180726 PAC new wind.pdf

Case No. PAC-E-17-07
Order No.: 34104
Contact: Matt Evans
Office: [phone]
Cell: [phone]
www.puc.idaho.gov

PUC grants Rocky Mountain Power CPCNs
for new wind and transmission projects,
sets ratemaking treatment

BOISE (July 26, 2018) – State regulators have approved a Certificate of Public
Convenience and Necessity for Rocky Mountain Power to build three new wind projects
and associated transmission facilities.
The Idaho Public Utilities Commission’s order also spells out a procedure for the utility to
recover its investment in the projects, which have an estimated cost of $2 billion, and
contains a number of conditions intended to protect ratepayers, including a cap on
recoverable costs.
The case dates to July 2017, when Rocky Mountain Power asked the Commission to grant it
a Certificate of Public Convenience and Necessity (CPCN) for the wind projects in Wyoming.
The company also requested CPCNs for transmission facilities associated with the wind
projects, and for Commission approval to subject the expenditures to binding ratemaking
treatment, meaning the company’s investment in the projects would be recoverable from
customers through rates.
Idaho Code requires a regulated utility to obtain a CPCN from the Commission before
constructing certain facilities or infrastructure.
Rocky Mountain Power said in its application that the transmission projects would alleviate
congestion on its transmission system and improve its ability to manage the intermittent
load generated by the new wind turbines, which have a generating capacity of 1,150
megawatts.
Rocky Mountain’s proposal calls for the wind projects to be subsidized by federal
production tax credits for renewable energy if the turbines are operational by Dec. 31,
2020.
Those tax credits, the company said, would provide significant economic benefits to
customers – about $137 million over 30 years.
Criticism of the proposal from intervening parties to the case – Monsanto, Pacificorp’s
Idaho Industrial Customers and the Idaho Irrigation Pumpers Association - focused on the
fact that the projects’ impetus was financial – tied to the federal production tax credits or
PTCs - rather than related to a need for more energy to reliably meet customer demand.
The company contended that acquiring new wind generation is preferential to power
purchases, or “uncommitted front office transactions (FOTs),” in meeting its resource
needs.
Traditionally, the company said, FOTs are among the lowest costs resources available but
the “availability of PTCs changes this dynamic.”
The Commission said this was the crux of the case – determining whether Rocky Mountain
Power had shown it “requires or will require the wind and transmission facilities in order
to adequately, efficiently, justly and reasonably serve its customers and promote the public
health, safety and convenience.”
The Commission found that displacing FOTs with the new wind generation “is fair, just and
reasonable because the costs passed on to customers will likely be demonstrably less.”
The Commission directed the company to track the projects’ costs and benefits through the
Energy Cost Adjustment Mechanism until they can be incorporated into base rates. The
resource tracking mechanism that will determine costs and benefits will include a 9.2
percent return on investment, which equates to a 6.96-percent return on investment after
taxes.
The costs included in these mechanisms will not exceed benefits; as a result, customer rates
will not increase due to these approved projects before the next general rate case.
The Commission’s order also calls for Rocky Mountain Power to bear the risks associated
with any portion of the wind projects that do not qualify for the production tax credits due
to delays.
The cost cap implemented by the Commission limits the expenses passed on to customers
to the company’s estimated project costs.
In its order, the Commission said Rocky Mountain Power had offered “substantial and
competent” evidence that “seizing this opportunity will result in a better outcome for its
customers.”
“However, because the justification is economic in nature, as opposed to purely reliable and
safe service, we find that the risk inherent in this business decision should not be entirely
borne by the ratepayers,” the Commission said.
Rocky Mountain Power provides electric service to approximately 75,400 customers in
Idaho. That is approximately 7 percent of its customer base across a service territory that
includes Utah and Wyoming.
The Commission’s order and all other documents filed in this case are available on the
Commission's website, here. Or go to www.puc.idaho.gov, click on "Open Cases" under the
"Electric" heading and scroll down to case number PAC-E-17-07.