20140909IPC to Staff 1-4.pdf

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DONOVAN E. WALKER
Lead Counsel
[e-mail]
September 9,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-14-22
Confirming Use of Capacity Deficiency Period in IRP Methodology - ldaho
Power Company's Response to the First Production Request of the
Commission Staff
Dear Ms. Jewell:
Enclosed for filing in the above matter are an original and three (3) copies each of
ldaho Power Company's Redacted Response to the First Production Request of the
Gommission Staff and ldaho Power Company's Confidential Responses to the
Commission Staff's Production Request Nos. 1 and 2.
Also enclosed are four (4) confidential disks containing information responsive to
Staff's Production Request No. 1.
Since\lV,
b/,-f(llA-
Donovan E. Walker
DEW:csb
Enclosures
1221 W. ldaho 5t. (83702)
P.O. Box 70
Boise, lD 83707
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwal ker@ idahopower. com
Attorney for Idaho Power Company
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
CONFIRMATION OF THE CAPACITY
DEFICIENCY PERIOD FOR
INCREMENTAL COST, INTEGMTED
RESOURCE PLAN, AVOIDED COST
METHODOLOGY.
RECEIV[ }
20lq Sff -9 pt{ Z: SG
u T r Ll?i,: lcct,r,vi i Js i r: r,r
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. |PC-E-14-22
IDAHO POWER COMPANY'S
REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST
OF THE COMMISSION STAFF
COMES NOW, ldaho Power Company ("ldaho Powe/' or "Company"), and in
response to the First Production Request of the Commission Staff to ldaho Power
Company dated August 20,2014, herewith submits the following information:
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 1
REQUEST NO. 1: The Company's Application at page 7 refers to eight
proposed projects that had previously received initial indicative pricing that included
capacity payments for the entire term of the contract and that subsequently have
received superseding and updated indicative pricing runs with the capacity portion of
the rates removed through June of 2021. For each of these eight contracts, please
provide the following:
A. The name, location, and developer of the project,
B. The proposed nameplate capacity of the project,
C. The proposed term of the contract,
D. A comparison showing the separate energy and capacity components of
the avoided cost rate, both under the initial indicative pricing and under the superseding
and updated indicative pricing runs with the capacity portion of the rates removed
through June of 2021.
RESPONSE TO REQUEST NO. 1:
A-C. Please see the confidentialtable below.
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 2
Project Name Location Developer Nameplate
Ratino Term
-
Mountain Home, lD
-
20.0 MW 20 Years
-
Pocatello, lD
-
20.0 MW 20 Years
-
Blackfoot, lD
-
0.6 MW 20 Years
-
Murphy, lD I 20.0 MW 20 Years
I East of Boise, lD I 20.0 MW 20 Years
-
East of Boise, lD I 80.0 MW 20 Years
-
American Falls, lD I 20.0 MW 20 Years
I Payette, lD I 28.0 MW 20 Years
Please see the confidential Excelfile provided on the confidential CD.
The confidential response and confidential CD will be provided to those parties
that have executed the Protective Agreement in this matter.
The response to this Request is sponsored by Randy C. Allphin, Energy
Contracts Coordinator Leader, ldaho Power Company.
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 3
REQUEST NO. 2: Please provide computations supporting the estimated
difference of $65 million in avoided cost rates for those eight projects that received
revised indicative pricing as stated on page 7 of the Application.
RESPONSE TO REQUEST NO. 2: An estimated difference for five of the
projects identified in the Company's Response to Staffs Request No. 1 was used as a
basis to calculate the $65 million estimate. Those five projects are listed below:
Difference
-
I
-
Total
Nameplate Ratins
20 MW
20 MW
20 MW
20 MW
20 MW
($6,557,733)
($6,146,406)
($6,066,622)
($6,sgt ,1 18)
66J130*01-9)
($3t,29t,898)
is approximately $6.3 millionThe average difference for the above-listed five projects
($31,731,898 divided by 5).
As noted in ldaho Powefs Application and the Company's Response to Staff's
Request No. 1, there were approximately 208 megawatts ("MW") nameplate rating
impacted by the revised deficit period. The calculated $6.3 million average for a 20 MW
project times 208 MW equals the approximated value of $65 million as contained within
the Application (208 MW / 20 MW X $6.3 mill = $65 mill).
The confidential response will be provided to those parties that have executed
the Protective Agreement in this matter.
The response to this Request is sponsored by Randy C. Allphin, Energy
Contracts Coordinator Leader, ldaho Power Company.
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 4
REQUEST NO. 3: Please provide computations supporting the estimated
difference of $170 million in avoided cost rates for all 529 MW of proposed solar
projects referred to on page 8 of the Application.
RESPONSE TO REQUEST NO. 3: The same basis and calculation as used in
the Company's Response to Staffs Request No. 2 was applied to the 529 MW of
proposed solar projects in calculating the approximate $170 million.
The calculated $6.3 million average for a 20 MW project times 529 MW equals
an approximate value of $166 million, which was rounded to $170 million and included
in ldaho Powe/s Application (529 MW / 20 MW X $6.3 mill = $170 mill).
The response to this Request is sponsored by Randy C. Allphin, Energy
Contracts Coordinator Leader, ldaho Power Company.
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 5
REQUEST NO. 4: Please provide copies of any written documentation or
correspondence with projects that have raised objections to ldaho Powe/s inclusion of
a first deficit of July 2021 in their indicative avoided cost prices as discussed on page 8
of the Application.
RESPONSE TO REQUEST NO. 4: To date, Idaho Power has received only one
notification from a project raising concerns with regard to the revised pricing to include
the July 2021 deficit year calculation. Attached hereto is that letter and also Idaho
Powe/s response to that letter.
The response to this Request is sponsored by Randy C. Allphin, Energy
Contracts Coordinator Leader, ldaho Power Company.
DATED at Boise, ldaho, this gfr day of September 2014.
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 6
DONOVAN E. WALKER
Attorney for ldaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 9th day of September 20141 served a true and
correct copy of IDAHO POWER COMPANY'S REDACTED 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:
Commission Staff
Kristine A. Sasser
Deputy Attomey General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
X Hand Delivered
U.S. Mail
Overnight Mail
FAXX Email [e-mail]
Christa Bearry, Legal Assistant
IDAHO POWER COMPANY'S REDACTED RESPONSE TO THE
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF - 7
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-14-22
IDAHO POWER COMPANY
RESPONSE TO STAFF'S REQUEST NO.4
[phone]
[phone] (Fax)
McDevitt & Miller LLP
Lawyers
420 West Bannock Street
P.O. Box 2564-83701
Boise, Idaho 83702
Chas. F. McDevitt
Deanf. (loe) Miller
Celeste K. Millet
August 12,2014
Yia Elecaonic Mail
Donovan E. Walket, Esq.
Idaho Po.wet Company
1221W.Idaho Street
P.O. Box 70
Boise,ID 83707
du aIke r(?rdah()Do\\ cr.c()n)
Re: SunetgyVotld-Mountain llome and Pocatello Airport
Dear Donovan:
As you know, onJuly 11,2074,Idaho Powet Company (Idaho Power) provided to Sunergy Wodd
Inc. (Sunergy) proposed eflergy prices for inclusion in anticipated Fifm Energr Sales Agreements for
the above referenced projects. Accotding to the Idaho Power transmittal letter, these prices were
calculated in accordance with the IRP methodology approved in Order No. 32697.
OnJuly 77,2014 Sunergy, ia writing, accepted the proposed pticing and requested that Enetgy Sales
Agreements (I,SAs) conaining those prices be prepared and transmitted to Sunergy.
Idaho Power did not provide ESAs to Sunergy. Instead, on August 6,2074Idaho Power sent to
Sunetgy cotrespondence containing a new schedule of prices. These prices removed payments for
capacity tfuoughJune 2A21, supposedly in accotdance IPUC Order No. 33084, Case No. IPC-E-13-
21.
Our review of the pleadings and Ordets in Case No. IPC-E-13-27 letds us to conclude that the
removal of capacity payments authorized by Order No. 33084 is applicable only to rates based on
the SAR methodology and that temoval of capacity payment fot prices based on the IRP
methodology is improper and not authorized by the Commission.
In Case No. 13-21, Idaho Power's Application was specifically limited to prices determined by &e
SAR methodology. The prayet for relief in the Application states:
"Idaho Power respectfully tequests that the Commission issue an order apptoving the
capacity deficiency pedod to be utiliryd in tbe SAR ayoided cost methodology for Idaho Power as
Donovan E. Walker, Esq
Idaho Power Company
August t2,2Q14
Page2
shoyrfl in Table 3, above, with a fust deficit occuffing inJ"ly 2021,.* (A.pplicatioa Pg. 5,
emphasis supplied).
The Commission's final Order states:
"IT IS HEREBY ORDERED that Idaho Power utilizeJuly 2021 as its fitst capacity deficit
to be used in tbe Corupanj't SAK netbodalag, as more fully described herein." (Order No.
33484,Pg. 5, emphasis supplied).
Based on this, we believe Idaho Power lacks authorization to unilatetally alter prices based ori the
IRP methodology to Jemove payments for capacity. We thercfore request that Idaho Power
fotthwith ftansmit to Sunergy, Energy Sales Agteements for the above referenced projects
conainiflg prices contained in Idaho Power's Jun e 17, 2A14 leue*
Sunergy is ptepared to inrmediately execute and tetum Energy Sales Agreernents with non-pdce
terms identical to those contained in the recently executed Boise City Solar project. To be clear,
Sunergy hereby obligates itself to sell on those terms and conditions and the pdces above
referenced.
Very Truly Yours,
McDevitt & Millet LLPM
DJM/hh
cc: Sunergy
^llmtoNIPCI,ITER^
An IDACORP Company
DONOVAN E. WALKER
Lead Gounsel
[e-mail]
August 13,2014
VIA ELECTRONIC AND U.S. MAIL
Dean J. Miller
McDEVITT & MILLER LLP
420 West Bannock Street
P.O. Box 2564
Boise, ldaho 83701
Re: Sunergy World - Mountain Home and Pocatello Airport
Dear Mr. Miller:
Please let this serye as a response to your letter dated August 12,2014. Your
letter correctly states that Case No. !PC-E-13-21 established a first capacity deficit of
July 2021for avoided cost rates established by the SAR Methodology. However, your
assertion that "removal of capacity payment for prices based on the IRP methodology is
improper and not authorized by the Commission" is incorrect. Additionally, your
assertions, and apparent attempt to establish a legally enforceable obligation to the
previously communicated indicative prices, are unfounded. Your assertions are not only
incorrect regarding the law of how a legally enforceable obligation is established in the
state of ldaho, but they are also incorrect as to the process of establishing negotiated
rates under the approved IRP Methodology.
The ldaho Supreme Court has recently issued an opinion in which it has
examined and reaffirmed the ldaho Public Utilities Commission's ("Commission")
authority and process for establishing a legally enforceable obligation as proper and
consistent with both state and federal law. ldaho Power Co., v. ldaho Public Utilities
Comm'n., 155 ldaho 780, 316 P.3d 1278 (Grouse Cree?'). The ldaho Supreme Court
affirmed that, "IPUC has authority under state and federal law, to require that before a
developer can lock in a certain rate, there must be either a signed contract to sell at that
rate or a meritorious complaint alleging that the project is mature and that the developer
has attempted and failed to negotiate a contract with the utility; that is, there would be a
contract but for the conduct of the utility." ld., 316 P.3d at 1285 (quoting Rosebud
Enterprises, lnc. v. ldaho Public Utilities Comm'n, 131 ldaho 1, 6, 951 P.zd 521,526
(1997)). "[W]e again affirm IPUC's requirement that a finding of a legally enforceable
'i221 W ldaho 5t. (83702)
PO. Box 70
Boise, lD 83707
Dean J. Miller
August 13,2014
Page 2 of 4
obligation requires a showing that there would have been a contract but for the actions
of the utility." Here, ldaho has simply sent to the projects, at their requests, initial
indicative modeled pricing runs-and has updated such indicative prices with the
removal of the capacity portion of the rate for those months prior to July 2021,
subsequent to the Commission's determination that the utility was capacity sufficient
through that date. These projects do not have a signed contract with the utility and
have not established that ldaho Power Company ("ldaho Powe/'or "Company") will not
negotiate with them, nor have they shown that ldaho Power has refused to purchase or
contract.
lf a qualifying facility ('QF') project feels that the utility is refusing to contract for
the purchase of its generation, then it may seek a legally enforceable obligation
determination from the Commission to bind the utility and its customers to the purchase,
even in the absence of a contract. Such a procedure, and such a concept as a legally
enforceable obligation, exists to prevent a situation where the utility refuses to purchase
from the QF. Grouse Creek,316 P.3d at 1280, 1285. lt does not exist so that the QF
can pick and choose what contractual terms, conditions, and rates it unilaterally wishes
to impose on the utility and its customers. Those items, most particularly the rates, are
determined by the Commission, not by the QF, and not by the utility. The Public Utility
Regulatory Policies Act of 1978 requires that the utility purchase. The Commission
determines the terms and conditions of the purchase and the appropriate price.
The approved IRP Methodology is meant to be a flexible and dynamic process
that arrives at a more accurate estimate of the utility's avoided cost that ultimately is
reduced to a 20-year obligation passed on to ldaho Power's customers. !t is not the
same as the certainty and availability of published avoided cost rates. lt is specifically
and expressly a negotiated rate process that utilizes the IRP Methodology to establish
the presumptive avoided cost rate as a starting point for the negotiated rate. Absent
any special circumstances or considerations that would justify an upward or downward
adjustment to that rate, the modeled rate would be the negotiated avoided cost rate.
Not only is it within ldaho Power's "authorization" to remove the capacity portion of the
modeled, indicative price for times that the utility is capacity sufficient, it is the
Company's obligation to ensure that an avoided cost rate is not locked in for the next 20
years that passes on to its customers avoided cost rates that are overpriced by more
than $170 million.
It is very clearly and prominently set forth in the communications that accompany
the indicative pricing that was sent to your clients that the indicative prices are for
discussion and negotiation purposes only, that at any time prior to both parties
executing an Energy Sales Agreement ldaho Power shall modify any draft Energy Sales
Agreement and pricing provided to reflect cunent contracting standards and regulatory
requirements, and that ldaho Power and its customers are under no obligation to
purchase energy from the proposed project until an Energy Sales Agreement has been
executed by both parties and approved by the Commission.
Dean J. Miller
August 13,2014
Page 3 of 4
The Commission clearly intended, in Order No. 32697, that the utility's capacity
deficiency be updated, and that a capacity payment be reflected in avoided cost rates
only for those times that the utility is capacity deficient.
ln computing avoided cost rates under the IRP Methodology,
each of the three utilities already employs a two-step
approach in which energy and capacity values are computed
separately. ln calculating a QF's ability to contribute to a
utility's need for capacity, we find it reasonable for the
utilities to only begin payments for capacity at such time that
the utility becomes capacity deficient. lf a utility is capacity
surplus, then capacity is not being avoided by the purchase
of QF power. By including a capacity payment only when
the utility becomes capacity deficient, the utilities are paying
rates that are a more accurate reflection of a true avoided
cost for the QF power.
Order No. 32697, p.21.
The inputs to the IRP Methodology are updated every two years with each new
lRP, and annually in October with updated gas, !oad, and cogeneration and small power
production forecasts. The capacity component of avoided cost rates in the IRP
Methodology is established separately from the energy component of the rate. The
energy component is based upon the proposed project's specific hourly generation
profile, which is compared to an AURORA modeled run of the Company's system. In
this comparison, for each hour that the QF provides generation, the highest cost
Company resource serving load (generation or market purchase) for that hour is
assigned as that hou/s avoided cost. These hourly incremental costs are accumulated
into monthly heavy-load and light-load prices that represent the avoided cost of energy.
The capacity component of the avoided cost rate is based upon the cost of a simple-
cycle natural gas combustion turbine and the QF's peak-hour capacity factor.
Consequently, it is not necessary to change or update any of the inputs in the AURORA
modeling or the IRP Methodology that are determined by the IRP and the October
updates. The capacity component of the avoided cost rate is simply removed for any
years that the utility is capacity sufficient. ln this case, with a Commission determination
that the Company is capacity sufficient until July 2021, the indicative pricing for
negotiated rate, proposed QF projects was revised to remove the capacity portion of the
rate until the July 2021 first capacity deficit.
I have transmitted, along with this letter, a courtesy copy of a new filing made by
ldaho Power today that addresses the issues you raise in your letter. With this filing,
ldaho Power is asking the Commission for an order confirming use of a first capacity
deficit of July 2021 for purposes of avoided cost prices determined by the incremental
Dean J. Miller
August 13,2014
Page 4of4
cost, IRP Methodology. You wil! find the additional discussion
Application relevant as a response to your August 12, 2A14,letter.
in the enclosed
Donovan E. Walker
DEW:csb
Enclosure