Idaho Public Utilities Commission

Case No. IPC-E-09-03, Order No. 30892

September 1, 2009

Contact: Gene Fadness (208) 334-0339, 890-2712

Website: www.puc.idaho.gov

 

Certificate for natural gas plant is approved

 

Idaho Power Company has been granted a certificate by state regulators to build a 330-megawatt natural gas-fired power plant four miles south of New Plymouth that is slated to begin operating in late 2012.

 

Without the new Langley Gulch Power Plant, Idaho Power risks falling short of meeting customer demand in four years, the Idaho Public Utilities Commission said in an order issued today. “The company has a statutory obligation to provide electric service and, since 2004, has forecast a need for a baseload generation resource in 2012,” the commission said.

 

Idaho Power proposes to build the plant on 137 acres of undeveloped range land adjacent to Interstate 84, immediately southwest of Exit 9 in rural Payette County.

 

Intervenors in the case, including the Industrial Customers of Idaho Power, the Idaho Irrigation Pumpers Association, the Idaho Conservation League and the Community Action Partnership Association of Idaho, said the project could be delayed because the rate of load growth has slowed with the economy. Further, they argued, Idaho Power could develop more energy efficiency and conservation programs.

 

After reviewing the record, the commission said “the public interest is not served by delay.” The commission said the lead-in time to develop a plant (about three years) is too long, that the company is already aggressively pursuing cost-effective conservation programs and there is a demonstrated need for more generation.

 

Using Idaho code adopted by the Legislature earlier this year, the commission granted the company “regulatory assurance” that it will receive recovery of its prudently incurred investment of $396.6 million in customer rates. Idaho Power sought preapproval assurance of $427.4 million. But the commission decided to separate costs that are known with greater certainty and competitively procured from amounts that are less certain.

 

Idaho Power must file quarterly reports on the progress of the project and a budget update showing total amount spent and billed and remaining contract dollars. Idaho Power maintains that the commission’s regulatory assurance will make it easier to obtain capital from lenders at rates more favorable to customers.

 

Approval of the project does not immediately impact rates. Idaho Power wanted to include Construction Work in Progress (CWIP) in customer rates annually as it moved forward with construction. The commission denied that request for now, but said it is open to considering CWIP as construction progresses. An advantage of CWIP to customers, the company maintained, is a quicker recovery of construction costs, thus avoiding financing costs that would be assessed to customers over several decades.

 

The company’s long-range plan to meet customer growth, called an Integrated Resource Plan, initially called for a coal-fired resource, but with rising concerns about climate change, the company revised its plan to call for a natural gas-fired baseload resource.

 

Idaho Power initiated a bid process that was reviewed by a third party. It received five valid proposals that represented 13 alternative sources, including a proposal by the company to build the plant itself. Idaho Power selected its own self-build plan, claiming it will have a revenue requirement impact of about $95 million less than the next competing proposal.

 

Intervenors argued the bid process was flawed, because, among other reasons, the bid evaluator was hired by the company, the process was not transparent enough, there was not an independent scoring by the bid evaluator and the company refused to consider any “build-and-transfer” projects, which would allow a third party to build the plant and then turn it over to Idaho Power to operate.

 

The commission acknowledged that the process could have been more transparent and that the “total universe of potential bidders was perhaps not realized.” However, the commission said, “Based on the evidence presented, we cannot conclude that a lower price and better project would have resulted” if the bid process had been better designed. Despite plant selection issues presented by the intervenors, it was apparent to the commission that the competitors were “sophisticated bidders and that the short list of projects were all competitive.”

 

In a separate case, the Northwest and Intermountain Power Producers Coalition has asked the commission to examine the current bid process. In today’s order, the commission said, “The actual and perceived flaws in the RFP (Request for Proposals) process, we find, while not fatal to the company’s resource selection, clearly demonstrate a need for a separate proceeding to consider RFP competitive bidding rules and guideline.”

 

While the intervenors advocated delay, several other parties submitting comments, including area cities, chambers of commerce and local businesses said additional energy infrastructure is needed and is a key element to attracting commerce and industry.

 

Idaho Power maintained that if Langley Gulch is delayed, any new large customers seeking to locate plant here would be advised that the company does not have firm resources sufficient to serve loads on a year-round basis. Further, the company warned, a delay could mean energy curtailments after 2012 under adverse circumstances such as low water, high temperatures, outages at distant generating plants, loss of transmission capacity or a combination of any of those.

 

Transmission costs are estimated to be about $25.4 million and will include construction of a new 18-mile 138-kV line from the plant to the Caldwell-Willis line, three miles from Caldwell Substation, and a 2.5-mile line from Ontario to Caldwell.

 

The plant is anticipated to employ up to 120 during the two years of construction and 18 full-time once it is operational.

 

A full text of the commission’s order, which more thoroughly addresses the positions of the commission staff, the company and the intervenors, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to Case Number IPC-E-09-03.

 

Interested parties may petition the commission for reconsideration by no later than Sept. 22. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.

 

Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.