Idaho Public Utilities Commission

Case No. IPC-E-12-14, Order No. 32585

June 29, 2012

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

Natural gas plant expense is allowed in rates

The Idaho Public Utilities Commission is allowing Idaho Power Company to increase its annual revenue by $58 million to pay for a $400 million natural gas plant scheduled to be online Saturday.

Average rates will increase by 6.8 percent to pay for the 330-megawatt Langley Gulch natural gas plant four miles south of New Plymouth. For an Idaho Power customer who uses 1,020 kilowatt-hours per month, the average monthly bill will increase by $5.63, from $82.72 per month to $88.35.

The commission determined in 2009 that the additional resource would be needed to meet customer demand and granted Idaho Power a Certificate of Public Convenience and Necessity (CPCN) to build the plant. “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 when it granted the CPCN three years ago. The purpose of the 2012 case is to review the company’s expenditures in building the plant.

While the total cost of the plant is $401.4 million, today’s order allows $389.4 million in base rates. About $7.2 million was included in rates during the company’s 2011 general rate case and another $3.23 million will be incurred after June 30 and so must be included in a future rate case.

Commission staff performed a detailed review of the company’s application and workpapers that included a comprehensive audit of the actual and estimated plant and transmission expenditures. The commission approved these adjustments:

n Removed $300,000 that Idaho Power requested for a contingency fund to resolve potential issues after June 30;

n Removed $251,894 in costs related to the bid process to construct the plant;

n Removed $1.2 million in expense related to an upgrade in the Langley to Wagner transmission line from 183 kV to 230 kV and placing it in a Plant Held for Future Use account for possible recovery later. The commission said the $1.2 million should not be placed in rates now because the additional capacity “is not associated with the near-term operation of the Langley plant. This investment is associated with the future generation and transmission needs of the company.”

n Removed $75,000 in costs for splicing fiber optic cable that will not be incurred until after June 30.

Parties filing comments in the case included the Industrial Customers of Idaho Power (ICIP), the Idaho Irrigation Pumpers Association, the Snake River Alliance and commission staff, along with 11 customers.

Both ICIP and the irrigators argued Idaho Power is experiencing declining load growth since the CPCN was granted in 2009. ICIP expressed concern that the low cost of operating the Langley plant would reduce use of the company’s three coal-fired plants by 70 percent.

The irrigators said the commission should schedule a full rate case to review the gas plant’s impact on Idaho Power’s overall system given changing conditions. In the alternative, the irrigators said, the commission should grant no more than half the increase and require Idaho Power to file a general rate case. The Snake River Alliance argued that construction of the plant “was and continues to be ill-timed,” and said Idaho Power has ample energy supplies, particularly so with the failure of both the Hoku polysilicon plant in Pocatello and the Micron-Transform Solar project in Nampa.

In its reply comments, Idaho Power acknowledged a decline in load of 1.5 percent, but said that without the Langley plant the company’s peak-hour loads would still reflect a projected deficit of 28 megawatts next month, 169 MW in July 2013 and 224 MW in July 2014. The company maintained that ICIP did not take into account Idaho Power’s use of its coal plants during below-average water years. Further, the company argued, the availability of Langley will significantly reduce the company’s reliance on purchased power.

Regarding the temporary condition of declining load, the commission said it is “not afforded the use of hindsight to judge the reasonableness of issuing the CPCN to Langley three years ago. However, it is interesting to note that ICIP argued in the prior CPCN case that Langley would be an expensive plant to operate but now maintains Langley, ‘will be Idaho Power’s least expensive unit, on a variable cost basis.’ “

The commission said granting half the increase, as requested by the irrigators, undermines the commission’s 2009 order when it issued the CPCN and would violate the statutory binding ratemaking treatment included in that same order. The pre-approved amount included in that order was necessary to facilitate the financing of the Langley plant, the commission said.

The commission noted that it attempts to balance the interest of the utility and ratepayers and reduced the requested rate base commitment by $26 million to protect ratepayers.

A full text of the commission’s order, along with other documents related to this case, 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 No. IPC-E-12-14.

Interested parties may petition the commission for reconsideration by no later than July 20. 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.