20070507_1912.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:MA Y 3, 2007
SUBJECT:CASE NO. PAC-07-07 (PacifiCorp)
PETITION REGARDING PURP A WIND QFS: TO REVISE PUBLISHED
AVOIDED COST RATES; TO ELIMINATE 90%/110% PERFORMANCE
BAND; AND TO AMEND PUBLISHED RATE ELIGIBILITY RULES-
(DISAGGREGATION)
On April 23 , 2007, PacifiCorp dba Rocky Mountain Power (PacifiCorp; Company)
filed an Application with the Idaho Public Utilities Commission (Commission) requesting a
change in the Company s PURPA obligations for wind QFs. PacifiCorp proposes restoring the
cap on entitlement to published avoided cost rates for wind-powered small power generation
facilities that are qualifying facilities (QFs) under Sections 201 and 210 of the Public Utility
Regulatory Policies Act of 1978 (PURPA) from the current level of 100 kW to 10 average
megawatts per month (10 aMW), subject to the following conditions:
1. Reducing the published avoided cost rates applicable to purchases by
PacifiCorp of electric power from wind-powered QFs by $5.04 per MWh
which amount represents the inflation-adjusted integration costs of that
wind power, to be applied against published avoided cost rates except in
those circumstances where the QF developer agrees in the power
purchase agreement with PacifiCorp to deliver QF output to PacifiCorp
on a firm hourly schedule;
2. Removing the t:equirement that the 90%/110% performance band be
applied to purchases from wind-powered QFs;
3. Authorizing PacifiCorp to purchase state-of-the-art wind forecasting
services to provide PacifiCorp with forecasted wind conditions in those
geographic areas in which wind generation resources are located
provided that QFs will reimburse PacifiCorp for their share of the on-
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going cost of the wind forecasting service, in proportion to their
percentage share of the wind-generator capability being supplied to
PacifiCorp from that area;
4. Requiring QFs to deliver a "mechanical availability guarantee" to
PacifiCorp to demonstrate monthly, except for scheduled maintenance
and events of force majeure or uncontrollable force, that the QF was
physically capable and available to generate a full output during 85% of
the hours in a month;
5. Clarifying the rules governing the entitlement to published rates to
prevent all QFs, whether wind or non-wind, capable of delivering more
than 10 aMW per month from structuring or restructuring into smaller
projects for the purpose of qualifying for the published avoided cost
rates; and
6. Clarifying that the cap on entitlement to published avoided cost rates
shall be restored to 10 aMW only until PacifiCorp s renewable targets for
each calendar year in the most recently acknowledged Integrated
Resource Plan are met.
BACKGROUND
On June 17 , 2005, Idaho Power Company in Case No. IPC-05-22 filed a petition with
the Commission requesting a suspension of its obligations under Sections 201 and 210 of
PURP A to enter into new purchase and sales contracts for energy generated by wind powered
QFs. PacifiCorp intervened in that case and requested similar treatment. In Order No. 29839
issued on August 4 2005, the Commission reduced the published rate eligibility cap for QF wind
projects from 10 aMW per month to 100 kW and required individual contract negotiations for
QFs larger than 100 kW for PacifiCorp, Idaho Power and Avista Corporation. PacifiCorp states
it has participated in follow up wind workshops in Idaho and has continued to study and analyze
the impact of integrating wind generation into its multi-state electrical system, utilizing its
existing integrated resource planning process.
PacifiCorp notes that Idaho Power has recently filed petitions respecting PURP A
purchase obligations in two different dockets, Case No. IPC-07-03 (Petition to Raise Published
Rate Eligibility Cap and Eliminate 90/110 Performance Band Requirements for Wind QFs) and
IPC-07-04 (Petition to Clarify Rules Regarding Published Rate Eligibility - Disaggregation).
PacifiCorp s Petition in this case makes similar recommendations with respect to PacifiCorp
Idaho service territory. PacifiCorp concurs with Idaho Power s recommendations, and
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recommends that similar policies be adopted with respect to PacifiCorp' s PURP A purchase
obligations.
Wind Integration Study - Proposed Rate Adjustment
In Case No. IPC-05-, Order No. 29839, the Commission found that the supply
characteristics of wind generation and related integration costs could provide a basis for
adjustment of the published avoided cost rates, an adjustment that may be different for each
utility. PacifiCorp s recommendation is that published avoided cost rates for purchases of wind
generation by the Company be reduced by $5.04 per MWh, which amount represents the
integration costs of that wind power, except in those circumstances where the QF developer
agrees in the power purchase agreement with PacifiCorp to deliver QF output to PacifiCorp on a
firm hourly schedule. The $5.04 per MWh represents the wind integration cost included in the
Company s latest acknowledged Integrated Resource Plan (the 2004 IRP) adjusted for inflation.
Attached as Exhibit A to the Company s Petition is an excerpt from the "PacifiCorp - 2004 IRP
Appendix J - Renewable Generation Assumptions" in which PacifiCorp provides a description
of the methodology used and the results derived from PacifiCorp s analysis of the wind
integration cost issue as part of the 2004 IRP process.
Elimination of the 900/0/1100/0 Performance Band
Idaho Power and A vista recommend the elimination of the 90%/110% performance
band, subject to several conditions. (Reference Avista Case No. A VU-07-02.PacifiCorp
recommends that the same policies be applied to the purchase of wind power by PacifiCorp from
QFs. PacifiCorp believes that its proposed discount captures, as best as can be determined
presently, the cost of integrating wind generation into the Company s system and, therefore to
some degree, takes into account the inherent difficulty of accurately forecasting the availability
of wind. The establishment of the discount, it contends, will in large measure account for the
variability of wind, and thereby diminish the need for a performance band for wind.
Furthermore, PacifiCorp believes there is benefit to a level of consistency in the structure of
PURP A QF tariffs among utilities.
In lieu of a performance band structure, PacifiCorp supports the concept of
establishing a Mechanical Availability Guarantee by the QF. This guarantee would encourage
wind developers to ensure that the maintenance is performed on the wind turbines and that they
maintain the readiness of their equipment throughout the full duration of the long-term contract.
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PacifiCorp has successfully implemented a Mechanical Availability Guarantee in power
purchase agreements with other wind-powered QFs and continues to support this method.
PacifiCorp also supports the concept that QFs should participate in funding wind
forecasting services, as a condition of not being bound by the performance band. Wind
forecasting services, the Company notes, are specific to any given wind farm and therefore may
not be able to be shared with other wind farms within the same geographic area. To the extent
that PacifiCorp could use the same wind data, the Company would propose to share such
expense on a pro rata basis with QFs that are selling their power to PacifiCorp under long-term
contracts, so that the QFs would pay a portion of the wind forecasting expenses proportional to
their share of the wind-generator capability within the PacifiCorp wind portfolio from that
geographic region.
Published Rate Eligibility - Disaggregation
Idaho Power and A vista have recommended adoption of a rule nearly the same as
that adopted by the Oregon Public Utility Commission preventing multiple projects owned by
the same person from receiving the published avoided cost rates, if located at the same site.
PacifiCorp recommends that the approach recommended by Idaho Power in Case No. IPC-07-
04 be applied to PacifiCorp purchases as well. PacifiCorp contends that wind projects are
uniquely able to reconfigure themselves into various legal ownerships solely for economic
reasons , without disturbing or affecting in any way the project site or structural design. In some
circumstances, other generating technologies, it notes, may have similar capabilities.Such
projects under common ownership that reconfigure themselves into multiple projects of a smaller
capacity, PacifiCorp contends, should not qualify for published avoided costs in Idaho. Rather
these projects, it contends, should negotiate directly with the Company to determine the
appropriate avoided cost price to be paid for energy delivered to PacifiCorp taking into account
the specific attributes of the project.
Additionally, while fundamental economic differences in the avoided costs and wind
integration costs exist for different utilities, PacifiCorp contends a uniform approach among
Idaho jurisdictional utilities is particularly useful to avoid unneeded incentives favoring one
utility over another solely due to different QF rules that might apply to different utilities.
PacifiCorp recommends that the cap on entitlement to published avoided cost rates be
restored to 10 aMW only until the Company s system-wide wind resource purchases meet the
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total wind targets, by calendar year, from the latest acknowledged IRP or until PacifiCorp files
for changes to its avoided cost schedules, or files a new wind integration cost study based on
additional industry experience.
COMMISSION DECISION
PacifiCorp recommends that its Application in Case No. PAC-07-07 be processed
pursuant to Modified Procedure. Reference IDAPA 31.01.01.201-204. PacifiCorp is receptive
to further proceedings, if the Commission believes, based on comments received, that further
proceedings would be advantageous. Staff supports the Company s recommended procedure.
Does the Commission agree that Modified Procedure is appropriate in Case No. PAC-07-07?
Scott Woodbury
bls/M:PAC-O7-07 sw
DECISION MEMORANDUM