20171213Post-Hearing Brief.pdf

Attorney for the Idaho Conservation League
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Matthew A. Nykiel (ISB No. 10270)
P.O. Box 2308
102 S. Euclid #207
Sandpoint, ID 83864
Ph: [phone]
Fx: [phone]
mnykiel @idahoconservation.org
IN THE MATTER OF THE
APPLICATION OF AVISTA
CORPORATION DBA AVISTA
UTILITIES FOR AUTHORITY TO
INCREASE ITS RATES AND
CHARGES FOR ELECTRJC AND
NATURAL GAS SERVICE IN
IDAHO
RECEIVED
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CASE NO. AVU.E.I7-OT
AVU-G-17-01
IDAHO CONSERVATION LEAGUE
POST.HEARING BRIEF
The Idaho Conservation League (ICL) was not a party to Avista's 2016 rate case, AVU-
E-16-03. The present docket, AVU-E-I7-01 is ICL's first foray into examining Avista's
spending on the Smartbum projects on Colstrip Units 4 and 3 in 2016 and 2017 respectively. We
did not join the settlement in the present case because the agreement presumes the Smartbum
projects were prudent investments and recoverable in rates. ICL's review of the record and the
unrebutted testimony of ICL and Siena Club witnesses establish that the Smartburn projects are
not legally required, do not economically benefit Idahoans, and do not meaningfully improve air
quality.
At the Technical Hearing, Avista failed to show that the Smartburn emission controls
were necessary to comply with the Regional Haze Rule of the Clean Air Act or any other
applicable regulation. Moreover. Avista failed to establish in the record or at hearing the
Smartburn projects were prudently incurred optional expenses.
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Because Avista did not carry its burden of proof, ICL respectfully requests the
Commission issue a final order applying the following conditions:
l) Find the expenses for the Smartburn projects were not prudently incuned;
2) Remove the cost of the Smartbum projects from Avista's rate base going forward;
3) Require Avista to provide transparent analysis for any future capital spending at Colstrip;
and
4) Direct Avista to rigorously review and challenge Colstrip projects proposed by the plant
operator, Talen.
Standard of Review
While not controlling law. the Commission's Annual Report contains the simplest
articulation of the standard of review: "If the utility has met its burden of proof in demonstrating
that the additional expense it incurred was l) necessary to serve customers and 2) prudently
incurred, the Commission must allow the utility to recover that expense."l Avista has not met
this burden.
Recent Commission Orders granting Certificates of Public Convenience and Necessity,
such as the order granting Idaho Power's request for pollution controls at Jim Bridger, are
analogous to Avista's request here to include the Colsfip Smartbum projects in rate base. When
approving Idaho Power's request for pollution controls, the Commission found the Company
faced an enforceable legal mandate to install controls or shutter the plant within two to three
years.2 The Commission reviewed the record and decided the short-term need to install controls
I See ldaho Public Utilities Commission 20 I 7 Annual Repon ar 17.
2 O.d.. No 32929 at 10.
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or shutter the plant outrveighed the potential for other options to meet customer's needs.3 Finally
the Commission concluded the pollution controls were "presently the least-cost, least-risk
alternative to both reduce environmental effects and allow reliable electric service to continue."a
The Commission also stated "the public interest is the paramount consideration" when
allowing utilities to include projects in rate base.5 While ICL challenged the project considered
in Order No. 32929, we agree the public interest is served when the Commission finds a project
was necessary pursuxrt to a legal obligation, or need to serve customers, and prudently incuned
because lower cost and lower risk alternatives were considered but found unavailable. The
Commission should make a particularly careful inquiry here because the record demonstrates the
remaining useful life of Colstrip is highly uncertain for bo& Avista and the plant co-owners. By
carefully scrutinizing capital investments now, the Commission protects the public interest by
limiting the total cost of Colstrip to be recovered, when the inevitable decision to close the plant
arnves.
As explained in our testimony and unrebutted at hearing, Avista faced no legal obligation
to install the Smartbum projects in 2016 or 2017. Avista provides no evidence that installing the
Smartburn projects in 2016 or 2017 was necessary to maintain reliability. Avista admits
repeatedly they considered the next major pollution control requirement to be in the mid-2020's
at the soonest. Avista, also, does not explain in this record why installing Smartburn more than a
decade before a speculated future obligation to a different project is presently the least-cost,
least-risk alternative. Because Avista had ample time and opportunity to consider other available
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options while maintaining reliable electric service, the Commission should find the Smartbum
projects were not prudent.
Argument
I. The Smartburn emission controls were not 6'mandatory and compliance" items to
ensure Colstrip Units 3 and 4 provide reliable senrice in the short-term.
Avista did not provide any evidence or legal analysis proving that the Smartburn
technology was necessary for Units 3 and 4 to meet compliance requirements under the Regional
Haze Rule of the Clean Air Act. Indeed, Avista's Senior Vice President of Energy Resources,
Jason R. Thackston's rebuttal testimony states Avista "proactively decided to install Smartbum
in an effort to managep ture regulatory obligation..."6. At hearing, in response to an inquiry
from Commissioner Raper, Mr. Thackston described the decision as "a judgment call to ease
future compliance". In other words, Avista's decision to install Smartbum was based on
speculation regarding future legal obligations.
Mr. Thackston claimed during the Technical Hearing that speculatively installing the
Smartbum projects in 2016 and 2017 was necessary to meet the "glide path" toward future
Regional Haze Rule regulations. During cross-examination, Mr. Thackston stated that he was not
an expert in interpreting and evaluating the rule to determine the compliance requirements for
Colstrip Units 3 and 4. Indeed, his educational and professional background does not identiff
any credentials that would indicate Mr. Thackston could reliably speculate about future
compliance requirements of the Regional Haze Rule. In contras! both Mr. Ouo and Mr.
Hausman gave unrebutted testimony that Avista faced no legal requirement to install Smartbum
6 Rebuttal Testimony of Jason R. Thackston at 8-9 (emphasis added).
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controls from the time Avista made the decision to install Smartbum in20l2 through the actual
installation of Smartburn in 2016 afi2017.
Funher Mr. Otto's unrebutted testimony explained any future controls would stem from
Montana's next State Implementation Plan due in 202l.lt is in this yet to be developed plan
where Montana will consider the glide path of current air quality, soruces of pollutants, and
requirements for additional Colstrip controls at some future date in the ensuing ten-year period.
On the record and at hearing Avista did not adequately explain why pre-compliance several years
before an as yet unknown obligation is necessary to ensure reliable service to customers today.
II. Avista did not establish that installing the Smartburn projects at Colstrip Units 3 and 4
in2017 and 2016, respectively' was a prudent investment.
While not mandatory, Avista argues that installing Smartbum projects was prudent for
three reasons, none ofwhich are persuasive.
First, Avista argues that installing Smartburn projects now could reduce the costs of
future Selective Catalytic Reduction (SCR) controls. But, Avista failed to provide any cost-
benefit analysis to justify this pre-compliance strategy. As explained above, Avista has no
credible knowledge today of the exact timing and pollution limits in the Montana State
Implementation Plan to be developed by 2021. And Avista did not point to anything in the record
that assesses a range of compliance options, dates, and altematives necessary to make an
informed judgment about an optional activity to meet an uncertain future. Avista provided no
evidence of the potential cost of an SCR with or without the Smartburn project. Instead of
evidence, Avista provided unsupported assertions of future cost savings. The Commission should
require more proof before permitting Avista to collect on speculative capital investments.
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Second, Avista argues that installing the Smartbum projects in 2016 and 2017 aligned
with previously scheduled outages. But nothing required the Colstrip owners to act in these
years. From the time Avista approved the installation of Smartburn (sometimein20l2) until now
Avista has consistently expected EPA to mandate the next major pollution controls on Units 3
and 4 no sooner than the mid-2020's.7 In addition, according to Mr. Thackston, plant owners
meet at least every other month to review capital projects and that, throughout the year, projects
may be added or subtracted as appropriate.s In addition, Avista's Director of Power Supply,
Scott Kinney, testified that every two out of three years, there are planned outages at Colstip for
higher capital program activities.e Therefore, over a l0-year period before the first possible
compliance dates in the mid-2020's (as projected by Avista), there will be dozens of meetings to
consider the prudency of the projects and at least 6 scheduled outages to align with. Avista
provides no evidence ttrat aligning the optional Smartburn projects with outages in 2016 or 2017
was necessary or prudent to maintain reliable service.
Third, Avista argues that opting to install Smartburn now provides necessary information
to design SCR controls that might be required in the future. But Avista provides no evidence or
analysis explaining why it was necessary to begin collecting this boiler operation data in 2016
and2017, when Avista projected no need for SCR or other control technology until the mid-
2020's. In addition, during the Technical Hearing Mr. Thackston indicated that co-owning
utility, Fuget Sound Energy, had prior experience installing, calibrating, and operating
Smartbum technology at Colstrip Units 1 and 2, and that other utilities have experience with the
Smartbum technology. Avista did not explain why these existing sources of information were
inadequate to inform future SCR designs. Furthermore, if Avista needed to collect boiler
7 Rebuttal Tesrimony ofJason R. Thackston ar 9- I 0.
8 ld. at 15, lines l4-18.
' Direct Testimony of Scott J. Kinney at 30, lines 7-9
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operation data to prepare for the design and installation of possible contols in the mid-2020's,
it's rmclear why it was necessaq/ to install Smartbum at both units rather than at just one. The
Commission should reject Avista's undocumented assertions about the prudency of the optional
Smartbum projects.
Conclusion
The Commission must not include in rate base any items that Avista does not meet its
burden to establish are necessary and prudent. Here, Avista did not establish the Smartburn
projects are necessary to meet a legal obligation or to maintain reliable service. Furthennore,
Avista did not establish the optional Smartburn projects are "presently the least-cost, least-risk
alternative to both reduce environmental effects and allow reliable electric service to continue."
Accordingly, ICL respectfully requests the Commission issue a final order that:
I ) Finds the expenses for the Smartburn projects were not prudently incurred;
2) Removes the cost of the Smartburn projects from Avista's rate base going forward;
3) Requires Avista to provide transparent analysis for any future capital spending at
Colstrip; and
4) Directs Avista to rigorously review and challenge Colstrip projects proposed by the plant
operator, Talen.
Respectfully submitted this l3th day of December 2017,
Attorney for
League
Conservation
7ICL Post-Hearing Brief
AVU-E-r7-01
CERTIFICATE OF SERVICE
I certify that on the I 3th day of December 201 7, I caused to be delivered true and correct copies
of the foregoing ICL POST-HEAzuNG BRIEF to the following via the service method noted:
Hand deliverv:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise, ID 83702-5983
(Original and 9 copies provided)
Electronic Mail onlv:
Sieta Club
Travis Ritchie
Staff Attorney, Sierra Club
travis.ritchie@sierracl ub.org
Idaho PUC Staff
Brandon Karpen
Idaho Public Utilities Commission
brandon.karpen@puc. idaho.gov
Clearwater Paper
Peter J. Richardson
Gregory M. Adams
Richardson & Adams, PLLC
[e-mail]
[e-mail]
Dr. Don Reading
[e-mail]
Idaho Forest Group, LLC
Ronald L. Williams
Williams Bradbury, P.C.
ron@wi lliamsbradbury.com
Larry A Crowley,
Director, Energy Strategies Institute, Inc.
[e-mail]
Avista Utilities
David J. Meyer, Esq.
Kelly O. Norwood
Avista Corporation
david.meyer@avi stacorp.com
kelly. norwood@avi stacorp.com
[e-mail]
deanj m il [e-mail]
[e-mail]
AVU-E-17-01
AVU-G-17-01
carol. haugen@c learwaterpaper.com
[e-mail]
j ohn j [e-mail]
[e-mail]
nathan.sm [e-mail]
Communiv Action Partnership Association of
Idaho
Brad M. Purdy
Attomey at Law
[e-mail]
Matthew Ny
December 13,2017