20170906_Daphne1.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM
TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM: DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
DATE: AUGUST 29, 2017
SUBJECT: ROCKY MOUNTAIN POWER’S APPLICATION TO APPROVE
CAPACITY DEFICIENCY PERIOD FOR AVOIDED COST
CALCULATIONS, CASE NO. PAC-E-17-09
In Order No. 32697, the Commission directed each utility to initiate a case outside of
its Integrated Resource Plan (IRP) filing to establish the capacity deficiency period for
calculating avoided cost under the surrogate avoided resource (SAR) methodology. On August
18, 2017, Rocky Mountain Power Company filed an Application asking the Commission to
approve its updated capacity deficiency period for use in its avoided cost calculations. The
Company asked that the Application be processed under Modified Procedure.
BACKGROUND
Under the Public Utility Regulatory Policies Act (PURPA), electric utilities must
purchase electric energy from qualifying facilities (QFs) at rates approved by this Commission.
16 U.S.C. § 824a-3; Idaho Power Co. v. Idaho PUC, 155 Idaho 780, 789, 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. At issue in this
case is the SAR methodology, which the Commission uses to establish “published” avoided cost
DECISION MEMORANDUM 2
rates. Id. Published rates are available for wind and solar QFs 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). Id.
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.” Id. at 16. As to
the capacity calculation, 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. The
Commission elaborated:
In 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.” 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.
THE APPLICATION
Rocky Mountain filed its 2017 IRP (Case No. PAC-E-17-03) with the Commission
on April 4, 2017. The Company’s 2017 IRP includes the results of its capacity balance which is
“calculated for summer peak loads only.” Application at 3. Also, the 2017 IRP “shows that the
Company first becomes capacity deficient in 2028.” Id.
Rocky Mountain identifies two factors affecting the capacity deficit period reflected
in its 2017 IRP: (1) power purchase agreements with QFs signed since preparation of the 2017
IRP; and (2) termination of a power purchase agreement originally included in the 2017 IRP. Id.
at 4. After accounting for these factors, Rocky Mountain states that its “capacity deficit still first
occurs in the summer of 2028.” Id.
DECISION MEMORANDUM 3
Rocky Mountain’s Application includes Table 2, which shows “updated system
capacity loads and resources.” Id. Table 2 reflects the inclusion of 460 MW of nameplate
capacity from nine additional QF contracts, as well as the removal of one QF contract, thus
eliminating five MW of nameplate capacity. Id. at 4-5. The Company asks the Commission to
approve a capacity deficiency period, for calculating SAR based avoided cost rates, of summer
2028.
STAFF RECOMMENDATION
Staff recommends that this matter be processed under Modified Procedure with a 21-
day comment period followed by a 7-day reply period.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and Notice of Modified
Procedure setting a 21-day comment period followed by a 7-day reply period?

M:PAC-E-17-09_djh