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Idaho Power asks for OK of a decade's worth of hydro relicensing costs

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Idaho Power asks for OK of a decade's worth of hydro relicensing costs

Idaho Power Co. is asking Idaho regulators to determine that nearly $221 million it has spent to date on relicensing its Hells Canyon hydroelectric complex is a "prudent" expenditure that the company should be allowed to recover in rates.

Meanwhile, FERC issued an order Jan. 19 denying Idaho Power's request for the federal agency to cut through red tape that has been holding up the project.

The IDACORP Inc. subsidiary has been working on relicensing the three-project complex since 1991 but formally filed its application with FERC in July 2003 in anticipation of a July 31, 2005, expiration date for the original license. The company's application for a 30-year license renewal is still pending the federal agency's decision, but Idaho Power has been operating under annual licenses FERC has issued since the expiration of its long-term license, according to testimony of Power Supply Environmental Affairs Director Chris Randolph. His testimony accompanies the utility's application to the PUC for the commission to determine that the costs are recoverable in customer rates.

The $220.8 million in expenditures on relicensing is just the amount Idaho Power has spent to date. Idaho Power is projecting the annual costs it will incur before getting a license will be between $20 million and $30 million, pushing total costs to between $350 million and $400 million, according to a PUC press release. Idaho Power Vice President of Regulatory Affairs Timothy Tatum said in his testimony that assuming total relicensing costs of $400 million, relicensing would cost $358 per kW. A capital cost estimate used in 2015 for a combined-cycle combustion turbine was $1,145 per kW, he said.

The Hells Canyon complex of three hydroelectric projects — Brownlee, Oxbow and Hells Canyon, spread out along 38 miles of the Snake River — has 1,167 MW of total generating capacity, which is 34% of Idaho Power's total capacity, according to a PUC staff memorandum. FERC issued the original license, which lasts for 50 years, for the three dams in 1955 and the last dam went online in the late 1960s.

PUC spokesman Gene Fadness said that regardless of the time it is taking to relicense the facilities the commission will examine the submitted expenses to determine if the company invested in the relicensing process in the most reasonable manner possible, given federal regulatory requirements.

Idaho Power is not requesting a rate increase to pay the unrecovered relicensing expenses at this time. In 2009, the PUC authorized Idaho Power to collect about $6.5 million annually from customers for the relicensing effort. As of Dec. 31, 2015, customers have paid $58.8 million toward relicensing, leaving a balance of about $162 million, the PUC said.

Though the relicensing effort has been extensive and expensive, the commission will determine whether Idaho Power has been doing all it can to cost-effectively get FERC's approval, Fadness said.

"It is cumbersome and lengthy, but we don't want to give the impression we will approve or disapprove the costs based on FERC relicensing because that is something over which we do not have any jurisdiction or responsibility," he said.

Fadness said the PUC is likely to agree with the company's view that obtaining a prudency determination now is reasonable because experts on the subject matter who have been working on the relicensing for years are retiring and information they provide for the prudency review is important.

While most of the customer load served from Hells Canyon is in Idaho, most of the Hells Canyon complex is just over the state line in Oregon, Fadness said. The split jurisdiction complicates relicensing matters because state agencies in Oregon as well as Idaho are involved, he said. In addition, there are multiple federal agencies and Native American tribes involved.

Portions of the project are either within or adjacent to national forest lands, wilderness areas, the Hells Canyon National Recreation Area and other federal reservations, he said. The portion of the Snake River below Hells Canyon is designated under the Wild and Scenic Rivers Act. Compliance with the National Environmental Policy Act, Clean Water Act and other federal laws is at issue.

A case in point is FERC's Jan. 19 order denying Idaho Power's request that the federal commission declare that, under the supremacy clause of the U.S. Constitution, Part I of the Federal Power Act pre-empts the state of Oregon's fish passage requirements with respect to the Hells Canyon.

Idaho Power stated that the primary reason for the relicensing delay has been the process of obtaining water quality certification from both Oregon and Idaho. The company told FERC the two states do not agree on how to resolve issues regarding fish passage and reintroduction of anadromous fish in tributaries above Hells Canyon Dam. Oregon supports fish passage and reintroduction but Idaho opposes these measures.

Both the National Marine Fisheries Service and the U.S. Fish and Wildlife Service have declined to begin consultation with FERC concerning threatened and endangered fish species until after the states have issued or waived water quality certification. As a result, FERC said it has been unable to act on the relicensing application.

The agency said Idaho Power's attempt to have FERC resolve the regulatory logjam is premature because both states have only drafts of their positions on fish passage.

"Idaho Power's petition for a declaratory order on federal preemption is premature. Currently, Oregon's draft water quality certification includes conditions that would require fish passage and reintroduction of anadromous fish above Hells Canyon Dam, whereas Idaho's draft certification includes conditions that would preclude Idaho Power from introducing or reintroducing fish species to Idaho waters without Idaho's consent," FERC said in its order. "However, both states' draft certifications are not yet final."

Numerous environmental organizations are concerned about impacts of the dams on endangered and threatened species and have addressed their concerns to federal and state agencies.

Further, operational issues of the complex concern irrigators, industry and other customers. The Idaho Irrigation Pumpers Association and Industrial Customers of Idaho Power groups have already petitioned to intervene in the PUC proceeding. (Idaho PUC Case No. IPC-E-16-32, FERC docket P-1971-079)