20030306Petition.pdf

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Peter Richardson
Richardson & O'Leary PLLC
99 East State Street, Suite 200
O. Box 1849
Eagle, Idaho 83616
Telephone: [phone]
Fax: [phone]
peter~richardsonando leary. com
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Attorneys for the Independent Energy
Producers of Idaho
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION
OF THE INDEPENDENT ENERGY
PRODUCERS OF IDAHO FOR AN
ORDER INCREASING THE SIZE AT
WHICH A QF IS ENTITLED TO
PUBLISHED AVOIDED COST RATES
CASE NO. GNR-03-
PETITION OF THE
INDEPENDENT ENERGY
PRODUCERS OF IDAHO
Comes now, the Independent Energy Producers of Idaho ("IEPI") by and
through its attorney and pursuant to Rules 51 and 53 (IDAP A 31.01,01,051
31.01.01.053) of the Idaho Public Utilities Commission s ("Commission ) Rules
of Procedure, and hereby respectfully petitions the Commission to issue its order
increasing the size at which a Qualifying Facility ("QF") is entitled to published
avoided cost rates from ten (10) megawatts to thirty (30) megawatts. In support of
said petition the IEPI says as follows:
BACKGROUND
The Public Utility Regulatory Policies Act of 1978 (PURPA, 16 U.C. ~
824a) requires that investor owned utilities purchase the output from qualifying
facilities. This Commission recently completed a proceeding in which it raised the
size at which a QF is entitled to insist on published avoided cost rates from one
megawatt to ten megawatts. (See Case No, GNR-02-1) while a step in the right
direction, the Commission s ten-megawatt limitation on eligibility for published
rates is dramatically lower than what PURP A allows, For example there are no
federal limitations on the size of a wind, solar waste or geothermal facility.
R ~ 292.204(a), and the size limitation for cogeneration facilities is eighty
megawatts. Unfortunately, FERC only requires published rates be made available
for QFs of up to 100 kilowatts, 18 CF ,R, ~ 292.304( c), However, published rates
may be made available for QFs of unlimited size if they are solar, wind or
geothermal and up to eighty megawatts for cogeneration facilities. Therefore, this
Commission has considerable legal latitude and authority in determining the size at
which a QF may be eligible for published avoided cost rates. The IEPI urges the
Petition of the IEPI
Commission to exercise that authority by increasing the size at which a QF may
insist on published avoided cost rates to thirty megawatts.
It is important to remember that the role of this Commission is to pro actively
encourage the QF industry in furtherance of important national policy. Indeed, in
the PURP A statement of purpose congress stated that our very "national security"
was furthered by its provisions, including the QF provisions which are one of the
cornerstones of the act. See 16 U,C, ~ 2601.
Congress passed PURP A to encourage industrial and commercial
cogeneration and small power production by prohibiting electric utility rate
discrimination against, and providing rate benefits for, qualifying cogeneration and
small power production facilities, PURP A also provides QFs with the right to
connect to the electric utility grid and exempts them from rate regulation by FERC
or financial regulation by state commissions. The purpose of such "favorable
treatment is to encourage the development of the QF industry in order to promote
the national goal of energy security,
The role of the state commissions in implementing PURP A is quite broad.
States are free to establish the terms and conditions of PURP A mandated purchases
by electric utilities under their jurisdiction as long as those terms and conditions
are within the general guidelines found in PURP A as implemented by the Federal
Petition of the IEPI
Energy Regulatory Commission, 45 Fed. Reg. 12 214 (1980). States may not
however, set the rates at which utilities purchase QF power at a level higher than
the purchasing utility s actual avoided costs. Connecticut Light Power Co.
C. (CCH) 61 012 (Ian, 11 , 1995). With that one restriction in mind, this
Commission then, is charged by Congress with encouraging the development of
the QF industry in furtherance of a national policy to diversify our national energy
portfolio away from reliance on energy sources that are subject to interruption and
outside of the control of the United States.
The Courts have consistently and explicitly found that the purpose of
PURP A is to encourage the development of cogeneration and small power
production facilities:
Responding to heightened fuel costs and potential fuel shortages
Congress sought to promote conservation of oil and natural gas by
electricity utilities. ... Thus, to encourage the development of
facilities that generate electricity using renewable resources and
facilities engaged in cogeneration of electricity and useful heat or
steam that might otherwise be wasted, ... and to overcome the
reluctance of traditional utilities to buy from, and sell to, these
alternative producers, Congress granted qualifying small power
production facilities certain benefits. Under PURP A, such
facilities were exempt from certain regulatory controls, and they
were assured a market by providing a right to interconnect with the
local public utility and to receive rates, as prescribed by FERC, up
to the full avoided cost of the utility.
Southern California Edison v. FERC 195 F .3d 17, 19 (D.C. Cir. 1999).
This Commission is charged by the United States Congress with
implementing PURP A in such a manner as to actually encourage the development
Petition of the IEPI
of the cogeneration industry. Implementing rules and policies that do not actively
encourage the development of the industry is contrary to law and contrary to good
public policy.
IMPACT OF CASE NO. GNR-O2-
This Commission is to be commended for its response to the petition by the
I. R. Simplot Company to increase the size of QFs that are entitled to published
avoided cost rates from 1 megawatt to ten megawatts. Unfortunately, the intended
result has simply not materialized. Since that case was closed approximately five
months ago , only one QF contract has been signed by any of the three investor
owned utilities in Idaho and only one QF contract has been brought before this
Commission for approval, and that contract is from outside Idaho. The flood
QF projects predicted by the utilities has not materialized.
The Commission correctly observed, in Order No. 29029 that:
Despite a QF history of industry reliability and an opportunity
presented to utilities to diversify their resource base by adding
renewables, utilities continue to regard PURP A QFs as interlopers.
Order No. 29029 at p. 5. Immediately after Order 29029 was issued, and in
keeping with their institutional opposition to PURP A, the utilities asked this
Commission to suspend their obligation to sign new avoided cost contracts while
they could prepare for and prosecute a new case to dramatically lower the
Petition of the IEPI
published avoided cost rates. This Commission ordered a new hearing to consider
the continued viability of the then published avoided cost rates. The IEPI whole
heartedly endorses the Commission s finding in the order opening the avoided cost
rate case to the effect that if the rates are no longer fair and accurate, the
appropriate response is to adjust the rates, not to limit the size of the QFs eligible
for the rates. Order No. 29069 at p, 7. The obvious rationale for such a decision
that if the avoided cost rates are accurate, then the utility and its ratepayers are
indifferent (only as to cost) whether the new resource is purchased from a QF or
built by the utility itself.
Of course the ratepayers are NOT indifferent as to the other tangible benefits
of requiring the utilities to purchase from QFs. As the Commission already noted
there are benefits from reliability and diversity. Of course there are many other
benefits , both great and small, such as helping to further the national policy of
energy independence (after all, the avoided cost unit is gas fired) and reducing
green house gas emissions, to bolstering the local tax base and providing jobs in
Idaho s cities and counties. In addition to the benefit of diversity of generation
sources, there is the added benefit of providing a distributed generation load
making the transmission system more reliable and efficient.
Petition of the IEPI
ECONOMIES OF SCALE NOT REALIZED
One of the central reasons this Commission increased the entitlement ceiling
to 10 megawatts was that:
The Commission also agrees that economies of scale can be
achieved by larger QF facilities and that a larger eligibility size
will encourage development of alternative energy projects, such as
geothermal, wind and biomass. Accordingly, the petitions of
Simplot and Earth Power are granted for the purpose of increasing
the size of the QFs eligible for published rates from 5 MW to 10
MW.
Order No. 29069 at p. 7.
Since the Commission issued that order it subsequently reduced the avoided
cost rates by a substantial amount. With the lower rates, the issue of economies of
scale has become critical. The entire industry is struggling to develop projects
within the ten-megawatt limitation at the new reduced published rates. It is simply
not working. The renewable sectors of the QF industry - wind, geothermal and
biomass in particular are finding it next to impossible to develop generation
projects with the ten-megawatt limitation placed over their projects.
The Commission assumed that its goal of encouraging
the development of a diverse energy portfolio for its
regulated investor owned would be furthered with at least
some additional QF power.
Order No. 29069 at page 7. The QF industry is unable to achieve sufficient
economies of scale at 10 megawatts to make the Commission s prediction come
Petition of the IEPI
true. For instance, the SAR is based on a GE Frame 7FA (1x1) configuration with
a 230 MW plant size. Compared to the 10 MW QF, this is a scale up multiple of
23 times. The economies of scale achievable by the SAR dwarf whatever a QF, no
matter how efficient, can achieve with a mere 10 MW plant. Increasing the size to
30 MW is still a decided disadvantage to the QF, but with a more reasonable scale
up multiple of 7., the Commission may actually be able to realize its goal for
some new QF power to come on line in Idaho, This huge size disparity
disadvantages the QF industry in many ways because all of the costs of
construction, operation and maintenance of a QF are proportionately much larger
than for the SAR. Since the SAR is the avoided cost the QF industry is not
encouraged, indeed with the 10 MW limit it is actively discouraged given the
current avoided cost rates
NO NEGATIVE IMP ACTS ON UTILITY SYSTEMS
The different effects a 30 MW QF has on a utility electrical system versus
a QF 10 MW in size are inconsequential. More importantly, the effects any
particular QF has on the host utility s electrical system are unique. Each QF will
have different effects depending on many factors other than size. The proximity
the QF to transmission, distribution, substations and the utility s load are all-
important, but unique factors that impact the utility s system. In addition, before a
Petition of the IEPI
QF may connect to the system, a detailed interconnection study is conducted by the
utility (and paid for by the QF) to insure there are no detrimental impacts caused
by the proposed project. If there are effects that are detrimental, then the QF must
pay for corrective measures or it will simply not be connected.
IMPACT OF RECORD HIGH NATURAL GAS PRICES
Natural gas has now moved from the supply status of a just-in-time
commodity to a commodity that is actually in deficit. It is projected to remain in
deficit status for the foreseeable future, As a result prices have recently hovered
near all time highs. Now is the time, as a matter of sound public policy, for the
Commission to do all in its power to encourage the wisest use of energy resources.
This petition of the IEPI gives the Commission one more tool to accomplish that
goal by increasing the threshold at which a QF is entitled to published avoided cost
rates from 10 MW to 30 MW.
PRAYER FOR RELEIF
Wherefore the IEPI respectfully requests that the Commission initiate a
proceeding, preferably on modified procedure, with the goal of raising the
threshold at which a QF is eligible for published rates from 10 MW to 30 MW.
Petition of the IEPI
Furthermore, should the Commission desire an evidentiary hearing or
additional information upon which to make its decision, the IEPI stands ready to
go to hearing or make whatever additional filings the Commission desires.
DATED this 6TH day of March, 2003,
Richardson & O'Leary P.LLC.
4J Peter Richardson
Attorneys for the Independent
Energy Producers of Idaho
CERTIFICATE OF SERVICE
I hereby certify that I have this 6th day of March 2003 , served the foregoing
PETITION OF THE INDEPENDENT ENERGY PRODUCERS OF IDAHO, in
Case No. GNR-02-, by personal service on:
Scott Woodbury,
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
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Nina Curtis
Administrative Assistant
Petition of the IEPI