20171005_daphne2.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

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

FROM: DAPHNE HUANG
DEPUTY ATTORNEY GENERAL

DATE: OCTOBER 3, 2017

SUBJECT: IDAHO POWER’S APPLICATION TO APPROVE OR REJECT ENERGY
SALES AGREEMENT WITH SHOROCK HYDRO, INC. FOR ROCK
CREEK HYDRO FACILITY, CASE NO. IPC-E-17-14

On September 28, 2017, Idaho Power Company applied to the Commission to approve or
reject its Energy Sales Agreement (“Agreement”) with Shorock Hydro, Inc. (“Shorock”). The
Agreement falls under the Public Utility Regulatory Policies Act of 1978 (PURPA), and is a new
contract for the sale of electric energy to Idaho Power from Shorock’s Rock Creek 1 Hydro
project (“Facility”) near Twin Falls, Idaho. The Agreement replaces an existing PURPA
contract executed in 1981. Application at 2-3.
Shorock objects to the Company’s proposed inclusion in the Agreement of: (1)
“90%/110%” provisions (relating to surplus energy); and (2) provisions relating to Operation and
Maintenance (O&M) charges in the Generator Interconnection Agreement. Id. at 2. However,
Shorock and Idaho Power submit that the Agreement is fully executed “with the joint
understanding that [Shorock’s] objections to [these] provisions would be raised and argued for
the Commission’s determination in Comments from both parties as part of [this case].” Id.
Shorock and Idaho Power ask that the Commission process the Application by Modified
Procedure, and agree to be bound by the executed Agreement with whatever determination the
Commission makes regarding the disputed provisions. Id. Idaho Power requests a final
Commission decision before January 15, 2018, when the existing contract expires. Id. at 6.
BACKGROUND
Under 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
DECISION MEMORANDUM 2
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 – which applies to the Facility in this case – to establish “published”
avoided cost 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 this case, the Facility is a QF under the
“all other resource type” (specifically “non-seasonal hydro”) category. Application at 3-4.
In calculating avoided cost, the Commission has 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. In calculating capacity, the Commission considers “each utility’s capacity deficiency
based on load and resource balances found in each utility’s [Integrated Resource Plan] IRP,” as
well as “a QF’s ability to contribute to a utility’s need for capacity.” Id. at 16, 21.
THE AGREEMENT
Idaho Power and Shorock entered the Agreement on September 25, 2017. Id. at 3-4.
Under the Agreement, Shorock elected to contract with Idaho Power for a 20-year term using the
non-levelized, non-seasonal, hydro published avoided cost rates, as established by the
Commission (Order No. 33773) for replacement contracts and energy deliveries of less than 10
aMW. Id. at 4.
The nameplate rating of the Facility is 2,166 kW, and Shorock agrees it will not exceed
10 aMW on a monthly basis. Id. at 5. The Facility “is already interconnected and selling energy
to Idaho Power” under the existing contract. Id. The Agreement specifies a Scheduled First
Energy Date and Scheduled Operation Date of January 16, 2018. Id. The terms of the
Agreement include that “applicable interconnection charges and monthly operational or
maintenance charges under Schedule 72 will be assessed to [Shorock].” Id. Also, PURPA QF
DECISION MEMORANDUM 3
generation “must be designated as a network resource (DNR) to serve Idaho Power’s retail load
on its system.” Id. at 5-6.
Under the Agreement, to maintain DNR status, “there must be a power purchase
agreement associated with [the Facility’s] transmission service request in order to maintain
compliance with Idaho Power’s non-discriminatory administration of its Open Access
Transmission Tariff (OATT) and maintain compliance with [Federal Energy Regulatory
Commission] requirements.” Id. at 6. The Agreement provides that it will not become effective
“until the Commission has approved all of [its] terms and conditions and declared that all
payments Idaho Power makes to [Shorock] for purchases of energy will be allowed as prudently
incurred expenses for ratemaking purposes.” Id.
Shorock and Idaho Power agreed to submit the signed Agreement for the Commission’s
approval “conditioned upon the Commission’s determination as to the provisions related to
90%/110% and O&M.” Id. at 6. “[T]he parties request a modified procedure schedule that
provides for Comments from [Shorock], and Reply Comments from Idaho Power related to these
issues.” Id. Finally, “because the existing contract will run its full term and expire on January
15, 2018, the parties request that the Commission set a procedural schedule that would result in a
final Commission determination prior to [that date].” Id.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with a comment
deadline of October 31, 2017 for Shorock and any persons wishing to comment; a reply deadline
of November 21, 2017 for Staff and Idaho Power; and sur-reply (if needed) deadline of
December 5, 2017 for Idaho Power.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure with Staff’s
proposed deadlines?

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