Is the hydro pressure typically calculated based on 1.5 times the design pressure? I'm wondering if this method is too conservative and possibly 1.5 times max operating pressure should be used.

Read the (ASME B31.3 ?)definition of design pressure. That's what the system may see so that should be the basis of a test.

In B31.3 it's actually 1.5 x design presure x (Sc/Sh.