171213 Hells Canyon relicensing.pdf

Case No: IPC-E-16-32
Contact: Matt Evans
[phone] office
[phone] cell
www.puc.idaho.gov

Comment deadline set for proposed settlement
approving Hells Canyon relicensing expenses

BOISE (Dec. 13, 2017) – A tentative settlement has been reached in a case involving the
relicensing of Idaho Power’s largest hydropower complex.

The proposed settlement agreement calls for approximately $216.5 million in expenditures related
to the relicensing of the Hells Canyon Complex to be designated as prudently incurred and eligible
to be a factor in determining customer rates at a later date.

That’s a decrease of almost $5 million from Idaho Power’s initial request to the Idaho Public
Utilities Commission, filed in late 2016.

The settlement is now awaiting approval of the Commission, which is accepting public comments
on the case through Jan. 5, 2018.

The Hells Canyon Complex consists of the Brownlee, Oxbow and Hells Canyon dams and is capable
of providing 1,167 megawatts of energy. That is approximately 70 percent of Idaho Power’s annual
hydroelectric generation and 30 percent of its total generating capacity.

Idaho Power is required to obtain a license from the Federal Energy Regulatory Commission
(FERC) in order to operate the dams.

Hells Canyon’s previous 50-year license expired in 2005. The complex has been operating under
annual licenses since then as the company and stakeholders attempt to resolve a number of issues
associated with the license application that Idaho Power filed with FERC in 2003.

Idaho Power said its relicensing work began in 1991 and has included extensive public review and
involved a number of federal and state agencies in Idaho and Oregon.

More than 100 species with endangered, threatened or protective status are present in the
complex’s general area, and Hells Canyon must comply with various provisions of the Wilderness
and Wild and Scenic Rivers Act, the National Historic Preservation Act, the National Environmental
Policy Act, the Endangered Species Act and Clean Water Act, in addition to regulations imposed by
the Environmental Protection Agency.

Idaho Power does not expect a decision from FERC until 2021 at the earliest.

While FERC is responsible for relicensing the complex, the Idaho Public Utilities Commission is
charged with determining whether the utility can recover from customers the costs associated with
obtaining the license.

To be eligible for inclusion in customer rates, a utility must demonstrate that capital costs are
associated with a plant-in-service that is used and useful in the near term, and that those expenses
were prudently incurred.

In December 2016, the company asked the Commission to designate $220,845,830 in relicensing-
related expenses through Dec. 31, 2015 as prudently incurred.

Analysis by Commission staff ensued and settlement discussions were held in October.
The tentative settlement now before the Commission call for $213,606,878 in relicensing expenses
to be approved, along with $2,897,267 in costs tied to a settlement agreement the company reached
in 2003 with Oregon’s Baker County in order to mitigate the economic impact of Hells Canyon on
the surrounding communities.

Among the expenses excluded in the proposed settlement were those that Commission staff
determined were lacking sufficient documentation, were more appropriately categorized as
operations and maintenance expense or for Allowance for Funds Used During Construction
(AFUDC), and those that Commission staff could not confirm to be related to relicensing.

Idaho Power customers already pay for some costs associated with the relicensing effort after a
2009 Commission decision authorized the company to collect approximately $6.5 million annually
from customers as AFUDC related to relicensing.

As of Dec. 31, 2015, customers had paid nearly $58 million toward relicensing, leaving a balance of
almost $162 million.

Idaho Power expects to continue to spend between $20 million and $30 million annually on the
relicensing effort until a new license is issued.

If FERC issues the license in 2021, the company projects its expenses to range from $350 million to
$400 million.

Even with the relicensing costs, Idaho Power contends that the continued operation of the Hells
Canyon Complex is a cost-effective resource for its customers.

Assuming relicensing costs of $400 million, Idaho Power estimates the capital cost for the Hells
Canyon Complex to be $358 per kilowatt. By comparison, the estimated capital cost for a combined
cycle natural gas combustion turbine is $1,145 per kilowatt, according to the company.

Expenses related to the relicensing that are not included in the tentative settlement agreement will
be considered O & M expenses at the time in which they are incurred, according to the settlement
agreement.

The proposed settlement also calls for Idaho Power to file a request for prudence determination on
relicensing costs incurred after Dec. 31, 2015 through a time period no longer than five years from
the date the Commission approves the settlement agreement, if approval occurs.

The proposed agreement does not call for a change to rates.

Customers interested in providing input on this case for the official case record should file
comments. To submit written comments, go to the Commission website, www.puc.idaho.gov, and
click on “Case Comment Form” under the Electric” heading and enter the case number, IPC-E-16-32.
Or go here. Comments can also be mailed to the Idaho Public Utilities Commission, P.O. Box 83720,
Boise, ID, 83720-0074.

Idaho Power’s application and exhibits related to the case and proposed settlement are available on
the commission’s website. Click on “Open Cases” under the “Electric” heading and scroll down to
Case No. IPC_E-16-32. Or go here.