20150423Yin Direct.pdf

IDAHO
BEFORE THE
l':t i'i-:l ?ii f' : L:39
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S PETITION TO MODIFY
TERMS AND CONDITIONS OF
PU RPA PU RCHASE AGREEMENTS
IN THE MATTER OF AVISTA
CORPORATION'S PETITION TO
MODIFY TERMS AND GONDITIONS
OF PURPA PURCHASE
AGREEMENTS
IN THE MATTER OF ROCKY
MOUNTAIN POWER COMPANY'S
PETITION TO MODIFY TERMS AND
CONDITIONS OF PURPA
PURGHASE AGREEMENTS
GASE NO. IPC-E-I5-01
CASE NO. AVU.E.I5.O1
CASE NO. PAC-E-I5-03
DIRECT TESTIMONY OF YAO YIN
IDAHO PUBLIC UTILITIES COMMISSION
APRTL 23,2015
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O. Please state your name and business address for
the record.
A. My name j-s Yao Yin. My business address is 472
West Washington Street, Boise, Idaho.
O. By whom are you employed and in what capacity?
A. I am employed by the Idaho Public Utilities
Commission as a Utilities Analyst.
O. What j-s your educational and professional
background?
A. I received a Bachelor of Science in Biological
Sciences from Shandong Universj-ty in 2006. LaLer, I
earned a Master of Science in Molecular Ce11ular Biology
(2007), a Mast,er of Public Policy in Environmental Policy
(2009) , and a Ph.D. in Environmental Science (201L), all
from Oregon Stat,e University. I will be attending the
Practical Regulatory Trainj-ng for the Electric Industry
Course held May 1,7-22, 20L5 by the Center for Publlc
Utilities at New Mexico State University.
Prior to joinj-ng the Commission, I worked for
Energy Biosciences Institute at, University of Illinois at
Urbana-Champaign as a Postdoctoral Research Associate.
Later, I worked for the Energy Policy Inst.it.ute at Boise
State University as a Research Assistant Professor. I
joined the Commission in May 201,4.
O. What j-s the purpose of your testimony in this
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proceeding?
A. The purpose of my testlmony is to review Rocky
Mountain Power's proposal to change its indicative pricing
practj-ce in the Integrated Resource Planning (IRP)
methodology so that it may provide more accurate avoided
cost rates to proposed QF projects.
O. What do you mean by "proposed QF projects"?
A. "Proposed QF projects" are projects for which a
QF developer has requested indicative avoided cost prices,
and is actively pursuing or negotiating a power purchase
agreemenE (PPA) with a utility.
a. Do the "proposed QF projects" include QF
projects that are seeking SAR-based published rates?
A. No, not in the context of my testj-mony as
discussed here. SAR-based projects that are seeking
published rat.es (those t,hat are smaller than the published
rate eligibility cap) may request the current published
rates approved by the Commission.
a. Are you proposing changes to the Integrated
Resource Planning process?
A. No. SAR-based projects, IRP-based projects, and
other long-term non-PURPA contracts will continue to be
included in the IRP planning process as contracts are
signed.
My testimony addresses a change to the practice
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of giving indicative pricing to proposed QF project, that
are negotiating IRP-based avoided cost rates as part of
the IRP methodology.
a. Does the term "proposed QF project" refer to
projects that make general inquiries about procedures for
obtaining a PURPA contract?
A. No. Typically, a QF is considered a proposed QF
when it is serj-ous1y pursuing a power purchase agreement
(PPA) and makes it to the stage of requesting indicative
avoided cost prices. Projects at earlier stages, such as
the general inquiry stage, are typically not considered as
proposed projects.
O. What are indicative prices?
A. Indicative prices are preliminary estimates of
avoided cost rates which serve as the starting point for
negotiations between QFs and a utility. They may differ
from the final prices in a contract (i.e., contract
prices).
a. What. do QF projects need to do before requesting
indicative prices from a utility?
A. Idaho Power's Schedule 73 and Avista's Schedule
62 specify the information a project needs to submit
before requesting indicative prices. Rocky Mountain Power
does not have a similar schedule in Idaho, although I
recommend it propose one so that. QF projects can have a
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better idea of the procedures for requesting indicative
prices in Idaho.
O. Please describe the current, indicative pricing
practice approved by the Commission.
A. Currently, proposed projects are not placed in
queue but are instead treated for pricing purposes as if
they are all t,he first project to recej-ve the next
indicative prices. In other words, the first proposed
project, the second proposed project, the third proposed
project...wi1l all be treated the same as the first
project for purposes of receiving indicative pricing.
The indicative prices, however, can be
recalculated (before they become contract prices) if an
earlj-er contract is signed, or if a signed contract is
removed.
O. Which Commission Order approved of this
practice?
A. In Case No. GNR-E-l-l--03, the Commission stated
that, "Iong-term contracts sha11 be consj-dered in IRP
Methodology calculations at such time as the utility and
QF have entered into a signed contract for the sale and
purchase of QF power." Order No. 32697 at 22. (Emphasis
added) .
Are there practical concerns with this practice?
Theoretically, this practice may result in
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accurate avoided cost rates by allowing indicative prlces
to be recalculated when an earlj-er contract is signed. In
reality, however, it can be very difficult to recalculate
rates for proposed projects in a timely manner when there
are many projects seeking indicative prices at the same
t,ime. As Rocky Mountain stated on page 7 of its Petition
in this case (PAC-E-15-03), "the currently approved
requirement that the Company's avoided cost rate modeling
can only be updated to account for signed QF contract [s]
wil-1 result in PURPA [contracts]
pricing that becomes inaccurate
based on indi-cative
" The inability to
update indicative pricing "wiII result in payments to QFs
that exceed avoided costs . ." (Rocky Mountain
Petition at 33. )
In addition, a QF may not want to re-negotiate
the new updated rates, because the new indicative prJ-ces
may be lower than the original ones. New indicative
prj-ces may be lower because, under the IRP methodology,
each successj-ve QF displaces lower-cost resources in the
utility's dispatch stack.
O. Why were these concerns not much of an issue in
the past?
A. The current indicative pricing practice works
well when individual project sizes are smal1, cumulative
project sizes are sma11, and multiple projects are not
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being proposed at about the same time, because the
resulting indicative prices are accurate and rarely need
to be recalculated. Today, however, PURPA project sizes
are much larger, both individually and cumulatively, and
multiple projects frequently seek indicative prices at the
same time. Under this cj-rcumst,ance, the sequence of
projecLs, which determines every project's avoided cost
rates, needs to be established to reflect how each project
actually displaces the utility's resources and contributes
to the utility's capacity. Unless indicative priclng is
able to reflect the actual impacts of each project,
inaccurate avoided cost rates may result.
a. Please describe the new indicative pricing
practice proposed by Rocky Mountain.
A. The new indicative pricing practice would offer
more accurate indicat,ive prices to QFs by putting all t.he
proposed projects into a queue based on the times they
request indicative prices. As Rocky Mountain describes
the proposed change on page 38 of its Petition, the
proposed modified indicative pricing practice "reflects
all acLive QF projects in t.he pricing queue ahead of any
newly proposed QF requests for indicative pricing."
O. Are there advantages t.o the newly proposed
practice?
A. Yes. When all proposed projects are placed in a
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queue, rather than being treated as the first project,
each project will receive different indicative pri-cing,
depending on its position in the queue. Generally, the
higher the position in t.he queue, the higher the avoided
cost rates. Using a queue will al1ow indicative pricing
to reflect how each project actually displaces the
util j-t.y's resources and cont.ributes to the utility's
capacity at the start of the negotiation process.
O. Can you give an example to show how the new
indicative prJ-cing practice would impact contract prices?
A. Rocky Mountain witness Dickman provides an
example on page 10 of his direct testimony. There he
states " [t] he Company calculated the impact on the IRP
Method avoj-ded costs of including roughly 3,000 MW of
proposed QFs [generation] (located in Idaho, Utah,
Wyoming, Oregon) prior to the next Idaho QF. Accounting
for t,hese proposed QFs rather than just those QFs with
signed contracts reduces avoided costs for the next Idaho
QF in the pricing queue by approximately $18 per MWh on a
2l-year levelized basis . ."
If proposed projects are not placed in a queue,
there could be substantial overpayments in avoided cost
rates to the QFs.
O. Indicative pricing using this methodology
assumes that the proposed projects will be built
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eventually, but what if a proposed project drops out of
the queue?
A. If projects drop out of the queue, utilities
will recalculate t,he indicative prices for projects
succeeding the dropped one, and the parties would
negotiate based on the new rates. Obviously, the new
rates will be higher than the original rates, because all
the projects that are situated lower in the queue will be
bumped up to displace higher-cost resources and have
better opportunity to contribute to the utility's capacity
need. Because the remaining projects will receive higher
avoided cost rates, they will financially benefit and
should readily accept the new, higher rates.
O. Under the proposed indicative pricing practice,
is it 1ike1y that j-n order to get higher indicative
prices, projects will try to request indicative prices as
soon as possible to save an earlier spot in the queue even
if QFs are not ready to seriously negotiate an IRP-based
PURPA contract?
A. Both Idaho Power's Schedule 73 and Avista's
Schedule 62 require projects to provide specific
information about each project before the utilities
provide indicative pricing. A1so, Ehe schedules specify
timeline milestones for QFs to meet as projects and
negotiatj-ons progress .
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Staff recommends that Rocky Mountain should file
a similar tariff schedule to 1ay out the PURPA negotiating
process and prevent projects from prematurely requesting
indicative prj-cing.
O. If a QF changes significant details about its
project, will the QF remain in the queue?
A. Yes, but not in the same queue position. Rocky
Mountaj-n Power states in its response to Staf f ' s f j-rst
production request that "if the QF changes significant
details about the project (such as site location, online
date, or project size) , the QF is removed from the queue
and t,hen re-enters the queue at the bottom as a new
request with the new project description." I agree with
Rocky Mountain's approach, but believe specific criteria
may need to be developed for management of the queue, such
as rules for QF entry, re-positioning, and removal from
t.he queue.
O. What is your recommendation regarding Rocky
Mountaj-n's request. t.o change its indicative pricing
practice?
A. I recommend that the indicative pricing practice
provided to proposed QF projects be updated to place all
the proposed projects in a queue, thereby providing more
accurate and up-t.o-date avoid costs. The Commission
should discontinue the "signed contract" requirement in
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Order No. 32597 for purposes of giving indicative prici-ng
to IRP-base projects. Fina11y, Rocky Mountain should be
directed to file a tarlff schedule outlining it,s PURPA
contracting procedures in Idaho.
O. Does this conclude your direct testimony in this
proceeding?
A. Yes, it does
cAsE NOS. rPC-E-15-01/AVU-E-l-5-01
PAC-E-15-03
4/23/Ls
YrN, Y. (Di) 1-0
STAFF
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23RD DAY oF APRIL 2015,
SERVED THE FOREGOING DIRECT TESTIMONY OF YAO YIN, IN CASE
NOS. IPC-E-15-OI/PAC-E-15-03/AVU-E-15-OI, BY E-MAILING A COPY THEREOF,
POSTAGE PREPAID, TO THE FOLLOWING:
DONOVAN E WALKER
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
dockets@ idahopower. com
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: [e-mail]
DEAN J MILLER
McDEVITT & MILLER LLP
420 W BANNOCK ST
BOISE ID 83702
E-mail : i oe(a)mcdevitt-miller.com
KELSEY JAE NI-INEZ
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 8370I
E-mail: [e-mail]
TED WESTON
ID REG AFFAIRS MANAGER
ROCKY MOLINTAIN POWER
2OI S MAIN ST STE 23OO
SALT LAKE CITY UT 84I I I
E-mail: [e-mail]
PETER J RICHARDSON
GREGORY M ADAMS
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE TD 83702
E-mail: [e-mail]
gre g@richardsonadams. com
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-mail : [e-mail]
LEIF ELGETHT]N
INTERMOUNTAIN ENERGY PARTNERS
LLC
PO BOX 7354
BOISE TD 83707
E-mail: leif@sitebasedenerq)r.com
KEN MILLER
SNAKE RIVER ALLIANCE
E.MAIL ONLY:
kmiller@ snakeriveralliance. ore
DANIEL E SOLANDER
YVONNE R HOGLE
ROCKY MOUNTAIN POWER
2OI S MAIN ST STE 24OO
SALT LAKE CITY UT 84I I1
E-mail: [e-mail]
yvonne.ho gle@pacifi com. com
CERTIFICATE OF SERVICE
DATA REQUEST RESPONSE CENTER C TOM ARKOOSH
E-MAIL ONLY: ARKOOSH LAW [e-mail] PO BOX 2900
BOISE ID 8370I
E-mail: [e-mail]
ERIN CECIL ERIC L OLSEN
ARKOOSH LAW OFFICES RACINE OLSON NYE BUDGE
E.MAIL ONLY & [e-mail] PO BOX 1391
POCATELLO ID 83204-1391
E-mail: [e-mail]
ANTHONY YANKEL RONALD L WILLIAMS
29814 LAKE ROAD WILLIAMS BRADBURY PC
BAY VILLAGE OH 44104 IOI5 W HAYS ST
E-mail: [e-mail] BOISE ID 83702
E-mail: [e-mail]
IRION SANGER MICHAEL G ANDREA
SANGER LAW PC AVISTA CORPORATION
1I 17 SW 53RD AVE 1411 E MISSION AVE
PORTLAND OR 97215 MSC-23
E-mail: [e-mail] SPOKANE WA99202
E-mail: michael.andrea@.avistacorp.com
CLINT KALICH MATT VESPA
AVISTA CORPORATION SIERRA CLUB
I4I I E MISSION AVE 85 SECOND ST 2ND FLOORMSC-23 SAN FRANCISCO CA 94105
SPOKANE WA99202 E-mail: [e-mail]
E-mail: [e-mail]
RICHARD MALMGREN FREDERICK J SCHMIDT
SR ASSIST GEN COLINSEL PAMELA S HOWLAND
MICRON TECHNOLOGY INC HOLLAND & HART LLP
8OO S FEDERAL WAY 377 S NEVADA ST
BOISE ID 83716 CARSON CITY NV 89703
E-mail: [e-mail] E-mail: [e-mail]
CERTIFICATE OF SERVICE
SCOTT DALE BLICKENSTAFF
AMALGAMATED SUGAR CO
195I S SATURN WAY
STE IOO
BOISE ID 83702
E-mail : [e-mail]
CAROL HAUGEN
CLEARWATER PAPER CORPORATION
E-MAIL ONLY
Carol.haueen@ cl eaf waterpaper. com
ANDREW JACKURA
SR VP NORTH AMERICA DEVL
CAMCO CTEAN ENERGY
9360 STATION ST STE 375
LONE TREE CO 80124
E-mail: [e-mail]
CERTIFICATE OF SERVICE