20090918Idaho Wind Farms Comments.pdf

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Glenn Ikemoto
Idaho Windfarms, LLC
672 Blair Avenue
Piedmont, California 94611
Tel: [phone]
Fax: [phone]
glenni(gpacbell.net
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A REVIEW OF THE
SURROGATE AVOIDABLE RESOURCE
(SAR) METHODOLOGY FOR
CALCULATING PUBLISHED AVOIDED
COST RATES
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CASE NO. GNR-E-09-03
COMMENTS OF IDAHO
WINDFARMS, LLC
Idaho Windfarms, LLC ("IWF") is a greenfield wind energy developer in Idaho
and has successfully developed the Bennett Creek and Hot Springs Windfarms near
Mountain Home. IWF respectfully submits the following Comments in response to the
Commission's Notice of Review of Avoided Cost Methodology.
In the Commission's Notice, it states that it is "concerned that a disparity
exists between Idaho's published avoided cost rate ... and the cost to a utilty of
developing and operating its own wind generation project." IWF believes that the
problem is not the SAR methodology. It is the assumptions. Through a long series of
individually reasonable decisions, the SAR methodology has evolved into a fairly
sophisticated pricing modeL. However, it has now produced a clearly above market
result.
There is nothing wrong with the SAR methodology. Estimating avoided costs
based on a combined cycle unit is pretty much standard across all western utilties.
What isn't standard is the natural gas forecast used in the last update. The natural gas
price forecast is by far the largest determinate of avoided costs. So, the simple truth is
that the natural gas forecast used in Idaho is higher than the forecasts used elsewhere.
The forecast used in the SAR methodology has always suffered from the fact that it is
not issued on a fixed and frequent schedule. When it was slow going up, the utilties
weren't complaining. Now that it's slow going down, they don't like it.
The SAR methodology is straightforward, easily verifiable and has produced
results comparable to estimates in other regulatory jurisdictions for years. Certainly in
the western United States, a new natural gas fired generating resource or purchases
from electricity markets dominated by natural gas fired generation are the marginal
resources. A reduction in renewable energy generation wil result in an increase in
natural gas consumption. This is the fundamental economic relationship that an avoided
cost methodology must capture. The SAR accomplishes this.
While there are differences in operating characteristics between a natural gas
fired resource and an intermittent resource, these can be accounted for and priced. That
has been done in excruciating detail in Idaho. The Commission can be comfortable that
the cost penalty associated with intermittent generation has been more than adequately
taken into account.
The current avoided cost update suffered from incredibly bad timing - the
eve of the steepest recession in 70 years. Commodity prices, including natural gas,
have fallen dramatically. Should that be reflected in avoided costs? Yes. Should the
SAR methodology be discarded because the natural gas forecast is out of date? No.
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