Idaho Public Utilities Commission.pdf

Idaho Public Utilities Commission
Case No. IPC-E-13-16, Order No. 32912
October 29, 2013
Contact: Gene Fadness [phone], 890-2712

Dates set for Bridger plant public and technical hearings

The Idaho Public Utilities Commission set a Nov. 25 date for a public hearing
regarding Idaho Power Company’s application for a certificate that would allow the
utility to include about $130 million in its rate base for emissions control
improvements to two of the four generating units at the Jim Bridger coal-fired
power plant near Rock Springs, Wyo. If granted, the application does not
immediately impact customer rates.

Idaho Power has one-third ownership of the plant, which it calls the “workhorse” of
its thermal fleet. The two units requiring upgrades have a baseload capacity of 351
megawatts, or about 19 percent of Idaho Power’s total baseload capacity.

The utility is seeking a commission order granting it a Certificate of Public
Convenience and Necessity (CPCN) by no later than Nov. 29 that would give
assurance to the company that its prudently incurred costs in making the plant
upgrades would be included in rates.

A public hearing on the company’s application is set for Nov. 25 at 7 p.m. in the
commission hearing room at 472 W. Washington St. Those not attending the
hearing can also submit written comment through Nov. 25. Written comment
carries the same weight as oral testimony.

The commission is rescheduling the technical hearing to Thursday, Nov. 7, at 9:30
a.m. in the commission hearing room. During the technical hearing, parties to the
case, including Idaho Power, commission staff, the Industrial Customers of Idaho
Power, the Idaho Conservation League and the Snake River Alliance will present
their testimony and exhibits and be available for cross-examination. While the
technical hearing is open to the public, public testimony is reserved for the hearing
on Nov. 25.

In addition to the certificate, Idaho Power seeks a binding commitment from the
commission that the PUC will provide rate treatment for amounts up to the
company’s commitment estimate. Should the project come in over the estimate,
Idaho Power would have to demonstrate that the amounts above the estimate were
needed and prudently incurred. If allowed, the projected $130 million would not be
recovered at once but amortized over several years. Idaho Power estimates the
Idaho portion of rates would increase the utility’s annual revenue requirement by
about $18.8 million.

Idaho Power seeks the binding ratemaking treatment “because of the magnitude of
the investment and the uncertainty surrounding coal-fired generation in today’s
political and social environment.” The utility said it does not believe Idaho law
requires a CPCN for plant upgrades such as this but “requests a CPCN so that a
public process is initiated to provide the company, commission and interested
parties a regulatory forum to fully vet these contested issues.” Typically, a CPCN is
granted for new power plants or major transmission expansion and generally not
for improvements to existing plant.

Idaho Power maintains the emissions improvements to the coal plant are needed to
comply with Clean Air Act regional haze rules that require controls to limit nitrogen
oxide emissions by December 2015 on Jim Bridger Unit 3 and December 2016 on
Unit 4. The rules, drawn up by the State of Wyoming, require that the owners of
the Bridger units install the necessary controls or discontinue operation. If a federal
ratification of the Wyoming rules comes as anticipated on or about Nov. 21, the
rules become federally enforceable. The regional haze rules are designed to
improve visibility in national parks and wilderness areas.

PacifiCorp, as a majority partner and owner-operator of the Bridger facility, is
moving forward with installing the controls. It received a CPCN in both Utah and
Wyoming in May of this year.

Idaho Power claims it considered other options, including replacing the Bridger
output with natural gas-fired generation. The company claims the Bridger upgrades
are the least-cost option. It says the Bridger plant has the lowest dispatch cost of
Idaho Power’s thermal generation fleet.

The commission staff, which operates independently of the commissioners, agreed
with the company’s analysis that the upgrades are more economically favorable to
customers. The staff said any alternatives to investing in Bridger emissions controls
must be dispatchable and reliable year-round. Further, staff said, the alternatives
must be constructed and operational by the federal compliance deadline. According
to an Idaho Power analysis, natural gas prices would have to decrease by 52
percent to make natural gas conversion more economically favorable. Carbon
dioxide emissions (CO2) prices would need to be 423 percent more than the
company’s baseline forecasted carbon prices to make the option to retire the units
the replace them with other generation sources more favorable.

While commission staff supports issuance of the certificate, it is recommending that
$81.38 million be pre-approved for ratemaking treatment rather than the
company’s $130 million, noting that some of the company’s requested amounts are
not as certain as others. “... Binding ratemaking treatment in this case should be
limited to only those expense categories that are necessary and known and
measurable with a high level of certainty,” commission staff said. The staff also
recommended that each category of costs be pre-approved individually rather than
from a total project cost perspective.

The Industrial Customers of Idaho Power (ICIP) does not oppose the certificate, but
opposes pre-approved ratemaking treatment. “There is no compelling reason the
commission needs to bind itself or future commissions with these investments at
this time,” ICIP said. If the commission were to pre-approve the investments, it
should then consider reducing the company’s Return on Equity, ICIP said. “Such
favored regulatory treatment surely does not carry the same risk as standard
investments that must wait until they are in the ground, used-and-useful and
proven prudent after that fact.”

The Snake River Alliance opposes the CPCN but said that if the certificate is
approved, it should not include binding ratemaking commitments. The alliance
claims Idaho Power is understating the cost of likely environmental compliance
measures and didn’t examine other alternatives like energy efficiency and
renewable sources. Once Idaho Power is committed to the investments in the
upgrades, further investment to meet new but unknown regulatory requirements
will be more difficult to resist and will extend the life of the coal plants beyond the
anticipated life of the plants, the SRA claims. Further, SRA said, Idaho Power is not
including in this application the costs of what it will cost to meet the federal MATS
(Mercury and Air Toxics Standards) rule. The SRA further claims that Idaho Power’s
application is premature because the federal Environmental Protection Agency has
yet to accept Wyoming’s state implementation plan and PacifiCorp has joined with
other groups to oppose federal haze reduction requirements.

The Idaho Conservation League claims the risks associated with investing in coal
generation have not been adequately characterized or compared to risks associated
with other options. “The application cannot credibly claim to present the lowest risk
alternative when it does not capture the entire range of future coal pollution control
costs,” the ICL said. Further, the ICL said the state Energy Plan gives higher priority
to conservation, energy efficiency, demand response and renewable resources than
it does to thermal-based sources for generation.

To read Idaho Power’s application and the accompanying testimony of commission
staff and other parties to the case, go to www.puc.idaho.gov and click on “Open
Cases” under the Electric heading. Scroll down to Case No. IPC-E-13-16.

Comments are accepted via e-mail by accessing the commission’s Web site and
clicking on "Case Comment or Question Form,” under the “Consumers” heading. Fill
in the case number (IPC-E-13-16) and enter your comments. Comments can also
be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to [phone].

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