Idaho Power filed with the Idaho Public Utilities Commission (IPUC) on Feb. 15 for cost recovery accounting associated with the planned shutdown by the end of 2020 of the coal-fired Boardman plant in Oregon, which is co-owned by Idaho Power with plant operator Portland General Electric (PGE).
Idaho Power told the commission it expects to incur incremental costs associated with the accelerated depreciation of the plant, new investment related to pollution controls that need to installed at the plant years before it is shut, and costs associated with the eventual decommissioning of the plant.
“While the incremental depreciation expense for the current investment is easily calculated based upon the current shutdown time line, the specific level of investment in capital additions, actual decommissioning costs, and potential salvage proceeds are not yet known,” Idaho Power added. “With the approval of PGE’s Boardman shutdown plan by the Public Utility Commission of Oregon and the Environmental Protection Agency, the incremental cost impacts are certain to occur. However, the exact impact is not yet known.”
As Idaho Power mentioned, the Boardman plant will be shut for clean-air purposes. In December 2010, after heated debate and pressure from environmental groups, Oregon environmental regulators approved a plan to cease coal-fired operations at the Boardman power plant not later than Dec. 31, 2020. The rules implementing the plan, which were approved by the EPA and published in the Federal Register in July 2011, require the installation of a number of emissions controls.
The estimated combined total capital cost of the required controls under the plan approved by Oregon is about $60m, Idaho Power parent IDACORP (NYSE:IDA) said in its Feb. 22 Form 10-K annual report. Idaho Power is a 10% owner of the Boardman plant, and thus Idaho Power’s estimated share of the capital cost is $6m, which is in addition to normal capital expenditures and maintenance costs. As of Dec. 31, 2011, Idaho Power had paid $2.8m of its total estimated share of the capital cost.
In September 2011, a federal district court in Oregon approved a consent decree that settled a citizen suit brought by the Sierra Club against PGE alleging certain violations of the requirements of the Clean Air Act at the Boardman plant. Under the terms of the settlement, beginning in 2015 through plant shutdown at the end of 2020, PGE has agreed to cap and reduce annual SO2 emissions to levels lower than those specified in the Oregon-approved compliance plan and further agreed to pay certain public interest groups a total of $2.5M for various air quality projects.
“The scheduled 2020 shutdown of coal-fired operations at the Boardman plant results in increased revenue requirements for Idaho Power related to accelerated depreciation expense, additional plant investments, and decommissioning costs,” said the Form 10-K. “As a result, in response to an application Idaho Power filed in September 2011, on February 14, 2012 the IPUC issued an order accepting Idaho Power’s regulatory accounting and cost recovery plan associated with the early shut-down and approving the establishment of a balancing account whereby incremental costs and benefits associated with the early shut-down will be tracked for recovery in a subsequent proceeding. On February 15, 2012, Idaho Power filed an application with the IPUC requesting a $1.6 million annual increase in Idaho jurisdiction base rates to recover the incremental Idaho jurisdictional annual revenue deficiency associated with early shut-down. As of December 31, 2011, Idaho Power’s net book value in the Boardman plant was approximately $25.9 million with annual depreciation of approximately $1.3 million.”
The Boardman plant receives coal through annual contracts with suppliers from the Powder River Basin in Wyoming, the Form 10-K noted. PGE, as the operator of the plant, has two agreements to supply coal beginning in 2012. All of the plant’s coal requirements in 2012, about 50% in 2013, and 33% in 2014, are under contract. A portion of the 2013 and 2014 coal used will be low sulfur content as Boardman prepares for the 2015 transition to a lower-sulfur fuel content.