20200521Reply Comments.pdf

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1407 West North Temple, Suite 330
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May 21,2020
VU ELECTRONIC DELIVERY
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
I l33l W Chinden Blvd.
Building 8 Suite 20lA
Boise,lD 83714
Re: CASE NO. PAC-E-20-02
IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER
REQUESTING APPROVAL OF $21.2 MTLLON NET POWER COST
DEFERRAL
Dear Ms. Hanian:
Please find Rocky Mountain Power's reply comments in the above referenced matter.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at (801) 220-
2963.
Very truly yours,
Steward
Vice President,
Enclosures
CC: Ron Williams
Eric Olsen
Randall C. Budge
James R. Smith
"^-D
Adam Lowney (tSB#10456)
McDowell Rackner Gibson PC
419 SW I ls Avenue, Suite 400
Portland, OR 97205
Telephone: [phone]
Fax [phone]
Email: [e-mail]
Emily Wegener Qtro hac vice pending)
1407 West North Temple, Suite 320
Salt Lake City, Utah 841l6
Telephone No. [phone]
Mobile No. [phone]
Email: [e-mail]
Attorneysfor Roclry Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF ROCKY MOUNTAIN POWER
REQUESTING APPROVAL OF $21.2
MILLON NET POWER COST DEFERRAL
) cAsE NO. PAC-E-20-02
)) REPLY COMMENTS OF
) ROCKY MOUNTATN POWER
Pursuant to Rule 202.01(d) of the Rules of Procedure of the Idaho Public Utilities
Commission ("Commission") and the Commission's April 2020 Notice of Modified Procedure,
Rocky Mountain Power a division of PacifiCorp ("RMP" or the "Company") hereby submits its
reply comments in the above-referenced case.
BACKGROUND
On April 1,2020, the Company filed an application ("Application") with the Commission
pursuant to the approved energy cost adjustment mechanism ("ECAM") for authority to adjust
Electric Service Schedule No. 94, Energy Cost Adjustment, ("Schedule 94"), rates to recover
approximately $21.2 million deferred net power costs from the deferral period beginning
January 1,2019 through December 31,2019 ("Deferral Period").
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The ECAM balance of $27.2 million at the end of the Deferral Period included $21.2
million from the Deferral Period, plus $6.1 million remaining balance from prior ECAM filings,
reduced by approximately $0.1 million credit balance in the depreciation regulatory asset. The
Company estimated that the $27.2 million would be reduced by approximately $4.9 million from
the Schedule 94 revenue collections less interest accrued from January I through May 31, 2019,
resulting in an ECAM balance of approximately $22.3 million. This balance was reduced by
approximately $3. I million for tax savings from the 20 I 8 Tax Act resulting in a net balance of
$19.2 million to be collected from customers June 1,2020 through May 31, 2021.
On May 14, 2020, the Commission Staff ("Staff') and PacifiCorp Idaho Industrial
Customers ("PIIC") filed comments responding to the Application. Staff recommended the
Commission approve the Company's Application as filed.
PIIC's comments addressed five issues with the Application: l) repowering lost energy; 2)
repowering test energy; 3) California greenhouse gas allowance purchases and Utah retail net
metering expenses; 4) Grant Meaningful Priority contract assignment; and 5) Lake Side 2 outage.
The Company files the following reply comments in response to these issues.
REPLY COMMENTS
Repowering Lost Energt
PIIC claims that the Company did not mention the cost of lost energy associated with
repowering as a recoverable component of the Resource Tracking Mechanism ("RTM") in its
initial filing in Case No. PAC-E- 17-06. But Mr. Rick Link's direct testimony in that case identified
a change in amount of coal generation due to repowering as well as the lost energy from the wind
turbines. Confidential Figure 3 in Mr. Link's testimony summarizes the change in annual coal
generation from Wyoming coal resources due to wind repowering. The figure shows that re-
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dispatch of Wyoming coal resources leads to increased coal generation before installing the new
equipment at the end of 2019 and 2020 followed by a decrease in generation.l Figure 4 in
Mr. Link's testimony showed the incremental change in wind energy output resulting from the
repowering project depicting a decrease in generation from 2017 through2019.2 These costs of
repowering were included in the economic analysis of the wind repowering projects. The costs of
meeting system balancing needs, which may include the cost of replacement power and the re-
dispatch of thermal resources, was assessed in the System Optimizer model and the Planning and
Risk model based on the estimated wind generation leading up to and during the repowering
construction period. The Commission determined that the repowering project was prudent and in
the public interest. The incremental repowering "lost energy" was considered in the project
economics and should be recovered through the ECAM.
Repowering Tbst Energt
PIIC's claim that net power costs are increased by $4.9 million due to test energy is not
correct. During the deferral period the repowered generators produced energy before being placed
into service, "test energy" which was placed on the grid reducing net power costs. PacifiCorp
capitalizes costs incurred associated with test energy in new facilities (e.g., fuel costs, services
fees, labor costs) to construction work in-progress ("CWIP"), and credits CWIP for the revenue
received or the value of the energy generated. FERC Electric Plant Insffuction 3A,, Components of
Construction Cost, is comprised of a list of direct and overhead costs that are properly includible
in the electric plant accounts. Included in 3,A., subsection 18 - Eamings and Expenses during
Construction, states:
The earnings and expenses during construction shall constitute a component of
construction costs. (a) The earnings shall include revenues received or earnedfor
I Direct testimony of Rick T. Link, page 30-31, Case No. PAC-E-17-06
2 Direct testimony of Rick T. Link, page33-34, Case No. PAC-E-17-06
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power produced by generating plants during the constraction periods and sold or
used by the utility. Were such power is sold to an independent purchaser before
intermingling with power generated by other plants, the credit shall consist of the
selling price of the energt. Where the power generated by a plant under
construction is delivered to and used by the utility for purposes other than
distrtbufion and sale ffor manufocturing or industrial use, for example), the credit
shall be the fair value of the energ/ delivered... (b) The expenses shall consist of
the cost of operating the power plant, and other costs incident to the production
and delivery of the power for which construction is credited under paragraph (a)
above.
When the test energy was generated, net power costs were reduced by $4.9 million, either
by increased sales or reduced purchases of energy. The Company removed those net power cost
savings by increasing net power costs and crediting CWIP per FERC guidelines. Reducing net
power costs would double count the value of the test energy, and therefore P[[C's recommendation
to remove these costs from the ECAM should be denied.
Allocation of California Greenhouse Gas Allowances and Utah Retail Net Metertng Expense
PIIC recommends that costs associated with California greenhouse gas ("GHG") allowance
purchases and the Utah retail net metering program should not be charged to Idaho customers. The
California Independent System Operator ("CAISO") requires the purchase of GHG allowances for
wholesale sales transactions within the state, including transfers in the Western Energy Imbalance
Market ("EIM"). Wholesale sales and purchases with the CAISO benefit all of the Company's
customers. The California GHG obligation of $4.4 million is required for wholesale transactions
and more than offset by EIM savings alone. Including California GHG costs in net power costs is
appropriate. The GHG expense related to wholesale transactions in Califomia and EIM transfers
is separate from the retail GHG program for California customers. Therefore, the California GHG
expense should be included in net power costs as it has been since the EIM began and system
allocated to all states.
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PacifiCorp agrees with PIIC that the Utah retail net metering program should be situs-
assigned to Utah. Indeed, the Utah retail net metering program is situs-assigned to Utah and treated
similarly to other PacifiCorp situs-assigned resources. The $2.4 million system-wide purchased
power expense or $88.86 per MWh for the Utah retail net metering program does not represent the
amount Idaho customers pay. Idaho customers receive an adjustment to net power costs that
reduces the $2.4 million by $1.6 million for a total adjusted expense of approximately $770
thousand or $28.61 per MWh. This reduction brings the net power cost expense to market pricing
and is in-line with the 2017 Multi-State Protocol agreement for allocating expenses and energy
across PacifiCorp's system including situs assigned programs.
Grant Meaningful Priority Assignment
PIIC recommends that $533,333 of Other Revenues be included in net power costs. The
Grant Meaningful Priority ("Grant") contract provides PacifiCorp with an annual option to take
delivery of the contract. PacifiCorp exercised its option to not execute the Grant contract for 2019,
so no costs or revenues impact net power costs in the ECAM. If the Company elects not to take
the contract, it has the right to sell its contract rights to another entity. Because these are not net
power costs the revenues are recorded in FERC account 456 - Other Electric Revenues. The Grant
contract assignment revenue was recorded in FERC Account 456 - Other Electric Revenues, not
FERCAccount46l.l asstatedbyPIIC. FERCAccount456isnotapartofPacifiCorp'snetpower
costs. There were no expenses for the Grant contract during 2019, so these revenues were excluded
from the ldaho ECAM.
Lake Side 2 Outage
PIIC noted that they did not conduct any discovery regarding the outage but requested that
the Company address the prudency of handling the outage in reply comments. The Lake Side
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Block 2 Power Station is a natural gas fired 2xl combined cycle power plant. The facility entered
commercial operation on June 1,2014 and operates in a combination of baseload and cyclic duty.
OnAugust 18,2019, the Lake Side Block 2 steam turbine tripped following a generator
stator fault. Immediate investigation of the protective relays indicated a significant phase-to-phase
and phase-to-ground fault had occurred. The generator protection was confirmed to have operated
correctly and initiated a unit trip within one cycle.
Due to the faults, a systematic partial disassembly of the generator was completed to allow
a unit condition assessment and a root cause failure analysis. The Original Equipment
Manufacturer ("OEM") and a contracted third party consultant concluded that the generator stator
was beyond repair. Along with this, fault debris contamination within the rotor necessitated
replacement of the rotor windings. The OEM replaced the generator stator and repaired additional
generator components, and the unit was retumed to service January 10,2020.
During the outage event, the Company worked with the OEM and third parties to ensure
the unit returned to service as economically, quickly, and safely as possible. This also included the
return of the combustion turbine units to "simple cycle" operation during the majority of the
generator repair.
The OEM performed a root cause analysis, which included the evaluation of sixteen
potential factors. All possible contributors were consequently classified as either "eliminated" or
"low probability". In addition, the OEM reviewed operating history and determined that no mis-
operation had occurred and the unit had continually operated within the design parameters. The
OEM could not identiff a root cause. The Company worked with the OEM to protect the generator
to assure no further damage was caused and bring the generation unit back on-line as soon as it
was safe to do so.
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CONCLUSION
The ECAM allows the Company to collect or credit the difference between the actual net
power costs incurred to serve ldaho customers and the base net power costs collected through rates
assuring customers pay the actual net power costs after sharing.
The Company opposes the adjustments to the ECAM proposed by PIIC for the reasons set
forth above. Thus, the Company respectfully requests that the Commission approve the deferred
balance as filed, and supported by Statr, and approve Electric Service Schedule No. 94 - Energy
CostAdjustment rates effective June l, 2020.
REOUEST FOR RELIEF
Rocky Mountain Power respectfully requests that the Commission issue an order
approving approximately $21.2 million ECAM deferral for the Deferral Period and approve a
3.0 percent increase to Electric Service Schedule No. 94, Energy Cost Adjustment.
DATED this 2l$ day of May,2020
Respectfully submitted,
ROCKY MOUNTAIN POWER
Adam Lowney (ISB#I 0456)
McDowell Rackner Gibson PC
419 SW llftAvenue, Suite 400
Portland, OR 97205
Telephone: [phone]
Fax: [phone]
Email: [e-mail]
Page 7
Emily Wegener Qtro hac vice pending)
1407 WestNorth Temple, Suite 320
Salt Lake City, Utah 84116
Telephone No. [phone]
Mobile No. [phone]
Email: [e-mail]
Attorneys for Roclcy Mountain Power
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