20150313order_no_33250.pdf

Office of the Secretary
Service Date
March 13, 2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
rN THE MATTER OF rDAHO POWER )
coMPANy'S PETITION TO MODIFY ) CASE NO. IPC-E-15-01
TBRMS AND CONDITIONS OF PURPA )
PURCHASE AGREEMENTS )
)
IN THE MATTER OF AVISTA )
coRpoRATION'S PETITION TO MODIFY ) CASE NO. AVU-E-15-01
TERMS AND CONDITIONS OF PURPA )
PURCHASE AGREEMENTS ) NOTTCE OF PETTTTON
)) NOTTCE OF
) INTERVENTIONDEADLINE
)
IN THE MATTER OF ROCKY MOUNTAIN )
POWER COMPANY'S PETITION TO ) CASE NO. PAC-E-15-03
MODIFY TERMS AND CONDITIONS OF )
PURPA PURCHASE AGREEMENTS ) NOTICE OF PETITION
)) NOTTCE OF
) INTERVENTIONDEADLINE
)) ORDER NO. 332s0
On February 27,20L5, Rocky Mountain Power Company and Avista Corporation
each filed Petitions with the Commission to reduce the length of their contracts under which
electric utilities must purchase energy generated by qualifying facilities (QFs) pursuant to the
Public Utility Regulatory Policies Act (PURPA). With its Petition, Rocky Mountain filed
supporting testimony of Paul Clements and Brian S. Dickman. Avista filed supporting testimony
of Clint Kalich with its Petition.
Rocky Mountain's and Avista's Petitions follow that of Idaho Power Company in
Case No. IPC-E-15-01, filed January 30, 2015, which sought similar relief. In that case, the
' Commission granted Idaho Power immediate interim relief by temporarily reducing the contract
term for Idaho Power's prospective PURPA contracts from 20 years to five years, pending
further order of the Commission. Order No.33222. Both Rocky Mountain and Avista petitioned
to intervene in Idaho Power's case, which the Commission granted. Order Nos. 33233,33239.
NOTICE OF PETITIONS
NOTICE OF INTERVENTION DEADLINE
oRDER NO. 33250
Rocky Mountain and Avista now request temporary and permanent reductions of their PURPA
contract terms, as was granted to Idaho Power.
BACKGROUND
PURPA was passed as part of the National Energy Act of 1978. PURPA was
intended to lessen the country's dependence on foreign oil and to encourage the promotion of
renewable energy technologies as alternatives to fossil fuels. Order No. 32697; FERC v.
Mississippi,456 U.5.742,745-46 (1992). Under the Act, the Federal Energy Regulatory
Commission (FERC) prescribes rules for PURPA's implementation. 16 U.S.C. $ 824a-3(a), (b).
State regulatory authorities such as the Idaho Public Utilities Commission implement FERC
rules, but have "discretion in determining the manner in which the rules will be implemented."
Idaho Power v. Idaho PUC, 155 Idaho 780,782,316 P.3d 1278, 1280 (2013) (citing FERC v.
Mississippi, 456 U.S. at 7 5l).
To encourage the development of renewable facilities, PURPA requires electric
utilities (unless otherwise exempted) to purchase the electric energy output from QFs. 16 U.S.C.
$ 824a-3; see also 18 C.F.R. $$ 292.101 (defining QFs), 292.303(a). "This mandatory purchase
requirement is often referred to as the 'must purchase' provision of PURPA." 1d.,16 U.S.C. $
824a-3(b); l8 C.F.R. * 292.303(a). Under the must purchase provision, the rate paid by a utility
for power produced by the QF is generally referred to as the "avoided cost" rate. "The avoided
cost rate represents 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 at7 citing Rosebud Enterprises v. Idaho PUC, LZSIdaho 624,
917 P.2d 781 (1996); 18 C.F.R. S 292.lOI(bX6). The avoided cost rate for PURPA contracts
must be'Just and reasonable to the electric consumers . . . and in the public interest" and "shall
not discriminate against [QFs]." 16 U.S.C. $ 824a-3(b); 18 C.F.R. * 292.304.
The Idaho Supreme Court has held that the Commission has the authority to
implement PURPA and set the avoided cost rates. Idaho Power, 155 Idaho at 789,316 P.3d at
1287; Rosebud, l2S Idaho at 612,917 P.zd at 169; A.W. Brown v. Idaho Power Company, l2l
Idaho 812,814,828P.2d84L,843 (1992). [n other words, PURPA requires that utilities buy the
power output from QFs under a federal rate mechanism (i.e., avoided costs) that is determined
and implemented by state utility commissions.
NOTICE OF PETITIONS
NOTICE OF INTERVENTION DEADLINE
oRDER NO. 33250
PURPA and FERC's implementing regulations are silent as to contract length;
consequently, the issue is in the Commission's discretion. See Afton Energy, Inc. v. Idaho
Power, 107 Idaho 781, 785-86, 693 P.2d 427, 43I-32 (198a); Idaho Power, 155 Idaho at 782,
316 P.3d at 1280. Since PURPA was first implemented in Idaho, this Commission has
periodically modified the length for PURPA contracts. See Order No. 29029. Initially, the
Commission established a maximum contract term of 35 years, which it shortened to 20 years in
1987. Order Nos. 21018, 21630. The term was reduced to five years in 1996, and raised back to
20 years in 2002. Order Nos. 26576, 29029. Most recently, the Commission temporarily
reduced PURPA contract length to five years but for Idaho Power only. OrderNo.33222.
Idaho Power's January 30, 2015, petition requested a reduction in contract length
from 20 years to two years, citing a dramatic increase in the number and size of PURPA projects
seeking power purchase agreements with the utility. IPC Petition (in Case No. IPC-E-15-01) at
I-2. In particular, Idaho Power witness Randy Allphin stated that Idaho Power has "an
additional 885 [megawatts] of PURPA solar capacity in the queue actively seeking PURPA
energy sales agreements to be on-line in 2016." Id. at 18 citing Allphin Direct at 3-4; Exh. 3.
Idaho Power asserted that the mandatory acquisition of this amount of power over a Z}-year
period exceeds the operational needs of the Company, places undue risk on customers when the
Company has sufficient resources to meet demand, and is unreasonable and contrary to the
public interest. IPC Petition at2,20,27-34. The Commission found that a "temporary reduction
of the maximum contract term for Idaho Power's QF contracts [shall be] five years while the
Commission reviews the issue of contract length in greater detail." Order No. 33222 at 4.r
Rocky Mountain and Avista now respond to the Order temporarily reducing Idaho Power's
contract length with their own petitions.
NOTICE OF ROCKY MOUNTAIN'S PETITION
YOU ARE HEREBY NOTIFIED that Rocky Mountain asks that the Commission
order a temporary reduction of the maximum contract term for Rocky Mountain's PURPA
contracts to five years - the same as the reduction ordered for Idaho Power - pending resolution
I Several parties have filed petitions to clarify the scope of the five-year interim relief, i.e., whether it applies to only
PURPA contracts that exceed the published rate eligibility cap (i.e., IRP-based contracts), or just intermittent wind
and solar PURPA contracts. In a discovery response dated February 24,2015, Idaho Power stated that its requested
interim relief "is limited to transactions with proposed QF projects that exceed the published rate eligibility cap)'
Resp. No. I to Simplot in Case No. IPC-E-15-01, citing IPC Petition at l-2.
NOTICE OF PETMIONS
NOTICE OF INTERVENTION DEADLINE
oRDER NO. 33250 3
of the issues raised in Idaho Power's and Rocky Mountain's cases. Rocky Mountain's Petition
asserts that, within five days after the Commission entered Order No. 33222, the Company
"received four pricing requests totaling 130 megawatts (MW)" from QF developers. Rocky
Mountain Petition at 4,16. These QF developers are in Idaho Power's service territory, but plan
to transmit or "wheel" power to Rocky Mountain. Id. at 4-5,16. Rocky Mountain states it "has
reviewed Idaho Power's Open Access Same Time Information System and confirmed that
transmission is available to enable these wheels." Id. at 5, n. 5.
YOU ARE FURTHER NOTIFIED that, according to the Company, the amount of
proposed Idaho PURPA projects seeking contracts with Rocky Mountain, including the four new
requests, totals 275.5 MW. /d. at5,20. The Company states it has 189.6 MW of Idaho PURPA
contracts already executed. Id. Rocky Mountain asserts that its parent company, PacifiCorp,
"currently manages 141 PURPA contracts totaling I,732 MW of nameplate capacity across its
six-state system." Id. at 19. Of those, 97 projects totaling 1,553 MW - or 90 percent of
PacifiCorp's total PURPA generation - have on-line dates of 2007 or later. Id. Across its multi-
state system, PacifiCorp has requests from 89 projects, totaling 3,641 MW. Id. at20.
YOU ARE FURTHER NOTIFIED that Rocky Mountain asserts that it, like Idaho
Power, has experienced a "striking increase in new QF activity." Id. at 19. Rocky Mountain
contends that the Commission's Order No. 33222, affording relief to Idaho Power from a flood
of QF activity, has resulted in an immediate spike in QF requests to Rocky Mountain. The
Company contends that the relief granted to Idaho Power in Order No. 33222 results in the
disparate treatment of and a competitive disadvantage to Rocky Mountain. The Company thus
asserts the Commission should grant it the same interim relief as that granted Idaho Power.
YOU ARE FURTHER NOTIFIED that in addition to the temporary immediate relief
requested, the Company asks the Commission to permanently reduce its contract length to three
years. Id. at 23-31. In support, Rocky Mountain cites the need to mitigate risk and protect its
customers. The Company notes that a three-year contract limit would better-reflect its trading
and hedging horizon, used as internal risk management, but inapplicable to PURPA contracts
due to the 2O-year contract term. Id.
YOU ARE FURTHER NOTIFIED that Rocky Mountain seeks permission to update
its indicative pricing practice to reflect "all active QF projects in the pricing queue ahead of any
newly proposed QF project that requests indicative avoided cost rates." Rocky Mountain
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ORDER NO. 33250
Petition at 4. In essence, the Company seeks relief from a prior Commission Order that,
according to the Company, restricts the updating of indicative avoided cost rates provided to
proposed QF projects based only upon signed QF contracts. Id. at 32,35 n. 101, citing Order
No. 32697 at 22. Rocky Mountain asserts that this restriction - coupled with the dramatic
increase in the number of QF projects and the cumulative amount of QF generation - results in
providing QF projects with indicative pricing that does not reflect the most accurate and up-to-
date avoided cost rates. Elimination of the signed contract requirement would allow the
Company to provide indicative pricing that reflects higher avoided cost rates to QF projects
located earlier in the queue, and later QF projects would be re-priced to more accurately reflect
current avoided costs. Rocky Mountain Petition at 38. If indicative pricing were more robust,
the Company asserts that avoided cost rates would be $18 per MWh less on a 2}-year levelized
basis. Id. at37.
NOTICE OF AVISTA'S PETITION
YOU ARE FURTHER NOTIFIED that Avista seeks the same interim relief granted
Idaho Power in Order No. 33222. Avista expresses concern that "PURPA developers that
previously planned to sell the output from their [projects] to Idaho Power may seek to sell such
output to Avista. Thus, as a direct result of the Commission's action affording one utility interim
relief, Avista could be required to enter into a significant number of PURPA contracts." Avista
Petition at 3. To prevent a rush of PURPA projects being delivered to Avista's door, it "requests
immediate Commission action ordering that the maximum required contractual term for Avista's
new PURPA contracts shall, pending further order of the Commission, be five years." Id. at 4.
YOU ARE FURTHER NOTIFIED that, in addition to the interim relief, Avista
requests that it be afforded the same permanent relief that the Commission may provide to other
utilities regarding the length of PURPA contracts. Id.
STAFF RECOMMENDATION
Staff reviewed Rocky Mountain's and Avista's Petitions and supporting documents.
Staff believes that consolidating Rocky Mountain's and Avista's Petitions with the Idaho Power
case will allow the Commission to efficiently and expeditiously examine the issue of PURPA
contract lengths.
NOTICE OF PETITIONS
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33250
DISCUSSION AND FINDINGS
On review of Idaho Power's Petition, and now Rocky Mountain's and Avista's
Petitions, we find that all three companies raise similar concerns regarding term length for
PURPA contracts. Therefore, we find it appropriate to consolidate the three matters in the
interest of resource-economy and to ensure optimal efficiency for the parties and this
Commission. Rule 247,IDAPA 31.01.0I.247 (the Commission may consolidate two or more
proceedings when it finds that the cases present related issues). All parties in the Idaho Power
case shall be designated to the Rocky Mountain and Avista cases. We also find it reasonable
based on the evidence submitted to date, to temporarily reduce Rocky Mountain's and Avista's
PURPA contract terms to five years, to align with the relief granted Idaho Power in Order No.
33222.
We further find that Rocky Mountain's request to change its indicative pricing
practice for QF projects in the negotiation queue shall be included in this case. See ldaho Code 5
6l-624. Finally, we note that there are petitions for clarification pending before the Commission
in Idaho Power's case. Those petitions will be addressed in a scheduling order that will apply to
Idaho Power, Rocky Mountain, and Avista.
NOTICE REGARDING INTERVENTIONS AND PARTIES
YOU ARE FURTHER NOTIFIED that persons desiring to intervene in this matter
must file a Petition to Intervene with the Commission pursuant to this Commission's Rules of
Procedure 72 and 73, IAPA 31.01.01.072 and -.073. All Petitions to Intervene must be filed
no later than March27r20l5. Persons desiring to present their views without parties' rights of
participation and cross-examination are not required to intervene and may present their
comments without prior notification to the Commission or the parties.
YOU ARE FURTHER NOTIFIED that all parties granted intervention in the Idaho
Power case (IPC-E-15-01) shall be designated as parties in Rocky Mountain's and Avista's cases
here.
YOU ARE FURTHER NOTIFIED that the following people are designated as Rocky
Mountain's representatives in this matter:
NOTICE OF PETMIONS
NOTICE OF INTERVENTION DEADLINE
oRDER NO. 33250
Yvonne Hogle
Rocky Mountain Power
201 South Main St., Ste. 2300
Salt Lake City, UT 84111
E-mail: )'vonne'hogle @pacificorp'com
YOU ARE FURTHER NOTIFIED that the
representatives in this matter:
Michael G. Andrea
Senior Counsel
Avista Corporation
1411 East Mission Ave. - MSC-23
Spokane, WA 99202
E-mail: [e-mail] E-mail: [e-mail]
I i nda. ger.,zai s @ avistacorp.com
YOU ARE FURTHER NOTIFIED that, once the deadline for intervention has passed,
the Commission Secretary shall prepare an updated a Notice of Parties to reflect the
consolidation and any additional intervenors.
NOTICE OF PROCEDURE
YOU ARE FURTHER NOTIFIED that the Petitions, exhibits, and testimonies have
been filed with the Commission and are available for public inspection during regular business
hours at the Commission offices. The Petitions, exhibits, and testimonies are also available on
the Commission's web site at www.puc.idaho.gov. Click on the "File Room" tab at the top of
the page, scroll down to "Open Electric Cases," then click on either case number as shown on the
front of this document.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission's jurisdiction under Title 6l of the Idaho Code and the Public Utility
Regulatory Policies Act of 1978 (PURPA). The Commission has authority under PURPA and
the implementing regulations of the Federal Energy Regulatory Commission (FERC) to set
avoided costs, to order electric utilities to enter into fixed-term obligations for the purchase of
energy from qualified facilities, to set the length of PURPA contracts, and to implement FERC
rules. The Commission may enter any final Order consistent with its authority under Title 61
and PURPA.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission's Rules of Procedure, IDAPA 31.01.01.000, et seq.
NOTICE OF PETITIONS
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33250 7
Daniel Solander
Rocky Mountain Power
201 South Main St., Ste. 2300
Salt Lake city, uT 84111
E-mail: daniel. solander @ pacificor?.com
following people are designated as Avista's
Clint Kalich
Linda Gervais
Avista Corporation
1411 East Mission Ave.
Spokane, WA 99202
ORDER
IT IS HEREBY ORDERED that, effective March 9,2015, and pending further order
of the Commission, the maximum contractual term for Rocky Mountain's and Avista's new
PURPA contracts shall be five years, subject to any clarifying order resolving pending petitions
to clarify in the Idaho Power case.
IT IS FURTHER ORDERED that Rocky Mountain's and Avista's cases shall be
consolidated with Idaho Power's case, IPC-E-15-01. All parties granted intervenor status in
Idaho Power's case shall be designated as parties in Rocky Mountain's and Avista's cases.
Further, the Protective Agreements entered in the Idaho Power case shall have full force and
effect for Rocky Mountain's and Avista's cases.
IT IS FURTHER ORDERED that any other persons desiring to intervene in the
Rocky Mountain or Avista matters shall file a Petition to Intervene by March 27,2015. Once the
deadline for Petitions to Intervene has passed, the Commission Secretary shall prepare and issue
an amended Notice of Parties.
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oRDER NO. 33250
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this t 314
day of March 2015.
(-l _
i.tt*-ts K!*S=
MACK A. REDFORD, dOMMISSIONER
ATTEST:
O:IPC-E- 15-01_AVU-E-15-01-PAC-E- l5-03-djh
NOTICE OF PETITIONS
NOTICE OF INTERVENTION DEADLINE
ORDER NO. 33250
PAUL KJ