20030319Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:MARCH 19, 2003
RE:CASE NO. GNR-03-
PETITION OF INDEPENDENT ENERGY PRODUCERS OF IDAHO (IEPI)
QF PUBLISHED RATE ELIGIBILITY
On March 6, 2003 , the Independent Energy Producers of Idaho (IEPI) filed a Petition
with the Idaho Public Utilities Commission (Commission) requesting that the Commission
increase from 10 MW to 30 MW the size at which a qualifying cogeneration or small power
production facility (QF) is entitled to published avoided cost rates. Reference Public Utility
Regulatory Policies Act of 1978 (PURPA).
The Federal Energy Regulatory Commission (FERC) requires only that published
rates be made available to QFs with a design capacity of 100 kW or less. 18 c.F.
292.304(c)(1). In recent Case No. GNR-02-the Commission increased the size at which a
QF is eligible to receive published avoided cost rates from 1 MW to 10 MW. Order No. 29069
July 2, 2002. Under PURP A there are no limitations on the size of eligible wind, solar, waste or
geothermal facilities; the size limitation for eligible cogeneration facilities is 80 MW. 18 C.
~ 292.204(a); ~ 292.203.
IEPI contends that it is the role of this Commission to pro actively encourage the
development of the QF industry in order to promote the national goal of energy security. IEPI
notes that the Commission has considerable legal latitude and authority in determining the size at
which a QF may be eligible for published avoided cost rates. 18 c.F.R. ~ 292.304(c)(2).
furtherance of a national policy to diversify our national energy portfolio away from reliance on
energy sources that are subject to interruption and outside the control of the United States, IEPI
contends that the Commission is charged with implementing PURP A in such a manner as to
DECISION MEMORANDUM
actually encourage the development of facilities that generate electricity USIng renewable
resources and facilities engaged in cogeneration. Failing to do so, it contends, is contrary to law
and contrary to good public policy.
The Commission, IEPI contends, is to be commended for increasing the size of QFs
that are entitled to published avoided cost rates from 1 MW to 10 MW. Unfortunately, it states
the intended result, development of alternative energy projects, has simply not materialized.
Since Case No. GNR-02-was closed approximately five months ago, only one QF contract
has been signed. (7.5 MW hydro project-Tiber Montana/Idaho Power, Case No. IPC-03-1).
The flood of QF projects predicted by the utilities, IEPI states, has not materialized. The QF
industry, it contends, is unable to achieve sufficient economies of scale at 10 MW to justify the
development of alternative energy projects, such as geothermal, wind and biomass.IEPI
recommends that the size limit for published rate eligibility be increased from 10 MW to 30
MW.
The different effects a 30 MW QF has on a utility's electrical system versus a QF 10
MW in size, IEPI states, are unconsequential. The effects any particular QF has on a host
utility s electrical system, it states, are unique. Relevant factors identified include the proximity
of a QF to transmission, distribution, substations and the utility s load. There will be no
detrimental impacts caused by proposed projects of this size, IEPI contends, because the costs of
interconnection and a detailed interconnection study are paid for by the QF. If there are effects
that are detrimental, then the QF must pay for corrective measures or it will simply not be
connected.
IEPI notes that natural gas has now moved from the supply status of a just-in-time
commodity to a commodity that is in deficit. Natural gas is projected, IEPI states, to remain in
deficit status for the foreseeable future. As a result, prices have recently hovered near all time
highs. Now, IEPI states, is the time, as a matter of sound public policy, for the Commission
do all in its power to encourage the wisest use of energy resources. IEPI requests that the
Commission initiate a proceeding, preferably on Modified Procedure, with a goal of raising the
threshold at which a QF is eligible for published rates from 10 MW to 30 MW. Should the
Commission desire an evidentiary hearing, IEPI stands ready to go to hearing or make whatever
additional filings the Commission desires.
DECISION MEMORANDUM
Commission Decision
Staff notes that QFs greater than 10 MW are not precluded from contacting an electric
utility and individually negotiating a Power Purchase Agreement. That has long been the
procedure for large QFs.The starting point for such negotiations under the Commission
approved methodology is the established posted rate. Generation facilities can also be developed
as independent power producers (IPPs)or merchant plants.
As IEPI states, this Commission only last July increased the capacity size of QFs
eligible for published rates from 1 MW to 10 MW. The Commission last year also increased the
length or term of QF contracts from 5 years to 20 years. IEPI proposes that the eligibility cap for
posted rates be increased from 10 MW to 30 MW. How does the Commission wish to handle
IEPI's Petition?
Scott Woodbury
Vld/M:GNREO301
DECISION MEMORANDUM