Loading...
HomeMy WebLinkAbout20201203IPC to Staff 25-39.pdf DONOVAN WALKER Lead Counsel dwalker@idahopower.com December 3, 2020 VIA ELECTRONIC FILING Jan Noriyuki, Secretary Idaho Public Utilities Commission 11331 W. Chinden Boulevard Building 8, Suite 201-A Boise, Idaho 83714 Re: Case No. IPC-E-20-02 Idaho Power Company’s Petition to Establish Avoided Cost Rates and Terms for Energy Storage Qualifying Facilities under PURPA Dear Ms. Noriyuki: Attached for electronic filing in the above matter is Idaho Power Company’s Response to the Third Production Request of the Commission Staff. If you have any questions about the enclosed documents, please do not hesitate to contact me. Very truly yours, Donovan Walker DEW/ cld Enclosures RECEIVED 2020December 3, PM 3:45 IDAHO PUBLIC UTILITIES COMMISSION IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 1 DONOVAN E. WALKER (ISB No. 5921) 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 Attorney for Idaho Power Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF IDAHO POWER COMPANY’S PETITION TO ESTABLISH AVOIDED COST RATES AND TERMS FOR ENERGY STORAGE QUALIFYING FACILITIES UNDER PURPA ) ) ) ) ) ) ) ) CASE NO. IPC-E-20-02 IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF COMES NOW, Idaho Power Company (“Idaho Power” or “Company”), and in response to the Third Production Request of the Commission Staff to Idaho Power Company dated November 19, 2020, herewith submits the following information: IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 2 REQUEST NO. 25: Page No. 5 of the Compliance Filing states that Table 2 presents the Company's actual loads, net of generation by solar PURPA projects, for January through September 2020. Please answer the following questions. a. Please explain why only solar resources are considered and why other resources such as wind are not considered. b. Please explain why only PURPA solar projects are considered and why non-PURPA solar projects are not considered. RESPONSE TO REQUEST NO. 25: a. Table 2 of Idaho Power’s compliance filing in Case No. IPC-E-20-02 is based on Idaho Power’s actual load, net of solar generation. The primary purpose of Idaho Power’s compliance filing is to demonstrate the peak hours that occur on the Company’s system when generation capacity delivered by a battery storage facility is likely to be of most benefit. These peak hours generally occur later in the afternoon and evenings during summer months. Idaho Power believes it is necessary to remove the effects of solar to best identify peak hours that must be balanced with generation resources during periods when solar generation rapidly declines but when load requirements continue at a high level. Wind resources were not included as generation output from wind facilities does not normally have an impact on the load shape due to its very low capacity factor during peak hours. The operational benefits of a battery storage facility as it relates to capacity value are potentially best realized during the time that solar declines, load persists, and capacity resources must be available to respond rapidly. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 3 b. Only PURPA solar Qualifying Facilities (QF) solar projects are considered in the data presented in Table 2 because they are the only type of utility scale solar facilities currently connected to Idaho Power’s system. Once non-PURPA solar generation facilities, i.e., Jackpot Solar, are connected, the Company will include them in its determination of peak hours. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 4 REQUEST NO. 26: Please explain whether the Company can measure the level of variability of the energy output of a solar-powered or wind-powered energy storage QF and apply solar or wind integration charges based on the level of variability of the type of resource. RESPONSE TO REQUEST NO. 26: Idaho Power does not have any energy storage PURPA Qualifying Facilities (“QF”) currently operating on its electrical system, but the Company believes it would have the ability to measure variability of the generation output from an energy storage QF at the meter level. Regarding integration charges, Idaho Power believes that integration charges should be applied to energy storage QFs. The determination of integration charges is the purpose of variable energy resource (“VER”) studies. In Idaho Power’s VER study currently underway, the Company has included a case based on a battery storage plus solar facility to estimate applicable integration charges for that category of energy storage QFs. However, because Idaho Power does not have any dispatchability of energy storage QFs, the costs to integrate energy storage QFs in the VER study are based on an assumed time period of when an energy storage QF delivers its stored energy. This assumed time period is consistent with the peak hours identified in Idaho Power’s compliance filing for the months of July and August when the peak hours occur. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 5 REQUEST NO. 27: Please explain why a landfill gas or anaerobic digester baseload resource is a reasonable benchmark resource for energy storage QF projects. RESPONSE TO REQUEST NO. 27: The application of a benchmark resource in the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”) is an essential component of determining a generation resource’s capacity value. The benchmark resources utilized in the ICIRP Methodology are based on historical output and published forced outage rates of various resource types. These include seasonal and non-seasonal hydro, baseload resources, wind, and solar. Out of the benchmark resources currently included in the ICIRP Methodology, Idaho Power believes that a baseload resource such as a landfill gas facility or anaerobic digester best approximates the ability of an energy storage PURPA Qualifying Facility (“QF”) that can control the quantity and timing of its generation output because these resources are fueled and capable of continuous generation output. The technical and operational aspects of battery storage allow for a similar type of control and continuous output but are also limited by time constraints specific to the purposes that the batteries are intended to serve and the discharge duration of the batteries. Until an actual energy storage QF is operating on the Idaho Power system, or published forced outage rates are readily available, Idaho Power believes the baseload resource is an appropriate benchmark to apply in the ICIRP Methodology. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 6 REQUEST NO. 28: Please explain why a Peak Hour Capacity Factor Credit is needed to calculate the rate when the only hours a QF is paid for capacity is during peak hours designated in the proposal. RESPONSE TO REQUEST NO. 28: A Peak Hour Capacity Factor Credit is utilized in the determination of a capacity price for all PURPA Qualifying Facilities (“QF”) that are priced using the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”). Regardless of when a QF delivers its generation, a Peak Hour Capacity Factor Credit must be applied to properly value the likelihood the QF will actually deliver its generation during peak hours. As described in the Company’s compliance filing, the only information Idaho Power has to calculate capacity value is an hourly generation profile of estimated generation provided by the QF for a one-year period. The Peak Hour Capacity Factor Credit is the pricing component used to account for forced outages and other operational circumstances that might cause a QF to not deliver its generation during peak hours. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 7 REQUEST NO. 29: Table 9 in the Compliance Filing shows a 30-year levelized capital cost of $8.64/kW-month and a stream of fixed O&M costs of a 170-MW, $878/kW Simple Cycle Combustion Turbine (SCCT). However, Page No. 73 of the 2017 Integrated Resource Plan (IRP) Appendix C shows that the economic life of the SCCT is 35 years. Please answer the following questions. a. Please provide the workpapers used to derive Table 9 in the Compliance Filing in Excel format with all links and formulae intact. b. Please explain why it is reasonable to use a 30-year levelized capital cost and fixed O&M for determining the avoided capacity cost for each year instead of using the 35-year economic life of the SCCT surrogate. c. Please provide the calculations that determined the $8.64/kW-month levelized cost. Please provide in Excel format with all links and formulae intact. d. Please provide the calculations (in Excel format with all links and formulae intact) and explain how the stream of fixed O&M costs in Table 9 are calculated from the fixed O&M of the SCCT listed on Page No. 73 of the 2017 IRP Appendix C in 2017 dollars. e. Why does the Company use the capital cost of a SCCT surrogate in 2017 dollars to determine the levelized capital cost instead of the capital investment cost for the same surrogate resource in 2026 (first deficit year) dollars? f. What is the levelized capital cost of an SCCT surrogate with a 35-year (economic life) and the stream of fixed O&M costs based on an IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 8 investment of the surrogate resource occurring in the first deficit year? Please provide in Excel format with all links and formulae intact. RESPONSE TO REQUEST NO. 29: a. Please see the Excel file provided as Attachment 1 to this Request. Table 9 as contained in Idaho Power’s compliance filing was developed to illustrate a sample pricing calculation for capacity value based on certain peak hours. In the application of the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”) the levelized capital cost of a Simple Cycle Combustion Turbine (“SCCT”) is escalated to the year the IRP is acknowledged by the Idaho Public Utilities Commission (“Commission”) then held constant during future years, until a new IRP is acknowledged. This escalation is demonstrated in Attachment 1. b. The levelized capital cost and fixed operation and maintenance cost is calculated over 35 years. The second table referenced in the 2017 Integrated Resource Plan, Technical Appendix C, page 76 is titled 30-Year Levelized Capacity (fixed) Cost per kW/Month. However, that table should be titled Levelized Capacity (fixed) Cost per kW/Month. c. Please see the Excel file provided as Attachment 2 to this Request. d. Please see Attachment 1. The fixed operations and maintenance component of the capacity price is escalated during all years of the IRP period in the ICIRP Methodology at the general IRP escalation rate as this price component contains several elements that are anticipated to increase over time, including property taxes and insurance. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 9 e. Please see Idaho Power’s response to subpart a. above. Escalating the levelized capital cost of an SCCT to 2026 dollars would improperly inflate the capacity value available to a QF. The ICIRP Methodology determines the capacity price included in an energy sales agreement with a QF based on the levelized cost of an SCCT from the most recently acknowledged IRP. Because it is a levelized price, it should be held constant from the year the IRP is acknowledged. Between 2020 and 2026, Idaho Power anticipates undergoing at least three IRP cycles, so the appropriate capacity price in 2026 dollars would be based on the IRP that is acknowledged in 2026. f. Idaho Power has not performed such calculation. The only capacity cost of an SCCT as used in the ICIRP Methodology is determined in the most recently acknowledged IRP. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 10 REQUEST NO. 30: Please provide the calculations for the SCCT — Frame F Class (170 MW) cost of capital as shown on Page No. 76, Appendix C, 2017 Integrated Resource Plan, 30-year Levelized Cost of Energy in Excel format with all links and formulas intact. RESPONSE TO REQUEST NO. 30: Please see Attachment 2 to Request No. 29. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 11 REQUEST NO. 31: Please describe the process and schedule that QFs and the Company will follow for QFs to submit their annual revised generation profile and for the Company to update their peak hours and capacity payment adjustments. In the description, please include the following. a. The time frame to update the Company's peak hours and premium peak hours for QFs. For example, will it occur at the QF's first anniversary of the online date, the Commission acknowledgement date of the October 15 filing, or some other date? b. The time frame for the QF to update its generation profile. c. The time frame for new rates to take effect. d. The specific provisions needed in future Energy Sales Agreements using the Company's proposed method and schedules RESPONSE TO REQUEST NO. 31: a. As described in Idaho Power’s compliance filing the Company stated: Under the ICIRP methodology, Idaho Power submits an annual compliance filing to the Commission that updates the load and gas forecasts in the ICIRP methodology. See Case No. IPC-E-20-35. Idaho Power believes that the load forecast that is updated annually for modeling the Company’s avoided costs available to PURPA QFs should also serve as the basis for identifying the peak hours to be used in the calculation of the avoided cost of capacity. Therefore, the Company proposes to file annual updates to the peak hours in conjunction with the annual October 15 update to the ICIRP methodology. b. The time frame for the Qualifying Facility (“QF”) to update its generation profile is a contract-specific provision. Idaho Power does not currently have an energy storage PURPA QF under contract and the Company has not submitted a PURPA IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 12 energy sales agreement with an energy storage QF to the Idaho Public Utilities Commission for its review and approval or rejection of said agreement. This could possibly be a negotiated provision that is done in conjunction with a periodic adjustment of the avoided cost rate contained in the contract. c. Under the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”) the capacity rate component is updated after the Commission’s acknowledgement of each Integrated Resource Plan. d. The compliance filing references general contract provisions that it believes would be required to implement payment of capacity during Peak Hours. However, Idaho Power does not currently have an energy storage PURPA QF under contract with specific contractual provisions regarding Peak Hours capacity payment, and the Company has not submitted a PURPA energy sales agreement with an energy storage QF to the Idaho Public Utilities Commission for its review and approval or rejection of said agreement. The specific implementation provisions would need to be negotiated with the prospective battery storage QF and submitted with the negotiated agreement for the Commission’s review. The Compliance filing is meant to comply with the directive from Order No. 34794 establishing the Company’s peak hours during which the avoided cost of capacity will be paid only on production during those hours. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 13 REQUEST NO. 32: Page No. 3 of the Compliance Filing states that the month/hours representing the highest five percent of estimated average load are highlighted in the two boxes in Table 1. Is the highest five percent identified by sorting all the numbers in Table 1 from highest to lowest. If not, please describe the method. Please provide workpapers in Excel format with formulas intact demonstrating the method used. RESPONSE TO REQUEST NO. 32: The highest five percent of estimated average load are identified using formatting available in Excel to identify those values. The spreadsheet used to create Table 1 is provided as an attachment to this request. The response to this Request is sponsored by Mark Annis, Senior Regulatory Analyst, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 14 REQUEST NO. 33: Page No. 6 of the Compliance Filing states that the data in Table 3 suggests a moderate correlation between LOLP and peak load hours. Please quantify the correlation and explain why a moderate level is acceptable. RESPONSE TO REQUEST NO. 33: Idaho Power has not performed a statistical analysis that quantifies the correlation between LOLP and peak load hours. The LOLP data presented in Table 3 generally corresponds and provides supporting evidence that the peak hours identified in the Company’s compliance filing are reasonable. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 15 REQUEST NO. 34: Similar to the format of Table 2 in the Compliance Filing, please provide the total actual load, the amount of actual solar generation, and the amount of actual wind generation as separate tables for each year from 2017 through 2020 in Excel format with all formulas intact. RESPONSE TO REQUEST NO. 34: Please see the Excel file provided as an attachment to this request. The response to this Request is sponsored by Mark Annis, Senior Regulatory Analyst, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 16 REQUEST NO. 35: Please provide the average Idaho Power Locational Marginal Pricing (LMP) for years 2018 and 2019, similar to that provided in Table 3 of the Compliance Filing in Excel format with all formulas intact. RESPONSE TO REQUEST NO. 35: Please see the Excel file provided as an attachment to this request. Note that the 2018 data begins April 4, 2018, the date Idaho Power began participation in the Western Energy Imbalance Market. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 17 REQUEST NO. 36: On page No. 4 of the Application, the Company identified three metrics to identify hours that are most important for output from a battery storage unit to be deployed: load net of solar, loss of load probability and locational marginal pricing from the energy imbalance market. Please provide detail on how the differing results (i.e., identification of most important hours) from these metrics were combined to yield a single proposed set of peak hours and premium peak hours. RESPONSE TO REQUEST NO. 36: Idaho Power’s determination of peak hours for purposes of capacity pricing for energy storage PURPA Qualifying Facilities (“QF”) is primarily based on the Company’s load forecast, net of solar. The load forecast consists of the same data that are updated annually for use in the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”). Idaho Power believes that using the load forecast and netting out solar results in the identification of peak hours when the dispatch of generation from an energy storage PURPA Qualifying Facility (“QF”) could provide the most benefit to the Company. The other metrics presented in Idaho Power’s compliance filing provide supporting information that further validates the Peak Hours. Another less quantifiable benefit, comes from the operational dispatchability during Peak Hours. By providing a price signal for a battery QF to discharge during peak hours, the QF will provide its output during hours that are more challenging for the Company to balance generation and market purchases with demand, i.e. summer afternoon and evening hours when solar generation declines rapidly but demand continues at a high rate. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 18 REQUEST NO. 37: In determining the peak hours based on load data shown in Table 1 of the Compliance Filing, did the Company consider the variance of the actual hourly loads over the days of each month? For example, when the Company put a box around hours 14 through 22 in July to designate core peak hours, did it consider the load variance over the 31 days of the month for each of those hours inside of the box (peak hours) compared to the load variance for hours outside of the box (non-peak hours). Please explain. RESPONSE TO REQUEST NO. 37: Yes, the load forecast data is derived from estimated loads on the Idaho Power system on an hourly basis. However, the load data needs to be averaged to a usable format consistent with the Incremental Cost Integrated Resource Plan Avoided Cost Methodology (“ICIRP Methodology”) to implement a practical method for allocating capacity cost assigned to the PURPA Qualifying Facility’s generation. Therefore, the Company presented the load data in a 12 x 24 average hourly format on a monthly basis. In addition, Idaho Power reviewed the hourly data over all summer months when the Company historically has experienced peak loads. For example, peak load hours similar in scale to those identified in the Company’s compliance filing applicable to July and August also occur in the month of June. However, the hours in June with high load values tend to occur in the latter half of the month. Idaho Power believes that assigning peak hours in the months of July and August are the most administratively efficient periods for capacity payment processing and the peak hours throughout those months are typically more consistent with the averaged peak hours identified in the Company’s filing. In addition, IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 19 Idaho Power believes that from an operational perspective, the peak hours identified for July and August will become more challenging to balance with generation resources due to increased solar generation and customer load. While day-ahead and real-time tools currently exist for adequately balancing generation and demand, the potential operational benefits of energy storage facilities are anticipated to be of most use during the peak hours identified in the filing. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 20 REQUEST NO. 38: Please explain how the Company determined the proposed rate differential of 120% between core peak hours and the premium peak hours. Please provide all workpapers used to justify the premium in Excel format with all formula intact. RESPONSE TO REQUEST NO. 38: Idaho Power agrees with the Idaho Public Utility Commission’s (“the Commission”) directive that capacity should be paid to energy storage PURPA Qualifying Facilities (“QF”) only during peak hours. However, the Company also believes there is a subset of peak hours that are of highest value within the overall peak hours. Idaho Power has proposed the Capacity Price during these “Premium peak hours” as identified in Idaho Power’s compliance filing should be set at 120% of the base price. The Company believes this pricing factor would create a price signal that is significant enough to encourage discharge of the QF’s battery units during the Premium peak hours. A similar concept is applied in the Commission’s Surrogate Avoided Resource Avoided Cost Methodology (“SAR Methodology”) for issuing published avoided cost rates. The SAR Methodology applies seasonality factors during certain months of the year to adjust rates reflective of the value QF generation provides during each month. For example, in the SAR Methodology, Season 2 rates are adjusted to 120% of the base rates. Under the SAR Methodology the months for July and August are included in Season 2. While Idaho Power has proposed 120% as the adjustment factor to the Capacity Price during Premium peak hours, it can only be determined in practice if the price signal is enough to encourage a battery storage QF to discharge its output during those IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 21 designated hours. If an energy storage QF comes under contract in the future, Idaho Power recognizes that it might have to adjust this factor within the provisions of an energy sales agreement to implement a price signal that provides the operational benefits of dispatching during Premium peak hours. The response to this Request is sponsored by Michael Darrington, Energy Contract Leader, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 22 REQUEST NO. 39: Please provide a rate proof comparing expected total capacity payments to QF's. The rate proof should include expected MWh by time-of-day period, using proposed peak period definitions for July and August, and the payment rate per MWh. Please provide this rate proof for each of the following in Excel format with all formula intact: a. under the current payment structure (with capacity payments over all hours), and b. under the proposed structure with a 120% differential between core peak hours and premium peak hours (with no capacity payments in the off- peak hours). RESPONSE TO REQUEST NO. 39: a. Please see the Excel file provided as an attachment to this Response. b. Please see Attachment 1 to Idaho Power’s Response to Request No. 29. The response to this Request is sponsored by Michael Darrington, Energy Contracts Leader, Idaho Power Company. DATED at Boise, Idaho, this 3rd day of December 2020. DONOVAN E. WALKER Attorney for Idaho Power Company IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF - 23 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 3rd day of December 2020 I served a true and correct copy of IDAHO POWER COMPANY’S RESPONSE TO THE THIRD PRODUCTION REQUEST OF THE COMMISSION STAFF upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Edward Jewell Deputy Attorney General Idaho Public Utilities Commission 11331 W. Chinden Boulevard Building 8, Suite 201-A Boise, Idaho 83714 Hand Delivered U.S. Mail Overnight Mail FAX X Email edward.jewell@puc.idaho.gov ________________________________ Christy Davenport, Legal Assistant