20240912Reply Comments.pdf

0IQAW POWER.
DONOVAN WALKER
Lead Counsel RECEIVED
dwalker(Mclahopower.com Thursday, September 12, 2024
IDAHO PUBLIC
UTILITIES COMMISSION
September 12, 2024
VIA ELECTRONIC FILING
Monica Barrios-Sanchez, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A (83714)
PO Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-24-16
In the Matter of Idaho Power Company's Application for a Certificate of
Public Convenience and Necessity for the Boise Bench Battery Storage
Facility
Dear Ms. Barrios-Sanchez:
Attached for electronic filing please find Idaho Power Company's Reply
Comments.
Please feel free to contact me directly with any questions you might have about
this filing.
Very truly yours,
i 2�GlJ�1 Pam`
Donovan E. Walker
DEW:sg
Attachment

DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker(o-)idahopower.com
Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR A ) CASE NO. IPC-E-24-16
CERTIFICATE OF PUBLIC CONVENIENCE )
AND NECESSITY FOR THE BOISE ) IDAHO POWER COMPANY'S
BENCH BATTERY STORAGE FACILITY. ) REPLY COMMENTS
COMES NOW, Idaho Power Company ("Idaho Power" or "Company"), and,
pursuant to Idaho Public Utilities Commission's ("Commission") Rule of Procedure' 203
and the Notice of Modified Procedure, Order No. 36250, hereby respectfully submits the
following Reply Comments in response to Comments filed by Commission Staff ("Staff")
and Clean Energy Opportunities for Idaho ("CEO") on August 28, 2024.
I. BACKGROUND
1. As discussed in the Company's initial Application in this case, Idaho Power
has generally been resource-sufficient since the addition of the Langley Gulch natural-
gas fired power plant in 2012 until the filing of the 2021 Integrated Resource Plan ("IRP").
IDAHO POWER COMPANY'S REPLY COMMENTS - 1

However, as discussed in detail in the Direct Testimony of Mr. Jared Ellsworth, Idaho
Power rapidly moved to a near-term capacity deficiency starting in 2023 due to several
dynamic and converging factors. This deficiency led to multiple requests for certificates
of public convenience and necessity ("CPCN") for resources to be online in 2023, 2024,
and 2025, while additional resources are expected to be needed each year through at
least 2028.
2. Given the expected resource need in 2026 and 2027, on September 15,
2022, Idaho Power commenced the competitive bidding process established by the Public
Utility Commission of Oregon ("OPUC"), which the Company is required to follow per
Commission Order No. 32745 issued in Case No. IPC-E-10-03. Over the subsequent
months all required steps of the OPUC competitive bidding process were completed. The
approved Request for Proposals ("2026 RFP") was issued in June 2023, resulting in the
Company receiving 192 bids from 31 different bidders across 47 resource sites. After
performing a detailed analysis of these bids and presenting the results to the OPUC, a
final shortlist ("FSL") representing the least-cost, least-risk resources was approved by
the OPUC on February 22, 2024. Idaho Power immediately began negotiating with the
projects on the FSL to procure the resources necessary to meet the identified 2026
capacity deficit of 236 megawatts ("MW").
3. Through an analysis of the projects on the FSL, it was determined that the
three lowest cost projects would be sufficient to meet the identified capacity deficit: (1) a
market purchase product with PowerEx Corp. ("PowerEx"), (2) a 200 MW solar
photovoltaic ("PV") plus 100 MW battery storage project, and (3) an Idaho Power-owned
battery energy storage system ("BESS"). With regard to the market purchase product, the
IDAHO POWER COMPANY'S REPLY COMMENTS -2

Company immediately executed an agreement with PowerEx and filed a request for
approval with the Commission in Case No. IPC-E-24-12. On August 29, 2024, the
Commission issued Order No. 36309 approving the market purchase agreement. The
second least-cost project on the FSL was the combination 200 MW solar PV plus 100
MW battery storage project. At the time the current Application was filed, contract
negotiations were in progress with this developer. However, subsequent to the filing of
this case, this project encountered a development hurdle related to their county permit,
thus eliminating the ability to rely on the 2026 commercial operation date. The
procurement process for the 150 MW Company-owned BESS was initiated concurrently
with negotiations for other projects on the FSL. On April 3, 2024, the Company filed the
current Application requesting that the Commission issue a CPCN for the Boise Bench
BESS ("BESS Project").
4. On August 28, 2024, Comments were filed by CEO and Staff. CEO
indicated that they support the use of batteries and do not oppose the issuance of the
CPCN in this case but encouraged the Company to further explore opportunities for
demand-side load shifting, offering suggestions for how such an analysis could be
structured. Staff's Comments supported the granting of the CPCN for the BESS Project
and found that the Company's 2026 RFP process fairly solicited a wide range of resource
alternatives reasonably achievable within the time constraints of the capacity
requirement. However, Staff also proposed multiple caps on allowable cost recovery to
be applied to various components of the project: (1) a soft cap for manufacturer-supplied
BESS equipment costs, Idaho sales tax, and Allowance for Funds Used During
Construction ("AFUDC"), (2) a soft cap on future annual augmentation costs, and (3) a
IDAHO POWER COMPANY'S REPLY COMMENTS - 3

hard cap for the balance of system ("BOS") cost with 5 percent contingency and
interconnection costs. These cost cap proposals were based on concerns that the BESS
Project may not be the least-cost resource available to meet the 2026 deficit.
5. In these Reply Comments, Idaho Power responds to the suggestions
offered by CEO, and addresses Staff's concerns with regard to the least-cost
determination for the BESS Project and the cost cap proposals stemming from these
concerns.
II. REPLY COMMENTS
A. The Commission Should Adopt CEO and Staff's Recommendation to Grant
the Company a CPCN for the BESS Project.
6. In order to comply with its continuing obligations to serve customers, the
Company must at times acquire additional resources to meet the identified capacity
deficits on its system when the need arises. Idaho Power performed a quantitative and
qualitative evaluation with an objective scoring methodology to reasonably evaluate the
price and non-price attributes of each project proposal submitted through the 2026 RFP
process, ultimately identifying the final shortlist of projects, including six with commercial
operation in 2026. The request for a CPCN to acquire 150 MW of dispatchable energy
storage is the result of those efforts.
7. Idaho Power appreciates Staff's thorough review of the Company's filing.
Staff issued four sets of discovery and performed a detailed and thorough review of the
Company's 2026 RFP process—including both the need identified therein and the
process through which the Company solicited resource bids—as well as the underlying
analysis of the final bids that led to the Company's decision to procure 150 MW of BESS
capacity at the Boise Bench site. Through their review Staff determined that the
IDAHO POWER COMPANY'S REPLY COMMENTS -4

Company's forecast of a 236 MW capacity deficit in 2026 is valid,' that the 2026 RFP
fairly and reasonably solicited a wide range of bids with the potential to meet this need,2
and ultimately recommended the Commission grant a CPCN for the BESS Project to help
meet the identified 2026 capacity deficiency.3
B. Idaho Power Completed a Robust Competitive Resource Procurement
Process for Identifying the Least-Cost, Least-Risk 2026 Resource
Acquisitions which included the BESS Project.
8. Staff's conclusion that the BESS Project at issue in this case may not be
the least-cost resource available to meet the 2026 deficit appears to be based on a
misunderstanding of the robust analysis process applied by the Company and fails to
recognize key information relied upon by Idaho Power in this comprehensive, competitive
RFP process. Idaho Power formally issued the 2026 RFP, soliciting bids for (1) energy
market purchases and (2) new or existing resources, which was well received with 192
bids from 31 different bidders across 47 resources sites, summing to more than 15
gigawatts of resources. The bids included a variety of ownership structures, including
many bids that would result in bidder-owned resources (i.e., Power Purchase Agreements
and Battery Storage Agreements), as well as three benchmark bids across three
sites, submitted by Idaho Power's Power Supply department. The Direct Testimony
of Mr. Hackett details the bid evaluation process which was consistent and
prescriptive as described in the 2026 RFP, ultimately identifying the final shortlist of
projects, including six with commercial operation in 2026. In their Comments, however,
Staff indicated they were not able to verify the BESS Project was a least-cost resource.4
Staff Comments, page 3.
2 Staff Comments, page 2.
3 Id.
4 Staff Comments, pages 4 and 5.
IDAHO POWER COMPANY'S REPLY COMMENTS - 5

9. Staff believes that Idaho Power's evaluation of the bids resulting from the
2026 RFP lacked comparable alternative resources in the selected portfolios, stating that
"[o]ne of the ways for Staff to determine if the BESS Project is least-cost, is for the
Company to perform a stochastic analysis through AURORA comparing the net present
value over a 20-year period of a model run of the resources the Company selects against
other combinations of short-listed resources that would resolve the deficit.115 Staff is
misunderstanding the process for the determination of the least-cost resources. First, the
Long-Term Capacity Expansion ("LTCE") modeling is utilized to develop 11 optimal
portfolios. This is done by forcing AURORA to utilize each of the 11 preliminary FSL
projects at least once, then allowing the LTCE model to select the remaining resources
to optimally meet the identified resource need. Once the 11 portfolios are developed, the
Company then performs the 60 stochastic runs to determine a mean portfolio cost for
each portfolio. The stochastic analysis is utilized to cost-rank those resources that have
been selected into the preliminary 2026 FSL. It is important to note that a cost-ranked list
of FSL projects is crucial within the context of a dynamic resource procurement process,
which is different from an IRP analysis. In the resource procurement process, Idaho
Power must simultaneously negotiate with all projects on the FSL in the event that
negotiations are unsuccessful with one or more projects, as evidenced by the failure of
the second-ranked project to obtain the necessary permits to ensure a 2026 online date.
10. As detailed in London Economics International LLC's Closing Report—2026
All Source Request for Proposals for Peak Capacity and Energy Resources ("Closing
Report"),6 the Independent Evaluator's overview and assessment of the eligibility and
5 Staff Comments, page 3.
6 See Confidential Exhibit No. 8 to the Direct Testimony of Mr. Hackett, Section 8.2.
IDAHO POWER COMPANY'S REPLY COMMENTS - 6

shortlist evaluations for the 2026 RFP, Idaho Power performs a portfolio sensitivity
analysis on the preliminary FSL projects following identification of the preliminary FSL.
The overarching purpose of the stochastic analysis is to further understand the range of
net present value ("NPV") portfolio costs over a wide range of stochastic shocks (i.e.,
across the full set of 60 stochastic iterations performed) and consequently the range of
difference in portfolios costs.'The results are utilized to rank the preliminary FSL projects,
resulting in the creation of the cost-ranked FSL.
11. Staff's assertion that the BESS Project is not definitively least-cost appears
to be based on the statement that "...the BESS Project was included within the portfolios
that were ranked V 5t" and 611, in the list of selected least-cost and least-risk portfolios."8
A key component missing from Staff's interpretation of the stochastic results is the two-
step nature of the process. As explained earlier, the LTCE modeling develops 11 optimal
portfolios. Once those are developed, the Company then performs the 60 stochastic runs
to determine a mean portfolio cost for each portfolio.
12. The final cost ranking of projects as detailed in Figure 39 of the Closing
Report is determined first by how many times each project was selected by the LTCE,
and by the relative cost among portfolios in which each resource was selected. Based
on this methodology, the PowerEx agreement holds the highest position due to its
selection across all 11 portfolios. Similarly, the 200 MW solar PV plus 100 MW battery
storage project ranked second as it was selected in three stochastic analysis portfolios,
reflecting the first, second, and fourth ranked mean portfolio costs. Finally, the third
The portfolio sensitivity analysis used in this process is consistent with the stochastic risk analysis
methodology used in the Company's 2023 Integrated Resource Plan ("IRP") and in alignment with
discussions during public meetings and the 2023 IRP Advisory Council.
8 Staff Comments, page 3.
IDAHO POWER COMPANY'S REPLY COMMENTS - 7

ranked project was the BESS Project, also selected in three stochastic analysis portfolios,
though these three portfolios reflected higher costs than those that included the second-
ranked 200 MW solar PV plus 100 MW battery project.9 No other project on the FSL was
selected more than twice. In other words, the BESS Project was selected in 3 of 11
modeling scenarios, which outranks every other feasible project on the FSL not already
under contract. Based on this analysis, the BESS Project was identified as a least-cost
resource as part of the AURORA LTCE modeling and further as a least-cost resource
necessary to meet the 2026 capacity deficiency.
13. In their review of the FSL projects, Staff also indicated they were not able
to identify a suitable alternative to the BESS Project "to make a useful comparison",10
concluding that the lack of availability of alternatives indicated the BESS Project could not
be verified as least-cost. Staff's analysis cited Idaho Power's response to a production
request in which the Company indicated that projects with differing product types were
not comparable on a Levelized Cost of Capacity ("LCOC") basis." Staff fails to recognize
that the determination of the LCOC or Levelized Cost of Energy ("LCOE") is for input into
AURORA's LTCE model, which provides a consistent, common evaluation tool, with
consistent assumptions in that tool, for reasonable evaluation results and the relative
ranking of the initial shortlist project submittals. The LCOC and LCOE alone do not
indicate the cost-effectiveness of a resource; the results of the LTCE modeling however,
do.
9 Closing Report, pages 61-63.
10 Staff Comments, page 4.
" Id.
IDAHO POWER COMPANY'S REPLY COMMENTS - 8

14. Staff further concluded that because the FSL did not include other
standalone BESS resources, the cost-effectiveness of the BESS Project could not be
verified. Staff's conclusion does not consider the evaluation performed in order to
determine the FSL, which was outlined in the 2026 RFP and described in detail in the
Closing Report. Once the pricing and non-pricing scores were developed, the first phase
of the initial shortlist creation involved a ranking methodology:
The ranking resulting from the sum of the non-pricing and pricing scores
determined for each bid was meant to indicate the completeness and
competitiveness of bids for each resource technology group. A ranking of
bids within each individual technology group was also meant to ensure that
like bids were assessed against one another before being compared with
bids of resource types with differing physical characteristics and associated
costs.'2
These technology-specific rankings were used by the Company to develop its narrowed
down initial shortlist. The Company also advanced bids with pricing proposals that were
viewed as more attractive than those of other bids of the same technology group. Figure
22 in the Closing Report presents the initial shortlist bids for 2026 resource-based
products, identifying six different standalone BESS projects, of which the top three
bidders amongst four different resource sites moved forward as the most cost-effective
resources for the standalone BESS technology group. The FSL did not include other
standalone BESS resources, because they were not more cost-effective than the other
FSL projects. The BESS Project was the only standalone BESS resource that was more
cost-effective than resources of other technology groups. While Idaho Power understands
Staff's desire to compare like projects, the process discussed in the Closing Report did
12 Closing Report, page 36.
IDAHO POWER COMPANY'S REPLY COMMENTS - 9

just that, resulting in the BESS Project moving forward to the FSL in place of other higher-
cost battery projects.
C. Idaho Power Will Justify All 2026 Resource Costs as Part of a Future
Proceeding.
15. Due to their concerns verifying the BESS Project was least-cost, Staff
"recommends the Commission set the future cost recovery of the BESS with cost caps.1113
Idaho Power does not believe cost caps are necessary. As explained in the Company's
Application, Idaho Power is not requesting binding ratemaking treatment in this case,
rather the Company's request in this case is that the Commission find Idaho Power has
met the requirements of Idaho Code § 61-526 and issue an order granting a CPCN to
acquire 150 MW of energy storage necessary to meet the identified capacity deficiency
in 2026. The Company will make a future filing to address the cost recovery associated
with these projects. It is in this future proceeding that Idaho Power will justify all costs
associated with BESS Project, not just those costs over the soft cap, if any.
16. If, however, the Commission finds it necessary to implement cost caps, the
Company would like to correct assertions made by Staff in support of the cost cap
components. First, due to Staff's "lack of confidence of the BESS Project being the least-
cost resource,1114 Staff recommends a hard cap be established on the remaining balance
of system ("BOS") costs with a 5 percent contingency and the interconnection costs, "to
hold the Company accountable to its cost estimate for its bid."15 As described earlier,
Staff's conclusion that the BESS Project is not least-cost is unfounded. Further,
implementing a hard cap on the estimated BOS and interconnection costs is
13 Staff Comments, page 6.
14 Staff Comments, page 7.
15 Id.
IDAHO POWER COMPANY'S REPLY COMMENTS - 10

inappropriate. When asked to provide support for the cost estimate, Idaho Power
explained that the values were simply an estimate because the bid submittal did not
provide the necessary level of detail.16 Further, the support the Company provided
included the BOS cost estimate, which was made up of 18 different cost categories
suggesting the complexity behind the BOS work to be performed and materials to be
installed. Yet, Staff recommends a hard cap on these costs indicating "there is no
uncertainty with contracted material prices"17 providing no support for this assumption. In
addition to material costs being only one component of the BOS costs, the material prices
have not yet been contracted. Finally, Staff's assertion that "[a]ny additional costs above
the hard cap could make the resource not cost-effective, therefore making the resource
not least-cost"18 is simply not true. Increased BOS and interconnection costs could be
offset by lower BESS equipment costs and not affecting the cost-effectiveness of a
project. It is premature to recommend a hard cap on the BOS and interconnection costs
that are merely estimates at this point in the procurement process.
17. In addition to proposing "a soft cap that includes the manufacturer supplied
BESS equipment costs, Idaho sales tax, and AFUDC,"19 Staff's proposal is to implement
a "soft cap on future augmentation costs"20 for the BESS Project. Staff is concerned the
Company could continually augment its battery systems above what is needed to offset
degradation outside of a traditional RFP process."21 Staff's suggestion is unsubstantiated.
Augmentation is an approach to addressing the degradation of battery cells that occurs
16 Idaho Power's Response to Request for Production No. 21.
17 Staff Comments, page 7.
1s Id.
19 Id.
20 Id.
21 Staff Comments, page 6.
IDAHO POWER COMPANY'S REPLY COMMENTS - 11

once a BESS is in operation. For project evaluation purposes and to ensure bids are
comparable, the Company includes an annual augmentation cost through the life of all
BESS projects. However, Idaho Power has not entered into battery augmentation
agreements because the potential planned augmentation for the BESS Project is
unknown. The time, scale, and costs of any future augmentation will require analysis of
then-current operational characteristics. Augmentation is dependent on past usage
including cycle counts, total megawatt-hour throughput, and longevity. Further, battery
suppliers generally will not even provide firm quotes for future augmentation agreement
costs because of the myriad of factors that play into potential future augmentation
requirements unless a long-term agreement is executed which the Company believes is
more expensive than augmentation purchases will be at the time of need. As it committed
to Staff, prior to making any determination related to expenditures associated with
augmentation, the Company will review the current operational capacity of each project,
future identified deficits, and costs compared to alternative resources.22 Proposing any
sort of cost cap on future unknown costs is inappropriate due to the myriad factors that
could impact not only the cost of BESS augmentation but other components of the prudent
decision-making process.
18. Finally, Idaho Power acknowledges the evaluation of the 2026 RFP bids is
performed on bids that include the most up-to-date cost estimates at the time. However,
it is unrealistic for Staff to conclude that developers would be "contractually held to their
cost estimates.1123 With a competitive bidding process that spans nearly 15 months,
excluding contract negotiation, contract execution, and material procurement, costs will
22 Response to Request for Production No. 71, Case No. IPC-E-24-07.
23 Staff Comments, page 4.
IDAHO POWER COMPANY'S REPLY COMMENTS - 12

change; inflation may lead to higher costs or legislation may drive some cost components
down. In fact, Staff noted in their Comments that "the Company's updated bid cost
estimate was less than the initial bid's cost,"24 highlighting the changing costs of the
resource bids.
19. Idaho Power does not believe cost caps are necessary. If, however, the
Commission finds it necessary to implement a cost cap, the Company believes that first,
only a soft cap should apply, and second, the soft cap should only apply to those costs
necessary for the BESS Project to become operational on June 1, 2026, or the
manufacturer supplied BESS equipment costs, Idaho sales tax, AFUDC, BOS, and
interconnection costs.
D. Exploration of the Value of Load Shifting is More Appropriate in a Rate
Design Proceeding
20. Idaho Power appreciates CEO's comments in support of the Company's
request in this case, acknowledging that "battery systems can play key roles in
maintaining reliable and affordable service in the face of rapid load growth1125 and not
opposing the Commission's granting of a CPCN for the BESS Project. In their Comments
however, CEO asks that the Company be encouraged to further explore opportunities for
demand-side load shifting in an effort to avoid procuring more expensive resources. CEO
believes that with the appropriate price signals Idaho Power's incremental load growth
may be served during lower-cost hours.26 Idaho Power does not disagree with CEO's
suggestion that "price signals offer meaningful opportunity for a customer to save
21 Staff Comments, page 6.
25 CEO Comments, page 6.
26 Id.
IDAHO POWER COMPANY'S REPLY COMMENTS - 13

money"27 but believes a proceeding in which rate design changes are considered is a
more appropriate time to consider load shifting impacts, not a CPCN proceeding resulting
from procurement of resources through the competitive bidding process.
III. CONCLUSION
21. Idaho Power acknowledges and appreciates CEO and Staff's review of the
Company's application and respectfully requests the Commission (1) accept Staff's
recommendation to grant the Company a CPCN to acquire new dispatchable energy
storage with 150 MW operating capacity, and (2) reject Staff's proposed establishment of
cost caps, or in the alternative, implement a soft cap that only applies to those costs
necessary to ensure the BESS Project is operational on June 1, 2026.
DATED at Boise, Idaho this 12th day of September 2024.
DONOVAN E. WALKER
Attorney for Idaho Power Company
27 CEO Comments, page 1.
IDAHO POWER COMPANY'S REPLY COMMENTS - 14

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 12th day of September, 2024, 1 served a true and
correct copy of Idaho Power Company's Reply Comments upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff Hand Delivered
Chris Burdin U.S. Mail
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Idaho Public Utilities Commission FAX
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Micron Technology, Inc. Hand Delivered
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Courtney White Hand Delivered
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IDAHO POWER COMPANY'S REPLY COMMENTS - 16