20171213Post-Hearing Brief.pdf

SIERRA
CLUB
December 13,20ll
Via Hand Delivery
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise,ID 83702-5983
diane.holt@puc. idaho. gov
Re: Case Nos. AVU-E-17-0L|AVU-G-17-01: Post-Hearing Brief of Sierra Club
Please find enclosed the Post-Hearing Brief of Sierra Club in the above mentioned case. This
document was hand delivered and served upon all parly representatives for this proceeding via
e-mail.
Please do not hesitate to contact me if you have any questions or need other materials. Thank
you.
Sincerely,
/s/ Ana Boyd
Ana Boyd
Legal Assistant
Sierra Club Environmental Law Program
2101 Webster Street, Suite 1300
Oakland, CA94612
Phone: [phone]
ana.b oy d@s i errac lub. o rg
Travis Ritchie, CA Ba# 258084 (pro hac vice)
Sierra Club
2l0l Webster Street, Suite 1300 r
Oakland, CA946l2 '*,
(4t5) 977-5727 ,i', ,,
[e-mail] --.', .
t., ),
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION 5i]
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N)l\)IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION DBA AVISTA
UTILITIES FOR AUTHORITY TO
INCREASE ITS RATES AND CHARGES
FOR ELECTzuCAND NATURAL GAS
SERVICE NOTICEOF APPLICATION IN
IDAHO
CASE NO. AVU-E-17-01*
AVU-G-17-01
POST-HEARING BRIEF OF
SIERRA CLUB
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Pursuant to Rule 255 of the Idaho Public Utilities Commission ("Commission") Rules of
Procedure and the direction of Chairman Kjellander at the December 8,2017 evidentiary hearing
in the above-captioned proceeding, Sierra Club hereby submits its post-hearing brief.
A. Summary of Position
Sierra Club recommends that the Commission reject Avista's request to keep in rate base
capital costs for SmartBurn pollution controls at Colstrip Units 3 and 4 because Avista failed to
demonstrate that those expenditures were prudent. There was no regulatory compliance
obligation requiring the expenditures, and to the extent it was a discretionary judgment call,
Avista failed to provide an adequate record upon which to judge the prudence of that decision.
During the evidentiary hearing, Avista's witness Jason Thackston admitted that Avista
"do[es]n't have a compliance deadline associated with SmartBurn," and that there is no specific
unit-applicable emissions limit that Colstrip 3 and 4 are required to meet that necessitated
SmartBum.' This now-admitted lack of a compliance obligation conflicts with Avista's
application and prior direct testimony, which claimed repeatedly that the SmartBum controls
were part of a category of capital costs that were "mandatory and compliance projects,"2
I Hearing Transcript atp.57,line l-2; Id. at line l4-17 (Thackston, X).
' Kinney, Di at p.30, line l7-19.
1SIERRA CLUB'S POST-HEARING BRIEF
"Environmental Must Do,"' and typically "done for compliance with laws, rules and contract
requirements that are external to the Company."a
Rather than supporting its initial assertion that the SmartBum controls were "mandatory,"
Avista's justification shifted in rebuttal testimony to instead claim that the installation of
SmartBurn was a'Judgement" call that, the Company claimed, would (1) proactively comply
with the Regional Haze Rule, and (2) save future capital and O&M expenditures if and when the
plant is required to install selective catalytic reduction ("SCR") controls at some undetermined
future date.s Even if these justifications were reasonable, which as discussed in more detail
below they are not, the Commission should nevertheless reject the capital expenditures from rate
base because the record does not contain sufficient information to support these claims.
Avista did not provide any cost-benefit analysis or payback analysis showing how much
money would be saved by undergoing the SmartBurn capital expenditure in201612017. Avista
did not provide any description or analysis of the risks or rewards of their "proactive"
compliance strategy with the Regional Haze Rule. Avista did not provide any analysis of the
decision to proceed with the SmartBurn expenditures in 2016/2017 rather than waiting until it
had more clarity on what the ultimate compliance obligations for Colstrip would be. If in fact
Avista's assertion that its'Judgement" related to the SmartBurn was correct, the Commission
should at a minimum require Avista to demonstrate on the record that it undertook a sufftcient
level of rigorous review to ensure that it was making a reasonable and prudent management
decisions on behalf of its customers. As it stands now, such a record does not exist.
To the contrary, Sierra Club provided evidence in this proceeding showing that Avista's
decision to install SmartBurn was not prudent.6 Both the State of Montana and the U.S. EPA
clearly indicated that no compliance obligation necessitating SmartBurn currently exists.T When
Colstrip is next reviewed under the Reasonable Progress program of the Regional Haze Rule, the
installation of SmartBurn will be unlikely to have any material impact on the requirement or
timing to install SCR.8 To date, the SmartBurn controls have had a relatively limited emissions
' Sierra Club Ex. 605 (Capital Project Authorization Form); see, also Kinney, Ex. 4, Schedule 3, page 90 of 108.
n Kinney, Di at p.30, line 20-22; see, also Hearing Transcript at p.58, line 3-16 (Thackston, X).
s Hearing Transcript at p.58, line21 - p.59, line 4 (Thackston, X).
u Hausman, Di. atp.5-27.
' Ex. 61 1 at p.2-7 (Montana DEQ 5-Year Progress Report); Ex. 61 0 at p. 3 of 5 (Federal Register Notice of Final
Montana FIP).t Hausman, Di. atp.25.
SIERRA CLUB'S POST-HEARING BRIEF 2
reductions impact.e Finally, even if SmartBurn would reduce the costs of SCR - an assertion for
which there is no supporting evidence in the record - such savings would only be achieved if
Colstrip actually installed SCR. Given the increasing likelihood that Colstrip will not operate as
long as Avista currently assrmes,'0 it is speculative at best to assume that the Colstrip owners
would agree to take on the huge capital expense to install SCR if the plant only has a few more
years to operate.
Based on both the lack of evidence in the record supporting Avista's decision to install
SmartBum on Colstrip and the evidence provided by Sierra Club and Idaho Conservation League
showing that the decision was imprudent, the Commission should not require Avista's Idaho
customers to bear the costs of those expenditures.
B. Avista Misinterpreted the Impact of the Regional Haze Glide Path on Colstrip's
Future Compliance Obligations; SmartBurn is Unlikely to Affect Colstrip's Future
Compliance Obligations.
Sierra Club requested briefing in this proceeding primarily to correct some of the
Company's misinterpretations of how the Clean Air Act's Regional Haze Rule operates. The
rule's various programs can be confusing; therefore, Mr. Thackston's misunderstanding of the
rule is understandable. Nevertheless, Mr. Thackston was incorrect when he implied that the
installation of SmartBurn potentially defers the need to install SCR because of the "glide path."ll
Staying on the glide path is only one of the obligations the State of Montana is required to meet
under the RegionalHaze Rule. Regardless of whether or not Montana is on or off the glide path,
Colstrip - as the largest contributor to emissions in the state - will be required to undergo a unit-
specific analysis of potential emissions controls during the Reasonable Progress program of the
Regional Haze Rule. That unit-specific analysis does not - and cannot - consider whether
Montana itself is on the glide path. Rather, the four factors that will determine Colstrip's
requirement are enumerated by statute and regulation.
Specifically, under the Reasonable Progress requirements, states are required to report in
five-year intervals that they are making progress toward achieving natural visibility conditions
' Hausman, Di. at p.22-25 (see actual emissions data in Figure I showing that post-SmartBurn NOx emissions at
Colstrip 3 and 4 moved from 0.16 lbs/mmbtu to 0.15 lbs/mmbtu).
'0 In response to questions from Commissioner Raper, Mr. Thackston testified that Avista's current IRP projects that
Colstrip will be available through the twenty-year horizon of the2017 IRP. Hearing Transcript atp.70,line24 -p.71, line 1 (Thackston, Com.).rr See Hearing Transcript atp.77,line24 _ p.72.line 2 (Thackston, Com.)
SIERRA CLUB'S POST-HEARING BRIEF 3
by 2064.In developing these "reasonable progress goals" and the emission reductions needed to
meet them, the state must develop a long-term strategy for emission sources that considers four
factors: (1) the costs of compliance, (2) the time necessary for compliance, (3) the energy and
non-air quality environmental impacts of compliance, and (4) the remaining useful life of any
potentially affected sources. I 2
EPA has repeatedly found that getting below the RegionalHaze Rule's glide path, known
as the "Uniform Rate of Progress" or "IJRP" does not create a safe harbor. States must still
consider the statutory factors required by the Regional Haze Rule in determining what specific
pollution controls would be reasonable.l3 This means that Montana will still be required to
submit a long-term strategy that addresses the reasonable progress goals. Colstrip is by far the
largest single source of emissions in Montana. If Montanais not meeting the glide path during its
next review period, the state would be obligated to identi$, additional sources of emissions
reductions for review. In other words, getting off the glide path means Montana would have to
"think outside the box" for ideas of how to get back to natural visibility conditions. However,
staying on the glide path does not mean that Montana can ignore a reasonable progress analysis
for sources that clearly contribute to pollution in the state.
It would be highly unlikely - and most likely illegal - for Montana to ignore Colstrip
Units 3 and 4 in its long-term strategy. That means Montana will still need to apply the four
statutory factors, listed above, necessary to determine whether emissions controls, such as SCR,
are reasonable to install on Colstrip Units 3 and 4. Nothing about installing SmartBum in20l6-
2017 affects those factors. As noted by EPA in the 2012Montana FIP,'o Colst.ip Units 3 and 4
will be evaluated in a future compliance period. That review will occur whether or not
SmartBurn is installed, and the outcome of that review is unlikely to be tipped one way or the
other by the installation of SmartBurn in2016-2017 .
t2 See 42 U.S.C. $ 7a9l(gXl); 40 C.F.R. $ s1.308(fX2Xi).
" See, e.g., Final RHR Revision, 8l Fed. Reg. 3078,3093 (Jan. lO,2O17)(*The URP is not a safe harbor, however,
and states may not subsequently reject control measures that they have already determined are reasonable"); Final
Arkansas FIP, 8l Fed. Reg. 66332,66361 (Sept. 27,2016)(*the CAA and Regional Haze regulations are clearthat
an evaluation ofthe four statutory factors is required, and this requirement applies regardless ofthe Class I area's
position on the glidepath"); Texas FIP,79 Fed. Reg. 74,818,74,834 (Dec. 16,2014) ("the URP does not establish a
'safe harbor' for the state in setting its progress goals").
'o Ex. 6lo at p.3 of 5.
SIERRA CLUB'S POST.HEARING BRIEF 4
C. Sierra Club Included Actual Data from EPA Reporting Showing the Small
Change to NOx Emissions Rates.
During the evidentiary hearing, Chairman Kjellander and Mr. Thackston had a brief
exchange regarding the availability of emissions data from Colstrip.'5 Mr. Thackston correctly
testified that such data is reported to EPA and is available to the public. In fact, Dr. Hausman
accessed this data and included a summary in his direct testimony on page 24 in Figure 1.16 The
charts included in Dr. Hausman's testimony show NOx emissions from both before and after the
installation of SmartBurn on Colstrip Units 3 and 4. The data indicate that for both Units 3 and 4,
the average annual NOx emissions went from about 0.16 lbs NOx/mmbtu before SmartBurn to
about 0.15 lbs NOx/mmbtu after SmartBurn.lT Dr. Hausman also noted that achieving a rate of
0.15 lbs NOx/mmbtu is consistent with general industry experience when installing SmartBurn
without SCR.
Mr. Thackston asserted for the first time during the hearing that the magnitude of NOx
emissions would instead be closer to a26 percent annual reduction of tons of NOx.l8 Sierra Club
has tried and failed to verifu those numbers based on the actual emissions data available from
EPA. It is possible that those numbers are instead estimates of reductions that, for whatever
reason, Colstrip has thus far failed to achieve. It is also possible that the decrease in average
annual tons of emissions is instead a function of an expected reduction in the operation of
Colstrip rather than something that is attributable to the SmartBurn controls. Regardless of the
basis for Mr. Thackston's statement, Sierra Club recommends that the Commission rely on the
actual data provided in the record that has been subjected to both rebuttal testimony and cross
examination.
D. Conclusion
The testimony provided by Sierra Club and Idaho Conservation League included
substantially more detail on the issues under review by the Commission in this proceeding. For
the sake of brevity, Sierra Club does not reiterate all of those points here. Instead, this brief
attempts to provide a concise summary of Sierra Club's position with respect to the imprudent
r5 Hearing Transcript atp.74,line 13 _ p.75,line l2 (Thackston, Com.).
'u Hausman Di. at p.24. (Dr. Hausman included a citation to the EPA data base. The dataset for NOx at Colstrip is
available through the Acid Rain Program.)
" Id. at p.23,line 1-4.t8 Hearing Transcript atp.74,line 2 (Thackston, Com.) and p.80, line 3-9 (Thackston, Di.).
SIERRA CLUB'S POST-HEARING BRIEF 5
capital expenditures made at Colstrip and to correct certain topics raised during the evidentiary
hearing. Sierra Club appreciates the opportunity to present its case to the Commission.
Dated this l3th day of December,2OlT
Respectfully submitted,
/s/ Travis Ritchie
Travis Ritchie
Attorney for Sierra Club
SIERRA CLUB'S POST-HEARING BRIEF 6
CERTIFICATE OF SERVICE
I hereby certify that on this 13th day of December 2017,I delivered true and correct
copies of the foregoing POST-HEARING BRIEF OF SIERRA CLUB upon all parties of record
in this proceeding via the method of service noted. This document was served upon parties via
email.
Hand Deliverv:
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise,ID 83702-5983
diane.holt@puc. idaho. gov
(Original and eight copies provided)
Email:
David J. Meyer
Vice President & Chief Counsel, Reg. & Gov't
Affairs
Avista Corporation
POBox3727
l4l I East Mission Avenue
Spokane, WA99220-3727
[e-mail]
Peter J. Richardson
Gregory M. Adams
Richardson Adams PLLC
515 N. 27th Street
P0 Box 7218
Boise. ID 83702
peterrichardsonadams. com
[e-mail]
Carol Haugen
601 W. Riverside Avenue, Suite 1100
Spokane, WA 99201
c aro l. haug e n@cle arw aterp ap er. c om
Kelly Norwood
Vice President - State & Federal Regulation
Avista Utilities
POBox3727
l4l I East Mission Avenue
Spokane, WA99220-3727
[e-mail]
[e-mail]
Dr. Don Reading
6070 Hill Road
Boise, ID 83703
[e-mail]
Brad M. Purdy
Attorney atLaw
2019 N. 17th Street
Boise, ID 83702
[e-mail]
Nathan Smith
803 Mill Road
Lewiston, ID 83501
nathan. smith@clearwaterpaper. com
j ohn j acob s@cl earwaterpaper. com
davi d. wren @clearw ate rp aper. co m
Matthew A. Nykiel
Idaho Conservation League
PO Box 2308
102 S. Euclid#207
Sandpoint, ID 83864
mnykiel@idahoconservation. org
Dean J. Miller
36208 Warm Springs Ave
Boise,ID 83716
deanj [e-mail]
[e-mail]
Benjamin J. Otto
Idaho Conservation League
710 N 6th Street
Boise,ID 83701
botto @idahoconservation. org
Dated this 13th day of December, 2017.
Marvin Lewallen
MA Lewallen & Associates,LLC
7408 SW Mapleleaf St.
Portland, OR97223
[e-mail]
Ronald L. Williams
Williams Bradbury, P.C.
PO Box 338
Boise, ID 83701
ron@williamsbradbury. com
Larry A. Crowley, Director
The Energy Strategies Institute, Inc.
5549 S. Cliffsedge Ave.
Boise, ID 83716
[e-mail]
Brandon Karpen
Deputy Attorney General
Idaho Public Utilities Commission
47 2West Washington Street
Boise, ID 83702
brandon. karpen@puc. idaho. gov
/s/ Ana Boyd
Ana Boyd
Legal Assistant
Sierra Club Environmental Law Program
2101 Webster St., Suite 1300
Oakland, CA946l2
Phone: [phone]