20200407Comments.pdf

STAFF COMMENTS 1 APRIL 7, 2020
DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917

Street Address for Express Mail:
11331 W CHINDEN BVLD, BLDG 8, SUITE 201-A
BOISE, ID 83714

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF ROCKY MOUNTAIN
POWER’S APPLICATION FOR APPROVAL
OF THE 2020 PACIFICORP INTER-
JURISDICTIONAL ALLOCATION
PROTOCOL
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CASE NO. PAC-E-19-20

COMMENTS OF THE
COMMISSION STAFF

STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.

BACKGROUND
On December 3, 2019, Rocky Mountain Power (“Company”), a division of PacifiCorp,
applied to the Commission for approval of the 2020 PacifiCorp Inter-Jurisdictional Allocation
Protocol (“2020 Protocol”). PacifiCorp provides electric service in six states. PacifiCorp
operates as Rocky Mountain Power in Idaho, Utah, and Wyoming, and as Pacific Power in
Oregon, Washington, and California. The Company requests the Commission approve its use of
the 2020 Protocol with an effective date of January 1, 2020.
On January 8, 2020, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Order No. 34525. PacifiCorp Idaho Industrial Customers, Idaho
RECEIVED
2020 April 7,PM2:47
IDAHO PUBLIC
UTILITIES COMMISSION
STAFF COMMENTS 2 APRIL 7, 2020
Conservation League, and Monsanto Company then intervened as parties. See Order Nos. 34555
and 34557.

STAFF REVIEW
Staff recommends that the Commission approve the 2020 Protocol for allocations
beginning January 1, 2020 through December 31, 2023. The 2020 Protocol provides a pathway
for the Company to handle differing state policies. There are limited immediate changes from
the previously approved 2017 Protocol which are discussed in greater detail below.

Differences from the 2017 Protocol (See Section 3 of the 2020 Protocol, Exhibit No.1)
Embedded Cost Differential and Equalization Adjustment
The Embedded Cost Differential (“ECD”) will continue through December 31, 2023
without any changes. This increases Idaho jurisdictional annual revenue requirement by
approximately $800,000. The ECD assigns the majority of the hydro resources originally owned
by Pacific Power and Light (OR, WA, CA, and part of WY) to those jurisdictions, while the
other jurisdictions receive a smaller share of the expenses and benefits of these resources. The
ECD was originally approved in the 2010 Protocol, remained in the 2017 Protocol, and is
proposed to continue in the 2020 Protocol. The ECD and other allocation differences in the 2017
Protocol resulted in an allocation shortfall, that was recovered through the Equalization
Adjustment. The parties agree that the new protocol is moving towards closing the shortfall—
eliminating the need for the Equalization Adjustment in the 2020 Protocol, and therefore the
Equalization Adjustment has been discontinued.

Exiting Coal Plants
The Company’s jurisdictions have conflicting policies on the continued use of coal
resources to supply load. The 2020 Protocol includes a process for states to exit coal plants to
comply with their respective policies. When a Commission issues an order to the Company with
an exit date (“Exit Order”), the Company will file an analysis evaluating whether the plant
should be reallocated to the remaining jurisdictions after the exit date or if the plant should be
closed. It is important to note that approval of the 2020 Protocol does not constitute an Exit
Order. Should one or more of the state commissions disagree with the Company’s analysis, the
STAFF COMMENTS 3 APRIL 7, 2020
Company will work with other jurisdictions in an attempt to find resolution for that coal unit’s
disposition.
Each jurisdiction will have to pay its fair share of each coals unit’s decommissioning
costs. The Company will use decommissioning studies to inform the decommissioning costs that
will be allocated to a jurisdiction issuing an Exit Order. The first decommissioning study was
received January 15, 2020 and covered the Jim Bridger, Dave Johnston, Hunter, Huntington,
Naughton, Wyodak, and Hayden plants. The Company provided a decommissioning study for
Colstrip on March 16, 2020. These studies will be updated no later than June 30, 2024 for Craig,
Hunter, Huntington, and Wyodak. Staff notes that any future Commission approval or
acceptance of these studies does not constitute a prudency determination of costs, only an
amount to be allocated. The Company still bears the risk of proving all costs are prudent.
When a state exits a coal unit, the decommissioning reserve will be transferred to those
states that remain in the unit. This decommissioning reserve will grow at the overall rate of
return for that state since it will not be a reduction to rate base.

QF Allocation
All existing Qualifying Facilities (“QF”) which have a legally enforceable obligation will
continue to be a system resource and allocated as such. Any Power Purchase Agreement signed
with a QF after January 1, 2020 will be situs allocated to the state whose commission approves
the contract. Beginning in 2030, all QF contracts, even those that were system allocated before,
will be situs allocated.
Idaho has the highest QF weighted-average cost per MWh of all jurisdictions served by
PacifiCorp. Because of the higher cost per MWh, the impact of situs allocation of all resources
beginning in 2030 to Idaho is estimated to be $25M annually, until 2032, when the last of the
high cost contracts expire. Keeping a system QF allocation will not be an option because it
would be challenged as unreasonable by other states. This increase in future Idaho revenue
requirement is part of the overall evaluation and has a lower Idaho revenue requirement than
other options. The cost per MWh for each of the jurisdictions is shown on Chart No. 1 below.

STAFF COMMENTS 4 APRIL 7, 2020
Chart No. 1: Cost per MWh by State

Additionally, Idaho produces more energy from QF’s proportionate to its jurisdictional
load when compared to other states PacifiCorp serves. Chart No. 2 below illustrates the ratio of
energy produced by QFs currently under contract in each state over the state’s jurisdictional load.
A ratio of one would mean that a state produces the same percentage of QF energy as the
percentage of the load on the system. Idaho has the highest ratio of all the jurisdictions that
PacifiCorp serves.

Chart No. 2: Ratio of Jurisdictional QF Energy Produced to Jurisdictional Load

CA ID OR UT WA WY
Weighted Average 68.93 76.39 69.10 54.32 34.45 37.16
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
QF Weighted Average Cost
CA OR WA ID UT WY
Ratio 0.26 0.72 0.37 1.61 1.38 0.57
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
QF Energy to Energy Consumed Ratios
STAFF COMMENTS 5 APRIL 7, 2020
Resolved Issues
The 2020 Protocol lists several issues that are resolved past 2023, which only take effect
if the parties agree to a post 2023 agreement. (See Section 5 of the 2020 Protocol, Exhibit No. 1)
Beginning December 31, 2023 all allocations of generation resources on the system at
that time will be fixed at the historical three-year average for of each jurisdiction. There are also
a number of other allocation changes regarding common cost allocations because the System
Generation (“SG”) factor will be replaced by a System Generation Fixed (“SGF”) factor. This
impacts several other factors as detailed below:
• The SGF Factors for each resource will be used to determine an Assigned
Production (“AP”) factor for each unit;
• Accumulated Depreciation for those units will be allocated by the AP factor for
that unit;
• Accumulted deferred income taxes for each unit will be calculated as has been
done historically and then allocated based on the AP factor;
• All Operations and Maintenance (“O&M”) expenses relating to that unit will be
allocated based on the AP factor;
• Any generation-related O&M expenses unallocated by the AP factor will be
allocated on the Assigned Production Operations and Maintenance (“APOM”)
factor. The APOM factor is calculated based on each states relative share of
direct-allocated generation O&M expenses;
• Property tax will continue to be allocated on gross plant using the Gross Plant
System (“GPS”) factor; and
• All other rate-base items will be allocated with the AP factor.
New generation resources will be allocated with fixed factors assigned to each state by a
method that will be determined in the Framework Issues discussed below.
Transmission Cots will be allocated on the System Transmission (“ST”) factor, based on
a classification of 75 percent demand-related and 25 percent energy-related, and based on 12
monthly coincident peaks. All transmission revenues will also be allocated through the ST
factor.
STAFF COMMENTS 6 APRIL 7, 2020
Distribution-related expenses and capital costs will be directly allocated to the best of the
Company’s ability. Those costs that cannot be directly allocated will be based on a System Net
Plant Distribution (“SNPD”) factor.
System overhead costs will be allocated on the System Overhead (“SO”) factor. This is
calculated on a equal weighting of the System Capacity (“SC”) factor, System Energy (“SE”)
factor, and the System Gross Plan Distribution (“SGDP”) factor.
Other minor allocation factor changes:
• Communication equipment that was allocated on the SG factors will be allocated
by the SE factor if the equipment is generation-related or the ST factor if
transmission-related;
• Contribution in Aid of Construction currently using the SG factor will be
allocated by the AP factor if generation-related or the ST factor if transmission-
related;
• Generation-related dispatch will be allocated by the SE factor; and
• Miscelleneous regulatory assets and liabilities, and miscellaneous deferred debits
will be allocated based on the underlying asset or cost. Those currenlty allocated
on the SG Factor will change to the appropriate AP factor for generation-related
allocations and ST factor for transmission-related allocations.
Demand-side management programs and state-specific initiatives will continue to be
allocated on a situs basis..
None of these allocation changes are dramatic changes from principles of allocation or
revenue requirement. In addition, these post 2023 changes will not be implemented without
further agreement between the parties and after Commission approval. At that time, Staff will
have a more clear picture of the revenue requirement impact of these changes.

Framework Issues (Items to be resolved)
There are four major areas that the signatories to the agreement will need to resolve
before the end of this protocol in order to have a durable agreement beyond 2023. (See Section 6
of the 2020 Protocol, Exhibit No. 1)

STAFF COMMENTS 7 APRIL 7, 2020
Resource Planning and New Resources
With states pursuing differing goals for the production and consumption of electricity, the
current method of resource planning and new resource acquisition needs to be altered. The
Company will continue to plan for capacity and operating needs. However, in the future, there
will need to be an additional process that will optimize a risk-adjusted, least-cost resource
portfolio on a system basis, while meeting individual state requirements, and assigning benefits
and costs of new resources added to meet each state’s needs.

Net Power Costs (“NPC”)/ Nodal Pricing Model (“NPM”)
Staff, along with parties subject to this Protocol, have signed a Memorandum of
Understanding (Appendix D) to begin development of a NPM. The NPM would provide a
method to allocate NPC while maintaining the benefits of operating the Company’s resources as
a system. Resources would be assigned to each state in compliance with each state’s policy
mandates. A NPM should allow the Company to allocate NPC on a state-by-state basis
following traditional cost causation principles. The parties agree that all best efforts should be
utilized to implement the NPM by the end of January 2021.

Special Contracts
The Company will continue to work in good faith with Special Contract Customers to
develop proposals on loads, costs, and benefits for presentation to the Multi State Process Work
Group (“MSPWG”). The Company intends to have those proposals presented by September 1,
2021.

Post 2023 Coal Resources Interim Capital Additions
With the potential of some states to exit coal resources earlier than others, it will be
necessary to monitor interim capital additions. In the final years of any resource’s life, the
Company would typically opt to incur additional O&M expense to reliably operate through its
end-of-life instead of investing in new interim capital additions. In this case, when one state
plans to exit a plant before other states, the Company would have incongruent expectations
between jurisdictions. Jurisdictions exiting earlier would expect fewer interim capital additions
and more O&M; jurisdictions remaining in a plant would expect additional interim capital
STAFF COMMENTS 8 APRIL 7, 2020
additions and less O&M. The allocation of those interim capital resources and a resolution to the
problem of incongruent expectations will need to be resolved for a post 2023 allocation
methodology.
(Note: Jurisidiction and state, and the various tenses of each, are used interchangeably in the Post
2023 Coal Reasource Interim Capital Additions section).

Future Meetings
The signatories of the 2020 Protocol will continue to meet regularly as the MSPWG to
work through the Framework Issues to create a post 2023 agreement that will hopefully be
durable and principle-based. The 2017 Protocol required an annual commissioner forum. In the
2020 Protocol, the Commission Forum will no longer be mandated, but can still be convened if
requested by a signatory or a Commission. (See Section 8.2 of the 2020 Protocol Exhibit No. 1)
A schedule of the dates in the 2020 Protocol is included as Attachment A.

STAFF RECOMMENDATIONS
Staff recommends the Commission approve the 2020 Protocol as presented in the
Application.

Respectfully submitted this 7th day of April 2020.

________________________________
Dayn Hardie
Deputy Attorney General

Technical Staff: Joe Terry
Rachelle Farnsworth

i:umisc/comments/pace19.20dhjtrf comments
Attachment A
Case No. PAC-E-19-20
Staff Comments
04/07/20 Page 1 of 1
Major Timeline and Dates for the 2020 Protocol
PacifiCorp
PAC-E-19-20

2020
1/1 Equalization Adjustment Ends
1/1 New QFs begin to be situs assigned

1/15
Decommissioning studies for Jim Bridger, Dave Johnston, Hunter,
Huntington, Naughton, Wyodak, and Hayden units
3/17 Decommissioning study for Colstrip units

12/15 Oregon expected to issue Exit Orders for units it intends to exit by
12/31/2027
12/31 Cholla Unit 4 expected to cease operations
2021

1/31
Nodal Pricing expected to be implemented for dispatch

2/1
PacifiCorp files for approval regarding continued operation and
reassignment of units Oregon filed to exit in 12/15/2020

2/1
PacifiCorp files for approval regarding operations of Haydent Units 1&2

9/1
PacifiCorp provided proposal for Special Contract customers
2022

Continued meetings on Framework Issues
2023
12/31 Oregon and Washington exit Jim Bridger Unit 1

12/31 Oregon expected to issue Exit Orders for units it intends to exit by
12/31/2029
2024
1/1 New allocation method
CERTIFICATE OF SERVICE
CERTIFICATE OF SERVICE

I HEREBY CERTIFY THAT I HAVE THIS 7th DAY OF APRIL 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-19-20, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:

TED WESTON
ROCKY MOUNTAIN POWER
1407 WN TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL: [e-mail]

ADAM LOWNEY
McDOWELL RACKNER GIBSON PC
419 SW 11TH AVE, SUITE 400
PORTLAND OR 97205
E-MAIL: [e-mail]

DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
[e-mail]
BENJAMIN J OTTO
IDAHO CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-MAIL: [e-mail]

RANDALL C BUDGE
THOMAS J BUDGE
RACINE OLSON PLLP
PO BOX 1391
POCATELLO ID 83204-1391
E-MAIL: [e-mail]
[e-mail]

BRUBAKER & ASSOCIATES
BRIAN C COLLINS
MAURICE BRUBAKER
16690 SWINGLEY RIDGE RD, #140
CHESTERFIELD MO 63017
E-MAIL: [e-mail]
[e-mail]

RONALD L WILLIAMS
WILLIAMS BRADBURY PC
PO BOX 388
BOISE ID 83701
E-MAIL: [e-mail]

ELECTRONIC SERVICE ONLY
[e-mail]
[e-mail]
[e-mail]

/s/ Reyna Quintero __
SECRETARY