HomeMy WebLinkAbout20090918PacifiCorp Comments.pdf~~:OUNTAIN RECEI D
2009 SfP l 8 AM 10: 29
201 South Main, Suite 230
Salt Lake City, Utah 84111
September 18,2009
VI OVERNIGHT DELIVERY
IDAHO PUEc.L
UTILITIES CO¡\i!l¡,î
Jean D. Jewell
Commission Secret
Idaho Public Utilities Commssion
472 W. Washigton
Boise,ID 83702
RE: Rocky Mountain Power's Comments in Case No. GNR-E-09-03
Notice of Review of Avoided Cost Methodology
Dear Ms. Jewell:
Pursuat to the Commssion's notice of review of the Surogate Avoidable Resources (SAR)
methodology for calculating published Avoided Cost Rates. PacifiCorp, dba Rocky Mounta
Power, hereby submits for fiing an original and seven (7) copies ofthe Company's comments.
The Company's comments are responsive to the directives contained in Order No. 30873 issued
August 6, 2009 by the Commssion for consideration; does the present SAR methodology for
published avoided cost rates need to be modified.
Any informal inquiries related to ths application should be directed to:
Ted Weston
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, UT 84111
Email: ted.westonlßpacificorp.com
Phone: 801-220-2963
Bruce Grswold
PacifiCorp
825 NE Multnomah
Portland, OR 97232
Email: bruce.griswoldlßpacificorp.com
Phone: 503-813-5218
Very try yours,Ú~/~
Ted Weston
Manger, Idaho Reguatory Affairs
Enclosures
Danel E. Solander
Rocky Mountan Power
201 South Main
Salt Lake City, UT 84111
Telephone: 801-220-4014
Facsimile: 801-220-3299
danel.solanderlßpacificorp.com
RECEI
20U9 SEP l 8 AM 10: 35
Attorney for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF A REVIEW OF THE )
SURROGATE AVOIDABLE RESOURCE ) CASE NO. GNR-E-09-03
(SAR) METHODOLOGY FOR ) ROCKY MOUNTAI POWER'S INTIL
CALCULATING PUBLISHED AVOIDED ) COMMNTS
COST RATES )
)
On August 6, 2009, the Idaho Public Utilty Commission ("Commission") issued
Order No. 30873 which directed Avista, Idaho Power, and Rocky Mountan Power to
provide responses to three questions concernng the curent Surogate Avoided Resource
("SAR") methodology. In compliance to Order No. 30873 Rocky Mountan Power
("RMP") submits its initial comments addressing the Commission's questions posed in
ths case.
I. Background
Order No. 30873 issued by the Commission described the history of avoided cost
methodology in Idao and how the SAR methodology was developed and has evolved
since the early 1980's. In 1993, Case No. IPC-E-93-28 resulted in the Commission
issuing an order establishing the surogate avoided resource as a natual gas-fired
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combined cycle combustion tubine ("CCCT"). The order went on to state that, if in th
futue, the CCCT proves to not be a viable cost-effective resource, the Commission can
seek to establish a new SAR. Whle recent orders by the Commssion have attempted to
provide modifications to the CCCT based avoided cost prices to accommodate
intermittent resources such as wid, it has become obvious that a more appropriate SAR
should be selected to reflect a wind resource.
By initiating this proceeding for stadad QF projects, the Commssion has
acknowledged that the time is ripe to evaluate the tye of generating resource that its
jurisdictional utilties may avoid by purchasing energy from QFs, regardless of whether it
is a thermal resource or an intermittent resource. Two major changes have occured since
the CCCT was selected as the SAR in 1993. First, the thee Idaho electric utilties; Idao
Power, A vista and Rocky Mountain Power, have each identified in their respective
Integrated Resource Plans and other resource acquisition documents their intention to
acquire, outside of PURP A, substatial amounts of power generated by renewable
resources, principally from generation using wind as its motive force. Second, the
implementation of state-mandated renewable portfolio stadards (RPS) has come into
play, requing states to meet a schedule to supply a portion of their electrc load with
renewable energy. For example, RM has state-mandated RPS goals and tietables in
four of its six states (Californa, Oregon, Washington and Uta) and with a similar
renewable energy standard (RES) under evaluation at the federal level, the Commssion
should include what the impact of RPS compliance goals will have on resource selection
as a factor when considerig a change to the SAR methodology. For all of these reasons,
the Commission's decision to initiate ths proceeding is both timely and appropriate.
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II. Rocky Mountain Power's Response to the Commission Questions
The Commission's questions and a sumar ofRMP's responses are as follows:
1. "Does the present SAR methodology for published avoided cost rates need to be
modified or augmented? Yes or No."
RMP's answer: Yes.
2. "If answer to Question i is yes,
2a. Please provide the basis for your answer."
RMP's answer:
2a. The curent SAR methodology with its proxy resource as a natual gas-fired
combined-cycle combustion tubine is an inappropriate benchmark for an intermttent
resource such as wind for several reasons. Capital and O&M costs for wid resources
var significantly from the curent CCCT SAR. Operating characteristics including
capacity factor, control over motive force, and dispatchabilty are unike the CCCT.
Costs associated with integrating the wind resource as a network resource on the
Company's grid are much higher th a CCCT. Finally, the CCCT SAR does not address
issues associated with renewable resources such as the resource's environmenta
attributes or renewable energy credits ("RECs") ownership. As noted by the Nortwest
Planng and Conservation Council ("NPCC"), renewable resources, paricularly wind,
are playing a much greater role in the region's new energy sources. As the NPCC tracks
these regional projects to update its assumptions in its power plans, its capita and
operating cost assumptions for wid generation are a reflection of the region's wind
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development. RM ha seen the same impact in its renewable resource procurement.
RMP, through its Integrated Resource Plan and competitive bidding process, is acquig
large amounts of power generated by renewable resources, principally from generation
using wid as its motive force. In addition, the majority ofRM's QF project requests in
Idaho over the past five years have been wind resources.. What the Company is seeing is
that its utilty wid projects acquired through our competitive bidding process, both
owned or through power purchase agreements, are being acquired by the Company at a
lower cost tha curent Idaho avoided cost prices and these acquisitions also include
those resource's RECs for the Company. Therefore, using a wid resource as a SAR will
more equitably align the QF wind project with a proxy resource that the Company
continues to acquire as identified in its Integrated Resource Plan on a competitive basis.
2b. "In broad and genera terms, how should the methodology be modified or
augmented?"
RMP's Answer:
2b. In general, RMP proposes that the Commssion consider developing a separate
SAR methodology for intermttent resources such as wid and retanig the existing SAR
methodology for thermal and/or baseload QF projects. This would retan the curent SAR
methodology model but use two different surogate avoided resources - one for wind and
one for baseload thermal QF projects. Each methodology would use inputs and
assumptions for its specific surogate avoided resource from an independent source - the
Nortwest Planng and Conservation Council with specific adjustments unque to each
utilty. This approach would provide two separate tracks for stadard QF projects seeking
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avoided cost prices. The result would establish two sets of avoided costs, one for
intermittent wind resources and one for thermallbaseload resources. The specific utility
adjustments that have been established in previous Commission orders would continue as
appropriate in each methodology except it should be noted that the wid integration
adjustment per Order No. 30497 would not be applied in the wind SAR methodology.
Since the wind SAR methodology assumes that the surogate avoided resource is a
utility-owned wind resource and the utility is already bearng the cost of integration on its
own resource, the wind integration adjustment normally applied per Order No. 30497 for
the QF would cancel out and no longer be a necessar adjustment in the methodology.
The Commission has already established the use of two separate contrct
performance mechansms for these two decidedly different QF projects - the mechancal
availability guartee ("MAG") for intermttent wind resources and the "90/110"
performance band for thermallbaseload resources. Establishment of a separte SAR for a
wind QF and for a thermallbaseload QF will provide additional alignent with stadard
QF contracting terms for each tye ofQF resource.
The followig changes to the curent SAR methodology are proposed for
consideration to accommodate the intermttent wind resources cost and operatig
characteristics. These suggested changes are not to be considered all-inclusive but serve
as a staing point on developing a separate wid SAR.
1. Create a separate Wind SAR methodology based upon the cost of a wid
resource.
a. Use existing Idaho approved SAR spreadsheet model
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b. Wind SAR methodology cost inputs and assumptions would come
from an independent source. Because the existing SAR methodology
uses the Northwest Planng and Conservation Council inputs and
assumptions, it is recommended that the Wind SAR methodology
would also use the NPCC curent wid assumptions, both
methodologies would apply utilty specific adjustments. These
assumptions and inputs would be updated on a reguar schedule as the
NPCC provides updates and / or as utility specific adjustments chage
and are approved by the Commission.
1. For example, the latest NPCC wind assumptions per NPCC
Sixth Power Plan Appendix I
1. Capital cost of approximately $1800/kW in 2009 price
year (including AFUDC)
2. Capital cost would be fuher reduced by available
federal ITC (30%) or other ta treatments available
3. Fixed O&M of $40.00 per kW-year
4. Varable O&M of $2.00 per MWh
5. Capacity factor of 38% capacity factor (eastern
Wyomig assumption). Ths capacity factor assumption
is a reflection of where RMP's avoided proxy resource
would be located and has been demonstrated by the
number of company-owned wind resources and PP As
acquired in Wyoming.
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6. SAR heat rate is dropped to zero
c. The methodology would be applicable to QF projects comig online in
2010-2012 where there is certinty regarding federal tax credits and
other ta treatments
d. SAR wind integration charge adjustment is removed since the utilty
surogate resource is wind and the utilty would bear the cost of
integration for its own resource
e. Monthy on-peak and off-peak scalars would stil apply to the resultat
avoided cost prices
f. Contract terms for intermttent resources including a MAG provision
would remain in the power purchase agreement
g. Environmenta attributes or RECs from the QF resource would be
assigned to the utilty since the utilty receives the RECs from its
surogate wind resource
2. Thermal and baseload QF resources would be evaluated using the existing
SAR methodology modeL. The Company suggests the Commssion consider
revisiting the curent market conditions and consider any fuer updates to
the fuel price forecast from the latest NPCC power plan based the market
conditions more reflective of the current economic and market conditions.
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III. Grandfathering of QF Contracts During this Case Proceedings
The Company recognzes that the Commssion has conducte such avoided cost
investigations in the past and is willng to cooperate to achieve the best outcome for
customers. Historically, the Commission has taen action to suspend the Company
obligation to enter into new QF contracts or renew existing contracts for projects over
100 kilowatts until such time that the investigation was completed and the Commssion
had made a final determination regarding appropriate avoided cost rates. Order No.
30873 on page 3, states that, "As always the published rates remain presumptively
reasonable and available to eligible QFs until changed" and although the Order does not
contemplate any control mechansm for in-progress QF projects durg ths investigation,
the Company seeks to address grandfathering of in-progress QF contracts durg ths
investigation, to provide certainty to both the QF developers as well as its customers.
RMP makes this request for several reasons. First, the Company curently has
requests from stadad QFs, new and existing, in varous staes of the contrt process,
from the initial request for information to the exchanges of draft power purchase
agreements. Several are requests from proposed QFs seeking contracts for new projects
with futue on-line dates that have met few, if any, of the necessar milestones for
execution. RM does not know if this proceeding will result in a modified SAR
methodology which produces avoided cost rates higher or lower than curent rates.
However, historically when avoided cost rate changes are being considered, the Company
sees a signficant increase in QF activity as developers seek to require utilties to enter
into long-term contracts at curent rates and lock in higher prices should a new SAR
result in lower avoided cost rates.
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Second, although many of these QFs, both existing and new, are required to
complete a new or updated interconnection study and agrement, they are pushig to
execute a power purchase agreement far in advance of finalizing a necessar
interconnection agreement. The Company has serious concerns about executing QF
contracts that may not receive interconnection agreements or may have interconnection
and integration issues that are not addrssed or acknowledged in the power purchase
agreement. At a minimum, a moratorium on new contracts or any contract tht has not
substatially completed the interconnection process while the SAR methodology issues
are resolved, would allow for substatial completion of interconnection milestones key to
a successfu project and power contract.
Third, establishing specific milestones and requirements for QF projects seeking
to be grandfathered under the existing avoided cost rates is an effective means of
ensurng QF projects close to completion with a majority of milestones met, can move
forward while those that
For these reasons, the Company believes that the Commssion should
immediately consider establishing milestones that it would expect a QF developer to
satisfy if the QF desires to be "grdfathered" to the existing rates. The Company
requests that the Commission require QF developers to meet two milestones to be eligible
for grandfatherig at the existing rates.
1. The QF developer would be required to post securty in the form of cash or an
acceptable letter of credit in an amount equal to $20 per kW multiplied by the nameplate
capacity of the generating project that the QF developer is seekig a power purchae
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, ,
ageement for. This $20 per kW amount would be held as securty and retained by the
Company in the event the QF failed to dilgently proceed though their interconnection
application process, defaulted on the power purchase agreement, or if the QF failed to
achieve its scheduled commercial operation date.
2. At the time the "grandfàthered" power purchase agreement is executed, the QF, at
a minimum, must have completed its feasibilty study report in the interconnection
process. In addition, at all times, the QF developer provide reguar updates on its
interconnection process and show steady progress in the interconnection queue until it
executes a generation interconnection agreement. A specific milestone schedule will be
developed with the QF and monitored by the Company. In the event, the developer does
not meet its scheduled milestones, including failure to execute a generation
interconnection agreement, the "grandfathered" power purchase agreement would be
terminated, gradfather status revoked, and the utilty would retain the $20 per kW
security amount previously described.
RM notes that there may be other issues that need to be addressed with respect
to "grandfathering" of QF contracts while the Commssion considers the modifying the
SAR.
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. .
CERTIFICATE OF SERVICE
I hereby certify tht on ths 18th day of September, 2009, I caused to be served, via E-
mail, a tre and correct copy of Rocky Mountan Notice of Review of Avoided Cost
Methodology in GNR-E-09-03 to the followig:
Krstine A. Sasser
Deputy Attorney General
Idaho Public Utilties Commssion
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Krs.sasserlßuc.idaho.gov
Kelly Norwood
A vista Corporation
1411 East Mission Avenue
P.O. Box 3727
Spokane, VV ashington 99202
kelly.norwoodlßavistacorp.com
Ted Weston
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Ted. westonlßacificorp.com
KaeiÆ!f f) øN ty
Coordiator, Administrative Services