20110712IPC to Staff 1-11.pdf

DONOVAN E. WALKER
Lead Counsel
dwalkertãidahopower.com
e;IDA~POR~
An IDACORP Company
July 12, 2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-11-10
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR A DETERMINATION REGARDING THE FIRM ENERGY SALES
AGREEMENT WITH INTERCONNECT SOLAR DEVELOPMENT, LLC,
FOR THE SALE AND PURCHASE OF ELECTRIC ENERGY
Dear Ms. Jewell:
Enclosed for filing please find an original and three (3) copies of Idaho Power
Company's Response to the First Production Request of the Commission Staff to Idaho
Power Company in the above matter.
Also enclosed are four (4) copies of a confidential disk containing information
being produced in response to Staff's First Production Request. The confidential
information should be handled in accordance with the Protective Agreement executed in
this matter.
DEW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
DONOVAN E. WALKER (ISB No. 5921)
JASON B. WILLIAMS
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalkerCëidahopower.com
jwilliamsCëidahopower.com
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2311 JUL J 2 Pl1 3: 58
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MAnER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
A DETERMINATION REGARDING THE )
FIRM ENERGY SALES AGREEMENT WITH )
INTERCONNECT SOLAR DEVELOPMENT, )
LLC, FOR THE SALE AND PURCHASE OF )ELECTRIC ENERGY. )
)
)
CASE NO. IPC-E-11-10
IDAHO POWER COMPANY'S
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF
THE COMMISSION STAFF TO
IDAHO POWER COMPANY
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company"), and in
response to the First Production Request of the Commission Staff to Idaho Power
Company dated June 21,2011, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 1
REQUEST NO.1: Please provide working copies of all input and output files
used to derive the Aurora prices upon which the rates in the Firm Energy Sales
Agreement (FESA) are based.
RESPONSE TO REQUEST NO.1: Please see the confidential Excel file
included on the enclosed CD. Because the Excel file is confidential and contains
material non-public information, Idaho Power is providing this information only to parties
that have executed the Protective Agreement.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 2
REQUEST NO.2: Please identify, quantify and explain the justification for all
differences between the Aurora price results from Idaho Powets analysis and the
purchase prices contained in the FESA. What factors, if any, were considered in
adjusting the Aurora prices? Please explain the rationale for all adjustments.
RESPONSE TO REQUEST NO.2: The AURORA price results were not
adjusted for any factors. Instead, the actual AURORA price results were used as
established by the AURORA modeL.
The AURORA price results (shown on the "Summary" tab of the confidential
Excel file provided by the Company in its Response to Staffs Production Request No.
1) were input directly into the Solar Project Proposed Energy Pricing Schedule (shown
on the "Solar Proposed" tab of the confidential Excel file provided by the Company in its
Response to Staffs Production Request No.1). This pricing schedule then applied the
seasonality, Heavy Load, and Light Load allocation previously established by the Idaho
Public Utilities Commission ("Commission"). An additional level of the Heavy Load
pricing for the months of July and August, those designations being Heavy Load Peak
Hour Pricing ("HLP") and Heavy Load Standard Hour Pricing ("HLS"), was also
introduced in this contract. Additional information on this pricing model is included in
Idaho Powets Response to Staffs Production Request NO.3.
The AURORA pricing model created a 20-year stream of non-Ievelized prices
that were directly input into the pricing model (shown on the "Solar Proposed" tab of the
confidential Excel file provided by the Company in its Response to Staff's Production
Request No.1). However, as the negotiated contract term is 25 years, pricing was
negotiated for the 5 years beyond the 20-year AURORA price stream. The parties
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 3
mutually negotiated and agreed to a 1 percent annual escalation beginning with the 20th
Contract Year rate for Contract Years 21-25. The calculated escalation for Contract
Years 1-20 is approximately 1.62 percent.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 4
REQUEST NO.3: Please provide a copy of all spreadsheets and analysis used
to adjust the Aurora prices to the prices contained in the FESA. Please clearly show
how Idaho Power derived the Heavy Load Peak energy pricing for the months of July
and August.
RESPONSE TO REQUEST NO.3: The non-Ievelized Integrated Resource Plan
("IRP") methodology created an annual price stream that was inserted into the proposed
pricing schedule (the "Solar Proposed" tab of the confidential Excel file provided by the
Company in its Response to Staffs Production Request No.1). This proposed pricing
schedule creates the seasonal and Heavy Load and Light Load pricing as previously
established and approved by the Commission. Idaho Power has negotiated with the
project and introduced an additional level of pricing within the July and August Heavy
Load Hour Pricing. The purpose of this additional level of hourly pricing is to create an
economic performance mechanism to incent performance that is consistent with the
hourly energy shape used in the AURORA modeling tool. This performance tool is in
addition to the 90/110 monthly kilowatt-hours ("kWh") performance guarantee.
To create this differentiation between Heavy Load Peak Hour Pricing ("HLP") and
Heavy Load Standard Hour Pricing ("HLS"), an incentive of 5 percent was applied to the
Heavy Load pricing for just the Heavy Load peak hours during the month of July and
August (3 p.m. to 7 p.m., a total of 4 hours) to create the HLP pricing. However, the
Heavy Load pricing in Heavy Load non-peak hours (a total of 12 hours) was reduced by
2 percent to create a HLS price that created a HLP and HLS price that, if the project
performs as expected, maintains the AURORA levelized value of $105.15. However, if
the project does not perform as expected and as was supplied to Idaho Power for input
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 5
into the AURORA model, the resulting overall levelized value would be less than the
levelized value of $105.15.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 6
REQUEST NO.4: Do the prices contained in the FESA include a specific
component intended to reflect the capacity value of the solar resource? If so, how big is
the capacity component and how was it derived? Does Idaho Power believe that the
Facility wil provide reliable capacity during the Company's peak summer load hours?
RESPONSE TO REQUEST NO.4: Yes, as described in the confidential Excel
file provided by the Company in its Response to Staffs Production Request No.1, the
IRP methodology includes two price components, the Energy Cost component that is
developed by the AURORA pricing model and the Capacity Cost component. The
Capacity Cost is included in column 10 of the "Analysis" tab of the confidential Excel file
provided by the Company in its Response to Staffs Production Request NO.1. To
determine the peak hour capacity factor applied to this project, data was collected from
Idaho Powets rooftop solar facilty that has been installed for 17 years. The data
collected determined that approximately 36 percent of the time the rooftop solar project
was providing its expected output during Idaho Power's peak energy loads.
Based on this data, the model assumes the project wil be able to deliver its
expected output to Idaho Power at the time of Idaho Powets summer time peak 36
percent of the time. In addition to this initial determination of the Capacity Cost
component based on historical solar data, the Heavy Load Peak Hour Pricing ("HLP")
and Heavy Load Standard Hour Pricing ("HLS") pricing tool and the 90/110 performance
guarantee within the agreement provide pricing mechanisms that wil potentially result in
lower overall energy costs to Idaho Power customers if the project does not perform as
expected. Idaho Power believes the Facilty wil provide capacity consistent with the 36
percent used in the modeL.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 7
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8
REQUEST NO.5: Does Idaho Power believe that it wil incur integration costs
for this facilty due to the intermittent nature of its generation? If so, has the Company
attempted to quantify those integration costs? Does Idaho Power have any plans to
attempt to quantify solar integration costs in the future?
RESPONSE TO REQUEST NO.5: As solar generation's fuel source (sunshine)
is by nature an intermittent fuel source, Idaho Power expects there wil be some level of
integration costs associated with solar generation. It is generally assumed that the level
of integration costs wil be less than wind generation due to the fact that there is greater
potential that solar generation projects wil deliver expected energy outputs to Idaho
Power during times of Idaho Power peak energy needs (hot, sunny, summer.
afternoons) on a more consistent basis. At this time, Idaho Power has not attempted to
quantify these integration costs; however, the Company plans to begin studying solar
integration issues in the second half of 2011.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9
REQUEST NO.6: Is Idaho Power currently negotiating contracts with any other
solar facilties? If so, please state the number of potential contracts and the size of
each facility.
RESPONSE TO REQUEST NO.6: Yes, Idaho Power has been approached by
numerous other potential solar projects. Currently, there are three projects, two of
which have proposed nameplate ratings of 20 megawatts ("MW") and one of 1 0 MW,
that are currently having discussions with Idaho Power
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 10
REQUEST NO.7: It is clear from the Application and the letter from Idaho
Power to Interconnect Solar that is attached to the Application that Idaho Power expects
that the interconnection and transmission process cannot be completed in less than 18
months, yet the parties have agreed to a Scheduled Operation Date that is
approximately only 12 months from now. Please explain any plausible scenarios under
which Interconnect Solar wil not either incur delay damages or face termination of the
Agreement for failing to meet its Scheduled Operation Date.
RESPONSE TO REQUEST NO.7: The project has selected a Scheduled
Operation Date of July 1,2012. This date is secured by the posting of Delay Security in
the amount of $45 per nameplate kilowatt ("kW") rating (20,000 kW multiplied by $45 =
$900,000) within 30 days of the Commission Order approving the FESA. As stated in
the Application, and its attachment, the Generator Interconnection Agreement ("GIA")
sets forth Idaho Powets obligations and timeline regarding construction of the
interconnection facilties. The GIA estimates that construction wil be complete 18
months after the funding is received for the construction. To date, the project has not
paid the required construction funding, nor signed the GIA. Consequently, the 18-
month time period has not yet begun to run.
Part of the 18-month estimate includes approximately one year to complete the
required Bureau of Land Management ("BLM") federal environmental permitting process
for the required construction. The project has paid $50,000 of the $1,245,000 cost
estimate as part of an Engineering and Procurement Agreement in order to start some
of the required environmental studies this spring as part of the BLM permitting process.
Interconnect Solar believes that the BLM permitting process wil be completed much
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 11
sooner than Idaho Power's one-year estimate, and was thus insistent upon selecting
July 1, 2012, as its Scheduled Operation Date.
Idaho Power repeatedly advised the project of the pending issue of a Scheduled
Operation Date that is prior to the expected completion of the interconnection facilties.
Idaho Power has made every effort to advise the project of these concerns. However,
the project insists upon moving forward with the FESA with the Scheduled Operation
Date as included. In addition to the FESA, Idaho Power prepared, and both parties
executed, an additional letter as evidence that the project acknowledged and accepted
the risk of the project not being on-line by the Scheduled Operation Date. The project
has acknowledged it is aware of the risks involved. Also, Idaho Powets customers are
protected by the required posting of the Delay Security.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 12
REQUEST NO.8: Interconnect Solar and Idaho Power have agreed to terms
providing for each party's 50 percent ownership of any Environmental Attributes,
including RECs, generated by the Facilty for the full 25-year term of the FESA. Please
explain why Idaho Power believes it is entitled to 50 percent specifically of the
Environmental Attributes (rather than 0 or 100 percent). Does Idaho Power intend to
seek ownership of 50 percent of Environmental Attributes in future PURPA contracts?
RESPONSE TO REQUEST NO.8: There has been no clear guidance
established in the state of Idaho with regard to whether the utilty or the Qualifying
Facilty ("QF") project owns the Renewable Energy Certificates ("RECs" or "REC")
associated with a QF project. In addition, Renewable Portolio Standards ("RPS")
currently are not applicable to Idaho Power at either the state or federal leveL. However,
there is a general consensus that in the future, Idaho Power wil need to comply with
some form of an RPS. Therefore, Idaho Power has begun inserting the following
contractual language in all Public Utilty Regulatory Policies Act of 1978 ("PURPA")
agreements:
Under this Agreement, ownership of Green Tags and
Renewable Energy Certificates (RECs), or the equivalent
environmental attributes, directly associated with the
production of energy from the Sellets Facilty sold to Idaho
Power wil be governed by any and all applicable Federal or
State laws and/or any regulatory body or agency deemed to
have authority to regulate these Environmental Attributes or
to implement Federal and/or State laws regarding the same.
The purpose of this language is to protect Idaho Power's potential future REC
ownership rights within these agreements. In this agreement, Idaho Power and the
project have negotiated 50 percent REC ownership to establish certainty regarding the
ownership of RECs. Idaho Power does not believe this negotiated REC ownership
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -13
precludes Idaho Power from negotiating higher REC ownership in future agreements if
the conditions warrant.
In future QF agreements, Idaho Power wil do everyhing it can to protect its
customers from future potential renewable energy compliance requirement costs by
either acquiring REC ownership rights within the QF agreements and/or at minimum
reserving its rights to REC ownership if future rules or regulations provide Idaho Power
rights to the RECs within these agreements.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 14
REQUEST NO.9: In Section 8 of Idaho Powets Application, on page 9, the
Application states, "Should the Facilty fail to deliver the peak load energy that its IRP-
based avoided cost pricing is based upon, it wil automatically receive the lower Heavy
Load Standard price." Please identify the specific section in the FESA where this is
addressed.
RESPONSE TO REQUEST NO.9: There is no "trigget' in the FESA that
changes the applicable pricing as the above sentence implies. Instead, as discussed in
the Company's Response to Staffs Production Request No.3, due to the Heavy Load
Peak Hour Pricing ("HLP") and Heavy Load Standard Hour Pricing ("HLS") structure
where the HLP pricing is a 5 percent increase over the calculated Heavy Load price and
the HLS pricing is a 2 percent reduction from the Heavy Load price, if the project were
to not perform as expected and instead delivered more energy to Idaho Power during
Heavy Load Standard hours and less energy during Heavy Load Peak hours, the
project would receive payments based on the HLS pricing (2 percent less than Heavy
load price) versus the HLP pricing (5 percent increase over Heavy Load Pricing). This
structure of HLP and HLS pricing effectively builds in an automatic pricing discount if the
project does not perform as expected.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY -15
REQUEST NO. 10: Section 1.34.1 of the FESA appears to define Surplus
Energy using a "70/130" requirement during the first contract year rather than a "90/110"
requirement typical of other non-wind PURPA contracts. Please explain why a "70/130"
definition is being used in the first contract year of this Agreement.
RESPONSE TO REQUEST NO. 10: The 70/130 performance requirement for
the first Contract Year then escalating to the customary 90/110 performance
requirement in the remaining Contract Years was a mutually negotiated item within the
FESA.
During negotiations, the project requested a wider degree of variance during the
first year of start-up and operation. Due to the fact that this is one of the first large scale
solar projects within the state of Idaho with a higher level of technology uncertainty in
comparison to proven resources such as wind, hydro, and biomass projects, Idaho
Power agreed to this provision.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 16
REQUEST NO. 11: Section 5.2 of the FESA defines the term "Operation Date,"
and Sections 5.3-5.5 contain terms related to the imposition of liquidated damages for
failure to meet the Scheduled Operation Date. For purposes of enforcing these contract
terms, what constitutes "operation" for a facilty comprised on 74,075 individual
generators? Do all of the generators have to be functioning on the Scheduled
Operation Date or just some specified fraction of them? Alternatively, is there some
fraction of the Facilty's generating capacity that must be met for the project to be
deemed operational? How would Delay Liquidated Damages be assessed if only a
portion of the generators are not operational on or before the Scheduled Operation
Date?
RESPONSE TO REQUEST NO. 11: As identified in this Request, this project
will consist of 74,075 separate generation units (photovoltaic panels) making the
identification of "operation" and "complete" significantly different than a hydro unit with a
single generator or even a wind project with 10 wind turbines. The FESA does not
specifically address this issue.
It is Idaho Powets understanding that multiple panels will be connected to 10 two
megawatt inverters. Idaho Power believes a reasonable interpretation of "operation"
and "complete" would be to have all 10 inverters installed, interconnected, and
delivering energy to the Idaho Power system. In addition, the bank of photovoltaic
panels supplying each inverter must be materially complete. A planned bank of 7,000
panels with only 1,000 panels installed would not be viewed as materially complete. As
to the exact panel count to qualify as materially complete, this is not specifically known
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 17
at this time and wil be determined at the time the completion status becomes an issue,
at which time all information and circumstances wil be considered.
Idaho Power believes the FESA is clear in regards to payment of the Delay
Liquidated Damages. The full lump sum Delay Liquated Damages amount is payable to
Idaho Power if the project is not complete and an Operation Date has not been granted
no later than 90 days after the Scheduled Operation Date. At this time, Idaho Power
has no intention of allocating the Delay Liquidated Damages based on partial project
completion.
The response to this Request was prepared by Randy C. Allphin, Senior Energy
Contracts Coordinator, Idaho Power Company, in consultation with Donovan E. Walker,
Lead Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 12th day of July 2011.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 18
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 12th day of July 2011 I served a true and correct
copy of IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY upon the
following named parties by the method indicated below, and addressed to the following:
Commission Staff
Kristine Sasser
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
-X Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-X Email Kris.SasserCëpuc.idaho.gov
Interconnect Solar Development LLC
Randy Hemmer, Manager
Interconnect Solar Development LLC
3777 Twilght Drive
Boise, Idaho 83703
Hand Delivered
-X U.S. Mail
_ Overnight Mail
FAX
-X Email randyhemmerCëclearwire.net
Ronald L. Wiliams
WILLIAMS BRADBURY, P.C.
1015 West Hays Street
Boise, Idaho 83702
Hand Delivered
-X U.S. Mail
_ Overnight Mail
FAX
-X Email ronCëwiliamsbradbury.com
~
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 19