20070420Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:APRIL 17, 2007
SUBJECT:CASE NO. A VU-07-02 (Avista)
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 2, 2007, Avista Corporation (Avista; Company) filed an Application with
the Idaho Public Utilities Commission (Commission) requesting a change in the Company
PURP A obligations for wind QFs. A vista proposes a raising of 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
Avista of electric power from wind powered QFs by 12%, as a
percentage reduction to be applied against scheduled avoided cost rates
except where the QF developer agrees in the power purchase and sale
contract with A vista to deliver QF output to A vista on a firm hourly
schedule, in which case the percentage reduction shall be 6%;
2. Removing the requirement that the 90%/110% performance band
requirement not be applied to purchases from wind powered QFs;
3. Authorizing Avista to purchase state-of-the-art wind forecasting services
to provide A vista with forecasted wind conditions in those geographic
areas in which wind generation resources are located, provided that QFs
will reimburse A vista for their share of the on-going cost of the wind
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forecasting service, in proportion to their percentage share of the wind-
generator capability being supplied to A vista from that area;
4. Requiring QFs to deliver a "mechanical availability guarantee" to Avista
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 solely for the purpose to qualify for the published avoided cost
rates; and
6. Clarifying that the cap on entitlement to published avoided cost rates
shall be raised to 10 aMW only until Avista s total wind portfolio from
all sources totals 400 MW.
BACKGROUND
Since the commencement ofIdaho Power Case No. IPC-05-22 (regarding PURP A
wind QFs), Avista states that it has participated in follow-up wind workshops in Idaho and
initiated its own wind integration study. In particular, Avista states that it retained a leading
industry consultant, EnerNex, to prepare a wind integration study, the final report of which was
released to the public on March 20 2007. Additionally, Avista states that it participated in, and
. benefited from Wind Integration Action Plan proceedings conducted under the auspices of the
Bonneville Power Administration and the Northwest Power & Conservation Council.
A vista notes that Idaho Power Company has recently filed petitions respecting
PURP A purchase obligations in two different dockets, Case Nos. IPC-07-03 (petition to raise
published rate eligibility cap and eliminate 90/110 performance band requirement for wind QFs)
and IPC-07-04 (petition to clarify rules regarding published rate eligibility - disaggregation).
The Company s Petition in this case reflects in part recommendations made by Idaho Power
Company with respect to its service territory. A vista concurs with those recommendations, and
recommends that similar policies be adopted with respect to Avista s PURPA purchase
obligations.
Wind Integration Study - Proposed 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
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adjustment of the published avoided cost rates, an adjustment that may be different for each
utility. A vista s recommendation that published avoided cost rates be discounted by 12%
reflects Avista s assessment, based on its wind integration study, of the cost to its system
associated with integrating up to 400 MW (nameplate capacity) of wind generation, both
constructed and purchased, into its system. The 12% discount reflects costs associated with
integrating the QF output into Avista s system, including intra-hour variability of deliveries from
wind generation. A vista s Wind Integration Study is submitted as Exhibit A to its Petition.
, In instances where the QF developer agrees to deliver QF output to A vista on a firm
hourly schedule, Avista recommends that the published avoided cost rates instead be discounted
by 6%, which reflects a lower level of costs incurred by the Company in integrating the wind
power.
A vista recommends that the cap on entitlement to published avoided cost rates be
raised to 10 aMW only until Avista s total wind portfolio from all sources totals 400 MW, or
until A vista files for changes to its avoided cost schedules, or files a new Wind Integration Cost
study based on additional industry experience. The 400 MW represents the targeted amount of
wind power acquisition, based on Avista s Integrated Resource Plan (IRP). As part of its IRP
process and other resource assessment processes, A vista plans to continue studying the costs and
effects of wind power upon its system, and will make further filings, when it appears that
material changes to its tariff are necessary.
Elimination of90%/110% Performance Band
Idaho Power Company in Case No. IPC-07-03 recommends the elimination of the
90%/110% performance band, subject to several conditions. A vista recommends that the same
policies be applied to purchases of wind power by A vista from QFs. A vista believes there is
benefit to a level of consistency in the structure of PURP A QF tariffs between utilities.
Additionally, Avista supports the concept of establishing a mechanical availability
guarantee grid. Such guarantee, the Company contends , would encourage wind developers to
maintain the readiness of their equipment throughout the full duration of the long-term contract.
A vista also supports the concept that QFs should participate in funding wind
forecasting services, as a condition for not being bound by the performance band. Where such
services are purchased or constructed by A vista within a geographic area, A vista would propose
to share such expense on a pro rata basis with QFs that are selling their power to A vista under
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long-term contracts, so that the QFs would pay a proportion of the wind forecasting expenses
proportional to their share of the wind-generator capability within the Avista wind portfolio from
that geographic region.
Published Rate Eligibility - Disaggregation
Idaho Power Company has also 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.
Avista recommends that the approach recommended by Idaho Power in Case No. IPC-07-
be applied to Avista s purchases as well.
A vista 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
site or structural design. In some circumstances, other generating technologies, it notes, may
have a similar capability. Projects that are under common ownership, Avista contends, should
not be able to reconfigure themselves legally, for the sole purpose of qualifying for published
avoided costs in Idaho.
Additionally, Avista contends that a uniform approach as between Idaho
jurisdictional utilities is particularly useful, in order to avoid unneeded incentives for favoring
one utility over another, not because of the fundamental economic differences reflected in the
avoided costs and wind integration costs, but because of different QF rules that might apply to
different utilities.
COMMISSION DECISION:
Avista recommends that its Application in Case No. A VU-07-02 be processed
pursuant to Modified Procedure. Reference IDAPA 31.01.01.201-204. Avista 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. A VU-07-02?
Scott Woodbury
bls/A VU-O7-02 sw
DECISION MEMORANDUM