20210519Comments.pdf

--,-'-;r/l-li,. .,-i:fiJDAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
[phone]
IDAHO BAR NO. 9917
IN THE MATTER OF ROCKY MOUNTAIN
POWER'S APPLICATION FOR APPROVAL
OF THE TRANSFER OF THE LOWER
KLAMATH HYDROELECTRIC PROJECT
GENERATING FACILITIES
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Street Address for Express Mail:
I I33I W CHINDEN BVLD, BLDG 8, SUITE 201-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE TDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. PAC.E.21.O1
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 January 14,2021, PacifiCorp, dlblal Rocky Mountain Power ("Rocky Mountain Power"
or "Company") applied to the Commission for approval of the Property Transfer Agreement
("Transfer Agreement") between the Company and the Klamath River Renewal Corporation
("Renewal Corporation").
The Transfer Agreement provides for transfer of four hydroelectric dams-J.C. Boyle,
Copco No. 1, Copco No. 2, and Iron Gate (collectively, "Lower Klamath Project")-from the
Company to the Renewal Corporation, along with approximately 8,000 acres of real property and
personal property associated with the dams. Application at l. The Company states that approval of
the Transfer Agreement is necessary for dam removal to begin. Id. at 16.
The Klamath Hydroelectric Settlement Agreement ("KHSA") was executed by the
Company and 48 parties, including the states of Oregon and California, the U.S. Department of
ISTAFF COMMENTS MAY 19,2021
Interior, the U.S. Department of Commerce's National Marine Fisheries Service, several Native
American tribes, and irrigation, conservation, and fishing groups in 2010. Id. at 4-5. The KHSA
provides $450 million in public funds to cover the costs of dam removal. Id. at 5. The Company
will collect $200 million from Oregon and California customers through dam removal surcharges,
and the remaining $250 million would be funded through California bond funding. Id. at 5,7. The
Company is not requesting dam removal cost recovery from ldaho customers. 1d
The KHSA was amended in 2016. The amended KHSA relies on Federal Energy
Regulatory Commission's ("FERC") authority under the Federal Power Act ("FPA") to review and
approve the license transfer and surrender. Id. In July 2020, FERC approved a partial transfer of
the Lower Klamath Project license from the Company to the Renewal Corporation but required the
Company to remain as a co-licensee. Id. at 10. To satisfu the Company's internal requirements
regarding the KHSA, and to satisff FERC's concerns, the Company, the states of Oregon and
California, the Renewal Corporation, the Karuk Tribe, and Yurok Tribe entered into a
Memorandum of Agreement, which removes the Company from the FERC license and makes the
states and the Renewal Corporation co-licens ees. Id. at I 0- I I . A new license transfer application
was submitted to FERC on January 13,2021. Id. at ll.
The Company will transfer its property interests in the Lower Klamath Project to the
Renewal Corporation once all anticipated FERC Orders and state disposition approvals are secured.
Id. at 12-13. Under the FPA, a license transferee must show it holds free title to the properties
subject to the license before the license transfer can be effective. Id. at 13. The Company seeks
state approvals of its Transfer Agreement with the Renewal Corporation so property transfer can
occur when the license transfer is accepted. 1d
STAFF ANALYSIS
Staff has reviewed the proposed transfer to Renewal Corporation and believes that Idaho
customers will not be harmed from the transaction. Staff also believes the proposed transfer meets
the statutory requirements of ldaho Code $61-328 and thus recommends approval of the
Company's Application.
2STAFF COMMENTS MAY I9,2O2T
PUBLIC INTEREST
The Company filed its Application for approval under the Idaho Electric Utility Asset
Transfer statute, Idaho Code $ 61-328. The Company states the transfer of the Lower Klamath
Project dams and related property to the Renewal Corporation is in the public interest because it is
lower cost and lower risk than relicensing the dams. The Lower Klamath Project has been
operating on annual licenses approved by FERC since the original license issued in 1954 expired in
2006. Additionally, the Company explains that the transfer will not impact its capability to provide
service to Idaho customers or increase their rates and shields Idaho customers from costs and
liabilities associated with dam removal. Id. at2.
Idaho Code $ 6l-328 requires the Commission to conduct a public hearing when an electric
utility "sells, leases, assigns, or transfers" property located in ldaho. Because the Lower Klamath
Project property being transferred is not located within the State of Idaho, Staff believes that a
customer notice, press release or a public hearing are not required. Staff has reviewed the proposed
transaction and believes that it supports the intent of the Electric Utility Asset Transfer statute and
is consistent with prior Commission orders.
ACCOUNTING TREATMENT
The Company is not seeking authorization for any accounting treatment or cost recovery
associated with transfer of the Lower Klamath Project property at this time. The dam removal fund
has been funded by Oregon and California ratepayers, along with State of California bonds. With
funding already secured, recovery from Idaho ratepayers is not necessary. When the transfer to
Renewal Corporation is approved by FERC, the Company will book any remaining plant balance to
a regulatory asset that will be amortized over the remaining depreciable life.
Staff recommends that recovery of any remaining plant balances be determined in the
Company's next general rate case. The prudency of any additional capital projects for the Lower
Klamath Project will be evaluated for prudence in future general rate cases as the costs are incurred.
Staff also recommends that the Company file bi-annual reports updating the Commission and Staff
on the status of the license transfer filing with FERC and provide information on new capital
projects for the Lower Klamath Project.
JSTAFF COMMENTS MAY t9,2021
LOWER KLAMATH PROJECT HYDROELECTRIC ECONOMIC ANALYSIS
Staff reviewed the economic analysis performed by the Company, including method,
important input assumptions, and the analysis results, to evaluate the removal of the Lower Klamath
Projects and believes it is reasonable. The economic analysis supports the Company's decision.
Based on the analysis, Staff also believes this is in customers' best interests. Staff believes that the
analysis supports Idaho's public interest and that the cost of and rates for supplying electric service
to Idaho customers will not be increased by their removal. Staff evaluated the economic analysis
by reviewing the analysis method, important input assumptions, and the analysis results.
Staff s conclusion is based on its review of the Company's Present Value Revenue
Requirement ("PVRR") method which is similar to the analysis used to determine prudence
of several investments made by the Company over the past several years. See Case Nos.
PAC-E-1 7-06, pAC -E-17 -07, PAC-E-20-03.
In this case, the analysis compared the PVRR cost and benefit streams over a 44-year period
of two scenarios: (1) relicensing the Klamath Projects, and (2) the decommissioning of the projects
through the KHSA. Both scenarios evaluated in the economic analysis were done from the
Company's perspective, thus giving results for determining the long-term impact to the Company's
ratepayers. The results of the analysis showed an approximate PVRR benefit of $3 million to the
Company's customers over the 44-year period in support of the KHSA over relicensing.
The analysis was performed in2010 using the best-known information at the time, paving
the way for the KHSA. Most of the information used in the relicensing scenario came from a2007
FERC Environmental Impact Statement. The majority of information for the KHSA scenario came
from the information agreed to in the KHSA. Examples of the costs and benefits in the analysis
included: (l) potential protection, mitigation, and enhancement measure costs required when
relicensing; (2) reduction in energy production for both relicensing and removal; (3) replacement
renewable energy for both relicensing and removal; and (4) dam removal surcharges recovered
from the Company's Oregon and Califomia customers.
Although the study is about ten years old, Staff believes the 2010 analysis was likely
conservative for two reasons. First, the cost of generation from other sources replacing the projects
were likely overstated due to the cost of renewable generation,r which has decreased significantly in
price, thus making the KHSA scenario more beneficial given today's prices. Second, the cost risk
I The replacement resources used in the PVRR analysis were renewable, non-carbon emitting resources. See Hemstreet , Di at 26.
4STAFF COMMENTS MAY 79,2027
of relicensing a hydroelectric project tends to increase as compared to initial estimates due to
inflation associated with the construction cost of environmental mitigation measures. It is highly
likely these costs today would be significantly higher.
CUSTOMER NOTICE AND PRESS RELEASE
The Company did not issue a customer notice or press release to Idaho ratepayers. As of
filing of Staff s comments, there have been no public comments submitted for this case.
STAFF RECOMMENDATION
Staff recommends approval of the transfer of the Lower Klamath Project to Renewal
Corporation. Staff recommends that prudency of additional capital and the accounting treatment be
determined as appropriate in future general rate cases. Staff also recommends that the Company
provide the Commission and Staff with bi-annual reports on the status of the license transfer filing
with FERC2 and provide information on new capital projects for the Lower Klamath Project.
Respectfully submitted this I4{t' day of May 2021.
Dayn Hardie
Deputy Attorney General
TechnicalStaff: TravisCulbertson
Michael Eldred
Kevin Keyt
i :umisc/comments/pace2 I .6dhksktncme comments
2 FERC License P-2082. FERC approved the proposed amendment to separate the Lower Klamath Project and transfer to a new
license. Pending License No. 14803.
5STAFF COMMENTS MAY 19,2021
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I9TH DAY OF MAY 2021,
SERVED THE FOREGOING COMMENTS OF THE COMI\{ISSION STAFF, IN
CASE NO. PAC.E-21--OI, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I 16
E-MAIL : ted.weston@pacifi corp.com
idahodockets@pacifi corp. com
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@paci fi com.com
JOHN HUTCHINGS
ROCKY MOUNTAIN POWER
I4O7 WN TEMPLE STE 320
SALT LAKE CITY UT 84I 16
E-MAIL: [e-mail]
)onh.^
SECRETARY/ -"/
CERTIFICATE OF SERVICE