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HomeMy WebLinkAbout20200828Phase II Comments-Redacted.pdf 1407 West North Temple, Suite 330 Salt Lake City, Utah 84116 August 28, 2020 VIA ELECTRONIC DELIVERY Jan Noriyuki Commission Secretary Idaho Public Utilities Commission 11331 W. Chinden Blvd. Building 8 Suite 201A Boise, ID 83714 Re: CASE NO. PAC-E-18-08 IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER FOR AUTHORIZATION TO CHANGE DERECIATION RATES APPLICABLE TO ELECTRIC PROPERTY Attention: Ms. Noriyuki Pursuant to Order No. 34754, please find Rocky Mountain Power’s Phase II comments in the above referenced matter. Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at (801) 220- 2963. Very truly yours, Joelle Steward Vice President, Regulation RECEIVED 2020 August 28 PM 4:09 IDAHO PUBLIC UTILITIES COMMISSION 1 Emily Wegener Rocky Mountain Power 1407 West North Temple, Suite 320 Salt Lake City, Utah 84116 Telephone No. (801) 220-4526 Emily.wegener@pacificorp.com Attorney for Rocky Mountain Power BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER FOR AUTHORIZATION TO CHANGE DERECIATION RATES APPLICABLE TO ELECTRIC PROPERTY ) ) ) ) ) CASE NO. PAC-E-18-08 PHASE II - INCREMENTAL DECOMMISSIONING COSTS Rocky Mountain Power, a division of PacifiCorp (the “Company”) pursuant to the Idaho Public Utilities Commission (“Commission”) Order No. 34754, which approved changes to depreciation rates and authorized Phase II to evaluate decommissioning costs and determine the appropriate ratemaking treatment for them. Phase II is to evaluate the decommissioning costs in the 2018 Depreciation Study, filed on September 11, 2018, compared to the costs in the 2020 decommissioning studies (“Incremental Decommissioning costs”) filed on January 17, 2020, and March 16, 2020, (collectively “2020 Decommissioning Studies”). The Company respectfully submits the following proposal for ratemaking treatment of the Incremental Decommissioning costs. 1. Rocky Mountain Power is an electrical corporation and public utility operating in the state of Idaho and is subject to the jurisdiction of the Commission with regard to its 2 public utility operations. PacifiCorp has two retail electric service divisions, Rocky Mountain Power and Pacific Power. Rocky Mountain Power provides retail electric service in Idaho, Utah, and Wyoming, and Pacific Power provides retail electric service in California, Oregon, and Washington. 2. Communications regarding this Application should be addressed to: Ted Weston Emily Wegener Rocky Mountain Power 1407 West North Temple, Suite 320 Salt Lake City, Utah 84116 E-mail: ted.weston@pacificorp.com E-mail: Emily.wegener@pacificorp.com In addition, Rocky Mountain Power requests that all data requests regarding this Application be addressed to: By email (preferred) datarequest@pacificorp.com By regular mail Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 Informal inquiries related to this Application may be directed to Ted Weston, at (801) 220-2963. 3. Through PacifiCorp’s Multi-State Process negotiations, the signatories to the 2020 PacifiCorp Inter-Jurisdictional Allocation Protocol (“2020 Protocol”) agreed that the Company should conduct a thorough study of decommissioning and site reclamation costs for 3 certain coal-fueled generation resources.1 On January 17, 2020, and March 16, 2020, the Company filed copies of the 2020 Decommissioning Studies with the Commission. 4. The 2020 Decommissioning Studies were performed by independent engineering consultant Kiewit Engineering Group Inc., with input from the Company and independent contractors with direct experience decommissioning coal-fueled facilities and site reclamation. The studies included review and input from an independent demolition contractor North American Dismantling Corporation and independent hazardous materials abatement contractors Winter Environmental and ARC Abatement. Two additional independent demolition contractors, Bierlein Companies, Inc. and Brandenburg Industrial Service Company, also reviewed the 2020 Decommissioning Studies results. 5. The scope of work for the 2020 Decommissioning Studies included the following requirements: (1) provide an owner-informed, overall decommissioning design basis to be used for all of the generating facilities in the study. The design basis established the fundamental assumptions for the cost estimates provided in the final 2020 Decommissioning Studies; (2) provide a Class 3 cost estimate to identify all of the costs for the decommissioning, demolition, reclamation, and remediation of the Hunter, Huntington, Dave Johnston, Jim Bridger, Naughton, Wyodak, and Hayden, and Colstrip generating facilities; (3) provide a narrative report describing the entities involved, process used to prepare the report, and assumptions; (4) provide a spreadsheet report incorporating the Association for the Advancement of Cost Engineering (“AACE”)2 Class 3 cost estimates inclusive of certain 1In the Matter of Rocky Mountain Power's Application for Approval of the 2020 PacifiCorp Inter-Jurisdictional Allocation Protocol, Case No. PAC-E-19-20, Order No. 34649 (Apr. 22, 2020) (2020 Protocol Sections 4.3.1.1- 4.3.1.2). 2 AACE is a 501(c)(3) non-profit professional association founded in 1956 that offers publications, practice guides, education, certification and recommended practices for cost estimating. 4 owner provided Asset Retirement Obligation (“ARO”) cost estimates as verified by the third- party study provider; and (5) provide cost estimates based on fourth quarter 2019 dollars. 6. PacifiCorp’s owned, but not operated, Cholla Unit 4 and Craig Units 1 and 2 were not included in the 2020 Decommissioning Studies because those units had common depreciable lives proposed for all states in the most recent depreciation study and common retirement dates in the 2019 Integrated Resource Plan.3 7. Arizona Public Service Company, the operator of the Cholla generation facility, has retained APTIM Corporation to study the decommissioning and demolition costs for the entire Cholla generation facility, including Cholla Unit 4. A decommissioning and demolition study for the Craig facility will be completed by no later than 2024 in accordance with the 2020 Protocol. 8. The 2020 Decommissioning Studies provide an AACE Class 3 estimate for demolition, salvage, and scrap costs for the facilities studied. An AACE Class 3 cost estimate has an expected accuracy of minus 20 percent to plus 30 percent. 9. The decommissioning cost estimates included in the 2018 Depreciation Study were extrapolated from AACE Class 5 estimates for demolition of a limited subset of PacifiCorp’s owned and operated coal-fueled facilities. A Class 5 study has an expected accuracy of minus 50 percent to plus 100 percent. It should also be noted that the underlying scope and design basis for the previous decommissioning cost estimates was refined and expanded in response to scoping feedback from stakeholders during the Multi-State Process negotiations. 3 PacifiCorp’s Integrated Resource Plan (IRP) for 2019, Case No. PAC-E-19-16 (Oct. 18, 2019). 5 10. The differences between the previous estimates and the current 2020 Decommissioning Studies are primarily in the method, estimate class, scope, assumptions for ARO and environmental liabilities, site reclamation, owner’s costs and contractor indirect costs. 11. The previous estimates developed demolition costs and salvage values for three coal-fueled generating facilities that were intended to be generally representative of the broader coal-fueled generating fleet. The cost of demolition and salvage for the generating facilities that were not directly studied were extrapolated to establish estimates using generally comparable generating facilities that had been studied. The 2020 Decommissioning Studies estimate the cost and salvage values for each generating facility individually. 12. The scope of the previous estimates was focused primarily at a facility level and limited to individual generating units. The previous estimates did not include infrastructure and utilities outside the plant perimeter. The 2020 Decommissioning Studies focused on individual units as well as all common plant facilities, both inside and outside the facility perimeter. 13. During the time between the previous estimates and the 2020 Decommissioning Studies, the scope and cost of AROs changed as existing obligations were completed and new obligations were incurred. In addition, the scope of the current studies included reviewing the cost of the Company’s ARO estimates. Where the consultant’s estimate for an ARO was significantly different than the Company’s estimate, the consultant included their estimate for the ARO in the 2020 Decommissioning Studies. The net result was a total increase of approximately $15 million. 6 14. Previous estimates did not include site reclamation. The 2020 Decommissioning Studies include site reclamation at an estimated average cost of $9.8 million per generating facility. Reclamation scope assumptions include grading to meet permit conditions and match existing terrain as much as reasonably possible, installing top soil, and seeding for native plants. Top soil installation and seeding was not estimated for Wyodak, due to its co-location with non-PacifiCorp generation resources in an energy hub. 15. The previous estimates did not include owner’s project development and oversight costs or itemized competitive market contractor indirect costs. The 2020 Decommissioning Studies includes owner’s project development and oversight costs. Owner’s costs include the cost of preparing the facility for the work, project management, long-lead permitting, and site demolition management. 16. Attachment No. 1 summarizes the results of the 2020 Decommissioning Studies by major category by plant excluding certain closure-related costs that may be considered outside of decommissioning costs or require additional steps to refine their accuracy. 17. The decommissioning costs include the costs to: (1) develop the decommissioning project including the site investigation; (2) decommission the facility, including decontaminating and preparing the facility for the demolition contractor; (3) dismantle and demolition of the facility less the offset value of salvage and scrap; (4) complete ARO, site remediation, and site reclamation; and (5) estimate competitive market contractor margin and indirect costs. The costs and offsets were adjusted to PacifiCorp’s ownership values for each facility studied. 18. Demolition costs are offset by the value of salvage and scrap. Estimated salvage value is based on the projected value of equipment, materials, and commodities that could be 7 sold. Estimated scrap value is based on the estimated then-current market prices of steel, titanium, copper based metals, and other valuable metals. 19. Other costs incorporated in the 2020 Decommissioning Studies that may be considered outside of decommissioning costs include: (1) assets for which cost recovery is accounted for through mechanisms other than depreciation; (2) assets that do not present an immediate hazard, nuisance, or need to decommission and remediate, including asbestos coated piping; (3) coal pile subsurface excavation and remediation and above-ground asbestos remediation costs that have been estimated, but will be further evaluated in the next steps; and (4) material and supply inventory and rolling stock dispensation. 20. The Company proposal does not seek recovery of the Other Decommissioning costs at this time; they are not part of the costs summarized in Attachment 1 and 2. The Company continues to evaluate these other costs, recovery will be addressed in future proceedings. 21. The 2020 Decommissioning Studies also assumed removal of 10 feet of coal- laden soil under the current coal piles at each facility. The Company plans to conduct a coal pile boring study to improve the coal pile subsurface excavation, remediation, and haul off cost estimate for each facility studied. The Company also plans to conduct an asbestos study for each facility studied to improve asbestos abatement costs. 22. The Company contemplates an update of the 2020 Decommissioning Studies in 2024 to address the Craig, Hunter, Huntington, and Wyodak coal-fueled resources. That study will update the estimated decommissioning costs so that depreciation rates for Craig4 and the longer-lived resources (i.e. Hunter, Huntington, and Wyodak) can be updated to reflect 4 PacifiCorp’s ownership share is 19 percent of Craig Unit 1 and 19 percent of Craig Unit 2. 8 more accurate and contemporaneous decommissioning estimates. Further, the operator of Cholla Unit 4 is separately estimating decommissioning and site reclamation costs for that unit. 23. The 2020 Decommissioning Studies also identified other plant closure costs that are necessary for the Company to fully recover all costs associated with closing a plant. For example, each generation plant has a certain level of materials and supplies inventory that is required to operate the plant. In the event of a plant closure, those material and supplies will no longer be required and often cannot be absorbed for use at a different generation facility. Given those circumstances, the Company would seek recovery of the unusable material and supplies inventory in addition to all of the other incurred or expected plant closure costs. As identified in the 2020 Decommissioning Studies, there are a significant amount of other plant closure costs that will need to be addressed in a future proceeding. 24. Attachment 2 summarizes the Incremental Decommissioning costs by plant with the annual amount on a total Company and Idaho allocated basis. The Incremental Decommissioning costs for the plants included in the study are approximately $454 million. The annual cost was calculated by dividing the Incremental Decommissioning costs by the remaining life of the last retired unit of the plant, based on the lives assumed in the 2018 Depreciation study. 25. Idaho’s allocation of the Incremental Decommissioning costs based on the 2020 Decommissioning Studies is approximately $2.3 million per year. The decommissioning costs collected in rates would be deferred to a regulatory liability account that would be reduced by actual decommissioning costs as incurred by the Company. 26. On June 15, 2020, the Company filed a Stipulation between parties in this case for new depreciation rates from the 2018 depreciation study. To enable the Company to delay 9 filing a rate case in 2019 with rates effective January 1, 2021, the Stipulating Parties agreed that the Company could defer incremental depreciation expense for one year during calendar year 2021. 27. The Company strives for consistent treatment among its states on system allocated assets, therefore it requests that amortization of the Incremental Decommissioning costs begin January 1, 2021, aligned with the new depreciation rates authorized by Order No. 34754.5 28. Consistent with the Commission-approved treatment of the incremental depreciation expense, the Company proposes that Idaho’s allocation of Incremental Decommissioning costs of $2,291,178 also be deferred during calendar year 2021 to be collected in customers’ rates beginning with the rate effective date of the Company’s next general rate case. The amortization period to recover the deferral would be determined in that case. III. REQUEST FOR RELIEF Rocky Mountain Power respectfully requests that the Commission approve the Incremental Decommissioning costs reflected in the 2020 Decommissioning Studies and authorize the Company to create a regulatory asset to defer Idaho’s allocated share of annual amortization expense of $2,291,178 of the Incremental Decommissioning costs during calendar year 2021. 5 In the Matter of the Application of Rocky Mountain Power for Authorization to Change Depreciation Rates Applicable to Electric Property, Case No. PAC-E-18-08. 10 DATED this 28th day of August, 2020. Respectfully submitted, ROCKY MOUNTAIN POWER ______________________________ Emily L. Wegener 1407 West North Temple, Suite 320 Salt Lake City, Utah 84111 Telephone No. (801) 220-4526 emily.wegener@pacificorp.com Attorney for Rocky Mountain Power CONFIDENTIAL Attachment 1 2020 Decommissioning Summary CO N F I D E N T I A L Ca s e N o . P A C - E - 1 8 - 0 8 - P h a s e I I At t a c h m e n t N o . 1 - 2 0 2 0 D e c o m m i s s i o n i n g S t u d i e s      De s c r i p t i o n Hu n t e r H u n t i n g t o n D   J o h n s t o n J   B r i d g e r N a u g h t o n W y o d a k H a y de n C o l s t r i p   3 & 4 † 1 S i t e   I n v e s t i g a t i o n   a n d   D e v e l o p m e n t   2 D e c o m m i s s i o n i n g   ‐   O w n e r   s c o p e 3 P r e ‐ d e m o l i t i o n   D e c o n t a m i n a t i o n 4 N e t   o f   D e m o l i t i o n ,   S a l v a g e ,   a n d   S c r a p 5 R e c l a m a t i o n 6 D e m o l i t i o n   C o n t r a c t o r   P l a n t   S p e c i f i c   I t e m s De m o l i t i o n   C o n t r a c t o r   S u b t o t a l   ‐   C a t e g o r i e s   3   t h r u   6   a b o v e Gr o s s   C o s t Sa l v a g e / S c r a p   O f f s e t Ne t   C o s t 7 O w n e r   P l a n t   S p e c i f i c   A R O s 9 D e m o l i t i o n   C o n t r a c t o r   P r o j e c t   I n d i r e c t s 10 B AS E   E S T I M A T E   S u b t o t a l ,   b e f o r e   C o n t i n g e n c y Gr o s s   C o s t Sa l v a g e / S c r a p   O f f s e t Ne t   C o s t 11 C o n t i n g e n c y 12 N e t   C o s t 13 P a c i f i C o r p   O w n e r s h i p   P e r c e n t a g e   o f   t h e   P l a n t 84 . 6 8 7 % 1 0 0 . 0 0 0 % 1 0 0 . 0 0 0 % 6 6 . 6 6 7 % 1 0 0 . 0 0 0 % 8 0 . 0 0 0 % 1 7 . 5 0 0 % 1 0 . 0 0 0 % 14 P a c i f i C o r p   S h a r e   o f   B A S E   E S T I M A T E   T o t a l ,   i n c l u d i n g   C o n t i n g e n c y  Gr o s s   C o s t Sa l v a g e / S c r a p   O f f s e t Ne t   C o s t †  ‐   C o l s t r i p   U n i t   1   ‐   4   c o m m o n   f a c i l i t y   c o s t s   c o n v e r t e d   t o   C o l s tr i p   U n i t   3   ‐   4   c o s t s   b y   m u l i t p l y i n g   b y   5 8 % . REDACTED Attachment 2 Incremental Decommissioning Costs Rocky Mountain Powe ttachment No. 2 Incremental Decommissioning Costs 2018 Depreciation Stud - Phase II SG Allocation Facto 5.911% Plant Plant Closure Date Remaining Life (Years) 2018 Depreciation Study Estimated Total Plant Decommissioning 2020 Engineering Decommissioning Study Incremental Decommissioning Costs Total Company Annual Amount Idaho Allocated Annual Amount Hunte 2042 22 50,022,000 109,400,262 59,378,262 2,699,012 159,542 Huntin ton 2036 16 40,256,000 111,919,004 71,663,004 4,478,938 264,756 Dave Johnston 2027 7 26,095,000 101,989,356 75,894,356 10,842,051 640,887 Jim Brid er 2037 17 52,662,000 156,984,308 104,322,308 6,136,606 362,742 Nau hton 2029 9 62,267,000 158,991,849 96,724,849 10,747,205 635,281 W odak 2039 19 7,138,000 30,690,185 23,552,185 1,239,589 73,274 Ha den 2030 10 352,000 14,093,486 13,741,486 1,374,149 81,228 Colstrip 2027 7 12,685,000 21,385,311 8,700,311 1,242,902 73,469 Total 251,477,000 705,453,761 453,976,761 38,760,451 2,291,178 Generating Unit Plant 2018 Depreciation  Study ‐ Depreciable  Life 2016 $/kW Net  Dependable  Capacity Estimated Unit  Decommissioning Estimated Total Plant Decommissioning Cholla 4 Cholla 2025 51.46 395.0            20,328,000             Cholla Cholla 20,328,000              Dave Johnston 1 Dave Johnston 2027 34.25 106.0            3,630,000                 Dave Johnston 2 Dave Johnston 2027 34.25 106.0            3,630,000                 Dave Johnston 3 Dave Johnston 2027 34.25 220.0            7,534,000                 Dave Johnston 4 Dave Johnston 2027 34.25 330.0            11,301,000             Dave Johnston Dave Johnston 26,095,000              Hunter 1 Hunter 2042 43.19 418.1            18,060,000             Hunter 2 Hunter 2042 43.19 269.0            11,618,000             Hunter 3 Hunter 2042 43.19 471.0            20,344,000             Hunter Hunter 50,022,000              Huntington 1 Huntington 2036 44.29 459.0            20,327,000             Huntington 2 Huntington 2036 44.29 450.0            19,929,000             Huntington Huntington 40,256,000              Jim Bridger 1 Jim Bridger 2028 37.21 354.0            13,172,000             Jim Bridger 2 Jim Bridger 2032 37.21 359.3            13,370,000             Jim Bridger 3 Jim Bridger 2037 37.21 348.7            12,973,000             Jim Bridger 4 Jim Bridger 2037 37.21 353.3            13,147,000             Jim Bridger Jim Bridger 52,662,000              Naughton 1 Naughton 2029 97.75 156.0            15,249,000             Naughton 2 Naughton 2029 97.75 201.0            19,648,000             Naughton 3 Naughton 2029 97.75 280.0            27,370,000             Naughton Naughton 62,267,000              Wyodak Wyodak 2039 26.63 268.0            7,138,000                 Wyodak Wyodak 7,138,000                Colstrip 3 Colstrip 3/4 2046 85.71 74.0              6,342,500                 Colstrip 4 Colstrip 3/4 2046 85.71 74.0              6,342,500                 Colstrip 3/4 Colstrip 3/4 12,685,000              Craig 1 Craig 2025 12.37 82.33            1,018,000                 Craig 2 Craig 2026 12.37 82.52            1,021,000                 Craig Craig 2,039,000                Hayden 1 Hayden 2030 4.50 45.1              203,000                    Hayden 2 Hayden 2030 4.51 33.01            149,000                    Hayden Hayden 352,000                   Gadsby 1 Gadsby 2032 39.11 64.0              2,503,000                 Gadsby 2 Gadsby 2032 39.12 69.0              2,699,000                 Gadsby 3 Gadsby 2032 39.12 104.5            4,088,000                 Gadsby Gadsby 9,290,000                Blundell 1 Blundell 2037 139.39 23.00            3,206,000                 Blundell 2 Blundell 2037 139.30 10.00            1,393,000                 Blundell Field Blundell 2037 2,140,000                 Blundell Blundell 6,739,000                Fleet 46.7              6,205.9        289,873,000           289,873,000           Page 1 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 28th of August, 2020, I caused to be served, via electronic mail a true and correct copy of Rocky Mountain Power’s Phase II Comments in Case No. PAC-E-18-08 to the following: Service List IDAHO IRRIGATION PUMPERS ASSOCIATION, INC. Eric L. Olsen (C) ECHO HAWK & OLSEN, PLLC 505 Pershing Ave., Ste. 100 P.O. Box 6119 Pocatello, Idaho 83205 elo@echohawk.com Dr. Lance D. Kaufman (C) 4801 W. Yale Ave. Denver, CO 80219 lance@aegisinsight.com Anthony Yankel (C) 12700 Lake Avenue, Unit 2505 Lakewood, Ohio 44107 tony@yankel.net MONSANTO COMPANY Randall C. Budge (C) Racine, Olson, Nye & Budge, Chartered P.O. Box 1391 201 E. Center Pocatello, Idaho 83204-1391 rcb@racinelaw.net Thomas J. Budge (C) Racine, Olson, Nye & Budge, Chartered P.O. Box 1391 201 E. Center Pocatello, Idaho 83204-1391 tjb@racinelaw.net BAI Maurice Brubaker (C) 16690 Swingley Ridge Rd. #140 Chesterfield, MO 63017 mbrubaker@consultbai.com Brian Collins 16690 Swingley Ridge Rd. #140 Chesterfield, MO 63017 bcollins@consultbai.com PIIC Ronald L. Williams (C) Williams Bradbury, P.C. P.O. Box 388 Boise ID, 83701 ron@williamsbradbury.com Jim Duke Idahoan Foods jduke@idahoan.com Kyle Williams BYU Idaho williamsk@byui.edu Val Steiner Nu-West Industries, Inc. val.steiner@agrium.com Page 2 of 3 IDAHO CONSERVATION LEAGUE Benjamin J. Otto (C) 710 N 6th Street Boise, ID 83702 botto@idahoconservation.org SIERRA CLUB Matthew Gerhart (CO Bar #50908) Sierra Club 1536 Wynkoop St., Ste. 200 Denver, CO 80202 matt.gerhart@sierraclub.org Ana Boyd Sierra Club 2101 Webster St., Ste. 1300 Oakland, CA 94612 ana.boyd@sierraclub.org COMMISSION STAFF Edward Jewell (C) Deputy Attorney General Idaho Public Utilities Commission 472 W. Washington (83702) PO Box 83720 Boise, ID 83720-0074 edward.jewell@puc.idaho.gov ROCKY MOUNTAIN POWER Ted Weston Rocky Mountain Power 1407 West North Temple, Suite 320 Salt Lake City, Utah 84116 ted.weston@pacificorp.com Emily Wegene Rocky Mountain Power 1407 West North Temple, Suite 320 Salt Lake City, Utah 84116 emily.wegener@pacificorp.com D. Matthew Moscon (#6947) Stoel Rives, LLP 201 South State Street, Suite 1100 Salt Lake City, Utah 84111 matt.moscon@stoel.com Lauren Shurman (#11243) Stoel Rives, LLP 201 South State Street, Suite 1100 Salt Lake City, Utah 84111 lauren.shurman@stoel.com Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 datarequest@pacificorp.com Page 3 of 3 Dated this 28th day of August, 2020. __________________________________ Katie Savarin Coordinator, Regulatory Operations