200403191st Response of ID Power to Staff.pdf

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MONICA 8. MOEN , ISB # 5734
BARTON L. KLINE, ISB # 1526
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL)
OF AN AGREEMENT FOR SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY AND
RENEWABLE ENERGY OF IDAHO, INC.
CASE NO. IPC-04-
IDAHO POWER COMPANY'
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF
COMMISSION STAFF
COMES NOW, Idaho Power Company ("Idaho Power" or "the Company
and , in response to the First Production Request of the Commission Staff to Idaho Power
Company dated February 27 2004 , herewith submits the following information:
REQUEST NO.1: Please provide a description of how the Optional Base
Energy Prices have been established.
RESPONSE TO REQUEST NO.1: Idaho Power established three criteria
to judge the reasonableness of the negotiated Optional Base Energy price.
1 )The Optional Base Energy Price must be less than the current Non-
levelized Published Avoided Cost;
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page
The Optional Base Energy Price must not exceed forward price
curves for Idaho Power system border prices for the years that a
forward price curve is available; and
The Optional Base Energy Price must not exceed recent
Commission-approved Idaho Power energy purchase prices. The
PPL Montana energy purchase agreement was recently approved
by the Commission and was used for this comparison.
In order to evaluate the negotiated Optional Base Energy Price against
these three criteria, equivalent energy products and prices had to be established to
provide like-kind comparisons.
(1 )Comparable Border Market price: An Idaho Power system border
forward price curve current at the time of negotiations (January 5,
2004) was used as the initial data (Attachment 4). An annual
weighted average of the monthly weighted average of the actual
Heavy and Light Load Hour pricing was calculated (Attachment 2).
(2)Comparable recent alternative: The PPL Montana purchase power
agreement was recently approved by the Commission. This
transaction is for only Heavy Load Hours during the months of
June, July and August through 2009.
To create a comparable product (Attachment 3), it was
assumed that the Renewable Energy project would deliver flat 7
MW of Optional Base Energy for the same three months (June , July
and August). During Heavy Load Hours , the PPL Montana price
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 2
was applied and , during Light Load Hours , the estimated Idaho
Power border price was applied to create a weighted average price
for the entire three months of energy deliveries.
The seasonalized prices from the Renewable Energy
agreement for the same months was applied to the same flat 7 MW
of generation to produce a comparable weighted average price for
the same three months of energy deliveries.
Once the comparable products and prices were established , a price was
negotiated that met the three initial criteria. Seasonalitity was applied to the negotiated
price in the same manner as it is applied to the non-Ievelized published avoided cost.
Attachment 1 summarizes the comparison of the negotiated price and the
three criteria. The negotiated price met all three criteria for the years when data was
available. As some of the criteria did not have data available for the full 20 years of this
agreement, a price comparison could not be made for the full term of this agreement for
all three criteria.
The current Non-Levelized Published Avoided Cost approved by the
Commission escalates at approximately 2.3% over the 20 years of this agreement. An
annual escalation factor of 1 % was negotiated for the Optional Base Energy prices
which resulted in the Optional Base Energy Price meeting all of the three criteria for the
years when data was available and a significantly lower price than the Non-Levelized
Published Avoided Cost in the later years of this agreement.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 3
The response to this request was prepared by Randy C. Allphin, Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Monica Moen , Attorney, Idaho Power Company.
REQUEST NO.2: Please explain how the method used to establish the
Optional Base Energy Prices conforms with the methodology described in the
Settlement Stipulation in Case No. IPC-95-9. The Settlement Stipulation describes in
detail how avoided cost rates are to be negotiated with Qualifying Facilities larger than
MW (now 10 MW as per Order Nos. 29029 and 29069).
RESPONSE TO REQUEST NO.2: By way of background, it should be
noted that the Commission accepted the above-referenced Settlement Stipulation in
Order No. 26576 dated September 4, 1996. It is important to remember that the length
of contracts for QF projects at issue in Order 26576 was limited to five years. Under
that condition , the use of forecasting models to set avoided cost rates did not present
much risk of overpayment or underpayment. Order No. 26576 also was predicated on
the discontinuance of the use of a surrogate avoided resource in setting avoided cost
rates. Clearly that situation has changed with the issuance of Order Nos. 29029 and
29069. There are other material differences between the situation that existed at the
time Order No. 26576 was issued in 1996 and the situation that exists today. As
result , the Company concluded that the process described in the referenced Settlement
Stipulation is not a valid method for setting 20-year avoided costs for QF projects and
did not use forecast models to negotiate rates with Renewable Energy.
The response to this request was prepared by Bart Kline , Attorney, Idaho
Power Company in consultation with Monica Moen , Attorney, Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 4
and Randy C. Allphin , Contract Administrator, Power Supply Planning, Idaho Power
Company,
REQUEST NO.3: Please provide the avoided cost rates that result from
analysis according to the methodology described in the Settlement Stipulation in Case
No. IPC-95-9. In the analysis, consider the full 17.5 MW capacity of the project. Staff
presumes that the AURORA model will be used for this analysis.
RESPONSE TO REQUEST NO.3: For the reasons described in the
Response to Request No., Idaho Power objects to this request on the grounds that
the information requested is not relevant and is not likely to lead to the discovery of
relevant information. Idaho Power does not have the forecast model upon which the
methodology described in the above-referenced Stipulation was based and the
AURORA model will not calculate avoided costs for a 20-year contract. In addition , the
AURORA model is currently being extensively updated for use in the 2004 IRP and is
simply not available to perform the requested analysis in the near future.
The response to this request was prepared by Randy C. Allphin , Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Monica Moen , Attorney, Idaho Power Company.
REQUEST NO.4: Please provide copies of any market price data used as
the basis for establishing the Optional Base Energy Prices. Include market price data for
any specific day or days used as the basis for the prices, as well as market price data
for any other time frames examined. Please identify the market products represented by
the market prices (firm , non-firm, on-peak, off-peak). Please provide any analysis used
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 5
by the Company to compare market prices to the Optional Base Energy Prices
contained in the Agreement between Idaho Power and Renewable Energy of Idaho, Inc.
RESPONSE TO REQUEST NO.4: See Attachment 4 for the detailed
market prices. Calculations to reconcile the detailed market prices into a weighted price
for a monthly flat product are displayed in Attachment 2.
The response to this request was prepared by Randy C. Allphin, Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Monica Moen , Attorney, Idaho Power Company.
REQUEST NO.5: Please provide any analysis done by the Company to
compare the Optional Base Energy Prices to other Idaho Power alternatives , such as
the recent PPL Montana agreement.
RESPONSE TO REQUEST NO.5: See Attachment 3 for a detailed
analysis and comparison of the PPL Montana agreement and the Optional Base Energy
prices within this proposed agreement. Attachment 1 provides a summary of the
detailed comparison.
The response to this request was prepared by Randy C. Allphin , Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Monica Moen , Attorney, Idaho Power Company.
DATED at Boise, Idaho, this 19th day of March 2004.
(fJ.
MONICA B. MOEN
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 19th day of March 2004 , I served a true
and correct copy of the within and foregoing IDAHO POWER COMPANY'S RESPONSE
TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF upon the
following named parties by the method indicated below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise , Idaho 83720-0074
--L Hand Delivered
S. Mail
Overnight Mail
FAX [phone]
Richard Vinson , President
Renewable Energy of Idaho, Inc.
320 Mountview
Meridian, ID 83642
Hand Delivered
x U.S. Mail
Overnight Mail
FAX [phone]
MONICA B. MOEN
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST
PRODUCTION REQUEST OF COMMISSION STAFF Page 7
CONFIDENTIAL
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