20180628IPC to Staff 1-6.pdf

S!ffi*.i?ECEIV[D
I$18,l{Ji{ 28 PH l+: 25
-tl,'.I - l.,Ltr.,' :.,i"il.iissiCI;,J
An IDACORP Company
DONOVAN E. WALKER
Lead Counsel
dwal [e-mail]
June 28,2018
VIA HAND DELIVERY
Diane Hanian, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re Case No. IPC-E-18-07
Petition for Modification of 901110 Performance Band and Calculation of
O&M Charges for PURPA QFs - Idaho Power Company's Response to the
First Production Request of the Commission Staff to ldaho Power Company
Dear Ms. Hanian
Enclosed for filing in the above matter are an original and three (3) copies of ldaho
Power Company's Response to the First Production Request of the Commission Staff to
Idaho Power Company.
Very yours,
Donovan E. Walker
DEW:csb
Enclosures
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
DONOVAN E. WALKER (lSB No. 5921)
ldaho Power Company
1221West Idaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker@ idahopower. com
IN THE MATTER OF THE PETITION OF
IDAHYDRO, SHOROCK HYDRO, INC.,
J.R. SIMPLOT COMPANY, AND
RENEWABLE ENERGY COALITION FOR
MODIFICATION OF THE 9O/110
PERFORMANCE BAND AND
CALCULATION OF OPERATION AND
MAINTENANCE CHARGES FOR PURPA
QUALIFY!NG FACILITIES
CASE NO. IPC-E-18-07
IDAHO POWER COMPANY'S
RESPONSE TO THE FIRST
PRODUCTION REQUEST OF THE
COMMISSION STAFF TO IDAHO
POWER COMPANY
iiICEIVED
i0l8 iui{ 28 Plt lr: 26
tD,,r'tiil Fii[]LliTrilr"r[s c0h1Ml$SION
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
)
)
)
)
)
)
)
)
)
)
COMES NOW, ldaho Power Company ("ldaho Power" or "Comp?ny"), and in
response to the First Production Request of the Commission Staff to ldaho Power
Company dated June 7, 2018, 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: Does ldaho Power believe 901110 contributes to more
accurate avoided costs? lf so, please explain why.
RESPONSE TO REQUEST NO. 1: Yes
lf not, why not?
The main function of the 90/110
provisions in the state of Idaho's implementation of the Public Utility Regulatory Policies
Act of 1978 ('PURPA') is to serve as a measure of firmness that establishes a
Qualifying Facility's ("QF") eligibility for "firm" avoided cost rates determined at the time
of contracting or legally enforceable obligation ("LEO"), as opposed to "non-firm"
avoided cost rates established at the time of generation delivery.
All QF purchases are "non-firm" in that delivery of their generation occurs as,
when, and in whatever amounts the QF determines it will deliver. The purchasing utility
has no dispatchable control over the QF's generation deliveries. The implementation of
PURPA's mandatory purchase requires its own unique definition of "firm" and "non-firm"
pricing. For "non-firm" purchases, "as available" pricing is applied and is determined at
the time of delivery. For "firm" pricing, avoided cost values are used for the duration of
the term at the time of contracting or LEO.
The ldaho Public Utilities Commission ("Commission") has determined that a
LEO for the purchase of QF generation translates into contractual obligations for both
the utility and the QF. ln order to receive the "firm" pricing avoided cost rates, the QF is
obligated to deliver its generation within the 90%-110o/o band of its own monthly
generation estimates, which the QF sets itself and is free to modify. Compliance with
the 90/1 10 provisions is how a QF establishes its eligibility for pricing determined at the
time of contracting or LEO that is set for the term of the contract or LEO. If the QF is
not in compliance with the 90/110 provisions required of "firm" pricing, then it receives
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 2
the other approved avoided cost price for "non-firm" or "as available" pricing determined
at the time of delivery. Thus, the 90/110 provisions contribute to more accurate avoided
costs, as the primary function of such provisions is to establish a QF project's eligibility
to one of two required and approved avoided cost prices set by the Commission.
The response to this Request is sponsored by Tessia Park, Vice President of
Power Supply, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY.3
REQUEST l{Ql: Please explain how the 901110 contract provision relates to
the cost of integrating variable resources.
RESPONSE TO EOUEST NO. 2:As stated in the Company's response to
Staffs Request No. 1, the primary function of the 90/110 provisions is to establish a
measure of firmness to determine the appropriate avoided cost rate eligibility for QFs.
This primary function has little to do with the cost of integrating variable resources.
However, application of the 901110 provisions allows for the beneficial use of the QF
project's estimated net energy deliveries in power supply planning and operations. The
monthly generation estimates provided by the QFs are part of the basis for the
Company's forecast of generation that it will receive from Cogeneration and Small
Power Production ("CSPP") QF projects. Please see ldaho Power's answer to J.R.
Simplot Company's lnterrogatory No. 2, discussing in general how the Company moves
from monthly, or long-term forecasts, into real-time operations to balance the system.
The "cost of integrating variable resources" has in the past been established and
implemented following a specific integration cost study conducted by the Company with
participation and input from stakeholders, a filing by the Company, and approval by the
Commission. The Company has conducted three wind integration studies and two solar
integration studies. The Company is currently authorized to include an integration
charge for wind and solar QF resources, which offsets the avoided cost prices for a
qualifying project. lntegration costs identified by the Company's integration studies
attempt to quantify and value the changed operation of the Company's system required
to integrate variable and intermittent resources, such as wind and solar, into its system.
This is accomplished by identifying and quantifying the additional amount of generation
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 4
reserves that must be held on the system in order to ramp generation both up and down
to accommodate for the variable and intermittent generation resources' upward and
downward deviations from forecast moving into real-time balancing operations.
As stated in ldaho Power's response to Staffs Request No. 1, all CSPP
purchases are "non-firm" in that delivery of their generation occurs as, when, and in
whatever amounts the QF determines it will deliver. The purchasing utility has no
dispatchable control over the QF's generation deliveries. The implementation of
PURPA's mandatory purchase requires its own unique definition of "firm" and "non-firm"
pricing. For "non-firm" purchases, "as available" pricing is applied and is determined at
the time of delivery. For "firm" pricing, avoided cost values are used for the duration of
the term at the time of contracting or LEO. The Commission has determined that a LEO
for the purchase of QF generation translates into contractual obligations for both the
utility and the QF. ln order to receive the "firm" pricing avoided cost rates, the QF is
obligated to deliver its generation within the g0%-110o/o band of its own monthly
generation estimates, which the QF sets itself and is free to modify. Compliance with
the 90/1 10 provisions is how a QF establishes its eligibility for pricing determined at the
time of contracting or LEO that is set for the term of the contract or LEO. If the QF is
not in compliance with the 90/110 provisions required of "firm" pricing, then it receives
the other approved avoided cost price for "non-firm" or "as available" pricing determined
at the time of delivery.
The 90/110 provisions are primarily concerned with a QF establishing its
eligibility for pricing determined at the time of contracting or LEO that is set for the term
of the contract or LEO. lntegration of variable resources is an operational task that is
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 5
required to operate a balanced system. ln the context of purchases from CSPP
projects, the integration of variable resources is typically referred to in relation to an
integration charge. The integration charge is designed to hold retail customers of the
utility indifferent to the required PURPA purchase by compensating the utility for the
increased cost necessitated by the requirement to hold additional generation reserves
on the system for up and down regulation. Thus, the primary function of 90/1 10
provisions and the integration of variable resources are aimed at, and address different
functions and aspects of, the mandatory purchase of CSPP QF generation.
The response to this Request is sponsored by Tessia Park, Vice President of
Power Supply, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 6
REQUEST NO. 3: Please explain how the 901110 contract provision relates to
the cost of holding system reserves.
RESPONSE TO REQUEST NO. 3: The cost of holding system reserves, for
both up and down regulation and system balancing, is typically studied and quantified in
integration studies. The 90/110 provisions are used to determine a PURPA CSPP
project's eligibility for one of two required avoided cost rates. For "non-firm" purchases,
"as available" pricing is applied and is determined at the time of delivery. For "firm"
pricing, avoided cost values are used at the time of contracting or LEO for the duration
of the term. Please see ldaho Power's responses to Staffs Request Nos. 1 and 2.
The response to this Request is sponsored by Tessia Park, Vice President of
Power Supply, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 7
REQUEST NO. 4: ls it practical and feasible to conduct an integration study on
hydro QFs on the ldaho Power system?
RESPONSE TO REQUEST NO. 4: !t is possible to conduct an integration study
for hydro QFs in the same or similar manner as an integration study for wind and solar
QFs. ln fact, ldaho Power's most recent draft2018 Variable Energy Resource ("VER')
lntegration Study indicates that a unified VER integration analysis may be the best way
to assess costs for the incremental addition of wind and solar generation to Idaho
Power's system. The analysis also indicates that the ldaho Power system is nearing a
point where the current configuration can no longer integrate additional VERs. To the
extent that hydro QF resources are intermittent and variable resources similar to wind
and solar that impose an additional cost upon ldaho Power retail customers from the
increased cost of having to provide additional up and down regulating reserves because
of hydro's variation of actual generation from forecast, a unified VER integration charge
assessed to hydro QF projects may be appropriate. That particular study has not yet
been performed, and, as discussed in ldaho Power's responses to Staff's Request Nos.
1,2, and 3, the firmness, the avoided cost rate eligibility requirements addressed by the
90/110 provisions, and the customer neutrality requirements of assessment of an
integration charge for variable, intermittent generation are separate concepts that
address different PURPA implementation requirements.
The response to this Request is sponsored by Tessia Park, Vice President of
Power Supply, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 8
REQUEST NO. 5: The current monthly operation and maintenance (O&M)
service charges for QF interconnection facilities are based upon a percentage of actual
interconnection investment: 0.7o/o for distribution facilities (below 138kV) and 0.4o/o tor
transmission facilities (138kV and 161Kv) See Case No. IPC-E-90-20. Does ldaho
Power believe this methodology is still reasonable and appropriate today? Please
explain.
RESPONSE TO REQUEST NO.5: Yes, the Company believes the methodology
of basing the O&M charge on a percentage of the construction cost and transfer cost
paid by the seller (the interconnection cost) is still reasonable and appropriate today.
This methodology calculates the percentage based on actual test year system-wide
transmission and distribution plant account balances and system-wide transmission and
distribution O&M expense account balances.
The methodology is consistent with traditional ratemaking methodologies, which
allocate system-wide costs to develop cost-of-service for all retail customer classes in
all jurisdictions, as well as for standby services, facilities charges, and Open Access
Transmission Tariff formula rates for transmission services.
For example, in the development of retail rates in a general rate case, the
Company performs a cost-of-service study to allocate its total costs among its different
classes of customers. The allocation process uses system-wide information to develop
rates applicable to specific customer classes or rate schedules. Each customer in a
class then pays the same rates based on its rate schedule. Actua! costs to serve each
customer are not tracked.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 9
Another pertinent example of a ratemaking methodology is ldaho Power's
facilities charge (Schedule 66, Miscellaneous Charges, Rule M), which administers
facilities charges to retail customers for customer-dedicated facilities installed beyond
the point of delivery but operated and maintained by Idaho Power. The facilities charge
includes an allocation of distribution O&M expenses based on the Company's ratio of
distribution O&M to total distribution plant investment, similar to how the Schedule 72
O&M rate is calculated. While the Schedule 66 facilities charge was developed for a
different purpose and thus uses a different calculation methodology than the Schedule
72 O&M charge, it provides another example of the routine, widespread use of system
average information to develop rates.
ln response to Renewable Energy Coalition's ("REC') Request for Production
No. 1.10, the Company recalculated the below 138 kilovolt rate using 2017 general
ledger data applied to the methodology used in Case No. IPC-E-90-20 and the O.7o/o
monthly rate did not change. This result demonstrates the stability of that methodology.
The response to this Request is sponsored by Mark Annis, Senior Regulatory
Analyst, ldaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 1O
REQUEST NO. 6: Please update the percentages mentioned above (0.7% and
0.4%) used to calculate the current O&M levelized rates by using the most recent input
data (i.e. 12 months ending December 31,2017), and provide worksheets (with formula
intact) to show the calculation steps.
RESPONSE TO REQUEST NO. 6:Please see the Company's responses to
REC's Request for Production Nos. 1.2 and 1.10.
The response to this Request is sponsored by Mark Annis, Senior Regulatory
Analyst, ldaho Power Company.
DATED at Boise, ldaho, this 28th day of June 2018.
NE R
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 28th day of June 2018 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
Edith L. Pacillo
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-007 4
J. R. Simplot Company
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Idahydro and Shorock Hydro, lnc.
C. Tom Arkoosh
ARKOOSH LAW OFFICES
802 West Bannock Street, Suite 900
P.O. Box 2900
Boise, ldaho 83701
David H. Arkoosh
Law Office of David Arkoosh
P.O. Box 2817
Boise, ldaho 83701
Renewable Energy Goalition
J. Kahle Becker
Attorney at Law
223 North 6th Street, Suite 325
Boise, ldaho 83702
X Hand Delivered
_U.S. Mail
_Overnight Mail
_FAXX Email edith.pacil idaho.qov
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
[e-mail]
_Hand DeliveredX U.S. Mai!
_Overnight Mail
_FAXX Emai! [e-mail]
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Emai! [e-mail]
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY. 12
lrion Sanger
SANGER LAW, P.C.
1117 SW 53rd Avenue
Portland, Oregon 97215
Tamarack Energy Partnership
Michael C. Creamer
Preston N. Carter
GIVENS PURSLEY LLP
601 West Bannock Street
Boise, ldaho 83702
Avista Corporation
Michael G. Andrea, Senior Counsel
Avista Corporation
1411 East Mission Avenue, MSC-23
Spokane, Wash in gt on 99202
Clint Kalich
Manager, Resource Planning and Analysis
Avista Corporation
1411 East Mission Avenue, MSC-7
Spokane, Wash ington 99202
_Hand DeliveredX U.S. Mail
_Overnight Mai!
_FAXxEmail [e-mail]
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXxEmail [e-mail]
pnc@q ivenspu rslev. com
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
_Hand DeliveredX U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
lV
Bearry, LegalAssistant
IDAHO POWER COMPANY'S RESPONSE TO THE FIRST PRODUCTION
REQUEST OF THE COMMISSION STAFF TO IDAHO POWER COMPANY - 13