20240723Staff Comments (Redacted).pdf

RECEIVED
Tuesday, July 23, 2024 3:21:44 PM
IDAHO PUBLIC
UTILITIES COMMISSION
CHRIS BURDIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9810
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR ) CASE NO. IPC-E-24-12
APPROVAL OF A MARKET PURCHASE )
AGREEMENT ) REDACTED COMMENTS
OF THE COMMISSION
STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Chris Burdin, Deputy Attorney General, submits the following
comments.
BACKGROUND
On March 18, 2024, Idaho Power Company ("Company"), filed an application
("Application") with the Idaho Public Utilities Commission ("Commission") seeking approval of
a market purchase agreement("MPA")between the Company and Powerex Corp ("Parties").
On April 16, 2024, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Order No. 36143. On May 10, 2024, a Notice of Parties was issued.
STAFF COMMENTS 1 JULY 23, 2024

STAFF ANALYSIS
Staff has reviewed the Application and recommends that the Commission approve the
MPA with Powerex Corp, and that the related expenses be declared prudent, with the exception
of two contingent expenses. The details of Staff s analysis are below.
Confirming the Requirement
Staff agrees that the Company's system will require approximately 236 megawatts
("MW") of additional capacity by 2026 to meet system reliability requirements.
To confirm this requirement, Staff reviewed the results from the Company's Reliability
and Capacity Assessment Tool ("RCAT"). The validity of the RCAT results depends on the
validity of the model's algorithms, inputs, and assumptions. Staff thoroughly reviewed all three
of these components through production requests and onsite meetings with the Company. Staff
is satisfied that the algorithms, inputs, and assumptions are reasonable, and believes that the
Company's forecast of a 236 MW capacity deficit in 2026 is valid.
Confirming the Solicitation
Staff believes the Company sufficiently solicited a comprehensive range of possible
resource alternatives via its Request for Proposal ("RFP")process.
Staff was initially concerned that Section 3.1 of the RFP (Eligible Products) did not
include nuclear or hydro power, and constrained gas-fired solutions to be convertible to
hydrogen, a technology that is still in development. Staff recognizes that Section 3.2 allowed
bidders to propose other products not specified in Section 3.1, but Staff believes bidders may
have been reluctant to submit proposals that were not specifically identified.
However, Staff also considered the impact of time constraints. Because a winning bid
would have to complete its project by 2026,projects with lead times of more than 3 years were
effectively eliminated from consideration. In its response to Production Request No. 14, Idaho
Power stated that:
solar and battery storage projects have been executed in approximately two years.
...[W]ind resource projects can be delivered in under three years. Idaho Power
believes that most dispatchable resources, such as natural gas, hydro-electric,
pumped storage, and geothermal are likely to take longer than three years to fully
develop,permit, procure, and construct.
STAFF COMMENTS 2 JULY 23, 2024

Staff agrees with the Company's estimated timelines, and believes that project types such
as nuclear, hydro, and conventional gas were likely not feasible for this solicitation.
Nonetheless, Staff recommends that the Company include the full range of resources in future
RFPs, regardless of the product development timeline. Staff believes it is preferable to allow all
resource types to be considered and let bidders assess whether their project can meet the RFP
time constraints.
Finally, Staff was concerned that the Company opted not to submit an internal bid to
expand its existing Langley Gulch gas plant("Langley"). Langley was designed with future
expansion in mind, which included oversizing some infrastructure for an additional turbine. In
response to Production Request Nos. 15 and 21, the Company explained that an expansion
project for Langley would still be subject to a multi-year air permit and a multi-year
interconnection request study, thereby extending the project timeline to five or more years. Staff
agrees that it was reasonable for the Company to not propose a gas expansion project due to time
constraints. However, Staff believes the Company should consider a benchmark gas project in
future solicitations, especially if the Company successfully reduces lead time constraints.
In conclusion, Staff believes that the RFP solicited for a wide range of resource
alternatives reasonably achievable within the time constraints of the capacity requirement.
Confirming the Selection
Staff believes the RFP and selection process were fair and unbiased.
In final Order No. 32745, the Commission directed the Company to follow the RFP
guidelines established by the Oregon Public Utility Commission ("OPUC"). The OPUC process
involves the OPUC, the public, interested stakeholders, and an Independent Evaluator("IE").
These parties have the opportunity to review and amend the text of the RFP, the selection
process, and the scoring method before the solicitation is issued. Once the RFP is issued,
stakeholders can scrutinize aspects of the Company's proposals and decisions during the
selection process. This comprehensive oversight is time consuming and laborious, but Staff
believes it adequately ensures that the entire selection process is fair and unbiased.
Staff reviewed the IE reports that were issued at various stages of the selection process
and believes the Company adhered to the approved process, applied the scoring fairly, and that
the final short list("FSL") of proposals was appropriately determined.
STAFF COMMENTS 3 JULY 23, 2024

Confirming the Result
Staff believes the proposed MPA is one of the least cost and least risk alternatives
necessary to meet the 2026 capacity deficit.
No single project proposed by bidders was able to fully satisfy the capacity deficit and
therefore the Company must procure a combination of projects. The Company ultimately
selected 6 projects to be on the FSL and ranked them by their cost-effectiveness. The Company
believes the top three projects from the FSL will satisfy its 2026 capacity deficit, but rather than
submit them as a group of projects, it is submitting each project as a separate case.
Least Cost and Least Risk
The selection of the least cost, least risk alternatives to meet the Company's capacity
deficit is based on AURORA-modeled results. From the results of the Company's Aurora
analysis, Staff believes the Powerex MPA is least cost and least risk because it was consistently
selected by the model over multiple price-policy alternative futures.
The Company utilized the AURORA model to select the least cost, least risk resources
from the RFP needed to resolve the Company's capacity deficit. The feasible resources from the
RFP reflecting each resource's performance characteristics and costs were included in the pool
of resources from which the model could select. For a given price-policy scenario, the model
selected the lowest cost set of resources out of the pool over a 20-year period that will resolve the
Company's capacity deficit. By running the model multiple times over several different price-
policy alternative futures, the resource combinations that are consistently selected by the model
have the highest probability of being least cost, least risk resources.
Confidential Exhibit No. 8 shows, for the 10 pre-determined price-policy scenarios, the
AURORA LTCE model selected the Powerex MPA as one of the least cost resources in all 10
scenarios. No other resource was selected by LTCE in every scenario. Staff believes that this is
compelling evidence that the MPA is a least cost, least risk resource.
Reliability
The Company explains that "after AURORA solves for and produces portfolios, select
resource buildouts...are analyzed...and tested to ensure they meet the pre-designated reliability
hurdle...." Ellsworth Direct at 5. In other words, the Company runs each scenario-specific
STAFF COMMENTS 4 JULY 23, 2024

portfolio through the RCAT to ensure that it meets the industry-standard reliability threshold of
less than 1 loss-of-load event in 10 years.
The Powerex Agreement
The Company requested the Commission approve the Powerex Agreement and declare
that all payments the Company makes to Powerex pursuant to such agreement will be allowed as
prudently incurred expenses for ratemaking purposes.
Staff reviewed the Powerex Agreement and believes that most of the terms of the
Powerex Agreement are reasonable. However, Staff is concerned regarding two of the terms in
the contract. Therefore, Staff recommends the Commission declare all payments the Company
makes to Powerex pursuant to the Agreement as prudently incurred expenses for ratemaking
purposes, except for costs and payments from Section 3(c)(i) and Section 19 contained in
"Additional Provisions"of the Powerex Agreement.
Section 3(c)(i)—
The Parties agreed
Confidential Exhibit 9 -Additional Provisions
Section 3(c)(i). Staff questioned what the estimated costs and charges would be and how they
are calculated. In the Company's response to Production Request No. 10, the Company
explained how the
Additionally, the Company stated that its '
" Id. These costs and charges are currently unknown and present an
unknown risk to ratepayers. If these expenses do materialize, Staff proposes that they be subject
to a prudence review when the Company seeks cost recovery.
STAFF COMMENTS 5 JULY 23, 2024

Section 19—
Section 19 of the Agreement states:
Confidential Exhibit No. 9—Additional Provisions Section 19.
Staff inquired how the amount to be paid to Powerex would be calculated and if the
Company intended to pass those costs on to Idaho ratepayers. In the Company's response to
Production Request No. 11, the Company stated, `
)7
Although the Company believes that it would not be subject to such compliance costs, the
provision presents an unknown expense and risk to ratepayers.
taff
recommends the Commission exclude these potential expenses from the prudence determination
in this case. Instead, Staff recommends the Commission declare that Section 19 expenses will be
subject to a firtuue prudence review when the Company seeks recovery of the cost.
Considerations for Future RFPs
Staff identified three systemic flaws in the current RFP process,which should be
addressed for fiuture RFPs.
First, Staff encourages the Company to get ahead of the capacity deficit and issue RFPs
early enough to allow long lead time projects to be considered. When long lead time resources
are excluded, the true least cost solution can't be confirmed, and potential reliability benefits
through resource diversity may not be realized.
STAFF COMMENTS 6 JULY 23, 2024

Second, Staff agrees with the Company's concern that the OPUC competitive bidding
process is too lengthy. Hackett Direct at 23. The Company initiated the RFP process with
OPUC in September 2022,and OPUC approved the FSL in February 2024,a period of 18
months. Assuming the new resources must be online by June 2026,only 28 months remain to
perform contracting, permitting, design, and construction of a project.
Third, Staff recognizes that many fundamental and irreversible decisions are made during
the initial RFP development with the OPUC; therefore,the Idaho Commission should be
involved during this stage of the process.
Accordingly, Staff recommends that the Commission direct the Company to file a
parallel case with the Idaho Commission whenever OPUC policy requires oversight. The
purpose of this case would be to obtain Commission approval for the RFP document and the
process and criteria used to select resources. When the Company files for a certificate of public
convenience and necessity, pre-approval, or recovery of the resource(s),the Commission can
then evaluate the selection of the resource(s) per the approved selection process.
STAFF RECOMMENDATION
Staff recommends the Commission issue an Order:
1. Approving the MPA with Powerex;
2. Declaring that payments made to Powerex pursuant to the MPA will be allowed as
prudently incurred except for potential expenses incurred under Sections 3(c)(i) and
19 of the MPA; and
3. Directing the Company to file an Idaho case for the review and approval of any RFP
that the OPUC requires to be filed.
Respectfully submitted this 23'd day of July 2024.
U0 M
Chris Burdin
Deputy Attorney General
Technical Staff: Matt Suess
1:\Utility\UMISC\COMMEN'SUPC-E-24-12 Comments-Redacxed.docx
STAFF COMMENTS 7 JULY 23, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS DAY OF JULY 2024,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF, IN CASE NO. IPC-E-24-12, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
DONOVAN E WALKER TIM TATUM
IDAHO POWER COMPANY IDAHO POWER COMPANY
PO BOX 70 PO BOX 70
BOISE ID 83707-0070 BOISE ID 83707-0070
E-MAIL: dwalkernidahopower.com E-MAIL: ttatum(a'-idahopower.com
dockets( idahopower.com
PATRICIA JORDAN, S CRETARY
CERTIFICATE OF SERVICE