20170814_Camille1.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF

FROM: CAMILLE CHRISTEN
DEPUTY ATTORNEY GENERAL

DATE: AUGUST 10, 2017

SUBJECT: THE APPLICATION OF IDAHO POWER COMPANY FOR APPROVAL
OF THE CAPACITY DEFICIENCY TO BE UTILIZED FOR AVOIDED
COST CALCULATIONS, CASE NO. IPC-E-17-12

On July 26, 2017, Idaho Power Company applied to the Commission for an Order
approving the capacity deficiency period to be used for the Company’s avoided cost calculations
under the Public Utility Regulatory Policies Act (PURPA). The Company asked that the
Application be processed under Modified Procedure.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from qualifying
facilities (QFs) at rates approved by the applicable state agency—in Idaho, this Commission. 16
U.S.C. § 824a-3; Idaho Power Co. v. Idaho PUC, 155 Idaho 780, 780, 316 P.3d 1278, 1287
(2013). The purchase or “avoided cost” rate shall not exceed the “’incremental cost’ to the
purchasing utility of power which, but for the purchase of power from the QF, such utility would
either generate itself or purchase from another source.” Order No. 32697 at 7, citing Rosebud
Enterprises v. Idaho PUC, 128 Idaho 624, 917 P.2d 781 (1996); 18 C.F.R. §
292.101(b)(6)(defining “avoided cost”).
The Commission has established two methods of calculating avoided cost, depending
on the size of the QF project: (1) the surrogate avoided resource (SAR) methodology, and (2)
the integrated resource plan (IRP) methodology. See Order No. 32697 at 7-8. The Commission
uses the SAR methodology to establish what is commonly referred to as “published” avoided
DECISION MEMORANDUM 2
cost rates. Id. Published rates are available for wind and solar QFs1 with a design capacity of up
to 100 kilowatts (kW), and for QFs of all other resource types with a design capacity of up to 10
average megawatts (aMW). For QFs with a design capacity above the published rate eligibility
caps, avoided cost rates are “individually negotiated by the QF and the utility using the [IRP
methodology].” Id. at 2; Order No. 32176.
In calculating avoided cost, the Commission found it “reasonable, appropriate and in
the public interest to compensate QFs separately based on a calculation of not only the energy
they produce, but the capacity that they can provide to the purchasing utility.” Order No. 32697
at 16. As to the capacity calculation for the SAR methodology, the Commission found it
appropriate “to identify each utility’s capacity deficiency based on load and resource balances
found in each utility’s IRP.” Id. With respect to the IRP methodology, the Commission
similarly stated
[i]n 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. If 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.

Id. at 21.
The Commission directed that “when a utility submits its [IRP] to the Commission, a
case shall be initiated to determine the capacity deficiency to be utilized in the SAR
Methodology [used for calculating published avoided cost rates].” Id. at 23. The Commission
also stated “utilities must update fuel price forecasts and load forecasts annually—between IRP
filings. . . . We find it reasonable that all other variables and assumptions utilized within the IRP
Methodology remain fixed between IRP filings (every two years).” Id. at 22.
In 2015, the Commission confirmed July 2024 as Idaho Power’s capacity deficiency
period for use in the incremental cost IRP methodology and approved the updated SAR model
based on that deficiency period and updated SAR-based rates. Order No. 33377.

1 See Order No. 33785 (regarding battery storage facilities).
DECISION MEMORANDUM 3
THE APPLICATION
In the Application, Idaho Power states that its 2017 IRP, which it filed with the
Commission on June 30, 2017 (Case No. IPC-E-17-11), identifies a first peak-hour deficit
occurring in July 2026. Application at 2. Idaho Power describes that peak-hour load deficits are
determined using 90th percentile water and 95th percentile peak-load conditions. Id. at 2-3. The
Company indicates that under the IRP’s preferred portfolio, a first capacity deficiency of
approximately 34 MW occurs in July 2026, and a first energy deficit of 143 MW occurs in July
2029. Id. at 3. The Company requests that the first capacity deficit date of July 2026 be used for
avoided cost calculations for both the SAR and IRP methodologies. Id.
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Application and Notice of
Modified Procedure, with comments due within 21 days of the date of the Order, and any reply
comments by the Company due within 7 days of the comment deadline.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and a Notice of Modified
Procedure, with comments due within 21 days of the date of the Order, and any reply comments
by the Company due within 7 days of the comment deadline?

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