com
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD #140
CHESTERFIELD MO 63017E-MAIL: kive lson@)consultbti.!:orn
bcoll in s @) con s u ltbai.cont
ELECTRONIC ONLY
JIM DUKE
IDAHOAN FOODS
E-MAIL: irluke @' iclahoan.cont
ELECTRONIC ONLY
VAL STEINER
NU-WEST INDUSTRIES INC
E-MAIL: r'al. steiner@) itatbs.coln
ANTHONY YANKEL
I27OO LANE AVENUE, UNIT 2505
LAKEWOOD OH 44T07
E-MAIL: tonl' @:' r'11!el.nct
ANSWER TO PETITION
FOR CLARIFICATION OR,
IN THE ALTERNATIVE,
RECONSIDERATION
YVONNE R HOGLE
ASSISTANT GENERAL COUNSEL
ROCKY MOUNTAIN POWER
1407 WN TEMPLE STE 320
SALT LAKE CITY UT 84I16
E-MAIL: Yvonne.hoglc @ pacil icorp.conr
RANDALL C BUDGE
RACINE OLSON NYE & BUDGE
PO BOX 1391
POCATELLO ID 83204-1391
E-MAIL: rctb @' rjtqinglar,i'. nct
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
PO BOX 388
BOISE ID 83701
E-MAIL: rorr @l rvil I i anrst'r raclbu ry.conl
ELECTRONIC ONLY
KYLE WILLIAMS
BYU IDAHO
E-MAIL: u illiar:rskQ hvr-ri.cclu
ERIC L OLSEN
ECHO HAWK & OLSEN
PO BOX 6119
POCATELLO ID 83205
E-MAIL: clo (iechoharvk.corn
BRADLEY MULLINS
1750 SW HARBOR WAY, STE. 450
PORTLAND OR 97204
E-MAIL: hrnr u I I i n s €l llq anaI v'tir-ts.coin
Keri J.
10
Assistant to Brandon Karpen
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