The URL can be used to link to this page

Home My WebLink About20100618ICL Comments.pdfBenjamin Otto ISB No. 8292 710 N 6th Street POBox 844 Boise,ID 83701 Ph: (208) 345-6933 x 12 Fax: (208) 344-0344 botto(Ðidahoconservation.org RCCJ:l\r¡:n. . ",if.. . .~.~ '~J' "'..'- ~-4~ 201n JUN 18 AM 10= 55 IDp~liO_P¡JE1LiÇ~~._,~ , UTiLITIES COMMISSiUN Attorney for Idao Conseration League BEFORE THE IDAHO PUBLIC UTILITIES COMMSSION IN THE MATTER OF A REVIEW OF ) THE SURROGATE AVOIDABLE ) RESOURCE (SAR)')CASE NO. GNR-E-09-03 METHODOLOGY FOR ) CALUCULATING PUBLISHED ) AVOIDED COST RATES ) COMMENTS ON THE STAFF'S STRAWMN PROPOSAL COMES NOW Idaho Conservation League ("ICL") with the following comments on the Staffs Strawman Proposal issued May 27,2010. While ICL has not previously engaged on this issue, we hope the Commission and other paries wil consider these comments and including ICL in any futue workshops. As an organization, ICL's interest is in representing the residential customer class specifically as well as promoting all forms of clean, effcient energy resources. ICL has a unique perspective in this issue because, unlike the utilities or the developers, we are indifferent to who builds renewable resources. Ou interest is in ensurng customers pay a fair rate and renewable projects can tae advantage of the entire suite of incentives available in the form of tax credits, Renewable Energy Certificates, and PUR A rates. ICL'S COMMENTS ON TH STR WMN 1 June 18, 2010 I. ICL SUPPORTS THE CONCEPT OF A REVISED SAR THAT ALIGNS WITH THE CHACTERISTICS OF THE AVOIDED RESOURCE. ICL generally supports the concept of a SAR methodology that explicitly accounts for differences in resource charcteristics. In the clean energy world, wind and geothermal curently offer similar costs that are competitive with gas fired generation. However, no one can deny that wind and geothermal have different fudaental charcteristics specifically in terms of variabilty and dispatchabilty. Moreover, wind and geothermal are different from each other as well as different from a gas fired CCCT. While ICL acknowledges the curent geothermal power purchase agreements do not include dispatchabilty provisions, this is a fuction of contracting rather than physics. Likewise, while integrated energy storage technology could bring a level of predictabilty and dispatchabilty to wind power, this appear to be more an engineering issue than a contracting issue. Despite this potential, the fact remains that the curent rage of resources available either as qualifying facilties or utilty built options present a diverse range of characteristics. ICL agrees with the fudamental premise of the staffs strawman proposal that either the current SAR method needs to incorporate these charcteristics, or separte SAR methodologies are needed to compare different resources. ICL is concerned that variabilty, dispatchabilty, tax credits, trsmission, and integrtion costs are not limited to wind generation alone. For example, while geothermal or small hydro resources ar more similar to a CCCT plant in terms of capacity value, they are dissimilar by having no fuel price or emissions risks. Driven by this concern, ICL believes any change to the SAR methodology should not be limited to wind alone; rather should accomplish the goal stated by the Staff: ICL'S COMMENTS ON THE STR WMN 2 June 18, 2010 F or an SAR method to be effectively employed, the SAR must share some of the same generation characteristics as the QF resources whose output is being purchased by the utilty. Staff Comments at 4, (September 18, 2009). II. BECAUSE CAPITAL COSTS FOR RENEWABLES ARE FALLING RAPIDLY, ANY REVISED SAR SHOULD INCLUDE AN ADJUSTMENT MECHAISM FOR THESE COSTS. The strawman explains, the "SAR assumptions primarly determine the capital costs component of avoided cost rates." Proposal, at 4. In nonfuel drven generation - be it geothermal, solar, small hydro or wind - capital costs are the primar component of the entire project. However, these capital costs continue to fall for some of technologies. CCCTs by contrast have stable capital costs and varable fuel costs. The curent SAR methodology accounts for this by incorporating periodic fuel cost adjustments. Likewise, any revised SAR that attempts to model nonfueled resources should include a method to adjust capital costs. ICL submits this could be accomplished by looking to an annual surey of capital costs incured for various projects conducted by market research or project development firms. To correct for assumptions and possible errors, the Commission could look to several sureys and calculate a median value. III. ANY REVISED SAR MUST ACCOUNT FOR TRASMISSION COSTS. ICL believes that transmission costs should play some role in the SAR methodology because the abilty and cost of connecting energy to load is fudamental to any resource selection process. The problem is that if the utilty avoids a self-built resource by purchasing energy from a PURP A project, the utility may not be avoiding any trsmission costs. ICL'S COMMENTS ON TH STR WM 3 June 18, 2010 The strwman proposes using the thee investor owned utilty's embedded costs or possibly their OATT trsmission rates. Proposal, at 4-5. Because these values reflect existing rather than new trsmission costs, ICL believes both methods will underestimate the potential costs and inadequately signal the need for new trsmission infrstrctue. A vista, Idao Power, and Pacific Corp, along with most other utilities, are all curently planing to build new trsmission infrastrctue. This planing should enable these utilties to provide the Commission with more accurate estimates of the cost of new transmission. These costs should account for both the location of the resource relative to load centers and how individual resources cumulatively trgger the need for new transmission lines. The utilties planing for new lines also informs this SAR methodology review process in that it signals the curent infrastrctue is inadequate to meet predicted demands. ICL is concerned that if the SAR methodology does not accurtely captue the costs for increased transmission capacity caused by PUR A projects and utilty built resources certin generation projects could avoid paying their share of these new costs. Each new resource, no matter who constrcts it, potentially drves the need for increased transmission infrastrctue. IV. TREATMENT OF TAX CREDITS DEPENDS UPON HOW UTILITIES TREAT THEM FOR SELF-BUILT RESOURCES. How to account for tax credits is a contentious issue in this matter. ICL believes curent tax policy is designed to provide an incentive for renewable energy development in addition to whatever incentive PUR A may provide. For this tax incentive to work, the benefit should go to whoever develops the project. As ICL curently understads the issue, the utilities believe the SAR method should account for ta credit benefits to qualifying facilities by reducing the avoided costs rate. Utilties Joint Sur-Reply, at 4-5. The developers believe that, by offsetting ICL'S COMMENTS ON TH STRA WM 4 June 18, 2010 the avoided costs rate by the amount of the tax credit, the SAR would effectively deprive qualifying facilties of the benefit of the credit. See Exergy's Reply Comments, at 6-7. The strawman invites arguents for the inclusion or exclusion of these credits. Proposal, at 6. ICL believes the answer to this conflct lies in how a utilty accounts for ta credits when placing self-built resources into their rate base. If a utility builds a resource and offsets the cost by the value of the tax credits when placing that resource into their rate base, then the SAR methodology should also reduce the cost of the avoided resource by the value of the ta credit. If instead, the utilty does not use the ta credits to reduce the cost to ratepayers for self-built resources, then the SAR should not allow them to do so for PUR A projects. The same formulation holds tre for qualifying facilties larger than lOaMW. If the utilty does not reduce the rates paid to these large facilities by the value of the tax credits, then they should not be allowed to do so for small qualifying facilities. VI. RECS MUST HAVE SOME VALUE OTHER TH ZERO. Like ta credits, the treatment of Renewable Energy Certificates remains contentious. RECs are similar to tax credits in that they provide an incentive to promote renewable energy in addition to whatever incentives PRUPA might provide. However, RECs are distinct in that they have two independent values, one as a marketable quatity, and another as a means to comply with regulatory requirements. One problem in Idaho is that these values are different for every part. Because Idaho Power is a net seller ofRECs, to them they have only a market value. By contrast, A vista and Rocky Mountain can either sell RECs or use them to meet regulatory obligations. Meanwhile, in the hands of developers, RECs are a valuable commodity that can provide a secondar stream of income beyond rates. What is clear from all of this is that, as ICL'S COMMENTS ON THE STRA WM 5 June 18, 2010 stated by the Staff "In any case, RECs have value, whether to meet state or federal requirements, or as a marketable commodity." Staf Comments, at 6. Because RECs have some value, any revised SAR methodology must incorporate some amount other than zero. The strawman explains "if the entire cost and value ofRECs is assumed to be captued by the utilty simply though the purchase of power from the QF, then the proper REC cost value to be entered in the model is zero." Proposal, at 6. This is an invalid assumption. The entire premise of the REC system is that they represent some additional value beyond the power associated with them -- the environmental attbutes of the generation source. Either selling the REC as a commodity, or retiring them to satisfy a regulatory obligation monetizes this value. Regulatory obligations always have some cost greater than zero and under the REC system, this cost is paid by acquiring and then retiring a REC, either to comply with a state portfolio stadard or to comply with trth in advertising laws. REC's are curently traded as a commodity, which can provide an approximate value for satisfying the regulatory costs. CONCLUSION ICL appreciates the opportity to offer its comments on this matter. We believe PUR A and the SAR methodology are an importnt mechanism to transition to a modern energy resource mix. As the number ofPURA projects continues to rise and the utilties embark on the substatial capital projects indentified in their Integrated Resource Plans it is critical the SAR methodology reflects curnt costs and values. ICL looks forward to continuing to work with all paries on this issue. Respectfully submitted this 18th day of June, 2010 11~ Benjamin J. Otto Idaho Conservation League ICL'S COMMENTS ON THE STR WMN 6 June 18, 2010 CERTIFICATE OF SERVICE I hereby certify that on this 18th day of June 2010, tre and correct copies of the foregoing COMMENTS ON THE STAFF'S STR WM PROPOSAL were delivered to the following persons via the method of service noted: Hand delivery: Jean Jewell Commission Secretary (Original and seven copies provided) Idaho Public Utilities Commission 427 W. Washington St. Boise, ID 83702-5983 Email Only Scott Woodbur Deputy Attorney General Idaho Public Utilties Commission 427 W. Washington St. Boise, ID 83702-5983 Scott.woodbur(Ðpuc.idaho.gov Michael Andrea Steve Silkorth A vista Corporation 1411 East Mission Ave Spokane, W A 99202 Michael.andrea(Ðavista.com Steve.silkwort(Ðavista.com Donavan E. Walker Baron L. Kline GregW. Said Randy C. Allphin Idaho Power Company POBox 70 Boise Idaho 83707-0070 dwalker(Ðidahopower.com bkline(Ðidahopower.com rsaid(Ðidahopower.com rallphin(Ðidaopower.com Greg Adams Exergy Development Group of Idao, LLC Richardson & O'Lear ICL'S COMMENTS ON TH STR WMN 7 June 18, 2010 515 N. 27th St Boise, Id 83702 greg(Ðrichardsonandolear.com Dean J. Miler Sagebrush Energy LLC (C) McDevitt & Miler LLP PO Box 2564 Boise ID 83701 joe(Ðmcdevittiler.com Daniel E Solander Senior Counsel Ted Weston ID Regulatory Affairs Mgr Rocky Mountain Power 201 So Main St Ste 2300 Salt Lake City UT 84111 ted. weston(Ðpacificorp.com Daniel.solander(Ðpacificorp.com Dean J. Miler Idao Forest Group, LLC McDevitt & Miler LLP PO Box 2564 Boise ID 83701 joe(Ðmcdevittiler.com Glen Ikemoto Idao Windfarms LLC 672 Blair Avenue Peidmont, CA 94611 Glenni(Ðpacbell.net ICL'S COMMENTS ON THE STR WMN tJ 64- ~ Benjamin J. Oto 8 June 18, 2010