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Home My WebLink About20120110IPC to Staff 1-4.pdfDONOVAN E. WALKER (ISB No. 5921) JASON B. WILLIAMS (ISB No. 8718) Idaho Power Company 1221 West Idaho Street (83702) P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5317 Facsimile: (208) 388-6936 dwalker~idahopower.com iwilliams~idahopower.com Attorneys for Idaho Power Company lHli 10 PN 12:50 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF IDAHO POWER COMPANY FOR A ) DETERMINATION REGARDING ITS ) FIRM ENERGY SALES AGREEMENT ) WITH DYNAMIS ENERGY, LLC. ) ) ) ) ) CASE NO. IPC-E-11-25 IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY COMES NOW, Idaho Power Company ("Idaho Power" or "Company"), and in response to the First Production Request of the Commission Staff to Idaho Power Company dated December 20, 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 a narrative describing how the rates included in Appendix F have been computed. Please provide a copy of all spreadsheets and analysis used to derive the rates. If any component of the rates was developed using AURORA, please provide a copy of all AURORA files used in the analysis (input, output, data, etc.). Please provide all files in an electronic, executable format with formulas intact. RESPONSE TO REQUEST NO.1: The rates included in Appendix F are based upon calculations from the Public Utilty Regulatory Policies Act of 1978 ("PURPA") Integrated Resource Plan ("IRP") methodology and inputs at the time this agreement was negotiated. The IRP methodology is comprised of three components: 1. Avoided Cost of Energy; 2. Avoided Cost of Capacity; and 3. Integration Cost. The above-listed components are described in greater detail below. Avoided Cost of Energy The Avoided Cost of Energy is a direct output from the AURORA dispatch modeL. A confidential Excel workbook containing the input, output, and summary files that were used to calculate the Avoided Cost of Energy for this project is provided on the confidential CD. The confidential CD wil be provided to those parties that have executed the Protective Agreement in this matter. Following are the basic inputs and assumptions that were used in this model run: . 2009 IRP base assumptions; . 2009 IRP load forecast; . 2009 IRP natural gas fuel cost forecast; and . Estimated hourly energy shape provided by the project. IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 2 Avoided Cost of Capacity The Avoided Cost of Capacity is a calculation based upon the cost of a combined-cycle combustion turbine ("CCCT") as identified in the 2009 IRP adjusted to reflect the size and performance characteristics of this proposed project. The Excel file provided on the confidential CD contains the files and formulas used to implement the process described below to calculate the Avoided Cost of Capacity. . The annualized capital (fixed) cost of a CCCT from the 2009 IRP is the basis for the capital cost ($/kilowatt ("kW") month). . This $/kW month value is converted to a total annual capital cost based on the nameplate rating of the proposed project. . The total annual capital cost is then multiplied by the project specific peak-hour capacity factor. (A description of the peak-hour capacity factor is provided below.) . This result is then divided by the megawatt-hours ("MWh") of generation from the proposed PURPA project, resulting in a $/MWh rate for Avoided Cost of Capacity. Peak-Hour Capacity Factor Calculation . Project provided data July, hours 3-7 p.m. average capacity factor 100% . Benchmark resource - Idaho Power data July, hours 3-7 p.m. average capacity factor 100% July, hours 3-7 p.m. 90th percentile capacity factor 92% . Calculation 100 percent divided by 100 percent equals a capacity multiplier of 1.00 92.0 percent times the multiplier of 1.00 equals a peak-hour capacity factor of 92.0 percent IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 3 Sample Annual Calculation - Calendar Year 2014 Capital cost of a CCCT per the 2009 IRP = $14.17 per kW-month ($14.17 X (20 megawatts ("MW") X 1,000)) X 12 months = $3,400,800 annual capital cost $3,400,800 X 92.0 percent peak-hour capacity factor = $3,128,736 $3,128,736 /109,500 MWh annual energy production = $28.58 per MWh Integration Cost No Integration Cost was applied to these price calculations due to the non- intermittent operations of this project. The response to this Request was prepared by Randy C. Allphin, Senior Energy Contract 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.2: Please explain the rationale for establishing a minimum Delay Price as specified in §1.6. What is the basis for specifically choosing $15 per MWh as the minimum Delay Price? RESPONSE TO REQUEST NO.2: This project has provided a very specific and exact 20 MW hourly energy shape for just heavy load hours; Idaho Power power supply planning and system operations will include this specific energy shape and performance in its planning and daily operation processes. If this project is delayed, there wil be power supply planning impacts and potentially market transaction costs incurred. This minimum $15 per MWh Delay Price was a negotiated value to compensate for potential costs that may occur if the project is delayed. The response to this Request was prepared by Randy C. Allphin, Senior Energy Contract 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 - 5 REQUEST NO.3: Please explain the rationale for a 15% reduction in applicable energy prices if Net Energy deliveries exceed plus or minus 10% for the time periods specified in §6.3 and §6.3.1. RESPONSE TO REQUEST NO.3: This project is unique among most PURPA projects in that it has committed to exactly 20 MW of energy deliveries just during heavy load hours. The agreement contains a plus or minus 10 percent hourly performance band that then triggers an adjustment to the contract price if the project fails to deliver the promised energy. This price adjustment mitigates costs Idaho Power customers may incur due to the project not performing as planned on an hourly basis. In addition, paragraph 6.3 provides for additional payment reductions if the project fails to operate within the performance requirements of this agreement for an extended period of time or on a recurring basis. As stated in the Company's response to Staff's Production Request No. 1 above, a key input in developing the pricing for this and any other PURPA IRP-modeled pricing is the project's anticipated energy shape as provided by the project. This energy shape is then included in the IRP pricing modeL. If the project has overstated or understated the actual energy shape of the project, the results of the IRP pricing may not be a perfect match based on the actual generation versus the estimated generation used in the IRP modeling. Various contract terms and conditions provide various levels of pricing adjustments to compensate for this performance issue. Because this project has provided exact energy amounts and time of day deliveries (20 MW all in all heavy load hours), the potential price risk within this IRP model run is higher in comparison to projects that are providing energy in all hours and at varying output levels. This additional performance requirement was negotiated and inserted into this agreement to IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 6 provide another level of protection against Idaho Power's customers paying inappropriate prices for energy production from this project. The response to this Request was prepared by Randy C. Allphin, Senior Energy Contract 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 - 7 REQUEST NO.4: As specified in §6.4, please explain the rationale for considering the Seller's failure to deliver 30,000 MWh in any Contract Year to be an event of default. How was the 30,000 MWh amount chosen? RESPONSE TO REQUEST NO.4: In all recent PURPA contracts, Idaho Power has included a minimum performance level criterion at which an agreement may be terminated in an effort to minimize termination disputes when a project has catastrophically failed. A minimum annual energy delivery of 30,000 MWh was a negotiated level of performance agreed to between the parties as a performance level that would trigger termination of this agreement. The response to this Request was prepared by Randy C. Allphin, Senior Energy Contract Coordinator, Idaho Power Company, in consultation with Donovan E. Walker, Lead Counsel, Idaho Power Company. DATED at Boise, Idaho, this 10th day of January 2012. -- IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 10th day of January 2012 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 (83702) P.O. Box 83720 Boise, Idaho 83720-0074 -- Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email kris.sasser~puc.idaho.gov Dynamis Energy, LLC Ronald L. Willams WILLIAMS BRADBURY, P.C. 1015 West Hays Street Boise, Idaho 83702 Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email ron~wiliamsbradbury.com C. Lloyd Mahaffey, CEO Wade D. Thomas, General Counsel 776 East Riverside Drive, Suite 150 Eagle, Idaho 83616 Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email L1oyd~dynamisenergy.com wthomas~dynamisenergy.com ~~ IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9