20110523Vol I Boise.pdf

.ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
INVESTIGATION INTO DISAGGREGATION
AND AN APPROPRIATE PUBLISHED
AVOIDED COST RATE ELIGIBILITY CAP
STRUCTURE FOR PURPA QUALIFYING
FACILITIES.
CASE NO. GNR-E~11-01
BEFORE
COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER PAULKJELLANDER
COMMISSIONER MACK REDFORD.
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:May 10, 2011
VOLUME I - Pages 1 - 112
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb(Ðheritagewifi.com
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1 APPEARANCES
2
3 For the Staff:Kristine Sasser, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Donovan Walker, Esq.
and Jason Williams, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
LOVINGER KAUFMANN
by Kenneth E. Kaufmann, Esq.
825 NE. Multnomah
Suite 925
Portland, Oregon 97232-2150
Michael G. Andrea, Esq.
Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99202
RICHARDSON & 0' LEARY
by Peter J. Richardson, Esq.
and Gregory M. Adams, Esq.
Post Office Box 7218
Boise, Idaho 83702
Williams Bradbury, P. C.
by Ronald L. Williams, Esq.
1015 West Hays Street
Boise, Idaho 83702
McDEVITT & MILLER
by Dean J. Miller, Esq.
Post Office Box 2564
Boise, Idaho 83701-2564
4
5
6 For Idaho Power Company:
7
8
9
For PacifiCorp dba Rocky
Mountain Power:
13 For Avista Corporation:
15
16 For NIPPC:
17
18
19
For Cedar Creek Wind:
For Intermountain
Wind, LLC and Renewable
Northwest Proj ect:
CSB REPORTING
[phone]
APPEARANCES
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10
11
12
13
14
15
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17
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21
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1 A P PEA RAN C E S (Continued)
2
3 For North Side Canal
Company & Twin Falls
Canal Company:
Barker Rosholt & Simpson
by Shelley M. Davis, Esq.
Post Office Box 2139
Boise, Idaho 83701
4
5
6 For Idaho Conservation
League:
Benjamin J. Otto, Esq.
Attorney at Law
Idaho Conservation League
Post Office Box 844
Boise, Idaho 83701
7
8
9 For Snake River Alliance:Mr. Ken Miller
Snake River Alliance
Post Office Box 1731
Boise, Idaho 83701
For Renewable EnergyCoalition:
(Telephonically)
John R. Lowe
12050 SW Tremont Street
Portland, Oregon 97225
CSB REPORTING
[phone]
APPEARANCES
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10
11
12
13
14
15
1 I N D E X
2
3 WITNESS EXAMINATION BY
4 M. Mark Stokes
(Idaho Power)
Mr. Walker (Direct)
Prefiled Direct Testimony
Prefiled Rebuttal TestimonyMr. Richardson (Cross)
Mr. Miller (Cross)
Mr. Otto (Cross)
Ms. Sasser (Cross)
Commissioner Kj ellander
5
6
7
8
9
Clint Kalich
(Avista)
Mr. Andrea (Direct)
EXHIBITS
NUMBER DESCRIPTION
16 FOR I DAHO POWER COMPANY:
17
18
20
21
22
23
2.Total Resource Cost for
Selected PURPA Contracts
Premarked
PAGE
11
28
57
68
80
90
97
102
106
PAGE
86
19
FOR RENEWABLE NORTHWEST PROJECT:
1908.Excerpt from Order No. 32068 Identified
24
25
CSB REPORTING
[phone]
INDEX/EXHIBITS
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19
1 BOISE, IDAHO, TUESDAY, MAY 10, 2011, 9:30 A. M.
2
3
4 COMMISSIONER SMITH: All right, we'll
5 start our hearing today. This is a hearing before the
6 Idaho Public Utilities Commission in Case No.
7 GNR-E-11-01, further identified as in the matter of the
8 Commission's investigation into disaggregation and an
9 appropriate published avoided cost rate eligibility cap
10 structure for PURPA qualifying facilities.
11 My name is Marsha Smith. I'm one of the
12 three Commissioners and I'll be Chairing today' shearing.
13 On my left is Paul Kj ellander and on my right is
14 Commissioner Mack Redford. The three of us are your
15 State Public Utilities Commission and we will be the ones
16 making the decision in this matter. We'll start today's
17 hearing by taking the appearances of the parties and
18 we'll begin with Idaho Power.
MR. WALKER: Thank you, Madam Chairman.
20 My name is Donovan Walker appearing here representing
21 Idaho Power.
22
23
COMMISSIONER SMITH: Thank you.
MR. JASON WILLIAMS: Good Morning, Madam
24 Chairman. My name is Jason Williams and I'm also
25 appearing on behalf of Idaho Power.
CSB REPORTING
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1 COLLOQUY
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20
21
1 COMMISSIONER SMITH: For Avista?
2 MR. ANDREA: -Good morning, Madam Chair,
3 Commissioners. My name is Mike Andrea appearing on
4 behalf of Avista Corporation.
5 COMMISSIONER SMITH: For Rocky Mountain
6 Power.
7 MR. KAUFMANN: Madam Chairman, I'm Ken
8 Kaufmann appearing on behalf of Rocky Mountain Power.
9 COMMISSIONER SMITH: For the Staff.
10 MS. SASSER: Madam Chair, Commissioners,
11 Kristine Sasser appearing on behalf of Commission
12 Staff.
13 COMMISSIONER SMITH: For NPPIC.
14 MR. RICHARDSON: Thank you, Madam Chair.
15 Peter Richardson of the firm Richardson & 0' Leary
16 appearing on behalf of the Northwest and Intermountain
17 Power Producers Coalition and also appearing is Greg
18 Adams.
19 COMMISSIONER SMITH: Thank you.
Mr. Miller.
MR. MILLER: Thank you, Madam Chairman,
22 Dean J. Miller. I'm appearing on behalf of two parties:
23 first, the Renewable Northwest Proj ect and I'd like to
24 introduce Ms. Megan Decker who will be our witness, and.25 also on behalf of Intermountain Wind and I'd like to
CSB REPORTING
[phone]
2 COLLOQUY
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1 introduce Mr. Paul Martin who will be the witness for
2 Intermountain Wind.
3 COMMISSIONER SMITH: Thank you,
4 Mr. Miller. What does that leave you, Mr. Otto?
5 MR. OTTO: So I am Ben Otto with the Idaho
6 Conservation League and that's who I'm here on behalf
7 of.
8 COMMISSIONER SMITH: Did you prefile
9 testimony, Mr. Otto?
10 MR. OTTO: I prefiled a statement of
11 posi tion and a strawman proposal. I did not file
12 testimony.
13 COMMISSIONER SMITH: So you don't have a
14 witness?
15 MR. OTTO: I do not have a witness.
16 COMMISSIONER SMITH: All right, thank you.
17 It appears to me from my list of parties that these are
18 all the people who have filed testimony and will have
19 witnesses today. Is there anyone that's been overlooked?
20 Oh, Mr. Williams, so sorry.
21 MR. WILLIAMS: Madam Chair, Ronald L.
22 Williams on behalf of Cedar Creek Wind. We did not file
23 testimony in this segment of the case.
24.25
COMMISSIONER SMITH: Are you a party to
this case?
CSB REPORTING
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3 COLLOQUY
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1 MR. WILLIAMS: Yes, I am. Yes, we are.
2 COMMISSIONER SMITH: Is there anyone here
3 appearing on behalf of the North Side Canal Company and
4 the Twin Falls Canal Company?
5 MS. DAVIS: Yes, Chairman Smith. Shelley
6 Davis here, Barker Rosholt & Simpson, representing North
7 Side and Twin Falls Canal Company.
8 COMMISSIONER SMITH: Is there anyone here
9 appearing on behalf of the Renewable Energy Coalition?
10 MR. LOWE: This is John Lowe. I'm just
11 listening by phone today.
12 COMMISSIONER SMITH: Mr. Lowe, is it your
13 intention to do any cross-examination?
14 MR. LOWE: No.
15 COMMISSIONER SMITH: Okay, well, if that
16 changes, then you just have to let me know at the
17 appropriate time.
18 MR. LOWE: Thank you.
19 COMMISSIONER SMITH: Is there anyone here
20 appearing on behalf of Interconnect Solar Development,
21 LLC? Let the record reflect that we don't see anyone.
22 Mr. Williams, are you also here on behalf
23 of Dynamis Energy, did you tell me that?
24
25
MR. WILLIAMS: Madam Chair, I represent
them in the 2010 generic case, filed an intervention, but
CSB REPORTING
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4 COLLOQUY
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1 they're not participating in this phase of this
2 proceeding.
3 COMMISSIONER SMITH: Is that true for you,
4 also, Mr. Richardson, for the Board of County
5 Commissioners of Adams County?
6 MR. MILLER: Yes, it is, Madam Chair, and
7 also for Grand View Solar.
8 COMMISSIONER SMITH: Okay, is there anyone
9 here appearing on behalf Of Birch Power Company? How
10 about Idaho Wind Farms, LLC? Or Blue Ribbon Energy? Or
11 the Idaho National Laboratory, Conventional Renewable
12 Energy Group? And I see Mr. Miller is here for the Snake
13 River Alliance.
14 MR. KEN MILLER: Good morning, Chairman.
15 COMMISSIONER SMITH: Now, I hope that no
16 one has been forgotten. We have some motions this
17 morning to strike that were filed earlier and some
18 replies and I'm going to take those up. Before we do
19 that, are there any other preliminary matters that need
20 to come before the Commission before we hear the
21 testimony of the witnesses? So I have a few things to
22 say and then you guys can take it from there.
23 The Idaho Public Utili ties Commission has
24 a long history of supporting the goals and implementation
25 of PURPA, not only as a matter of law, but also as a
CSB REPORTING
[phone]
5 COLLOQUY
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1 matter of spirit. This includes ensuring that utili ties'
2 customers pay no more than utili ties' avoided costs and
3 as we know, those costs change over time and so this has
4 to be addressed regularly.
5 When we lowered the eligibility size from
6 10 megawatts to 100 kilowatts last year, we did so hoping
7 to swiftly address what seemed to be the most important
8 issue at the time, which was the disaggregation of large
9 proj ects that more appropriately should have bid into
10 utili ty request for proposals or negotiated rates with
11 utili ties and gotten contracts that way. We may not have
12 stated as artfully in our orders as we could have, but
13 the purpose of today' s hearing is to deal with the
14 disaggregation issue.
15 We are aware of the multitude of other
16 issues that are out there, including negotiating rates
17 using the IRP methodology, the correctness of the
18 surrogate avoided resource that we use and the numerous
19 other concerns that all of you have and we intend to have
20 proceedings to address all those concerns and issues;
21 however, we know from our past experience that doing that
22 will be a lengthy process and we wanted to reconsider the
23 eligibility size more expeditiously than in that lengthy
24 process, so it was our hope that if we could find an
25 appropriate way to assure that disaggregation is not
CSB REPORTING
[phone]
6 COLLOQUY
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1 inappropriately inflating customer rates, then we could
2 look again at the proj ect size without having to wait for
3 the conclusion of the future cases that will consider all
4 those other issues, so today' s hearing is limited to the
5 issue of formulating ways to address disaggregation and
6 nothing else.
7 Of course, it is always appropriate to
8 tell the Commission that we were mistaken and that these
9 issues are inseparable and it's always appropriate to
10 tell us we're wrong, and sometimes we understand and
11 change, but with these comments in mind, I want to ask
12 the Idaho Power Company, Rocky Mountain and Avista to
13 review the obj ections that have been made to their
14 prefiled testimony and to consider whether there are any
15 parts of that testimony that could be eliminated in light
16 of the expression of today' s purpose, the purpose of
17 today' shearing, and maybe you don't need to say that
18 today and you'll certainly have the opportunity to say
19 that in the future in the cases that address the other
20 issues, and also by the same token, I would ask the
21 movants to look at what they've asked to be stricken and
22 ensure that they didn't inadvertently sweep in stuff that
23 was appropriately the subj ect of today' s hearing and I
24 would like to give you maybe, I don't know, 10 minutes to
25 do that, unless you think it would take longer and my
CSB REPORTING
[phone]
7 COLLOQUY
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1 hope, of course, is that our alternative to that is we
2 will come back and we will go page by page and line by
3 line through the obj ections and decide what's in and
4 what's out, so in the hope of administrative efficiency,
5 I'll give you 10 minutes to do that, unless you think you
6 need more.
7 Any questions? Not many cheerful faces.
8 We'll be in recess for 10 minutes.
9 (Recess.)
10 COMMISSIONER SMITH: All right, it looks
11 like we have everyone back. I was told when we broke
12 that some people were having a difficult time hearing me,
13 so I tried to move the microphone closer and if you still
14 have difficulty, just kind of wave your arm and we'll try
15 and adj ust further. Thank you all for taking the break
16 and taking my comments seriously, which I know you have
17 done. What I'd thought we would do now is just start
18 wi th the witnesses and when they come up, you will spread
19 whatever you're spreading and then we'll deal with issues
20 that still may arise, unless someone has a better plan.
21 Mr. Walker.
22 MR. WALKER: Thank you, Madam Chair. If I
23 may preliminarily before we get started with witnesses
24 and without getting into any real argument about the
25 motions to strike or any prepared statements like that, I
CSB REPORTING
[phone]
8 COLLOQUY
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1 think, in essence, you know, what we would like to say is
2 that we believe that there's a vast difference between
3 challenging the validity of either of these methodologies
4 and we're willing to concede and accept the currently
5 approved application of those methodologies as ordered by
6 the Commission, but we do think and have to state that
7 there's a difference and think it would be improper to
8 prohibi t us from suggesting as a solution to
9 disaggregation, which you've instructed us to do, that
10 application of those methodologies in a certain way is a
11 solution to disaggregation and we think that that can be
12 done and we think that we've done that without getting
13 into issues challenging their validity or the mechanics
14 of how they're calculated.
15 We think that that's a very crucial
16 distinction here and we think we've tried very hard to
17 walk that line and think that, you know, we have three
18 recommendations. One is to maintain the 100 kW cap. The
19 other is specifically tailored that if it goes back to 10
20 average megawatts to use the IRP methodology, and the
21 third is our explanations about why we think and
22 statements that we think criteria, most of those won't
23 work.
24 Now, what was obj ected to was the
25 summaries of those positions, the explanations in our
CSB REPORTING
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9 COLLOQUY
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1 testimony of why we think this distinction that I was
2 talking about makes them within scope and in looking at
3 our testimony, we do have a portion that we feel we could
4 offer to remove. We did because this was a separate
5 docket from the GNR-E-10-04, we felt it necessary to
6 bring into this record a summary of our positions and
7 some of the issues from that hearing, but we would be
8 willing to strike that portion as long as there was some
9 reference in our testimony back to those pleadings to
10 identify those.
11 COMMISSIONER SMITH: So, okay, Mr. Walker,
12 I understand your position. Procedurally is it best,
13 then, to call your witness, Mr. Stokes, and we'll see
14 what you offer in terms of his testimony and then we will
15 see if, I think, Mr. Miller has continuing obj ections to
16 material that hasn't been removed, would that be the
17 easiest way to do this?
18 MR. WALKER: You know, however the Chair
19 prefers to proceed would be acceptable to us.
20 COMMISSIONER SMITH: Okay, let's do it
21 that way. Are there any other preliminary matters?
22 Anyone else who wishes to make a statement before we
23 proceed?
24 Mr. Wal ker, would you please call your
25 first witness?
CSB REPORTING
[phone]
10 COLLOQUY
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18
1 MR. WALKER: Idaho Power calls Mark Stokes
2 as its witness.
3
4 M. MARK STOKES,
5 produced as a witness at the instance of the Idaho Power
6 Company, having been first duly sworn, was examined and
7 testified as follows:
8
9 DIRECT EXAMINATION
10
11 BY MR. WALKER:
12 Q Could you please state your name and spell
13 your last name for the record?
14 A My name is Mark Stokes and my last name is
15 spelled S-t-o-k-e-s.
16 Q And by whom are you employed and in what
17 capaci ty?
A I am employed by Idaho Power Company as
19 the manager of power supply planning.
20 Q And are you the same Mark Stokes that
21 filed direct testimony with this Commission on March
22 25th, 2011, and prepared exhibits numbered 1 and 2 to
23 that testimony?
24
25
A Yes, I am.
Q Did you also file rebuttal testimony on
CSB REPORTING
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11 STOKES (Di)
Idaho Power Company
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1 April 22nd, 2011?
2 A Yes,I did.
3 Q Mr. Stokes, if I could direct your
4 attention to your direct testimony and given the
5 statements that have gone on this morning, I direct your
6 attention to page 4 and you're aware of the motion to
7 strike portions of your testimony?
8 A Yes, I am.
9 Q And one obj ected-to portion was page 4,
10 starting on line 14, all the way through page 8, line 24,
11 and given our statements and that objection, would you be
12 willing to withdraw that portion of your testimony
13 starting on page 4, line 22, through page 8, line 24, but
14 leave in place that portion which makes reference to the
15 joint petition and the Docket GNR-E-10-04?
16 A So on page 4 would the striking start on
17 line 14 or line 22?
18 Q Start on line 22.
19 COMMISSIONER SMITH: How about line 21
20 following the word "reference"?
21
22
MR. WALKER: Yes, to be more precise.
Q BY MR. WALKER: Line 21 following the word
23 "reference" and that would leave intact the obj ected-to
24 line 14 through 21 so that the reference to the other
25 docket stayed there?
CSB REPORTING
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12 STOKES (Di)
Idaho Power Company
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1 A Okay, yes, I'm okay with that.
2 MR. WALKER: And Madam Chair, if I may ask
3 for some direction, would the Commission like me to walk
4 through each obj ected-to portion with Mr. Stokes?
5 COMMISSIONER SMITH: No, I think what
6 we'll do now is you will ask to spread and I will ask if
7 there are obj ections and if there are, then we will talk
8 about them.
9 MR. WALKER: Okay, if I could please have
10 a moment.
11 COMMISSIONER SMITH: Sure.
12 (Pause in proceedings.)
13 Q BY MR. WALKER: Mr. Stokes, if I could
14 direct you to page 23 of your direct, this is in another
15 portion of the obj ected-to testimony, the portion was
16 page 16, line 18 through page 25, line 14. I'd like to
17 direct your attention to page 23, line 13 after the
18 reference to the GNR-E-10-04 case through page 23, line
19 22. Similarly to the withdrawal of the previous section,
20 would you be willing to withdraw the remainder of that
21 paragraph after line 13 "GNR-E-10-04" and place a period
22 after the "04" for the same reason?
23 COMMISSIONER SMITH: How about after
24 "docket"?
25 MR. WALKER: Docket, yes.
CSB REPORTING
[phone]
STOKES (Di)
Idaho Power Company
13
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18
19
20
1 THE WITNESS: Is this is all on page 23?
2 Q BY MR. WALKER: Yes, all on page 23, line
3 13, place a period after "docket" and then strike the
4 remaining of that paragraph through page 23, line 22.
5 A Yes, I'm okay with that.
6 Q Mr. Stokes, if I were to ask you the
7 questions set out in your prefiled direct and rebuttal
8 testimony, would your answers to those questions be the
9 same here today as they appear in the prefiled?
10 A Yes, they would.
11 MR. WALKER: Madam Chair, I move that the
12 prefiled direct and rebuttal testimony of Mark Stokes be
13 spread upon the record as if read and that Exhibits No. 1
14 and 2 be marked for identification.
15 COMMISSIONER SMITH: Is there any
16 obj ection to spreading the prefiled testimony as amended
17 here this morning?
MR. MILLER: There is.
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: Thank you, Madam Chairman.
21 If it please the Commission, I might just make a couple
22 of preliminary comments that kind of outline our position
23 that will sort of permeate every single specific
24 objection. First, we appreciate the Commission's
25 willingness to take seriously our motions. I know that
CSB REPORTING
[phone]
14 STOKES (Di)
Idaho Power Company
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1 the Commission's first and usual preference at sort of
2 the evidentiary hearing stage is to be liberal in the
3 admission of evidence with the idea that at the
4 deliberation stage the Commission can sort out what is
5 kind of relevant and what isn't too relevant, but I think
6 that that would be a mistake in this case for, I think,
7 four reasons.
8 First, leaving irrelevant material in the
9 record creates a prejudicial dilemma for the non-utility
10 parties. As I'm sure Commissioner Redford recalls from
11 his litigation days, a party who does not cross-examine
12 or challenge evidence in the record can be deemed or seen
13 to admit or not contest the unchallenged testimony. At
14 the same time, by virtue of the Commission's Bench Order
15 and the time frame in this case, the parties have been
16 unable to conduct discovery on much of the material that
17 is offered in the record, so we're faced with a very
18 prejudicial dilemma of choosing between not crossing on
19 irrelevant material and running the risk of the failure
20 to cross being deemed an admission or, on the other hand,
21 attempting to conduct cross-examination that will be
22 undoubtedly incomplete and ineffectual because of the
23 inability to adequately prepare for the
24 cross-examination.
25 The second reason that I think it would be
CSB REPORTING
[phone]
15 STOKES (Di)
Idaho Power Company
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1 a mistake to be liberal in the admission of evidence in
2 this case is I think Commissioner Smith in her
3 introductory remarks clearly identified the scope of this
4 case, which is to devise an eligibility cap structure for
5 10 average megawatt proj ects and at the same time prevent
6 disaggregation, so the focus of this case is the creation
7 of an eligibility cap structure for 10 average megawatt
8 projects.
9 The utility testimony on the whole is a
10 broadside attack or challenge to the existing surrogate
11 avoided resource method which has been in existence for
12 20 years and an invitation to shift to an entirely
13 different method. Leaving this material in the record
14 would broaden the scope of the proceeding way beyond what
15 Commissioner Smith has identified.
16 And the third reason, I think, is that in
17 many cases where the scope of the proceeding is broad or
18 ambiguous , it makes sense and is sensible to be liberal
19 in allowing evidence in with the idea that you can later
20 sort it out, but here in our view as expressed by
21 Commissioner Smith, the dividing line between relevant
22 and irrelevant is bright and clear, so there isn't the
23 usual need to be liberal in the admission of evidence
24 wi th the idea that it can later be sorted out.
25 And the third or the fourth reason, I
CSB REPORTING
[phone]
16 STOKES (Di)
Idaho Power Company
.1 think, is that granting our motions would affirm the
2 Commission's ability to control its own proceedings. The
3 Commission's orders, whether procedural or substantive,
4 should mean something and parties should abide by them..
5 By granting the motion, the Commission would make clear
6 that the Commission says what it means and means what it
7 says, and in this case, the Commission in its Order has
8 clearly defined the scope of this proceeding and the
9 Commission should affirm that when it invites comments on
10 topic A, it is not an invitation to provide information
11 or argue topics B, C and D, so with those general
12 comments in mind, we obj ect to the spreading of the.13
14
testimony of Mr. Stokes, I won't go through them at this
moment, but with respect to each of the sections
15 identified in our motion to strike filed on April 13th.
16 COMMISSIONER SMITH: Let me see if I can
17 speed this up by telling you, Mr. Walker, what it's my
18 intention to do and see if you would like to further
19 argue and Mr. Miller later, it would be my intention not
20 to strike page 3, line 27 through page 4, line 9. I
21 think that's a description of the Company's position and
22 I think it's appropriate for them to tell us that, let's
23 see, so I would leave that in. I would also leave in the
24 portion on page 4 from line 14 through line 21 where we.25 started with the material that was voluntarily removed
CSB REPORTING
[phone]
17 STOKES (Di)
Idaho Power Company
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1 earlier.
2 It is my intention to strike the material
3 on line 9 -- page 9, line 1 through page 11, line 8, and
4 let me see, page 16, line 1 through page 16, line 17
5 MR. WALKER: Excuse me, Madam Chair, what
6 was that?
7 COMMISSIONER SMITH: Mr. Walker? Oh, it's
8 page 16, line 1 through page 16 through line 17 was the
9 next motion to strike through this testimony. I would
10 leave that in. The next challenged material is also
11 starting on page 16 at line 18, continuing through page
12 25 at line 14, noting that a brief part of that material
13 on page 23 has already been removed, and it would be my
14 intention to strike that material, and with regard to the
15 last two on page 25 and 26 and 27, I would not strike
16 that. So Mr. Miller, in light of that indication from
17 me, do you have anything further to add before I go to
18 Mr. Walker?
19 MR. MILLER: The problem you referenced
20 wi th respect to the difficulty of hearing is occurring,
21 so I'm not sure.
22 COMMISSIONER SMITH: I'm sorry, so let me
23 work from your motion.
24 MR. MILLER: The only question I had is I
25 think I got everything, except the last three points,
CSB REPORTING
[phone]
18 STOKES (Di)
Idaho Power Company
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20
1 page 25, line 15, page 26, line 10 and Exhibit No.1.
2 COMMISSIONER SMITH: I would not strike
3 page 25, line 15. I would not strike page 26, line 10
4 through 27, line 4. I believe that the material I did
5 strike is where Exhibit 1 is referred to and so that
6 would also be out. If I'm incorrect on that, Mr. Walker,
7 please tell me.
8 MR. MILLER: And Exhibit I?
9 COMMISSIONER SMITH: Out.
10 MR. MILLER: I think we understand the
11 Commission's ruling.
12 COMMISSIONER SMITH: Thank you, Mr.
13 Miller. Mr. Walker.
14 MR. WALKER: Thank you, Madam Chair. I
15 appreciate the Chairman's guidance and the fact leaving
16 some portions of the testimony in, but with all due
17 respect, the portions that, the portion that was stricken
18 was actually specifically crafted word for word to be
19 responsi ve to the direction on scope.
COMMISSIONER SMITH: Mr. Walker, could you
21 please point me to which one you're specifically
22 referring to?
23
24.25
MR. WALKER: Yes, sorry. The Chair
indicated that the Commission was inclined to strike I
believe the first section indicated to be stricken was
CSB REPORTING
[phone]
19 STOKES (Di)
Idaho Power Company
.
.
.
1 page 9, line 1 through page 11, line 8; is that correct?
2 COMMISSIONER SMITH: That's correct.
3 MR. WALKER: That portion, Madam Chair,
4 was obj ected to on the basis that it argues that the IRP
5 methodology is preferable to the SAR methodology and
6 actually, that's a mischaracterization of what that
7 section does and what it says. That section actually
8 addresses the rationale for why it's proper to suggest
9 what the Company suggested as solutions to disaggregation
10 because they get at the underlying problem or motivation
11 to dis aggregate and so we think that that i s relevant and
12 wi thin the scope and actually explains why the rest of
13 the testimony is relevant and within the scope and I just
14 don't understand why it would be improper or be stricken
l5 and maintain that it should be properly included as
16 wi thin the scope.
17 COMMISSIONER SMITH: I understand your
18 obj ection, Mr. Walker. I think from my point of view you
19 have stated that you believe the existing methodology is
20 sufficient. I don't think that -- I think the level of
21 detail that you go into here is not necessary for the
22 Commission to understand your position with regard to the
23 case, so that i s why I took it out, because I think it
24 really goes to the heart of what I think the next
25 proceeding will be, which is about the SAR and the IRP
CSB REPORTING
[phone]
20 STOKES (Di)
Idaho Power Company
.
.
.
1 costing methodology, so I'm going to continue to strike
2 and I assume you i 11 have a continuing obj ection.
3 MR. WALKER: Yes, if that could be
4 noted.
5 COMMISSIONER SMITH: Yes, it is noted.
6 MR. WALKER: And the next portion that I
7 have marked that the Chair indicated the Commission was
8 inclined to strike was page 16, line 18 through page 25,
9 line 14.
10 COMMISSIONER SMITH: Yes, that's
11 correct.
12 MR. WALKER: Madam Chair, this section of
13 testimony was obj ected to by RNP and joined by NIPPC on
14 the basis that it is an argument for the superiority of
15 the IRP methodology. Once again, that is a
16 mischaracterization and an unfair summary of this large
17 portion of testimony. This entire section actually
18 describes Idaho Power's second recommendation or its
19 alternative recommendation to the Commission, and as I
20 stated earlier, this was carefully and specifically
21 crafted to be word for word responsive to the
22 Commission's direction to propose ideas to come up -- to
23 investigate and come up with ideas and suggest possible
24 solutions that would allow wind and solar up to 10
25 average megawatts to avail themselves of a published
CSB REPORTING
[phone]
21 STOKES (Di)
Idaho Power Company
.
.
.
1 rate, while at the same time addressing disaggregation
2 and giving some assurance that the avoided cost is not
3 going to be exceeded.
4 COMMISSIONER SMITH: Okay.
5 MR. WALKER: And we believe that that's
6 directly on point and wi thin the scope and that it's
7 improper nowhere has the Commission ever limited the
8 scope to say you can only discuss criteria.I think Mr.
9 Miller argued on a very broad just basis we need notice
10 of this. Everybody has been on notice about this and, in
11 effect, what we're talking about is really, in effect,
12 maintenance of the status quo while we continue to
13 investigate. These were -- this particular section,
14 however, is an al ternati ve solution that accomplishes, it
15 actually accomplishes, all three of the stated goals from
16 the Commission's orders of proposing a solution that
17 takes the published rate cap up to 10 average megawatts
18 while properly addressing disaggregation and the dilemma
19 of protecting customers from having the utility's avoided
20 cost being exceeded. We think it's very much within the
21 direct and the scope and we ask that it be included and
22 spread.
23
24
25
MR. MILLER: Madam Chairman?
COMMISSIONER SMITH: Mr. Miller.
MR. MILLER: I know that you're
CSB REPORTING
[phone]
22 STOKES (Di)
Idaho Power Company
.
.
.
1 undoubtedly prepared to rule without further comment from
2 me, but I just can't leave unrebutted Mr. Walker's
3 comments. The Commission's Order is very clear what it
4 desires to do in this case.
5 COMMISSIONER SMITH: I've read it, Mr.
6 Miller.
7 MR. MILLER: I'm sure you have, but I just
8 want to point out that what the Commission asked the
9 parties to do is to devise an eligibility cap structure.
10 It did not ask the parties to suggest that the rate
11 methodology be changed as a solution to disaggregation
12 and that seems to me to be what all of this testimony is
13 suggesting, avoiding the Commission's request for
14 information on the eligibility cap structure, rather
15 attempting to shift the debate to the appropriateness of
16 the current rate setting methodology.
17 COMMISSIONER SMITH: It is still the
18 Chair's intent to strike this material and, Mr. Walker, I
19 appreciate your point of view and I understand it and
20 that is why I left in your second recommendation on page
21 4, but I believe that if the Commission chose to go that
22 route, it would require further proceedings in order to
23 implement it, so I think at this time the level of detail
24 of the testimony I'm striking is beyond what we intended
25 for this hearing and if it's necessary, we'll have a
CSB REPORTING
[phone]
23 STOKES (Di)
Idaho Power Company
.
.
.
1 subsequent hearing to go into that kind of detail, so I
2 will note your continuing obj ection for the record.
3
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MR. WALKER: Thank you.
COMMISSIONER SMITH: Anything else?
MR. RICHARDSON: Madam Chair?
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: Exhibit 1 was snagged in
8 the testimony that you struck, so was Exhibit 2, I might
9 point out.
10
11 Exhibit 2 --
12
13
14
MR. WALKER: Madam Chair, I don't believe
COMMISSIONER SMITH: Is not obj ected to.
MR. WALKER: was objected to.
MR. RICHARDSON: I'm not sure how an
15 exhibi t can stand in the record without testimony
16 supporting it.
17 COMMISSIONER SMITH: Is there an obj ection
18 to Exhibit 2? If not, maybe Mr. Stokes can just refer to
19 it and explain it in live testimony and then we can move
20 on.
21 MR. RICHARDSON: Madam Chair, yes, we
22 joined in the obj ection with the --
23
24 the objection.
25
COMMISSIONER SMITH: Well, it wasn't in
MR. RICHARDSON: I understand, but I think
CSB REPORTING
[phone]
24 STOKES (Di)
Idaho Power Company
.
.
.
20
21
1 the Exhibit 2 is supported by the testimony that you
2 struck. For the very reasons that you struck the
3 testimony, Exhibit 2 should also be struck because it
4 goes into the IRP methodology calculation in some detail
5 and without any testimony supporting it and without our
6 opportunity to engage in discovery on the information in
7 that exhibit, we would have the same disadvantages that
8 Mr. Miller referred to.
9 COMMISSIONER SMITH: Okay, Mr. Walker.
10 MR. WALKER: Actually, Exhibit 2 has
11 nothing to do with the IRP methodology or the SAR
12 methodology. It is a price, a proj ected 20-year
13 levelized price, calculation for several proposed
14 contracts that are pending before this Commission.
15 COMMISSIONER SMITH: So Mr. Walker, do you
16 want to clarify that with your witness and then there
17 will be testimony supporting Exhibit 2?
18 Q BY MR. WALKER: Mr. Stokes, could you
19 please refer to Exhibit No. 2 in your testimony?
A Yes.
Q Could you please -- what is Exhibit No.2?
22 Could you describe that for the Commission?
23 A Yes. Exhibit 2 provides an explanation
24 first off, is a summary of 17 of the most recent PURPA
25 wind contracts that Idaho Power has signed. The purpose
CSB REPORTING
[phone]
25 STOKES (Di)
Idaho Power Company
.
.
.
1 of putting the exhibit together is to illustrate the
2 magni tude of the dollars that we're looking at, again,
3 because of the quantity of the PURPA proj ects that we
4 have signed contracts for. A lot of the energy that
5 we're going to be getting from these proj ects is going to
6 be during light load hours when we're typically surplus
7 anyway and heavy load hours during certain months of the
8 year and this exhibit basically tries to quantify the
9 magnitude of the dollars that will be lost or that our
10 customers will be forced to pay as a result of having to
11 sell this surplus energy into a market that is lower than
12 what we're paying for through the PURPA contracts.
13 COMMISSIONER SMITH: So this is an
14 analysis based on the contracts you've signed?
15 THE WITNESS: It is and it is in no way
16 tied to the IRP methodology.
17 Q BY MR. WALKER: And Mr. Stokes, the
18 listing of 17 proj ect names, those are all 17 pending
19 contracts in front of the Commission as we sit here
20 today; is that correct?
21 A Yes, I believe so.
22 Q And if you go across the top, the
23 nameplate capacity, annual energy in kilowatt-hours,
24 annual energy megawatt-hours, that's all information from
25 those pending contracts?
CSB REPORTING
[phone]
26 STOKES (Di)
Idaho Power Company
.
.
.
1 A Yes. They were all calculated based on
2 the information provided from the developers and the
3 pricing that's in the contracts.
4 Q And what were they compared to?
5 A The prices in the contracts were compared
6 to forward market price proj ections for the Mid-C market
7 for both heavy load and light load hours and that when
8 you add it all together, it ends up basically being a
9 difference over the 20-year period of almost $26.00 a
10 megawatt-hour.
11 COMMISSIONER SMITH: All right, it's not
12 my intention to strike Exhibit 2.
13 Okay, Mr. Miller.
14 MR. MILLER: We, of course, would abide by
15 the Chair's ruling and just point out that we had no
16 opportunity to cross-examine and ask the Commission to
17 give it what weight it's worth.
18 COMMISSIONER SMITH: I'm certain we can do
19 that. All right, Connie, I hope that's all straight, so
20 having dealt with the obj ections, the prefiled testimony
21 will be spread upon the record as defined in the Chair's
22 response to the motions to strike.
23 (The following prefiled direct testimony
24 of Mr. M. Mark Stokes is spread upon the record.)
25
CSB REPORTING
[phone]
27 STOKES (Di)
Idaho Power Company
.
.
.
1 Q Please state your name and business
2 address.
3 A My name is M. Mark Stokes and my
4 business address is 1221 West Idaho Street, Boise, Idaho.
5 Q By whom are you employed and in what
6 capacity?
7 A I am employed by Idaho Power Company
8 (" Idaho Power" or "Company") as the Manager of Power
9 Supply Planning.
10 Q Please describe your educational
11 background and work experience with Idaho Power.
12 A I am a graduate of the Uni versi ty of
13 Idaho with a Bachelor of Science Degree in Civil
14 Engineering.I also hold a Masters Degree in Business
15 Administration from Northwest Nazarene Uni versi ty and am
16 a registered professional engineer in the state of Idaho.
17 I joined Idaho Power in 1991 as a member of the
18 construction management team responsible for the
19 construction of the Milner Hydroelectric Proj ect. In
20 1992, I joined the Generation Engineering Department
21 where I was responsible for dam safety and regulatory
22 compliance for Idaho Power's 18 hydroelectric proj ects.
23 In 1996, I began working with Idaho Power's Hydro
24 Services Group, a new business ini tiati ve wi thin the
25 Power Production Department, where I was responsible for
28 STOKES, DI 1
Idaho Power Company
.1 business development and marketing.In 1999,I returned
2 to my previous position
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29 STOKES,DI 1a
Idaho Power Company
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1 wi thin the Power Production Department to administer
2 Idaho Power's dam safety program.
3 In 2004, I accepted a position as the President of
4 Ida-West Energy Company, a subsidiary of IDACORP. In
5 this role, I was responsible for managing the overall
6 operation of the Company as well as the operation and
7 maintenance of nine hydroelectric proj ects with
8 qualifying facility status. In 2006, I rejoined Idaho
9 Power's Power Supply Business Unit as the Manager of
10 Power Supply Planning. The Power Supply Planning
11 Department is responsible for resource planning, load
12 forecasting, and cogeneration and small power production
13 contract management.
14 Q What is the purpose of your testimony
15 in this matter?
16 A The purpose of my testimony is to
17 provide direct testimony for Idaho Power in response to
18 the Idaho Public Utilities Commission's ("IPUC" or
19 "Commission") Order No. 32195 in this case, and Order No.
20 32176 in Case No. GNR-E-10-04.
21 In Order No. 32176, the Commission reduced the
22 eligibility cap for published avoided cost rates from 10
23 average megawatts ("aMW") to 100 kilowatts ("kW") for
24 wind and solar qualifying facilities ("QF"). Order No.
25 32176 states:
30 STOKES, DI 2
Idaho Power Company
.1 The Commission solicits information and
investigation of a published avoided cost rate
eligibility cap structure that: (1) allows
small wind and solar QFs to avail themselves of
published rates for proj ects producing 10 aMW
or less; and (2) prevents large QFs from
disaggregating in order to obtain a published
avoided cost rate that exceeds a utility'savoided cost.
2
3
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5
6 Order No 32176, p. 11.
7 The Commission further clarified this request in
8 Order No. 32195 stating:
9 The Commission initiates this proceeding to
investigate and determine in a finite time
10 frame requirements by which wind and solar QFs
can obtain a published avoided cost rate11 wi thout allowing large QFs to obtain a rate
that is not an accurate reflection of a12 utili ty' s avoided cost for such purchases..13 Order No. 32195, p. 1.
14 Q Could you please summarize the
15 recommendations of your testimony?
16 A Yes. My testimony will discuss and
17 conclude that:
18 1.The best method with which to address
19 disaggregation issues is to extend and make permanent the
20 published rate eligibility cap of 100 kW to all QF
21 resource types, and to apply the Integrated Resource Plan
22 (" IRP") -based avoided cost pricing methodology to all
23 proj ect s larger than 100 kW.
24 /.25 /
31 STOKES, DI 3
Idaho Power Company
.
.
.
1 2. Should the Commission feel compelled to go
2 back to a 10 megawatt ("MW") or a 10 aMW published rate
3 eligibility cap, then the published rate should be
4 developed using the IRP methodology and not the Surrogate
5 Avoided Resource ("SAR") methodology.Idaho Power
6 believes that the most effective way to assure that QFs
7 do not obtain a rate that exceeds a utility's avoided
8 cost is to require that avoided cost rates be determined
9 using the Commission approved IRP-based methodology.
10 3."Cri teria" designed to separate QF
11 proj ects by ownership interests and geographic proximity
12 will not work and do not address the underlying problems
13 of price, need, and an appropriately set avoided cost
14 rate.
15 Q Are these positions consistent with
16 Idaho Power's submissions in GNR-E-10-04?
17 A Yes. Idaho Power has stressed and
18 rei terated the severe problems with the current SAR
19 methodology and 10 aMW published rate eligibility in the
20 Joint Petition of the three utili ties, in Idaho Power's
21 Comments, and in its Reply Comments in Case No.
22 GNR-E-10-04, all of which are incorporated herein by this
23 reference.
24 /
25 /
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Idaho Power Company
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9 Q Does Idaho Power receive many
10 requests from "small" wind QFs to enter into power
11 purchase agreements pursuant to PURPA?
12 A No. In fact, nearly all of the wind
13 QF proj ects that Idaho Power has contracted with, as well
14 as those that approach Idaho Power seeking PURPA
15 published rate contracts, are all large disaggregated
16 projects whose individual pieces typically exceed 10, 20,
17 and sometimes up to 30 MW of nameplate capacity. The
18 ultimate common ownership suggests that if not
19 dis aggregated into smaller increments separated by one
20 mile between them in order to qualify for published
21 avoided cost rates, these proj ects would generally range
22 in size from 40 MW to 150 MW in size.
23 For example, please refer to my Exhibit No.2. This
24 exhibi t shows the last 17 wind QF proj ects with signed
25 contracts that have been submitted to the Commission for
39 STOKES, DIll
Idaho Power Company
.1 review. All of these wind QF proj ects are disaggregated
2 large proj ects, with the exception of the 5 MW Western
3 Desert proj ect. Cottonwood, Deep Creek, Rogerson Flats,
4 and Salmon Creek are all Exergy proj ects located in the
5 same locale (80 MW). Al'ha, Bravo, Charlie, Delta, and
6 Echo are all Shell Wind Energy proj ects previously known .
7 as Cotterel Mountain and located in the same locale
8 (147.2 MW). Grouse Creek and Grouse Creek II have common
9 ownership and are located in the same locale (42 MW).
10 Murphy Energy, Murphy Mesa, and Murphy Wind have common
11 ownership and are located in the same locale (60 MW).
12 Rainbow Ranch and Rainbow West share common ownership and.13 are located in the same locale (40 MW). This list could
14 continue back through nearly all of the other
15 Commission-approved QF power purchase agreements for
16 Idaho Power, demonstrating the fact that Idaho Power
17 actually receives very few, and almost no, truly "small"
18 wind QF projects. Without the disaggregation of these
19 wind QFs, they would all be required to use the IRP
20 methodology to establish the avoided cost pricing in
21 their contracts.
22 The Cotterel proj ects are amongst the best examples
23 of how a wind QF is dis aggregated and how the current
24 PURPA system in Idaho can be manipulated to increase the.25 costs borne by Idaho Power's customers and inflate the
price a
40 STOKES, DI 12
Idaho Power Company
.
.
.
1 proj ect developer receives for its sale of energy. The
2 proj ects cannot deny and, in fact, make no attempt to
3 even downplay the fact that they have purposefully
4 disaggregated a large single proj ect into 10 aMW
5 increments in order to obtain a more favorable price.
6 The proj ect was initially proposed to Idaho Power as a
7 single, large, 150 MW wind farm in the Company's 2009
8 wind request for proposals ("RFP"). The proj ect was
9 selected in that RFP process to initiate contract
10 discussions. However, after many months of negotiations,
11 an agreement was unable to be reached and negotiations
12 were terminated. Idaho Power's RFP was also terminated
13 for various reasons, one of which being the fact that the
14 Company started to receive numerous requests for, and
15 started placing large amounts of PURPA wind under
16 contract, which it was required to purchase. The naming
17 convention of Alpha, Bravo, Charlie, Delta, and Echo
18 amplifies the image produced by viewing a map of the
19 proposed proj ects that shows one continuous string of
20 turbines, with just enough separation broken out between
21 the pieces/parts to technically provide one mile of
22 separation between "different" proj ects. Counsel for the
23 projects has admitted the use of this practice "to obtain
24 the published rate" in pleadings from the GNR-E-10-04
25 docket. See Petition for Reconsideration of the
Northwest
41 STOKES, DI 13
Idaho Power Company
.1 and Intermountain Power Producers Coalition, p. 13.
2 Other disaggregated proj ects follow a very similar model
3 of development.
4 Q Does the Company have a
5 recommendation regarding the Commission's potential use
6 of some modified criteria as to QF ownership and
7 geographical separation of projects that would allow
8 "small" wind and solar QFs to avail themselves of
9 published avoided cost rates for projects larger than 100
10 kW while preventing large QFs from disaggregating in
11 order to obtain published avoided cost rates?
.12
13
14
A The Company does not support the sole
use of some criteria regarding ownership and geographical
separations as a solution to disaggregation. Adj usting
15 the existing ownership or disaggregation criteria will
16 not fix the underlying problem, which is the economic
17 incenti ve created by the SAR-based pricing methodology,
18 that motivates proj ects to dis aggregate in order to
19 obtain the higher avoided cost rate. The use of some
20 cri teria will not work because they do not address the
21 underlying problems of price, need, and an appropriately
22 set avoided cost rate. Even if the Commission were to
23 develop rules that required independent ownership
24 criteria and expanded the "one mile" location rule, I.25 believe developers would
42 STOKES, DI 14
Idaho Power Company
.1 become more creative in developing ownership and
2 disaggregation schemes so long as they could avail
3 themselves to the SAR-based avoided cost rate.
4 Q Is your suggestion that QF developers
5 would develop schemes to work around Commission-imposed
6 ownership and disaggregation criteria merely speculation?
7 A No. It has happened in Oregon.
8 Oregon has rules that enable QF developers to receive the
9 published avoided cost rates for proj ects up to 10 MW
10 (nameplate capacity) or less if they are separated by at
11 least five miles. The Company is aware of at least one
12 instance in Oregon where a single developer was able to.13
14
effectively disaggregate a single 65 MW wind proj ect,
covering an 8 to 10 mile footprint, into multiple QFs so
15 that each proj ect qualified for published avoided cost
16 rates. Thus, while I understand the Commission wants to
17 find a way to allow small QF wind and solar proj ects to
18 have access to published avoided cost rates, I simply do
19 not believe that adjusting the eligibility criteria will
20 make that happen. QF developers with large-scale,
21 utility grade projects will still find ways to work
22 around the Commission's rules to access the published
23 avoided cost rate if there is an economic advantage for
24 them to do so..25 /
43 STOKES, DI 15
Idaho Power Company
.
.
.
1 Q Did the Commission recently issue an
2 Order in this docket delaying the requirement of the
3 utili ties to answer questions about the IRP methodology
4 until a later phase of the proceedings.
5 A Yes. However, there is a significant
6 distinction that is relevant here. The validity of the
7 IRP methodology is not in question; thus, the
8 Commission's Order delaying discovery responses to a
9 later phase of proceedings is appropriate. The IRP
10 methodology is a Commission-approved, vetted, and
11 authorized methodology that has been in place, in Idaho
12 Power i s case, for over 16 years as an accepted way to
13 establish a utility's avoided cost. However, it is not a
14 challenge to the validity of the IRP methodology to
15 suggest, as Idaho Power is here, that application of that
16 methodology is the appropriate solution to the problems
17 and issues surrounding disaggregation of QF proj ects.
18 /
19 /
20 /
21 (Material contained on this portion of the page has been
22 struck from the record.)
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20
21
22
23
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25
contained on this page has been struck from the
52 STOKES, DI 24
Idaho Power Company
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1
2
3 (Material contained on this portion of the page has been
4 struck from the record.)
5
6
7
8
9
10
11
12
13
14
15 Q Do you have any other recommendations
16 for the Commission when considering how to deal with the
17 problems of disaggregation of QF proj ects?
18 A Yes. As referenced above, should the
19 Commission determine that published rates should be
20 available for projects larger than 100 kW, Idaho Power's
21 recommendation is that those published rates be set using
22 the IRP methodology. Additionally, the measurement of
23 the published rate eligibility cap should no longer be
24 measured on average MWs but instead should be based upon.25 actual
53 STOKES, DI 25
Idaho Power Company
.1 nameplate rating of the QF proj ect. Nameplate rating had
2 been the standard measurement to determine eligibility in
3 the past, and the change in use to average MW has added
4 to the problem of disaggregation by allowing much larger
5 proj ects, in some cases up to 30 MW, to individually
6 qualify for published rates. The use of nameplate MW
7 rather than average MW is more likely to truly capture
8 the smaller, more unsophisticated developers that the
9 Commission intends to capture with published rates.
10 Q Do you have any concluding remarks?
11 A Idaho Power respectfully urges the
12 Commission to make permanent the 100 kW published rate.13 eligibili ty cap not only for wind and solar QF proj ects
14 but for all QF proj ects and allow the avoided cost rates
15 to be determined using the IRP methodology. This is a
16 very straightforward way to quickly address the issue of
17 disaggregation as well as other issues regarding QF
18 contracts and avoided cost rates. Additionally, it has
19 the added benefits of aligning with the Company's
20 required integrated resource planning process,
21 considering the Company's need for additional resources
22 in the avoided cost rate calculation, and it more
23 accurately reflects the Company's avoided cost.
24 Should the Commission determine that it wishes to.25 make published rates available for wind and solar
proj ects
54 STOKES, DI 26
Idaho Power Company
.
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1 larger than 100 kW, the Company respectfully urges the
2 Commission to only do so if those published rates are set
3 pursuant to a resource specific IRP-based methodology for
4 establishing the Company i s avoided cost.
5 Q Does this conclude your testimony?
6 A Yes.
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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23
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55 STOKES, DI 27
Idaho Power Company
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1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: Now we're ready for
4 the fun part. Let's see, who wants to ask questions?
5 Mr. Richardson, do you have questions for Mr. Stokes?
6 MR. RI CHARDSON : Than k you,
7 Madam Chairman, I do.
8 COMMISSIONER SMITH: And we didn't do his
9 rebuttal, are you doing rebuttal at the end?
10 MR. WALKER: Madam Chair, actually I did
11 submit both his direct and his rebuttal and asked that
12 they both be spread.
13 COMMISSIONER SMITH: All right, I missed
14 that, I'm sorry. So without obj ection, we will spread
15 the prefiled rebuttal testimony of Mr. Stokes upon the
16 record as if read.
17 (The following prefiled rebuttal testimony
18 of Mr. M. Mark Stokes is spread upon the record.)
19
20
21
22
23
24
25
CSB REPORTING
[phone]
56 STOKES
Idaho Power Company
.
.
.
1 Q Please state your name and business
2 address.
3 A My name is M. Mark Stokes and my
4 business address is 1221 West Idaho Street, Boise, Idaho.
5 Q Are you the same Mark Stokes that
6 submitted direct testimony in this case?
7 A Yes, I am.
8 Q What is the purpose of your rebuttal
9 testimony?
10 A The purpose of my rebuttal testimony
11 is as follows:
12 (1) To reiterate Idaho Power Company's
13 ("Idaho Power") position that the solution to fixing the
14 issues associated with disaggregation of the Public
15 Utility Regulatory Policies Act of 1978 ("PURPA")
16 projects lies in addressing the underlying economics used
17 in setting avoided cost rates;
18 (2) Using the utilities' Idaho Public
19 Utilities Commission ("Commission") -approved integrated
20 resource plan ("IRP") -based pricing to set avoided cost
21 rates addresses the underlying economic issues for PURPA
22 proj ects; and
23 (3) The "criteria" proposed by various
24 parties in this docket does nothing to address the
25 underlying economic issues associated with PURPA pricing
57 STOKES, REB 1
Idaho Power Company
.
.
1 and will continue to be susceptible to manipulation and
2 gamesmanship, thus failing to resolve the disaggregation
3 issue as requested by the Commission.
4 Q What is the Commission requesting in
5 this case?
6 A In Order No. 32915, the Commission
7 stated that it wants "information and investigation of a
8 published avoided cost rate eligibility cap structure
9 that:(1) allows small wind and solar QFs to avail
10 themselves of published rates for proj ects producing 10
11 aMW or less; and (2) prevents large QFs from
12 disaggregating in order to obtain a published avoided
13 cost rate that exceeds a utility's avoided cost." Order
14 No. 32915 at 3.
15 Q Has Idaho Power provided information
16 that responds to these two issues?
17 A Yes. In my direct testimony, I
18 provided the following Idaho Power recommendations that
19 would resolve both of these issues:(1) make permanent
20 the 100 kilowatt published rate eligibility cap or,
21 al ternati vely, (2) should the Commission wish to raise
22 the published rate eligibility cap to 10 megawatts or 10
23 average megawatts, that published rates be established
24 using the IRP-based pricing methodology to determine.25 published rates that are consistent with the utility's
avoided costs. The IRP-based
58 STOKES, REB 2
Idaho Power Company
.
.
1 methodology examines the unique characteristics of each
2 PURPA proj ect (e. g., size, location, generation profile,
3 etc.) and provides a price the electric utility would
4 otherwise have to pay to acquire similar generation.
5 This truly results in the closest thing to an
6 "apples-to-apples" comparison of the rate the utility
7 should pay for PURPA generation versus the incremental
8 cost the utility avoids by not purchasing generation on
9 its own.
10 Q Why would addressing the
11 disaggregation problem without addressing the underlying
12 economic issues not solve the disaggregation problem?
13 A Addressing disaggregation without
14 addressing the underlying pricing and economic issues
15 will not solve the problem, and, indeed, will likely
16 perpetuate it. As long as PURPA developers can select
17 from the different cost and price calculations, they will
18 seek out the higher of the two calculations. They will
19 have a strong economic incentive to disaggregate in order
20 to avail themselves of the published avoided cost rate
21 whenever it is higher than the alternative calculation.
22 For example, the Direct Testimony of Bruce Griswold
23 relates Rocky Mountain Power's experience in Oregon where
24 Oregon electric utili ties and PURPA developers, together.25 with the Public Utility Commission of Oregon, entered
into a stipulation designed
59 STOKES, REB 3
Idaho Power Company
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1 to solve the disaggregation problem by prohibiting
2 qualifying facility ("QF") generators from locating
3 wi thin a five-mile radius of one another if they were
4 owned or affiliated with one another. Griswold, p. 18,
5 line 7 through page 20, line 3; see also Direct Testimony
6 of Clint Kalich, p. 32, line 10 through p. 33, line 12.
7 Nonetheless, a single, large PURPA wind project of 64.5
8 MW was able to manipulate Oregon's five-mile separation
9 rule and disaggregate into nine discreet proj ects wi thin
10 an eight to ten mile footprint so as to receive the
11 published avoided cost rate in Oregon. Id. Similar
12 gamesmanship of the disaggregation rules is likely to
13 occur in Idaho if the underlying economic issues
14 associated with its current PURPA pricing methodology are
15 not addressed.
16 Q Has the Commission previously
17 examined the disaggregation problem in the PURPA context?
18 A Yes. Idaho Power has seen the issue
19 of disaggregation as a potential problem for a number of
20 years, and attempted to address the same in Case No.
21 IPC-E-07-04.In that case, Idaho Power proposed that a
22 five-mile separation be implemented between related PURPA
23 proj ects, rather than the currently accepted one-mile
24 separation required by Federal Energy Regulatory
25 Commission to be certified as a QF, in order to address
the issue of
60 STOKES, REB 4
Idaho Power Company
.
~.
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1 disaggregation. This proposal was rej ected by Commission
2 Staff (" Staff"), and ultimately by the Commission. Order
3 No. 30415. The Commission rejected Idaho Power's
4 fi ve-mile separation proposal, specifically finding that
5 such a rule "would encourage and might actually promote
6 gamesmanship" by PURPA proj ect developers. Order No.
7 30415 at 11. The above example of the PURPA project (s)
8 that was able to successfully disaggregate under Oregon's
9 similar five-mile rule shows that the Commission was
10 correct in its finding that a five-mile rule would be
11 subj ect to gamesmanship and manipulation, just as the
12 current one-mile rule is. I am convinced, as evidenced
13 by the Oregon example mentioned above, that given the
14 underlying economics of the published avoided cost rate,
15 PURPA developers will find a way to engage in
16 gamesmanship with regard to any disaggregation rule set
17 by this Commission to avail themselves of the higher
18 published avoided cost rate.
19 Q Do any of the other parties to this
20 proceeding support maintaining the 100 kW published rate
21 eligibili ty cap on a permanent basis?
22 A Yes, in fact four of the six parties
23 that submitted direct testimony in this proceeding
24 recommend making the 100 kW published rate eligibility
25 cap permanent as a feasible solution to the issue ofdisaggregation.
61 STOKES, REB 5
Idaho Power Company
.
.
.
1 Those parties include the three utili ties, Idaho Power,
2 Avista Corporation, and Rocky Mountain Power, as well as
3 Staff.
4 Q Do you have any comment or response
5 to the Staff's proposal?
6 A Yes. Idaho Power fully supports and
7 agrees with Staff's second proposal:"To make permanent
8 the Commission's prior Order to temporarily lower the
9 eligibili ty cap for published rates to 100 kW for wind
10 and solar resources." Sterling Direct, p. 11. Staff
11 correctly identifies that under this approach, wind and
12 solar proj ects would still be entitled to contract under
13 PURPA, but the avoided cost rates in those contracts
14 would be based on the IRP methodology.Id. Staff
15 believes this to be a feasible option for the Commission
16 and further states that "the IRP methodology can be used
17 for projects of any size and is well suited for wind and
18 solar resources because it can take into account
19 generation characteristics that are unique to wind and
20 solar, in addition to the utility's need for new
21 resources." Id.This recommendation by Staff correctly
22 addresses the underlying problem, or the root cause of
23 disaggregation, by eliminating the economic incentive for
24 projects to disaggregate. In addition, this
25 recommendation also
62 STOKES, REB 6
Idaho Power Company
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1 addresses the disparity of PURPA proj ects obtaining a
2 rate that is not an accurate reflection of the utility's
3 avoided cost for such purchases.
4 Q Do you have any comment or response
5 to Staff's proposed Single Proj ect Criteria?
6 A Yes. I do not believe that Staff's
7 proposed criteria will alleviate the disaggregation issue
8 as PURPA proj ect developers will still be motivated to
9 game the disaggregation criteria so long as they are
10 economically incented to seek a higher published avoided
11 cost rate. Staff's Single Proj ect Criteria does not
12 address the underlying problem of economics and avoided
13 cost pricing, and so long as the underlying economic
14 issue is unaddressed, PURPA developers will find a way to
15 game the disaggregation criteria when economically
16 incented to do so by different published avoided cost
17 rates. Additionally, Staff's proposal creates a policing
18 role for the electric utilities that are required to
19 purchase power from PURPA projects, requiring the
20 electric utility to make the first determination as to
21 whether a proj ect satisfies the proposed eligibility
22 cri teria. This not only creates additional and
23 burdensome administrative roles and responsibilities for
24 the utility, already taxed with onerous administrative
25 duties related to the PURPA
63 STOKES, REB 7
Idaho Power Company
.
.
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1 contracting process, but also places the utili ties in the
2 precarious position of having to, on the one hand, engage
3 in good faith negotiations with a PURPA counter-party
4 while, on the other hand, refuse to negotiate with a
5 PURPA proj ect developer if the utili ty perceives that the
6 proj ect fails to comply with the proposed eligibility
7 cri teria. The utility should not be further forced into
8 this dual role of enforcer and contracting party.
9 Q Do you have any comment or response
10 to the criteria-based proposals of Megan Decker on behalf
11 of Renewable Northwest Proj ect ("RNP") in its direct
12 testimony and of the Idaho Conservation League's (" ICL")
13 statement of position and strawman proposal?
14 Yes. In general, my concerns withA
15 the RNP and ICL proposals are the same concerns as those
16 that I have with the Staff's Single Proj ect Criteria
17 proposal; i. e., so long as the underlying economic issue
18 is unaddressed, PURPA developers will find a way to game
19 the disaggregation criteria. As long as the underlying
20 economic issue of an appropriate avoided cost methodology
21 goes unaddressed, an economic incentive for PURPA
22 developers to manipulate any disaggregation criteria will
23 In addition, similar to the Commissionstill exist.
24 Staff's proposal, the RNP and ICL proposals require that
25 the electric utilities police PURPA
64 STOKES, REB 8
Idaho Power Company
.
.
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1 eligibili ty criteria, placing additional burden and
2 administrative complication as well as possibly
3 conflicting interests upon electric utili ties in their
4 required negotiations with PURPA developers.
5 Q Do the Commission Staff's, ICL' s, or
6 RNP' s criteria-based proposals consider the impact PURPA
7 proj ects are having on Idaho Power's customers?
8 A No, and this is the most troubling
9 aspect of all of the criteria-based approaches suggested
10 to the Commission. None of the proposals suggest that
11 their proposed criteria will do anything to ensure Idaho
12 customers are not paying more than the electric
13 utili ties' avoided costs for PURPA energy. The proposals
14 simply establish criteria to allow PURPA developers to
15 continue to develop their proj ects and receive the
16 published avoided cost rate if they meet certain
17 eligibili ty criteria. These proposals tell only one-side
18 of the PURPA story, the developer's side. The other side
19 of the story is the customer's side, who ultimately has
20 to pay for electricity generated by PURPA proj ects. The
21 Commission's directive in this proceeding was not simply
22 to devise a way that further PURPA development could be
23 encouraged and continue, but the directive was also to
24 make sure that PURPA QFs were not - and do not "obtain a
25 published avoided cost rate that
65 STOKES, REB 9
Idaho Power Company
.
.
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1 exceeds a utility's avoided cost," Order No. 32176, p.
2 11, nor "obtain a rate that is not an accurate reflection
3 of a utility's avoided cost for such purchases." Order
4 No. 32195, p. 1. PURPA requires that utility customers
5 be economically indifferent to the effects of whether
6 power is purchased from a QF or otherwise acquired
7 (generated or purchased) by the utility. Because the
8 underlying economic issues are not addressed by the
9 various proposals, these criteria will likely be
10 exploi ted by PURPA developers so as to avail themselves
11 of the published avoided cost rate to the direct and
12 substantial detriment and financial harm of all of the
13 utilities' customers.
14 Q Does Idaho Power's proposal to
15 address the disaggregation issue through the application
16 of the IRP-based pricing methodology to set avoided cost
17 rates consider impacts of PURPA proj ects on Idaho Power's
18 customers?
19 A Yes. By setting avoided cost rates
20 for PURPA proj ects based upon the IRP methodology,
21 assurance can be given to customers that they will not be
22 overpaying for energy the electric utili ties are avoiding
23 by purchasing PURPA energy. Because the IRP-based
24 methodology addresses the underlying economic issue with
25 the Commission's current policy on PURPA pricing, PURPA
developers will have no
66 STOKES, REB 10
Idaho Power Company
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20
21
22
23
24
25
1 incenti ve to exploit disaggregation rules to receive more
2 attracti ve published avoided cost rates. This approach
3 addresses both issues that the Commission ordered be
4 addressed in this docket:(1 ) it solves the problem of
5 disaggregation and (2) additionally, provides assurance
6 that customers will not be overpaying for PURPA energy by
7 paying a rate that exceeds the utility's avoided cost.
8 This approach is fully supported by all three electric
9 utili ties, as well as Commission Staff, and should be
10 implemented by the Commission.
11 Q Does this conclude your testimony?
12 A Yes.
13
14
15
16
17
18
19
67 STOKES, REB 11
Idaho Power Company
.1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair.
5 I guess I don't want to get the record too confused, but
3
4
6 I'll still refer to the existing pagination?
7 COMMISSIONER SMITH: I think that's the
8 only way we can do it.
9
10
11
12
MR. RICHARDSON: Thank you.
CROSS-EXAMINATION
.13 BY MR. RICHARDSON:
14 Q Mr. Stokes, at the bottom of page 3, you
15 state that the best method with which to address
16 disaggregation is to make permanent the 100 kW cap. Do
17 you see that?
18 A Yes, I see the section.
Pardon me?
Yes, I see the section there at the bottom
You are aware, aren't you, that the
23 Commission wasn't interested in the best method to
19 Q
24 address disaggregation, but was rather looking for a.
20 A
25 method that allows small wind and solar QFs to avail
CSB REPORTING
[phone]
68 STOKES (X)
Idaho Power Company
21 of the page.
22 Q
.
.
.
1 themselves of published rates for proj ects producing 10
2 average megawatts or less?
3 A Well, the other part of the Commission's
4 directi ve, again, I can read it word for word, is a
5 method that prevents large QFs from disaggregating in
6 order to obtain a published avoided cost rate that
7 exceeds the utility's avoided cost.
8 Q Thank you. At the top of page 4 of your
9 testimony, you begin that paragraph with the phrase,
10 should the Commission feel compelled to go back to the 10
11 megawatt -- back to a 10 megawatt or to a 10 aMW rate
12 eligibili ty cap, the published rate should be developed
13 using the IRP methodology and not the SAR methodology.
14 Do you see that?
15 A Yes, I do.
16 Q And you just quoted me from the
17 Commission's Order, did you not, that said that the
18 Commission solicits information on a method, and I'm
19 quoting, "that allows small wind and solar QFs to avail
20 themselves of published rates"; correct?
21 A Could you repeat that, please?
22 Q Didn't you just quote to me from the
23 Commission's Order that the Commission was soliciting
24 information on a method "that allows small wind and solar
25 QFs to avail themselves of published rates"?
CSB REPORTING
[phone]
69 STOKES (X)
Idaho Power Company
.
.
.
1 MR. WALKER: I'll obj ect. That's not the
2 portion that Mr. Stokes quoted to Mr. Richardson.
3 Q BY MR. RICHARDSON: Have you read the
4 Order that established this docket?
5 A Yes. Again, that was
6 Q Is that an accurate quote from that
7 Order?
8 A What you read was the first part of the
9 directi ve, not the entire directive.
10 Q Correct, but that's an accurate quote from
11 the Order was the question.
12 A For that part of it, yes.
13 Q Okay, under the IRP methodology, there
14 can't be a published rate, can there be?
15 A I'm not sure I follow your question,
16 Mr. Richardson. I mean, that's part of our proposal is
17 to -- was to use the IRP methodology to establish a
18 published avoided cost.
19 Q That's available for all comers, same
20 rate, a published rate? What's your idea of a published
21 rate, I guess, is the question?
22 A A rate that would allow the utility to pay
23 a QF proj ect a rate that would represent the cost to the
24 utility of acquiring the same electric energy under some
25 other procurement method.
CSB REPORTING
[phone]
70 STOKES (X)
Idaho Power Company
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.
1 Q So that's not a published rate as we know
2 it today, is it?
3 A I mean, using that methodology, the IRP
4 methodology is an accepted method that has been used for
5 16 years to establish the avoided cost rates.
6 Q The question wasn't is it a method. The
7 question was is it equivalent to the published rate as we
8 know it today?
9 A Are you referring to the SAR methodology
10 calculated rate?
11 Q No, I'm referring to your testimony that
12 says that should the Commission feel compelled to go back
13 to a 10 megawatt or a 10 aMW rate eligibility cap, the
14 published rate should be developed using the IRP
15 methodology and not the SAR methodology. That's a quote
16 from your testimony, and my question is, is the IRP
17 methodology the same thing in your mind as the published
18 rates that we are familiar with and have today?
19 A And again just to clarify, your
20 terminology the same rates we have in effect today are
21 what the SAR methodology is calculating?
22 Q The published rates, that i s your words in
23 your testimony. Is the IRP methodology the same thing?
24 A Are you asking me if the methodologies are
25 the same?
CSB REPORTING
[phone]
71 STOKES (X)
Idaho Power Company
.
.
.
1 Q Let's go back to it. You state that the
2 published rate should be developed using the IRP
3 methodology and not the SAR methodology. My question is,
4 isn i t an IRP methodology, under that methodology, isn't
5 it impossible to have a published rate as we know it
6 today?
7 A No. In fact, in our proposal what we are
8 proposing is that the IRP methodology be used to
9 establish the published rate.
10 Q A published rate, a rate that everyone is
11 available to take advantage of?
12 A In our proposal what we proposed was by
13 project type, because, again, we believe that the IRP
14 methodology provides a more accurate evaluation of the
15 energy that each type of proj ect provides to the
16 utility.
17 Q So you would publish a published rate for
18 all solar projects? Every solar project is eligible for
19 the same rate?
20 MR. WALKER: Madam Chairman,
21 Mr. Richardson is actually asking about our Exhibit No. 1
22 which has been stricken from the record and perhaps it
23 would be instructive to have that exhibit admitted so
24 that we all know exactly what we're talking about.
25 COMMISSIONER SMITH: Mr. Richardson.
CSB REPORTING
[phone]
72 STOKES (X)
Idaho Power Company
.
.
.
1 MR. RICHARDSON: Madam Chairman, I didn't
2 mention Exhibit 1: Perhaps what this illustrates is that
3 you may not have been as inclusive as you could have been
4 in order to make the issues more succinct and clear as to
5 what is or is not on the table today.
6 COMMISSIONER SMITH: You know, the
7 Commission maybe isn't as clear as it could be sometimes.
8 I think that you need to let the witness answer to the
9 best of his ability. He may not agree with you and then
10 you can move on.
11 MR. RI CHARDSON : Than k you, Madam Cha i r .
12 Q BY MR. RICHARDSON: So the question was
13 under your proposal, would you have a rate for solar
14 proj ects that every solar proj ect that comes to you would
15 be entitled to?
16 A That was the general intent of our
17 proposal, yes.
18 Q And that would be true for wind proj ects,
19 every wind proj ect no matter where located would be
20 entitled to the same published rate?
21 A Yes, our thinking was that, again, the IRP
22 methodology utilizes the AURORA model that's used in our
23 integrated resource planning process and is updated every
24 two years and that that model could be used, again, every
25 two years at the completion of an IRP to establish a
CSB REPORTING
[phone]
73 STOKES (X)
Idaho Power Company
.
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.
1 published avoided cost rate for each type of resource
2 that would be calculated based on the value of the energy
3 and the capital or capacity cost, the fixed piece, that
4 that specific type of proj ect would provide to the
5 utility.
6 Q So you're proposing to create a published
7 rate that is updated every two years under your IRP
8 methodology?
9 A Yes.
10 Q Do you say that in your testimony?
11 A I do not recall right off. If you can
12 find it, direct me to it, please.
13 Q And is that published rate, just to be
14 clear because this is not how I read your testimony, it
15 was different, I thought you were suggesting that each
16 indi vidual proj ect was going to have its own unique rate
17 based upon your run of your AURORA model as you said.
18 That is the way the IRP methodology isA
19 currently applied or had been applied for proj ects larger
20 than what the cap was set at, that an individual run
21 would have been done and has been done for each
22 individual proj ect.
23 Q And is that your proposal going forward
24 for proj ects under 10 average megawatts?
25 A I believe we could live with that, also.
CSB REPORTING
[phone]
74 STOKES (X)
Idaho Power Company
.
.
.
1 Q So is that your testimony or not? I'm
2 trying to figure out what you're recommending here.
3 MR. WALKER: Madam Chairman?
4 COMMISSIONER SMITH: Mr. Walker.
5 MR. WALKER: I would like to make an
6 obj ection and make a motion that since Mr. Richardson has
7 now opened the door into an examination of how the IRP
8 methodology would be applied to individual proj ects that
9 our Exhibit 1 and that portion of testimony that was
10 stricken that explains exactly how that would work is now
11 very much relevant and should be included and spread upon
12 the record with the rest of his testimony.
13 COMMISSIONER SMITH: Mr. Richardson.
14 MR. RICHARDSON: Madam Chair, we engaged
15 in discovery on the mechanics of Exhibit 1 and we were
16 soundly shot down and in order to cross-examine this
17 wi tness on Exhibit 1, I would have to have my discovery
18 that was the subject of a protective order answered.
19 COMMISSIONER SMITH: So do you have the
20 answer to your question now?
21 MR. RICHARDSON: I don't, Madam Chair.
22 The witness is
23 COMMISSIONER SMITH: So Mr. Stokes, I 1m
24 not clear either. Is it the Company's proposal to use
25 the IRP methodology to establish a fixed rate or is it
CSB REPORTING
[phone]
75 STOKES (X)
Idaho Power Company
.
.
.
1 the Company's proposal to individually calculate a rate
2 for each proj ect based on the IRP methodology? I know
3 you can live with either. I mean, you told me you could
4 li ve with the latter, but what is your proposal? What
5 does No. 2 on page 4 mean?
6 THE WITNESS: Let's see, excuse me for a
7 second. No. 2 on page 4 referring to -- okay, there we
8 go. Okay, again, in my testimony, the primary proposal
9 was to leave the 100 kilowatt cap in place,
10 Madam Chairman, and the secondary proposal was intended
11 that if the Commission felt compelled to return the cap
12 to 10 megawatts or 10 average megawatts that the avoided
13 cost rate paid to QF developers be set using the IRP
14 methodology.
15 COMMISSIONER SMITH: And that would be a
16 published rate available to all projects less than 10
17 megawatts?
18
19
THE WITNESS: Yes.
COMMISSIONER SMITH: It would not be an
20 individual proj ect calculated rate?
21 THE WITNESS: Our intent was that we would
22 calculate it once based on a representative proj ect of a
23 particular technology and that would be applied to all
24 projects.
25 COMMISSIONER SMITH: Thank you. Now can
CSB REPORTING
[phone]
76 STOKES (X)
Idaho Power Company
.
.
.
1 we move on?
2 MR. RI CHARDSON : Ye s , than k you,
3 Madam Chair. I'm doing some editing here because of
4 changes. That i s all I have, Madam Chair. Oh, excuse me,
5 Exhibit 2, I do have a couple more, Madam Chair.
6 COMMISSIONER SMITH: All right.
7 Q BY MR. RICHARDSON: Would you please
8 reference your Exhibit 2?
9 A Okay.
10 Q Did you provide the parties workpapers
11 supporting this exhibit?
12 A I do not recall, I i m sorry.
13 Q And this Exhibit 2 compares the cost of
14 your recent wind proj ects to a market estimate?
15 A To a forward market price curve that we
16 utilize.
17 And that i s a 20-year forward market priceQ
18 curve?
19 A It is extended out 20 years, yes, to do
20 this calculation.
21 Q And is it possible today for me to go on
22 the market and actually enter into a forward 20-year
23 market curve contract?
24 I don't believe so for the full 20-yearA
25 term. Right now based on information we i re seeing from
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.1 brokers, you could realistically hedge that price into
2 the 2016 to 2017 time frame.
3 Q So the market for me to go out and buy
4 electricity on the forward market is not a 20-year
5 market, it i S a five-year market?
6 A Well, more like six or seven I would
7 say.
8 Q Okay, six or seven, I'll accept that, so
9 you i re asking the Commission to conclude what, based upon
10 a forward contract that I could acquire on the market to
11 a 20-year economist's estimate of what the next 20 years
12 is going to look like?.13 MR. WALKER: Objection, Your Honor. He
14 hasn't asked the Commission to conclude any such thing
15 with this exhibit.
16 MR. RICHARDSON: I asked you're asking the
17 Commission to conclude what from this exhibit.
18 COMMISSIONER SMITH: I'll allow the
19 question.
20 THE WITNESS: Well, again, this exhibit is
21 intended to estimate and quantify the dollars that Idaho
22 Power's customers will be subj ect to as a result of all
23 of the surplus energy that we will be receiving from
24 these proj ects..25 Q BY MR. RICHARDSON: Why did you do that
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.1 for 20 years when you know for a fact that you can't
2 estimate with any degree of certainty beyond year 2016 or
3 2017?
4 A Simply because they're 20-year contracts.
5 You could certainly back that down to 2016 or '17 and
6 estimate the number that way if you'd like to.
7 Q And did you run a similar comparison on
8 the Company's Langley Gulch power plant?
9 MR. WALKER: Objection, Your Honor.
10 That's beyond the scope and irrelevant to this
11 proceeding.
12 COMMISSIONER SMITH: Sustained..13 Q BY MR. RICHARDSON: And how did these
14 costs for the QF projects on this list compare to the
15 costs Idaho Power is incurring to acquire new
16 resources?
17 MR. WALKER: Objection, Your Honor, same
18 grounds.
19 COMMISSIONER SMITH: Yes, Mr. Richardson,
20 that's way beyond what we're talking about,
21 disaggregating.
22 MR. RI CHARDSON : Than k you,
23 Madam Chairman. I think I made my point. I have no
24 further questions..25 COMMISSIONER SMITH: Thank you.
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20
1 Mr. Miller.
2 MR. MILLER: Thank you, Madam Chairman.
3
4 CROSS-EXAMINATION
5
6 BY MR. MILLER:
7 Q Good morning, Mr. Stokes.
8 A Good morning.
9 Q Throughout your testimony without pointing
10 to any specific place and throughout the testimony of the
11 other utility witnesses, there is an express concern
12 about gaming. Generally we call that gaming the system.
13 A Yes, I do.
14 Q And even though you use those words, it's
15 never quite clear to me what they exactly mean and would
16 I be fair to say that what you're trying to get at is the
17 point that as long as there are two prices available to a
18 seller, the seller will always seek the higher price?
19 A Yes.
Q Is there anything in that behavior that
21 seems irrational for a seller to seek the highest
22 price?
23 A Not in my mind. Again, that was a big
24 part of our argument on why we don't think this criteria
25 will solve the disaggregation issue.
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1 COMMISSIONER SMITH: Sorry to interrupt,
2 Mr. Miller, but I need to ask the people who are
3 listening in by telephone, we are hearing some of your
4 keyboard noise or whatever, so if you would please mute
5 your telephone, we'd really appreciate it. Thanks.
6 Sorry.
7 MR. MILLER: Thank you, Madam Chairman.
8 Q BY MR. MILLER: Do you think there's
9 anything immoral about a seller trying to seek the
10 highest price available to them?
11 MR. WALKER: Objection, Your Honor.
12 That's irrelevant to whether he thinks something is
13 immoral or not.
14 COMMISSIONER SMITH: Mr. Miller.
15 MR. MILLER: Well, the utili ties have
16 characterized developer behavior in derogatory terms with
17 the use of the phrase "gaming."
18 COMMISSIONER SMITH: Well, I don't know.
19 Some of us don't think of gaming as derogatory. I think
20 you need to move on.
21 MR. MILLER: As long as the Commission
22 understands the point, I don't need to go too much
23 further into it, but I will risk one more.
24 Q BY MR. MILLER: Mr. Stokes, when you fill
25 out your personal income tax return, do you take
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.1 advantage of every deduction that's legally available to
2 you?
3 MR. WALKER: Objection, Your Honor. Mr.
4 Stokes' personal income tax practices are irrelevant to
5 this proceeding and beyond the scope.
6 COMMISSIONER SMITH: Mr. Miller?
7 MR. MILLER: I think I can with a small
8 amount of latitude make a relevant point.
9 MR. WALKER: I would continue to object to
10 references to his --
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.
11 COMMISSIONER SMITH: And I will continue
12 to sustain.
13 MR. MILLER: Fair enough.
14 Q BY MR. MILLER: So what we have here, I
15 guessi in broad terms is the problem of two prices, one
16 higher than the other; right?
17 A Two different methodologies, yes.
18 Q And if for public policy reasons it's
19 decided that some people should not have access to the
20 higher price, then there are at a high level two
21 potential ways to effectuate that decision. One would be
22 to eliminate the dual pricing; correct?
23 A That would be one way to eliminate the
24 problem, I think, yes.
25 Q Which is essentially in very broad terms
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1 Idaho Power's proposal in this case?
2 A Well, again, in our proposal, our primary
3 proposal, was to make the 100 kilowatt cap permanent.
4 Q Right, and the other solution would be to
5 devise a set of criteria which would define who is
6 eligible for the higher price and who is not?
7 A Well, the incentive criteria based on the
8 Commission's directive would be to basically prevent
9 large proj ects from disaggregating in order to obtain
10 some sort of a higher rate that may be possible under a
11 different methodology.
12 And what the Commission asked for in thisQ
13 case is thoughts on how to devise a set of criteria to
14 define who would be eligible for the higher price and who
15 would not?
16 No, that's not my understanding. TheA
17 Commission did not specifically limit the scope of the
18 case to criteria I do not believe.
19 Q All right. Some parties took the
20 Commission at its word and actually tried to devise
21 eligibility criteria.
22 MR. WALKER: Objection, Madam Chairman,
23 that's argumentative.
24 COMMISSIONER SMITH: Sustained.
25 MR. MILLER: That's a fair point. It i S a
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1 good obj ection.
2 Q BY MR. MILLER: Have you reviewed the
3 proposals of the Staff in its effort to devise
4 eligibility criteria?
5 A Yes, I have.
6 Q Have you reviewed the proposals of the
7 Renewable Northwest Proj ect to devise eligibility
8 criteria?
9 A Yes, I have.
10 Q Have you reviewed the proposal of Rocky
11 Mountain Power which evolved between the direct testimony
12 and rebuttal testimony to devise eligibility criteria?
13 A Yes, I have.
14 Q Putting aside the difference in details of
15 those proposals, do you agree that a common feature of
16 all three of them is oversight and ability by the
17 Commission to make a final determination as to which
18 projects appear to be aggregated and which appear not to
19 be aggregated?
20 MR. WALKER: Obj ection, Madam Chair. That
21 goes beyond the scope of the direct testimony. There was
22 no specific analysis of either of those proposals or
23 reference to them in the direct testimony.
24 COMMISSIONER SMITH: I agree, Mr. Walker,
25 but I think this is your expert witness and he has
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1 reviewed the proposals and I think if he has an opinion
2 wi thin the scope of his expertise, he's certainly willing
3 to provide it, so I'll overrule the obj ection.
4 THE WITNESS: Can you go ahead and repeat
5 the final part of the question?
6 Q BY MR. MILLER: Let me back up just one
7 moment. In its -- Madam Chair, I am correct, am I not,
8 that the rebuttal testimony has been spread?
9 COMMISSIONER SMITH: It has.
10 Q BY MR. MILLER: In its rebuttal testimony,
11 did Idaho Power offer any constructive suggestions or
12 improvements of any of those three proposals?
13 A I do not believe we did.If you're aware
14 of some point, please reference it.
15 I couldn't find any. Putting aside theQ
16 difference in details, would you agree that a common
17 feature of all three proposals is the ability of the
18 Commission to make a final determination as to whether
19 the eligibility criteria have been met or not met?
20 A Under all of the proposals that have been
21 made, I think the Commission has ultimately the final
22 say, but what it does is it puts the utility in the
23 posi tion of having to police a list of criteria to make
24 some kind of a determination of whether a proj ect is
25 actually a larger proj ect or not, and myself, I do not
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1 really want to be placed in that role.
2 Q So your objection, then, is that the
3 utility has to make an initial determination?
4 A I believe that's the way each of the
5 proposals that have been made have been set up, yes.
6 Q And is it the Company's position that this
7 would be a burdensome obligation or that it would put the
8 Company in a position of some kind of a conflict of
9 interest?
10 A I believe it does create some conflict
11 because it places us both in the role of being an
12 enforcer of a list of criteria as well as a contracting
13 party that is obligated to negotiate in good faith with
14 the other party.
15 MR. MILLER: Madam Chairman, could I
16 distribute an exhibit?
17 COMMISSIONER SMITH: You may.
18 (Mr. Miller distributing documents.)
19 MR. MILLER: I'm not sure I have enough
20 copies for everyone.
21 (Renewable Northwest Proj ect Exhibit No.
22 1908 was marked for identification.)
23 COMMISSIONER SMITH: We'll have additional
24 copies here within a minute, so please proceed,
25 Mr. Miller.
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.1 Q BY MR. MILLER: Mr. Stokes, I've handed
2 you what's been marked as RNP Exhibit 1908. Do you have
3 that with you?
4 A Yes, I do. I'm in the process of reading
5 it.
6 Q For ease of reference, I'll indicate that
7 this is a portion of Commission Order 32068 and if I
8 could direct your attention, if it would help, to the
9 second page and there's the paragraph that starts with
10 the words "Staff recommended."
.
.
11 MR. WALKER: Madam Chairman?
12 COMMISSIONER SMITH: Mr. Walker.
13 MR. WALKER: I think it would be helpful
14 to note that this appears to be only page 1 and page 5 of
15 the referenced Order and not page 2 and not a complete
16 Order.
17 COMMISSIONER SMITH: Well, I would note
18 that the Commission under its Rules of Procedure may take
19 administrati ve notice of our orders, so we would take
20 administrative notice of the entirety of Order 32068 if
21 that makes you feel better.
22 MR. WALKER: Thank you.
23 Q BY MR. MILLER: And the sentence I'm most
24 interested in is in the middle of that paragraph and the
25 sentence reads, "The Company's goal regarding appropriate
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1 rates is one of gatekeeper, assuring that its customers
2 are not being asked to pay more than the Company's
3 avoided cost." Do you see that sentence?
4 A Yes, I'm reading it now.
5 Q With respect to your worry that the
6 Company is placed in the role of enforcer, wouldn't it be
7 fair to say that the Commission already expects the
8 Company to exercise a, as characterized here, gatekeeper
9 function?
10 A I'm sorry, can you repeat that, please?
11 Q With respect to your worry that the
12 Company would be required to be, in your words, an
13 enforcer, isn't it true that the Commission already
14 expects the Company to engage in the role of a
15 gatekeeper?
16 A Yes, I believe so. I mean, I believe our
17 current PURPA contract count is at about 127 contracts
18 right now. Just in the past two years our staff that
19 administers and negotiates these contracts has grown from
20 one person to three people. We take that gatekeeper role
21 seriously and believe we do a good job of it.
22 Q So requiring the Company to make an
23 initial determination as to eligibility wouldn't be
24 markedly different from what the Commission already
25 requires the Company to do, would it?
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1 A It would be an additional step that would
2 require quite a bit of subj ecti ve decisions, I believe,
3 in some cases. Again, I can't speculate what types of
4 proj ects may come to us that we would have to apply a
5 list of criteria to, but my guess is that there will be
6 several that aren't particularly very cut and dried.
7 Q And we've touched on the point that under
8 all three of the proposals after the initial
9 determination there would be the opportunity for review
10 by the Commission to make the ultimate decision as to
11 eligibility; is that correct?
12 A My understanding is that the way the
13 proposed methods would work, if there was any kind of a
14 disagreement between the developer and the utility, that
15 would be the point where the Commission would be asked to
16 review how the criteria were being applied.
17 Q Does Idaho Power have doubts about the
18 intellectual capability of this Commission to review
19 facts and come to a reasoned conclusion?
20 A No, we don't.
21 Q Does Idaho Power Company have any doubts
22 about the ability of this Commission to enforce its
23 orders?
24 A No.
25 MR. MILLER: That's all I have.
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1 COMMISSIONER SMITH: Thank you,
2 Mr. Miller.
3 Mr. Otto, do you have any questions?
4 MR. OTTO: I do have a few questions.
5
6 CROSS-EXAMINATION
7
8 BY MR. OTTO:
9 Q Mr. Stokes, thanks for coming in.
10 A Thank you.
11 Q I guess you really didn't have a choice,
12 but thanks anyway. I want to ask you about page 4 of
13 your testimony and it's your second proposal, which is if
14 the cap is returned to 10 average megawatts to change the
15 pricing methodology. I want to ask you about returning
16 to 10 average megawatts, how do you propose to define
17 what is a 10 average megawatt project or not?
18 A Well, again, that would be at the
19 discretion of the Commission. In the proposal we also
20 throw out the idea of making the cap 10 megawatts as
21 opposed to 10 average megawatts.
22 Q I'm not asking about that. What I'm
23 asking is how I understand your proposal No. 2 is that a
24 single proj ect that is 10 average megawatts would be
25 eligible for a published rate. What is Idaho Power
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1 Company's proposal for how to define what is a single
2 project of 10 average megawatts?
3 A Again, I mean, historically the way it's
4 been calculated, you take the average monthly energy that
5 the proj ect would generate and if the cap is set at 10
6 average megawatts, it would be expected to be below that
7 amount on a monthly basis.
8 Q I'm sorry, I guess that was a little
9 unclear. It wasn't the question about the average. It's
10 the question about a single proj ect.
11 A About?
12 Q About what is a single proj ect. Your
13 proposal is a single proj ect of this size would get a
14 published rate, how do you define a single proj ect?
15 What's your proposal for some way to define that?
16 A Well, again, in our proposal there would
17 not be a need to worry about whether a proj ect was a
18 single proj ect or not if the avoided cost rate was set
19 using the IRP methodology.
20 Q So really, your proposal is just to have
21 everything use the IRP methodology regardless of size?
22 That's what I think you just said.
23 A Again, our proposal and the purpose of
24 using, utilizing the IRP methodology is to set what we
25 believe is an appropriate avoided cost rate.
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1 Q Regardless of size?
2 A In essence, it could be applied to all
3 proj ects, yes.
4 Q So basically, there would be no smaller
5 subset of proj ects that get a published rate and a larger
6 subset that get a negotiated rate, I guess?
7 A Yes. Yeah, I think that would be the
8 intent of our proposal there would be that the IRP
9 methodology would be used to establish what would be
10 termed the published rate.
11 Q Okay, I want to move on. On pages 4 and
12 then on pages 14 and 15, you talk about why some criteria
13 just won't work and you point to one example of one
14 proj ect in Oregon. Do you have any other examples?
15 A That's the main one that I'm aware of that
16 has happened here somewhat recently where a developer has
17 been able to devise a scheme to get around a five-mile
18 separation rule.
19 Q Are you aware of other proj ects in Oregon
20 that have not gotten around it?
21 A I'm not, no.
22 Q So there's one example in Oregon, but we
23 can assume there's other examples that did work, the
24 criteria did work?
25 A I would assume so. I can't verify that,
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1 though.
2 Q So it's not impossible, it's just getting
3 the right criteria?
4 A Again, Idaho Power's position is that we
5 don't believe a criteria-based solution resolves the
6 issue without addressing the underlying problem of the
7 setting an appropriate avoided cost rate.
8 Q Sure, and I think we heard today at the
9 opening of this hearing that and I think it's been clear
10 in the orders leading up to this that pricing is going to
11 be addressed in a later issue. No one is talking about
12 using solely just criteria and not address pricing. Do
13 you agree that that seems to be --
14 A I agree that that appears to be the intent
15 of the Commission, yes.
16 Q So we really are talking about criteria
17 now and pricing second?
18 A Yes, that seems to be the direction that
19 this hearing is going, but again, Idaho Power's position
20 and really, the whole impetus for our proposal is we
21 think there is an elegant, easier solution by utilizing
22 the IRP methodology without even having to go down the
23 criteria path.
24 Q Right, so that would be the IRP
25 methodology for all PURPA proj ects, everything up to 80
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1 megawatts?
2 A Well, under our second proposal, that may
3 be, that would, I think, how that would be implemented.
4 Under the first proposal would be to leave the 100
5 kilowatt cap in place and use the IRP methodology for
6 projects, for anything larger than 100 kilowatts.
7 Q Okay; so then under your second proposal,
8 that would be published avoided costs, published rates
9 using the IRP methodology for every PURPA proj ect up to
10 80 megawatts?
11 MR. WALKER: Madam Chair, again, this line
12 of questioning seems to be confused and could be greatly
13 informed by that portion of testimony which was stricken
14 which explains the answers to most of these questions as
15 well as Exhibit No. 1 clearly delineates how the proposal
16 No. 2 is intended to set a published rate based on a
17 generic generation profile on a resource specific basis
18 for all proj ects under 10 average megawatts and leaves in
19 place the individualized methodology that has been in
20 place for a number of years, up to 16 years now, for
21 those projects larger than 10 average megawatts and I
22 would ask that since the door continues to be opened on
23 that that that portion of testimony and that exhibit be
24 spread upon the record.
25 COMMISSIONER SMITH: Mr. Otto.
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1 MR. OTTO: That was my final question on
2 this specific issue and on the use of the IRP methodology
3 and I would just stand by the previous obj ections.
4 COMMISSIONER SMITH: So you're going to
5 wi thdraw your question.
6 MR. OTTO: I will withdraw my question.
7 COMMISSIONER SMITH: Thank you. Moving
8 right along.
9 Q BY MR. OTTO: Okay, I do have -- I'll move
10 on to a different subject, then, which is that -- so your
11 obj ection, one of the obj ections, to the criteria and the
12 procedure that I think was proposed by several parties
13 would be that the utility would make an initial
14 determination of the size and then there would be
15 Commission review and you objected to that, feeling like
16 that was a heavy burden for the utility to make that
17 ini tial determination of size?
18 MR. WALKER: Objection, Madam Chair.
19 That's been asked and answered.
20 COMMISSIONER SMITH: I think this has been
21 covered, Mr. Otto, and I think Mr. Miller went over this
22 in detail, so if you have something different or you
23 think you're going to get a different answer...
24 MR. OTTO: I guess I just was thinking
25 about it differently, but if the Commission feels that
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20
21
1 the question has been asked and answered, I'll abide by
2 that.
3 COMMISSIONER SMITH: Well, if you think
4 you don't have an answer to your question, you can try
5 it, but it seems kind of repetitive.
6 Q BY MR. OTTO: I guess my question was
7 currently who makes the initial determination of what
8 size a proj ect is for the published rates or larger?
9 A The information is submitted by the
10 developer to us and we look at the average monthly
11 generation that they would expect to generate and that is
12 what is used to determine if it's less than 10 average
13 megawatts.
14 Q So you make an initial determination?
15 A We do, but it's a very cut and dried
16 calculation to do. It's a very simple thing to figure
17 out.
18 MR. OTTO: That's all. Thank you.
19 COMMISSIONER SMITH: Thank you, Mr. Otto.
Ms. Davis?
22 questions at this time.
MS. DAVIS: The canal companies have no
23
24
25
COMMISSIONER SMITH: Mr. Williams?
MR. WILLIAMS: No questions.
COMMISSIONER SMITH: Mr. Miller?
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1 MR. KEN MILLER: No questions.
2 COMMISSIONER SMITH: Ms. Sasser.
3 MS. SASSER: Thank you, Madam Chair.
4
5 CROSS-EXAMINATION
6
7 BY MS. SASSER:
8 Q Good afternoon, Mr. Stokes. I just have a
9 couple of questions for you.
10 A Okay.
11 Q Based on the scope of your testimony which
12 takes into account all proj ects, would it be fair to say
13 that you disagree with the Commission's decision to
14 maintain published rate eligibility for non-wind and
15 non-solar projects?
16 A We believe that, again, in our proposal of
17 utilizing the IRP methodology that it ought to be applied
18 to all types of projects, again, to accurately value the
19 energy and the shape and the timing and the value of that
20 energy when it's delivered to the utility. Did that
21 answer your question or not?
22
23
24
25
Q Not directly, no.
A Maybe you could rephrase it, then.
Q The Commission in its initial Order from
the GNR-E-10-04 case clearly thought that the issue of
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1 disaggregation and pricing as it pertained to
2 dis aggregated proj ects and published rates was applicable
3 to wind and solar proj ects when it reduced the
4 eligibili ty threshold for only those types of proj ects.
5 Your proposal that any change be applied to all proj ects,
6 would it be fair to say based on the position of Idaho
7 Power and your testimony that you disagree that it's not
8 simply a disaggregation issue that's causing a problem?
9 A Yes. I mean, in our opinion the
10 underlying problem is what the avoided cost rate is
11 currently and how it's calculated with the existing SAR
12 methodology. What we've seen happen is happening, you
13 know, primarily with wind and solar because those
14 technologies can actually be disaggregated, where other
15 technologies probably have more of a hurdle just because
16 of the technology type itself.
17 Q Okay, thank you. Then would you say that
18 the issue of overpaying for published rate proj ects is a
19 new problem in the last two to three years or do you
20 believe that the Company has always overpaid?
21 A I believe that really the problem has
22 increased over the last several years and certainly the
23 magni tude of the proj ects that we have seen. When you
24 look at the things that are available to developers of
25 wind and solar proj ects, especially, tax incentives and
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1 all the other things, none of those things are accounted
2 for in the existing SAR methodology which is based on a
3 combined cycle combustion turbine which is a totally
4 different type of resource as opposed to a wind or a
5 solar resource. A combined cycle combustion turbine is
6 dispatchable. The utility can turn it on and off when it
7 needs the energy and when it's economical to; whereas, a
8 PURPA proj ect, you sign the contract and you're obligated
9 to every bit of energy that comes out of the proj ect as
10 it comes.
11 Q But correct me if I'm wrong, the
12 statements that you're making about dispatchable and
13 non-dispatchable, do they not primarily apply to the wind
14 and solar proj ects that are currently being submitted for
15 approval?
16 I'm not -- are you saying that wind andA
17 solar proj ects are dispatchable?
18 No, just the opposite, that Idaho Power inQ
19 your testimony shows that you want to apply this to all
20 proj ects, but that wind and solar because of the type of
21 energy that they generate are those non-dispatchable
22 types of proj ects.
23 Yes, they are non-dispatchable proj ects.A
24 Do you know how many megawatts of non-windQ
25 and solar published rate contracts the Company has added
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1 over the last two years to its system?
2 A I couldn't even take a guess at the
3 number. I don't believe it's a large number. There's
4 been several digester proj ects in the Jerome area that
5 we've added.I couldn't even try to guess what a number
6 would be as far as megawatts or number of proj ects,
7 though.
8 Q Okay. As evidenced by your Exhibit 2
9 attached to your testimony, are those all wind
10 projects?
11 A Yes, they are all wind proj ects.
12 Q So is it safe to say that wind proj ects
13 seem to be an area of concern for the Company?
14 A Gi ven the recent surge in PURPA, the
15 maj ori ty of those proj ects have been wind proj ects, yes.
16 Q On pages 11 through 13, you talk about the
17 large proj ects that have dis aggregated to obtain
18 published rate contracts. Is it your position that
19 disaggregation of these proj ects would be allowed under
20 Staff's proposed disaggregation criteria?
21 A You know, I did not try to make that
22 determination as part of preparing for the hearing. I
23 would have to go back and look through all the individual
24 criteria to try to determine that, I guess. I guess I
25 don't have an opinion on it right now.
CSB REPORTING
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STOKES (X)
Idaho Power Company
100
.
.
.
1 Q Okay. As sort of a follow-up, then, is it
2 your testimony that the Commission cannot control
3 disaggregation of proj ects regardless of criteria that it
4 does put in place, such as those suggested by Staff?
5 A Again, I think a criteria-based solution
6 may be better than what we have today, but I don't think
7 it's the best or easiest solution to implement.
8 Q But you believe that the Commission could
9 enforce criteria if that type of time framework were set
10 up?
11 A I mean, obviously, if it's Set up, we
12 would adhere to whatever order the Commission issued and
13 apply it accordingly. It's just our opinion that we
14 don't think it's the best way and we think that there
15 will continue to be issues out there until we resolve
16 getting an appropriately set avoided cost rate.
17 Q Final point, considering all of the wind
18 power purchase agreements that Idaho Power has signed
19 over the past several years, has there ever been a
20 question in your mind about which of these proj ects are
21 truly single proj ects and which are large dis aggregated
22 proj ects?
23 A Well, certainly, the bigger proj ects, a
24 lot of the proj ects that are in Exhibit 2 were actually
25 submi tted in our 2012 wind RFP and were unsuccessful in
CSB REPORTING
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101 STOKES (X)
Idaho Power Company
.
.
.
1 that process and thereafter those developers came to us
2 requesting PURPA contracts, so certainly, the large ones,
3 I think it's very obvious when you look at the naming
4 convention of some of the proj ects makes it even more
5 obvious in my mind.
6 Q So you would say that the Company at face
7 value can often look at a set of power purchase
8 agreements that are submitted and identify that as a
9 disaggregated large proj ect?
10 A Certainly, in the case of what we've seen,
11 we would consider them to be large projects that have
12 disaggregated, yes.
13 MS. SASSER: That's all I have. Thank
14 you.
15 COMMISSIONER SMITH: Commissioner
16 Kj ellander?
17
18 EXAMINATION
19
20 BY COMMISSIONER KJELLANDER:
21 Q Mr. Stokes, sort of a follow-up on a
22 question that Ms. Sasser brought to you in reference to
23 page 4, line 2. It's more a point, I guess, of
24 clarification for me. You talk about 10 megawatts or a
25 10 average megawatt published rate. At first 10
CSB REPORTING
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102 STOKES (Com)
Idaho Power Company
.
.
.
1 megwatts, are you referring to what would be considered a
2 nameplate project of 10 megawatts?
3 A Madam Chairman, Commissioner Kj ellander,
4 that would be the intent that it would be a nameplate
5 rating on whatever the generation resource was.
6 Q And from your evaluation, then, an average
7 megawatt off of a 10 megawatt nameplate is, what, between
8 three to three-and-a-half average megawatts?
9 A For a wind proj ect?
10 Q For a wind proj ect.
11 A Yeah, if you assumed a 30 percent capacity
12 factor for wind in southern Idaho, which would be roughly
13 a third of what the nameplate is, a little less than a
14 third.
15 Q So, again, then, from a clarification
16 perspecti ve, so it's your position and the Company's
17 posi tion that regardless of whether it's three-and-a-half
18 average megawatts or 10 average megawatts under the
19 published rate, there's still the potential for
20 disaggregation even at the lower level?
21 A At a three megawatt level
22 Q Uh-huh.
23 A -- or three average megawatt level? I
24 think it's greatly reduced. Again, when you look at the
25 size of some of these projects, a 10 average megawatt or
CSB REPORTING
[phone]
103 STOKES (Com)
Idaho Power Company
.
.
.
1 less wind proj ect, you're looking on the order of
2 probably 50 to $60 million to construct, design and build
3 that kind of a project and in my mind, that's not a small
4 QF developer.
5 COMMISSIONER KJELLANDER: Okay, thank you.
6 COMMISSIONER SMITH: Do you have redirect,
7 Mr. Walker?
8 MR. WALKER: No redirect.
9 COMMISSIONER SMITH: Thank you for your
10 help, Mr. Stokes.
11 THE WITNESS: Thank you.
12 (The witness left the stand.)
13 COMMISSIONER SMITH: Mr. Andrea, I think
14 we're ready for your witness.
15 MR. ANDREA: Thank you, Madam Chair. With
16 your indulgence, could I make a short statement on the
17 motion to strike? I assume we're going to deal with that
18 first.
19 COMMISSIONER SMITH: Yes, and you are
20 certainly welcome to do so.
21 MR. ANDREA: On the motion to strike, we
22 appreciate the Commission's clarification. We definitely
23 understood the issue to be to prevent disaggregation. We
24 certainly disagree with Mr. Miller's assertion of what
25 the issues are. I believe he reads the Order too
CSB REPORTING
[phone]
104 STOKES (Com)
Idaho Power Company
.
.
.
1 narrowly. What I heard him say is that it's basically
2 two things: allowing proj ects up to 10 average megawatts
3 and preventing disaggregation. That completely reads
4 over part of the Commission's Order which we think is
5 important which is also set for this hearing, which is
6 that the Commission clearly stated that they wanted to
7 ensure that large QFs do not obtain a rate that is not an
8 accurate reflection of the utility's avoided cost, so I
9 would argue there's really three issues and much of our
10 testimony goes to what we believe, as Idaho Power has
11 testified, is the issue and that is the economic
12 incenti ve which drives disaggregation.
13 Absent that economic incentive, I don i t
14 believe we'd be here today. If the published avoided
15 cost rate is accurately reflecting the utility's avoided
16 cost, there would be no reason for the proj ects to
17 disaggregate, so much of our testimony goes to that. We
18 believe it's squarely wi thin the scope of the testimony.
19 Like Idaho Power, we do not wish to
20 challenge or have any desire to challenge the IRP
21 methodology or the SAR. We would take both of those
22 methodologies as approved, accepted methodologies that
23 have been used and do not attempt to challenge or
24 collaterally attack any of the prior orders.
25 To the issue of notice just very briefly
CSB REPORTING
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105 STOKES (Com)
Idaho Power Company
.
.
.
20
21
22
1 and I know I'm moving quickly because I know the time, I
2 believe the notice put Mr. Miller and others on notice
3 and certainly, if they didn't read the notice in the same
4 way that we did, we apologize for that, but they
5 certainly were on notice by the time we filed our direct
6 testimony, had the opportunity for rebuttal testimony and
7 have the opportunity today to do cross-examination, so
8 wi th that, there is a small piece of our testimony that
9 we are willing to withdraw and we can do that in the same
10 manner that Idaho Power did once Mr. Kalich is on the
11 stand.
12 COMMISSIONER SMITH: Okay.
13 MR. ANDREA: So with that, I would call
14 Clint Kalich for Avista Corporation. Thank you.
15
16 CLINT KALICH,
17 produced as a witness at the instance of the Avista
18 Corporation, having been first duly sworn, was examined
19 and testified as follows:
DIRECT EXAMINATION
23 BY MR. ANDREA:
24
25
Q Mr. Kalich, will you state your name for
the record and spell your last name?
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106 KALICH (Di)
Avista Corporation
.
.
1 A My name is Clint Kalich and the last name
2 is spelled K-a-l-i-c-h.
3 Q And where are you presently employed and
4 in what capacity?
5 A I'm employed with Avista Corporation in
6 Spokane, Washington, as the manager of resource planning
7 and power supply analyses.
8 Q Are you the same Clint Kalich that filed
9 direct testimony in this proceeding on March 25th of this
10 year?
11 A Yes.
12 Q Are you the same Clint Kalich that filed
13 rebuttal testimony in this proceeding on -- sorry, I may
14 have got my dates wrong April 22nd?
15 A Yes.
16 Q Okay, and did you sponsor Exhibit 101 to
17 your direct testimony?
18 A I did.
19 Q Madam Chair, with your permission -- well,
20 let me ask, Mr. Kalich, would you refer to page 22 of
21 your direct testimony starting at line 11 --
22
23
24.25
A I'm there.
Q -- and through page 23, line 5?
A Yes.
Q Based on your understanding of the scope
CSB REPORTING
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107 KALICH (Di)
Avista Corporation
.
.
.
1 of this proceeding, would you be willing to withdraw that
2 portion of your testimony?
3 A Yes, I'm willing.
4 MR. RICHARDSON: Could you repeat that
5 reference, please?
6 MR. ANDREA: Page 22, the question that
7 starts on line 11, and continuing through page 23, line
8 5. With that, Avista Corporation submits the direct and
9 rebuttal testimony of Mr. Kalich and spreads it to the
10 record.
11 COMMISSIONER SMITH: Is there any
12 objection to spreading the pre filed direct and rebuttal
13 testimony of Mr. Kalich on the record?
14 MR. MILLER: There are.
15 COMMISSIONER SMITH: Mr. Miller.
16 MR. MILLER: Thank you, Madam Chairman.
17 Preliminarily, we at the Commission's direction reviewed
18 Mr. Kalich' s testimony to see if any portions of our
19 motion swept too broadly and we found one question and
20 answer that we think we perhaps in our enthusiasm
21 overstepped. On page 10, the question starting at line 1
22 with the answer going through line 19, while we disagree
23 wi th the statements there, they do seem to be wi thin the
24 scope of the inquiry as essentially an argument that an
25 eligibili ty cap structure would be ineffectual. We
CSB REPORTING
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108 KALICH (Di)
Avista Corporation
.
.
.
1 disagree with that point of view, but it's probably a
2 fair point or fair argument for the Commission to
3 consider, so with respect to that question and answer, we
4 would--
5 COMMISSIONER SMITH: Mr. Miller, I guess
6 I'm confused. I'm looking at page 3 of your motion and I
7 don't see that page 10, lines 1 through 19 are in it.
8 Perhaps you intended another question to stay in.
9 MR. MILLER: You know what, I think you're
10 right.
11 COMMISSIONER SMITH: You didn't obj ect to
12 something that wasn't obj ectionable.
13 MR. MILLER: I guess we were right all
14 along. I apologize for that little detour. Other than
15 that, we would renew the specific obj ections contained in
16 our written motion filed on April 13th. I think there
17 has been adequate argument, the Commission understands
18 our point of view that the point of this case is to
19 devise criteria for eligibility and anything else is
20 irrelevant. There are different points of view,
21 obviously, but I think those have been adequately
22 ventilated for the Commission and we would submit it
23 based on our written motion.
24 COMMISSIONER SMITH: Any response, Mr.
25 Andrea, to any particular section, line, whatever?
CSB REPORTING
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109 KALICH (Di)
Avista Corporation
.1 MR. ANDREA: I'm happy to address any
2 particular line. In the interest of time, I would just
3 say that as a general matter, it's our view that the
4 remaining testimony is well wi thin the issues and as has
5 come up several times in cross-examination of Mr. Stokes,
6 the price, the economic issue is very much not severable
7 from the other factors and in fact, the central issue of
8 any avoided cost structure, it has to be the rate that
9 will be applied in that structure.
10 We're not challenging or asking the
11 Commission to set the rate in any particular manner.
12 We're merely pointing out that in the bundle of things.13
14
that must be considered to prevent disaggregation,
removing the economic incentive for such disaggregation
15 is the threshold and very much a key issue in this
16 proceeding.
17 COMMISSIONER SMITH: And I think it's
18 entirely appropriate to point out to the Commission that
19 what we thought we could accomplish with this case is not
20 possible to be done in the manner that we envisioned, but
21 also we're not going to get into the details that we
22 think should be in a future proceeding. With that, I'm
23 going to go to lunch and I hope you all will, too, and we
24 will be back at 1: 15 and that will give me my lunch hour.25 to refresh my recollection about just what's in all these
CSB REPORTING
[phone]
110 KALICH (Di)
Avista Corporation
.
.
.
18
1 pages that are the subj ect of the motion and rule on it
2 after.
3 MR.MILLER:Madam Chairman?
COMMISSIONER SMITH:Mr.Miller.
MR.MILLER:Could I just ask an unrelated
procedural question of the parties?
COMMISSIONER SMITH:You may.
4
5
6
7
8 MR. MILLER: I was curious if any of the
9 parties intend any cross-examination of Mr. Martin.
10 MR. RICHARDSON: Not from us.
11 COMMISSIONER SMITH: Was that a no?
12 MR. RICHARDSON: That was a no,
13 Madam Chairman.
14 COMMISSIONER SMITH: I assume because Mr.
15 Martin doesn't have four days to spend with us, he would
16 like to get on with it if there's some questions, is that
17 your purpose of your inquiry?
MR. MILLER: Two points, I guess. First
19 is if there's no intended cross-examination, we would ask
20 the parties' indulgence simply to spread his testimony on
21 the record, and if there is intended cross-examination,
22 we would hope that he could somehow get on today.
23
24
25
COMMISSIONER SMITH: Mr. Walker.
MR. WALKER: Idaho Power had a few
questions for Mr. Martin on cross-examination.
CSB REPORTING
[phone]
111 KALICH (Di)
Avista Corporation
.
.
.
1
2
COMMISSIONER SMITH: Okay; so would you --
we've already started Mr. Kalich. If I'd known this, Mr.
3 Miller, I would have had Mr. Martin up now.
4
5 be fine.
6
MR. MILLER: Sometime this afternoon will
COMMISSIONER SMITH: Okay, we will get to
7 him today, then. All right, thank you. See you at 1:15.
19
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25
8
9
10
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18
(Lunch recess.)
CSB REPORTING
[phone]
112 KALICH (Di)
Avista Corporation