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HomeMy WebLinkAbout20101223Idaho Power Comments.pdfRECEi DONOVAN E. WALKER (ISB No. 5921) LISA D. NORDSTROM (ISB No. 5733) Idaho Power Company P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5317 Facsimile: (208) 388-6936 dwalker(âidahopower.com Inordstrom(âidahopower.com Zlllrl O,Fr ?? P-~4 L:4 3. V..tj. .._\~ ""'- if'1 . Attorneys for Idaho Power Company Street Address for Express Mail: 1221 West Idaho Street Boise, Idaho 83702 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE JOINT PETITION ) OF IDAHO POWER COMPANY, AVISTA ) CASE NO. GNR-E-10-04 CORPORATION, AND PACIFICORP DBA ) ROCKY MOUNTAIN POWER TO ) COMMENTS OF ADDRESS AVOIDED COST ISSUES AND ) IDAHO POWER COMPANY TO ADJUST THE PUBLISHED AVOIDED ) COST RATE ELIGIBILITY CAP. ) ) Idaho Power Company ("Idaho Powet' or "Company"), by and through its attorney of record, Donovan E. Walker, and in response to the Notice of Modified Procedure issued in Order No. 32131 on December 3, 2010, respectfully submits the Jollowing comments. I. INTRODUCTION On November 5, 2010, Idaho Power Company, Avista Corporation, and PacifiCorp d/b/a Rocky Mountain Power ("the Utilties") filed a Joint Petition requesting the Idaho Public Utilties Commission ("Commission") to initiate an investigation into COMMENTS OF IDAHO POWER COMPANY - 1 various avoided cost issues regarding the Public Utilty Regulatory Policies Act of 1978 ("PURPA") Qualifying Facilties ("QF"). Additionally, the Utilties requested that the Commission issue an Interlocutory Order adjusting the published avoided cost rate eligibility cap for QFs from 10 average megawatts ("aMW") to 1 00 kilowatts ("kW") effective immediately. On December 3, 2010, the Commission issued Notice of the Joint Petition and Notice of Modified Procedure, Intervention Deadline, and Oral Argument setting a Modified Procedure comment schedule with which to develop a record for its decision regarding the Joint Petition and Motion's request to lower the published avoided cost rate eligibility cap. Order No. 32131, Case No. GNR-E-10-04. Comments are due on December 22, 2010; Reply Comments are due January 19, 2011; and Oral Argument is scheduled for January 27, 2011. The Commission also ordered that its decision regarding whether to reduce the published avoided cost rate eligibilty cap become effective on December 14,2010. ¡d., at 6-7. In that Notice, the Commission stated that it "wil first take up the request to reduce the eligibilty cap." ¡d., at 5. The Commission set out three specific topics that it is interested in receiving comments upon: (1) the advisabilty of reducing the published avoided cost eligibility cap; (2) if the eligibilty cap is reduced, the appropriateness of exempting non-wind QF projects from the reduced eligibilty cap; and (3) the consequences of dividing larger wind projects into 10 aMW projects to utilze the published rate. ¡d. In these Comments, Idaho Power wil address these three topics by submitting comments supporting the initial request to reduce the published avoided rate eligibilty COMMENTS OF IDAHO POWER COMPANY - 2 cap and seeking application of that published rate eligibilty reduction to all PURPA QF projects. II. BACKGROUND Sections 201 and 210 of PURPA, and pertinent regulations of the Federal Energy Regulatory Commission ("FERC"), require that regulated electric utilties, such as Idaho Power, purchase power produced by cogenerators or small power producers that obtain QF status. 16 U.S.C. § 824a-3(a). The rate a QF receives for the sale of its power is generally referred to as the "avoided cost" rate and is to reflect the incremental cost to an electric utilty of electric energy or capacity or both, which, but for the purchase from the QF, such utilty would generate itself or purchase from another source. 16 U.S.C. §§ 824a-3(b), (d). The Commission has authority under PURPA Sections 201 and 210 and the implementing regulations of the FERC, 18 C.F.R. § 292, to set avoided costs, to order electric utilties to enter into fixed-term obligations for the purchase of energy from QFs, and to implement FERC rules. See Connecticut Light and Power Co., 70 F.E.R.C. 11 61,012, 61,024 (1995). Idaho Power has an obligation under federal law, FERC regulations, and this Commission's Orders, that it has not been relieved of, to enter into power purchase agreements with PURPA QFs. As stated in the Joint Petition filng, Idaho Power has received a large amount, in terms of both volume and megawatts ("MW"), of requests from PURPA QF developers demanding to enter into published avoided cost rate Firm Energy Sales Agreements ("FESA"). The Company continues to process these requests, in the ordinary course of business, and file the same for review with this Commission, as is its legal obligation. However, the continued and unfettered addition COMMENTS OF IDAHO POWER COMPANY - 3 of PUPRA QF generation onto Idaho Powets system carries with it several negative and damaging effects to the both the utilty and its customers on system reliabilty, utility operations, and the cost of providing energy to customers. By lowering the published rate eligibility cap, the Commission would not be eliminating PURPA's requirement that utilties purchase power from QFs. It would simply be modifying the method in which the price, or avoided cost, is calculated and established for the QF. See Southern California Edison Co., 70 F. E. R. C. 11 61 ,215, 61,677 (F.E.R.C. 1995) (FERC "has not, and does not intend in the future, to second- guess state regulatory authorities' actual determinations of avoided costs (i.e. whether the per unit charges are no higher than incremental costs)."). Despite what some may argue, PURPA is not meant to incent renewable energy projects with the price that is paid to a QF. In fact, an incentive price for QFs is ilegal under PURPA, as PURPA requires prices to be set at the utilty's avoided cost, which is to reflect the incremental cost to an electric utilty of electric energy or capacity or both, which, but for the purchase from the QF, such utilty would generate itself or purchase from another source. See Independent Energy Producers Association v. California Public Utiliies Comm'n, 36 F.3d 848, 858 (9th Cir. 1994) ("If purchase rates are set at the utilty's avoided cost, consumers are not forced to subsidize QFs because they are paying the same amount they would have paid if the utilty had generated energy itself or purchased energy elsewhere."). The incentive to QF development from PURPA is therefore not in the price that a QF is entitled to but in the fact that the utilty is required to contract with the QF. See 16 U.S.C. § 824a-3(a). Consequently, there is nothing in the request to reduce the published rate eligibilty cap that is offensive to the "purpose" COMMENTS OF IDAHO POWER COMPANY - 4 of PURPA. It is an action that is clearly within the authority and discretion of the Commission, as it is the body charged with implementing the requirements of PURPA and establishing each utilty's avoided cost. Lowering the published rate eligibilty cap to 100 kW would essentially require all PURPA QF contracts to be individually negotiated with an individually determined price based upon that project's specific operating profile. This Integrated Resource Plan- ("IRP") based methodology for individually negotiated rates and contracts is a better model with which to address the difficult issues raised by this case and a means to possibly arrive at creative solutions that will stil allow the development of QF projects, but in a manner that is better for customers and better for the utilties in that the price would better reflect a value equivalent to that which the Company would receive if the utility were to generate itself or purchase from another source. The recently approved Rockland Wind Project FESA is a good example of this process and how it can result in a project that is both feasible for the developer and more favorable to Idaho Power customers than a project under the more prescriptive Surrogate Avoided Resource ("SAR") methodology. PURPA requires that utilty customers be economically indifferent to the effects of whether power is purchased from a QF or otherwise acquired (generated or purchased) by the utilty. Southern California Edison Co., 71 F.E.R.C. P 61,269,1995 WL 327268 (F.E.R.C. 1995) ("The intention (of PURPA) was to make ratepayers indifferent as to whether the utility used more traditional sources of power of the newly-encouraged alternatives."). When the utilty is forced to buy QF power in excess of its true avoided cost, or in excess of its minimum loads, customers are no longer indifferent. The issues COMMENTS OF IDAHO POWER COMPANY - 5 raised in this docket should be addressed by the Commission at this time and not after the impacts on customers have become inevitable and acute. As recently as November 2, 2010, in the Yellowstone Power case, the Commission reiterated to Idaho Power that, "we intend for the Company to assist the Commission in its gatekeeper role of assuring that utilty customers are not being asked to pay more than the Company's avoided cost for the QF contracts. We expect Idaho Power to rigorously review such contracts." Order No. 32104. Even though Idaho Power is legally obligated to continue to negotiate, execute, and submit PURPA QF contracts for Commission review, it also feels obligated to call attention to several problems with the current methodology: (1) the continuing and unchecked requirement for the Company to acquire additional intermittent and other QF generation regardless of its need for additional energy or capacity on its system or the availabilty of other lower cost resources; (2) circumvention of the IRP process; (3) system reliabilty and operational issues; and, most importantly, (4) it dramatically increases the price that customers must pay for their energy needs beyond that which would otherwise be considered prudent. II. THE ADVISABILITY OF REDUCING THE PUBLISHED AVOIDED COST RATE ELIGIBILITY CAP In the Joint Petition, Idaho Power stated that today it has over 208 MW of wind generation currently operating on its system with an additional 264 MW of Commission- approved QF wind contracts, many of which are currently under construction and scheduled to be on-line by December 31, 2010. Additionally, the Company stated that it had 80 MW of QF wind pending approval at the Commission and over 570 MW of new COMMENTS OF IDAHO POWER COMPANY - 6 QF wind contract requests for a total of over 1,100 MW of wind powered generation potentially entering Idaho Powets system in the near term. Since the November 5, 2010, Joint Petition filing, the Commission has approved the 80 MW of wind generation that was pending and Idaho Power has filed 23 signed PURPA contracts with the Commission for review which represent over 450 MW of wind generation (twenty contracts) and about 12 MW of non-wind generation (three contracts). To update the numbers from the Joint Petition, as of December 20, 2010, Idaho Power has over 326 MW of wind on-line, over 678 MW of signed QF contracts for wind, and another 162 MW in contract discussions - which totals over 1166 MW of wind. See Attachment NO.1 (Wind Project Summary) and Attachment NO.2 (showing all PURPA QFs). Attachments Nos. 1 and 2 itemize the wind and all-source QF generation that is currently on-line, pending Commission decision, or in contract negotiations. The additional 678 MW of signed QF wind contracts that have been submitted to the Commission represent a total payment amount of over $3.9 bilion over the 20-year term of the agreements. This estimate was calculated assuming a 2011 on-line date and an average annual capacity factor of 32 percent. The 162 MW of wind generation currently under contract discussions represents an additional total payment of over $932 millon based on the same assumptions. For comparison, Idaho Powets total approved rate base is just over $2 bilion. Idaho Power is deeply concerned with the increase in power supply costs due to these contracts, and the resulting increase in rates to its customers, that the current published avoided cost, SAR methodology, causes. The Company projects that with COMMENTS OF IDAHO POWER COMPANY - 7 the current amount of QF wind under contract and in contract discussions at published avoided cost rates assumed to be at 614 MW, that customers wil face an additional cost averaging in excess of a $48 millon PURPA premium above other, lower cost resources through at least 2020. This equates to an approximate 5 percent rate increase in the Company's Power Cost Adjustment ("PCA"). A. Approved Avoided Cost Methodologies - The Surrogate Avoided Resource and the IRP-Based Approach. The Commission has authorized two methods for establishing the avoided cost rate that a QF is entitled to receive in its FESA with an Idaho utilty. One method is applicable to those QFs that generate less than 10 aMW on a monthly basis. This method establishes the published avoided cost rate, and is set by the Commission using the cost of a SAR. The current SAR is a natural gas-fired combined-cycle combustion turbine. The other method is applicable to QFs that are larger than 10 aMW or, in other words, wil generate in excess of 10 aMW on a monthly basis. This method is generally referred to as the IRP-based methodology. In the IRP-based methodology, the QF's generation profile is utilzed with the utilty's power supply modeling program to establish a base price for the QF's generation. Adjustments to that base price, if any, are based upon a project's individual characteristics and are separately considered by the Commission. In Order No. 30873, the Commission described how the SAR methodology has evolved over time. In fact, it was just over thirty years ago, on August 8, 1980, when the Commission issued its first order, Order No. 15746, establishing the principles applicable to purchases of power from PURPA QFs. In Order No. 15746, the Commission determined that each of the three utilities would use a hypothetical COMMENTS OF IDAHO POWER COMPANY - 8 baseload coal-fired generating plant as the generation facilty that could be deferred or avoided. As such, the cost of this coal-fired facilty would be used to set avoided cost rates. In 1993, Case No. IPC-E-93-28, the Commission concluded that the avoidable resource or SAR should no longer be a coal-fired generating plant but instead should be a natural gas-fired combined-cycle combustion turbine. The more prescriptive SAR-based published avoided cost methodology was developed and intended for smaller projects and the more unsophisticated developers in part to ease the administrative burden on the developer and to "level the playing field" in negotiating the economic components of a QF contract. This concept, which has its inception in the Commission's 1980 Order, dates back to the infancy of the Public Utilty Regulatory Policies Act of 1978. This concept was accepted and/or tolerated in order to accommodate small QF developers because historically (1) small QF developers generally had fewer resources to dedicate to complex contract negotiations and (2) the financial impact to the utilty's customers for a relatively low volume of small QF projects was likewise small. However, in the passage of the last thirty years, the size and scale of projects that are able to qualify for the published avoided cost rates has increased dramatically. Many of the current QF projects in actuality are not "small" projects but are large, utilty- scale projects that are broken up into 10 aMW increments in order to qualify for the published avoided cost rates. Likewise, the historical "unsophisticated" QF project developers are no longer the norm, and QF projects have evolved to the point where they are sophisticated parties who are very knowledgeable within this field. In fact, in COMMENTS OF IDAHO POWER COMPANY - 9 many instances, QF developers have large resources available to them and in some cases may be larger entities than the utilties themselves. B. Problems with the SAR Methodology. The SAR methodology currently used in the calculation of the avoided cost rates paid to QFs is a generic calculation which has at least three specific problems associated with it. First, the SAR methodology does not represent the actual costs avoided by adding a specific PURPA resource to Idaho Powets resource portolio. A system specific analysis, such as the IRP-based methodology, that considers the characteristics of the specific resource under question is necessary to determine a more accurate assessment of the costs avoided as a result of adding a specific PURPA resource. A true avoided cost determination, which would be appropriate for renewable projects that generate renewable energy certificates ("RECs"), would consider the cost to the utilty to develop and operate a similar project over a 20-year period. This would take into account the RECs, government tax incentives, accelerated depreciation allowances, and other similar cost incentives that the utility, and its customers, would have the advantage of if the utilty were to build the resource, and that currently generate a double recovery windfall to the QF developer. Second, the SAR methodology is essentially a static methodology. The published avoided cost rates calculated with the SAR methodology are updated infrequently at best; yet the power markets, natural gas costs, resource construction and development costs, government tax incentives, and other costs can vary on a day- to-day basis. The SAR methodology essentially gives PURPA developers a free option to force a QF's output onto the utilty at the published avoided cost rate. When it COMMENTS OF IDAHO POWER COMPANY - 10 becomes profitable for PURPA developers to develop their projects, regardless of whether Idaho Power needs the project's output and regardless of the cost impacts on existing customers, they proceed with development and exercise their option to "put" the project's output to Idaho Power. Third, all PURPA resources are not equivalent. See e.g., 18 C.F.R. § 292.304(c)(3)(ii) (avoided costs may "differentiate among (QFs) using various technologies on the basis of the supply characteristics of the different technologies."). In other words, two different resources under similar FESAs at the published avoided cost rate can provide significantly different levels of value to Idaho Powets customers - cost and value are two very different things. For example, a high capacity factor QF such as a biomass project which produces a significant amount of light load energy and a solar project which produces little, if any, light load energy, can bring significantly different levels of value to a utilty's system and its customers. If the utilty is surplus during light load hours, then a significant portion of energy produced by any QF during light load hours wil need to be sold into the market - most likely at a significant loss. Idaho Power is concerned about any new PURPA projects and their associated impact on customers. However, PURPA wind projects in particular present a number of challenges, not only because of the unique nature of their generation but also because of the magnitude and volume of proposed QF wind projects, that require a closer examination to determine the real costs associated with adding these resources. C. Circumvention of the IRP Planning Process. The IRP planning process conducted by Idaho Power is designed to determine the best mix of resources needed to meet future load growth considering cost, risk, and COMMENTS OF IDAHO POWER COMPANY - 11 environmental concerns. This process was established in the early 1990s and has evolved over the years to include significant input from stakeholders, including major customer representatives, government agencies, environmental groups, and the general public. The current state of PURPA development in Idaho has created a situation where the IRP planning process is being circumvented in order to benefit independent developers wanting to build generation projects in Idaho Powets service area. The recent flood of PURPA wind projects in Idaho Powets service area wil put the total amount of wind generation on Idaho Powets system over 1,100 MW. In order to integrate this amount of wind generation, the IRP process wil need to focus solely on dispatchable resources (such as natural gas-fired combustion turbines) that can provide operating reserves necessary to integrate wind. For the past several years, Idaho Powets resource planning needs have been driven by summertime peak-hour loads. This has been demonstrated with the addition of approximately 430 MW of dispatchable simple-cycle combustion turbines, development of Langley Gulch to add approximately 300 MW of dispatchable combined-cycle combustion turbine capacity, and demand response programs (i.e., Irrigation Peak Rewards, AlC Cool Credit, and FlexPeak Management programs), focused on reducing summertime peak-hour loads. Wind resources are not a dispatchable resource and the Company cannot depend on serving any significant portion of peak-hour summertime loads with wind resources. At present, for planning purposes, Idaho Power uses a 5 percent capacity expectation for wind resources. So, for each 100 MW of nameplate wind generation in its resource portolio, Idaho Power COMMENTS OF IDAHO POWER COMPANY - 12 plans on receiving 5 MW during the summertime peak-hour load. Actual performance of the wind projects under contract to Idaho Power during the summer of 2010 suggests that a 5 percent capacity expectation is accurate. While a majority of the new developments being proposed are wind projects, many of the current issues surrounding PURPA are relevant to all generation technologies that can be certified as a QF under the rules of the FERC. When the Public Utilty Regulatory Policies Act of 1978 was enacted, it was envisioned as a way to allow small, renewable projects to be developed, projects that would be considered too small by utilty standards. See e.g., Southern California Edison Co., 71 F.E.R.C. P 61,269,1995 WL 327268 at *6 (F.E.R.C. 1995) (Congress intended PURPA to diversify generation fuel mix and encourage renewable technologies). The concept of avoided cost rates was used to ensure the cost to customers was no more than a utilty's cost to develop a larger project. Id. However, the quantity of PURPA development currently being seen in Idaho was never contemplated when the PURPA rules were establish by the Commission. The current avoided cost rates, combined with tax credits and other incentives, have created a situation where independent developers can easily justify the economics of (and finance) PURPA projects. The economics are in fact so favorable developers are taking utilty scale projects and breaking them into smaller than 10 aMW projects in order to qualify for avoided cost rates. The result is that the Company's extensive IRP process, which is mandated and overseen by the Commission, is being circumvented by the current Idaho requirements of PURPA. The least cost planning aspects of the IRP process are also being circumvented in the process. The flood of PURPA projects onto the Company's system is now dictating the resource "choices" in COMMENTS OF IDAHO POWER COMPANY - 13 down or being unavailable to serve load the next day or for the next peak hour. Similarly, hydro cannot be taken to zero given minimum stream flow levels and resultant environmental effects. This surplus electricity, if it cannot be used to serve Idaho Power load, must be moved across the system and sold into the market. The only available transmission capacity to move this electricity off the system and to market is across the Idaho to Northwest path. Idaho to Northwest transmission capacity has an operating rating of 2,304 MW and PacifiCorp has rights to up to 1,600 MW of that amount. That leaves Idaho Power with a maximum of 704 MW of transmission capacity to the Northwest, under normal operation conditions, which is insufficient to move the amount of surplus that could exist. F. The Continued Addition of QF Generation at Published Avoided Cost Rates is Very Costly to Customers. Assuming that all of the integration costs have been addressed, the fact of the matter is that if 614 MW of the QF contracts currently submitted for review to the Commission or in contract discussions at published avoided cost rates are approved, and if all of the PURPA wind under contract is built, Idaho Power wil be purchasing the output of these projects at prices significantly greater than recent, and expected, market prices. Figure 3 below shows the average light load surplus from Figure 2, and superimposes curves representing the non-Ievelized PURPA rates during LL hours and recent Mid-C market prices. This ilustrates the premium being paid for QF energy over market prices at a time when the Company does not need the energy. COMMENTS OF IDAHO POWER COMPANY - 17 through 2020 (assuming all projects are on-line and operating in 2011), of entering into these QF contracts is over $325 milion. These calculations do not include transmission costs, which may actually increase the cost to customers even more. The bottom line is that these QF contracts are far more costly to customers than would be suggested by recent Mid-C prices. An additional $48 millon in above-market costs equates to a rate increase of around 5 percent in the Company's PCA. It is difficult to see how the customers are held neutral, or indifferent, with a requirement to enter into FESAs, at above-market prices, for power that is not needed on the system and also withholds the value that could be derived from the RECs. IV. THE APPROPRIATENESS OF EXEMPTING NON-WIND QF PROJECTS FROM THE REDUCED ELIGIBILITY CAP The second issue that the Commission requested comments upon is "if the eligibilty cap is reduced, the appropriateness of exempting non-wind QF projects from the reduced eligibilty cap." Order No 32131 at 5. All PURPA QF projects should be included in the published avoided cost rate eligibilty cap reduction for the simple reason that they all contribute to the same problems discussed above. All QFs generate during light load hours and contribute to the price and cost differentials already discussed. The lack of any consideration of the utilty's need for the energy, or load, in relation to when the QF supplies generation that the utilty must take from it does not change because the QF is a non-wind resource. Additionally, as stated above, the more prescriptive SAR-based published avoided cost methodology was developed and intended for smaller QF projects and the more unsophisticated developers in part to ease the administrative burden on the COMMENTS OF IDAHO POWER COMPANY - 19 developer and to "level the playing field" in negotiating the economic components of a QF contract. This concept was accepted and/or tolerated in order to accommodate small QF developers because historically (1) small QF developers generally had fewer resources to dedicate to complex contract negotiations and (2) the financial impact to the utility's customers for a relatively low volume of small QF projects was likewise small. However, this is no longer the case. The historical "unsophisticated" QF project developers are no longer the norm, and QF projects have evolved to the point where they are sophisticated parties who are very knowledgeable about the ups and downs of the PURPA process as well as negotiation of a QF contract. Likewise, with the cumulative nature of more than thirty years of QF projects entering onto the system, as well as the more recent phenomenon of larger and larger projects that are able to break themselves into 10 aMW increments, it can no longer be said that the financial impact to the utilty's customers from any QF project, no matter how small, has a "small" impact to the rates that they pay for electricity. While the scale of wind QFs is much larger, many of the same problems are, and the same financial harm is, caused by non-wind QFs just the same. A reduction in the published rate eligibility should apply equally to all QF projects. V. THE CONSEQUENCES OF DIVIDING LARGER WIND PROJECTS INTO 10 aMW PROJECTS TO UTILIZE THE PUBLISHED RATE The third issue that the Commission requested comments upon is "the consequences of dividing larger wind projects into 10 aMW projects to utilze the published rate." Order No. 32131 at 5. There are many negative consequences, some of which have already been referred to above, of the ease and abilty of large QF projects, particularly large wind farms, to break themselves up into 10 aMW increments COMMENTS OF IDAHO POWER COMPANY - 20 in order to qualify for the published avoided cost rate ("disaggregate" or "disaggregation") and avoid the individualized IRP-based methodology that is supposed to be applied to "Iarget' QF projects. Many of the "problems" discussed above are the "consequences" of these larger projects' abilty to divide into 10 aMW increments. It is especially beneficial to an intermittent resource that provides a significant portion of energy primarily during light load times, or more particularly outside of the system peak hours to have a locked-in price that does not take into account the value of the energy that it provides, the need for the energy during the time in which it is provided, nor the availabilty of lower cost resources. This ultimately results in the most serious consequence of dramatically inflating the cost of power and the rates that customers must pay. Additionally, this abilty to disaggregate compromises a utilty's competitive acquisition processes in the form of requests for proposals ("RFP"). The Company has seen the issue of disaggregation as a potential problem for a number of years, and attempted to address the same in Case No. IPC-E-07-04. In that case, the Company proposed a five mile separation, rather than the currently accepted one mile separation required by FERC to be certified as a QF, between QF projects in order for the projects to be considered separate and distinct QFs. This was rejected by the Commission Staff and ultimately the Commission. Order No. 30415. The Commission stated: The Company asks the Commission to impose an ownership restriction on projects located within what we find to be an arbitrary "five-mile radius." This would be in addition to the geographic separation required by FERC for QF status. While it may be that it is "not Idaho Powets intent that its proposed five mile radius rule place undue burdens on the development of new QF generation projects," we cannot find that without change abuse wil occur and the public interest COMMENTS OF IDAHO POWER COMPANY - 21 will not be served. Petition, p. 5. It is a change that we find would encourage and might actually promote gamesmanship. On the basis of the established record we find no reason to change the eligibilty criteria for published rates to require a standard different than FERC QF status requirements. Order No. 30415 at 11. Since the time of the Commission's Order No. 30415, issued on September 7, 2007, the norm for PURPA wind projects has been to take larger QF projects, create multiple legal entities, and reconfigure into multiple smaller projects in order to qualify for the published avoided cost rate and to avoid the more precise and individualized IRP-based methodology. In fact, the great majority of all QF wind projects follow just this type of development modeL. As can readily be seen by even a cursory look at Attachment NO.1, the list of all of the existing and proposed QF wind projects for Idaho Power's system, as well as a review of Attachment No.3, which is a map showing the general location of these QF wind projects, nearly all of them are disaggregated large- scale projects that should be negotiating PURPA contracts under the IRP-based methodology. Additionally, a slightly closer look at the last twenty QF wind contracts that have been filed for review with the Commission since November 2010 shows that these twenty, less than 10 aMW, published rate projects all belong to just four different developers and ultimate owners - and are physically located in only five different locations. They are large projects, and are disaggregating with the purposeful intent of gaining access to the published avoided cost rates and avoiding the IRP-based methodology. This practice is inflating the cost borne by Idaho Powets customers and COMMENTS OF IDAHO POWER COMPANY - 22 providing an energy product that is not only not needed on the system but causes additional problems for reliabilty and operations. Another significant fact about the large group of these most recently proposed QF wind projects is that the overwhelming majority (nearly all) of them were proposed projects in the unsuccessful 2012 wind RFP issued by Idaho Power in 2009, which Idaho Power recently concluded without awarding a contract. In the RFP, Idaho Power received bids from 25 projects, or project configurations, from 14 different bidders. The proposed projects ranged in size from 50 MW to 160 MW. The bids included projects in Idaho, Utah, Wyoming, Montana, Washington, and Oregon. The 20-year levelized prices ranged from approximately $85 per MWh to almost $150 per MWh. Many of these projects have reconfigured to disaggregate into 10 aMW projects, and have demanded and executed published rate QF contracts at the equivalent of a 20-year levelized price of $82.38 per MWh (if the project came in during 2011). This is gamesmanship to the detriment of Idaho Power and its customers. While the Company believes that a change in the required separation between QF projects still has some merit, the request to lower the published rate eligibilty cap accomplishes a similar result from a somewhat different and better approach. By lowering the cap, the IRP-based methodology that previously only applied to larger QF projects over 10 aMW would now apply to essentially all QF projects and remove the incentive to break up larger projects to technically meet one mile of separation because there would no longer be a disparate price advantage, either real or perceived, in doing so. The issue of disaggregation would no longer be an issue because all wind projects would have to negotiate an individually priced contract under the proper IRP-based COMMENTS OF IDAHO POWER COMPANY - 23 methodology meant to apply to the acquisition of the resources they are sellng. A "truet' avoided cost could be sought and the individual characteristics and uniqueness of these larger projects could better be taken into consideration, as was the intent of the IRP-based methodology for larger projects. Vi. CONCLUSION There is a huge problem here. The great advantages that Idaho Power customers, its service territory, and its region enjoy from consistently having among the very lowest electricity prices in the nation are being eroded and eviscerated by a flood of QF generation that we are paying too much for. Idaho Power is forced to purchase this power with no regard to whether it is needed on its system, with no regard to whether it is called for in the Company's IRP process, and with no regard to whether there are other lower cost alternatives for its customers. Additionally, the Company is forced to deal with the difficult tasks and problems associated with integrating large amounts of intermittent and uncertain renewable generation into its system, once again with its customers paying the resulting price. Customers do not even get the "benefits" derived from the renewable aspects of that generation in the form of RECs, nor is the Company even able to "claim" or get credit for the existence of that renewable energy on its system. The Company does not expect the parties, nor the Commission, to solve all of the issues or problems identified with avoided costs and QF generation at this moment. However, we are fortunate that an existing, approved avoided cost methodology, the IRP-based methodology, exists and, as demonstrated herein, is a very reasonable COMMENTS OF IDAHO POWER COMPANY - 24 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 22nd day of December 201 0 I served a true and correct copy of COMMENTS OF IDAHO POWER COMPANY upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Donald L. Howell, II Kristine Sasser Deputy Attorney General Idaho Public Utilties Commission 472 West Washington P.O. Box 83720 Boise, Idaho 83720-0074 Avista Corporation Michael Andrea Clint Kalich Avista Corporation 1411 East Mission Avenue - MSC-23 P.O. Box 3727 Spokane, Washington 99220-3727 PacifiCorp d/b/a Rocky Mountain Power Daniel E. Solander J. Ted Weston Rocky Mountain Power 201 South Main Street, Suite 2300 Salt Lake City, Utah 84111 Bruce Griswold PacifiCorp 825 NE Multnomah Portland, Oregon 97232 Exergy, Grand View Solar, J. R. Simplot, Northwest and Intermountain Power Producers Coalition, & Board of Commissioners of Adams County, Idaho Peter J. Richardson Greg Adams RICHARDSON & O'LEARY, PLLC 515 North 2ih Street P.O. Box 7218 Boise, Idaho 83702 COMMENTS OF IDAHO POWER COMPANY - 26 -- Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email don.howell(ãpuc.idaho.gov kris.sasser(ãpuc. idaho.gov Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email michael.andrea(ãavistacorp.com clint.kalichcæavistacorp.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email daniel.solandercæpacificorp.com ted.westoncæpacificorp.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email bruce.griswoldcæpacifiCorp.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email petercærichardsonandoleary.com gregcærichardsonandoleary.com Exergy Development Group James Carkulis, Managing Member Exergy Development Group of Idaho, LLC 802 West Bannock Street, Suite 1200 Boise, Idaho 83702 Grand View Solar II Robert A. Paul Grand View Solar II 15960 Vista Circle Desert Hot Springs, California 94221 J.R. Simplot Company Don Sturtevant, Energy Director J.R. Simplot Company One Capital Center 999 Main Street P.O. Box 27 Boise, Idaho 83707-0027 Northwest and Intermountain Power Producers Coalition Robert D. Kahn, Executive Director Northwest and Intermountain Power Producers Coalition 1117 Minor Avenue, Suite 300 Seattle, Washington 98101 Renewable Energy Coalition Thomas H. Nelson, Attorney Renewable Energy Coalition P.O. Box 1211 Welches, Oregon 97067-1211 John R. Lowe, Consultant Renewable Energy Coalition 12050 SW Tremont Street Portland, Oregon 97225 Cedar Creek Wind, LLC Ronald L. Willams WILLIAMS BRADBURY, P.C. 1015 West Hays Street Boise, Idaho 83702 COMMENTS OF IDAHO POWER COMPANY - 27 Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email jcarkuliscæexergydevelopment.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email robertapauicægmail.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email don.sturtevantcæsimplot.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email rkahncænippc.org Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email nelsoncæthnelson.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Emailjravenesanmarcoscæyahoo.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email roncæwiliamsbradbury.com Scott Montgomery, President Cedar Creek Wind, LLC 668 Rockwood Drive North Salt Lake, Utah 84054 Dana Zentz, Vice President Summit Power Group, Inc. 2006 East Westminster Spokane, Washington 99223 Idaho Windfarms, LLC Glenn Ikemoto Margaret Rueger Idaho Windfarms, LLC 672 Blair Avenue Piedmont, California 94611 Interconnect Solar Development, LLC R. Greg Ferney MIMURA LAW OFFICES, PLLC 2176 East Franklin Road, Suite 120 Meridian, Idaho 83642 Bil Piske, Manager Interconnect Solar Development, LLC 1303 East Carter Boise, Idaho 83706 Intermountain Wind LLC Dean J. Miler McDEVITT & MILLERLLP 420 West Bannock Street P.O. Box 2564 Boise, Idaho 83701 Paul Martin Intermountain Wind LLC P.O. Box 353 Boulder, Colorado 80306 COMMENTS OF IDAHO POWER COMPANY - 28 Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email scottcæwesternenergy.us Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email dzentzcæsummitpower.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email glennicæEnvisionWind.com MargaretcæEnvisionWind .com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email gregcæmimuralaw.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email bilpiskecæcableone.net Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email joecæmcdevitt-miler.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email paulmartincæintermountainwind.com Dynamis Energy, LLC Ronald L. Wiliams WILLIAMS BRADBURY, P.C. 1015 West Hays Street Boise, Idaho 83702 Wade Thomas, General Counsel Dynamis Energy, LLC 776 East Riverside Drive, Suite 15 Eagle, Idaho 83616 North Side Canal Company and Twin Falls Canal Company Shelley M. Davis BARKER ROSHOLT & SIMPSON, LLP 1010 West Jefferson Street, Suite 102 P.O. Box 2139 Boise, Idaho 83701-2139 Brian Olmstead, General Manager Twin Falls Canal Company P.O. Box 326 Twin Falls, Idaho 83303 Ted Diehl, General Manager North Side Canal Company 921 North Lincoln Street Jerome, Idaho 83338 Board of Commissioners of Adams County, Idaho Bil Brown, Chair Board of Commissioners of Adams County, Idaho P.O. Box 48 Council, Idaho 83612 COMMENTS OF IDAHO POWER COMPANY - 29 Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email roncæwillamsbradbury~com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email wthomascædynamisenerg.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email smdcæidahowaters.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email olmsteadcættcanal.com Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email nscanaicæcableone.net Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email dbbrowncæfrontiernet.net Birch Power Company Ted S. Sorenson, P.E. Birch Power Company 5203 South 11 th East Idaho Falls, Idaho 83404 Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email tedcætsorenson.net c£~w~ Donovan E. Walker COMMENTS OF IDAHO POWER COMPANY - 30 Idaho Power Company Cogeneration and Small Power Production As of December 20,2010 Project Resource Number Dm Prolec Name State County Project Size (MWl Projects Online 1 21615205 Hydro Arena Drop ID Canyon 0.45 2 31616150 Digester B6 Anaerobic Digester ID Gooding 2.28 3 21615078 Hydro Barber Dam ID Ada 3.70 4 21615101 Wind Bennett Creek Wind Farm ID Elmore 21.00 5 31615100 Digester Bettencourt Dry Creek BioFactory, LLC ID Twin Falls 2.25 6 31616100 Digester Big Sky West Dairy Digester (DF-AP #1, LLC)ID Gooding 1.50 7 31214058 Hydro Birch Creek ID Gooding 0.05 8 31415065 Hydro Black Canyon #3 ID Gooding 0.14 9 31615139 Hydro Blind Canyon ID Gooding 1.50 10 31416013 Hydro Box Canyon ID Twin Falls 0.36 11 31515100 Hydro Briggs Creek ID Twin Falls 0.60 12 31765170 Wind Burley Butte Wind ID Cassia 21.30 13 31715126 Hydro Bypass ID Jerome 9.96 14 31315050 Wind Camp Reed Wind Park, LLC ID Elmore 22.50 15 31416020 Hydro Canyon Springs ID Twin Falls 0.13 16 31318100 Wind Cassia Wind Farm LLC ID Twin Falls 10.50 17 31616081 Hydro Cedar Draw ID Twin Falls 1.55 18 31516014 Hydro Clear Springs Trout ID Twin Falls 0.52 19 31615057 Hydro Crystal Springs ID Twin Falls 2.44 20 31415023 Hydro Curr Catte Company ID Twin Falls 0.22 21 31615106 Hydro Dietrich Drop ID Jerome 4.50 22 11615077 Hydro Elk Creek ID Idaho 2.00 23 41717137 Hydro Falls River ID Fremont 9.10 24 31615121 Hydro Faulkner Ranch ID Gooding 0.87 25 31415134 Hydro Fisheries Dev.ID Gooding 0.26 26 31315035 Wind Fossil Gulch Wind ID Twin Falls 10.50 27 31615098 Hydro Geo-Bon #2 ID Lincoln 0.93 28 31765160 Wind Golden Valley Wind ID Cassia 12.00 29 31315093 Hydro HaileyCspp ID Blaine 0.06 30 31715128 Hydro Hazelton A ID Jerome 7.70 31 31715140 Hydro Hazelton B ID Jerome 7.60 32 21615100 Landfill gas Hidden Hollow Landfill Gas ID Ada 3.20 33 11715144 Hydro Horseshoe Bend Hydro ID Boise 9.50 34 41718140 Wind Horsshoe Bend Wind MT Cascade 9.00 35 21615105 Wind Hot Springs Wind Farm ID Elmore 21.00 36 31415094 Hydro Jim Knight ID Gooding 0.34 37 31615031 Hydro Kasel & Witherspoon ID Twin Falls 0.90 38 31615030 Hydro Koyle Small Hydro ID Gooding 1.25 39 31615056 Hydro Lateral # 10 ID Twin Falls 2.06 40 31316015 Hydro Lemoyne ID Gooding 0.08 41 31615105 Hydro Little Wood Rvr Res ID Blaine 2.85 42 31515107 Hydro Littlewood I Arkoosh ID Lincoln 0.87 43 31715099 Hydro Low Line Canal ID Twin Falls 7.97 44 31615130 Hydro Low Line Midway Hydro ID Twin Falls 2.50 45 31615125 Hydro Lowline#2 ID Twin Falls 2.79 46 31715123 Hydro Magic Reservoir ID Blaine 9.07 47 31765150 Cogen Magic Valley ID Minidoka 10.00 48 21765151 Cogen Magic West ID Elmore 10.00 49 31515009 Hydro Malad River ID Gooding 0.62 50 31615117 Hydro Marc Ranches ID Jerome 1.20 51 31615154 Hydro Mile 28 ID Jerome 1.50 52 31720190 Wind Milner Dam Wind ID Cassia 19.92 53 12614070 Hydro Mitchell Butte OR Malheur 2.09 54 21615200 Hydro Mora Drop Small Hydroelectric Facility ID Ada 1.85 55 31515004 Hydro Mud CreeklS & S ID Twin Falls 0.52 56 31414111 Hydro Mud Creeklhite ID Twin Falls 0.21 57 12616071 Hydro Owyhee Dam Cspp OR Malheur 5.00 58 31315060 Wind Payne's Ferr Wind Park, LLC ID Twin Falls 21.00 59 31615067 Hydro Pigeon Cove ID Twin Falls 1.89 60 41455091 Digester Pocatello Waste ID Bannock 0.46 61 31415164 Hydro Pristine Springs #1 ID Jerome 0.13 62 31415165 Hydro Pristine Springs Hydro #3 ID Jerome 0.20 Idaho Power Company Cogeneration and Small Power Production As of December 20,2010 Project Resource Number Dm Projec Name State County Projec Size (MW) 63 21415119 Hydro Reynolds Irrigation ID Canyon 0.26 64 31216020 Hydro Rim View ID Gooding 0.20 65 31615003 Hydro Rock Creek #1 ID Twin Falls 2.05 66 31615104 Hydro Rock Creek #2 ID Twin Falls 1.90 67 31515103 Hydro Sagebrush ID Lincoln 0.43 68 31617100 Hydro Sahko Hydro ID Twin Falls 0.50 69 41515122 Hydro Schaffner ID Lemhi 0.53 70 11415009 Hydro Shingle Creek ID Adams 0.22 71 31615158 Hydro Shoshone #2 ID Lincoln 0.58 72 31416001 Hydro Shoshone Cspp ID Lincoln 0.37 73 41866112 Industrial Simplot Pocatello ID Power 12.00 74 31315021 Hydro Snake River Pottery ID Gooding 0.07 75 31414075 Hydro Snedigar ID Twin Falls 0.54 76 11766002 Biomass Tamarack Cspp ID Adams 5.00 77 21662100 Cogen Tasco - Nampa ID Canyon 2.00 78 31616082 Cogen Tasco - Twin Falls ID Twin Falls 3.00 79 41717139 Hydro Tiber Dam MT County 7.50 80 31415027 Hydro Trout-Co ID Gooding 0.24 81 31315150 Wind Tuana Springs Expansion ID Twin Falls 35.70 82 12616072 Hydro Tunnel #1 OR Malheur 7.00 83 55653167 Biomass Vaagen Brothers WA Stevens 4.50 84 31315029 Hydro White Water Ranch ID Gooding 0.16 85 31715141 Hydro Wilson Lake Hydro ID Jerome 8.40 86 31315070 Wind Yahoo Creek Wind Park, LLC ID Twin Falls 21.00 Subtotal 422.56 Projects Under contract not yet online Estimated Estimated First Energy Operation Date Date 1 41455301 Wind Alpha Wind Project ID Cassia 29.90 Oct-14 Dec-14 2 41455350 Wind Bravo Wind Project ID Cassia 29.90 Oct-14 Dec-14 3 41455400 Wind Charlie Wind Project ID Cassia 27.60 Oct-14 Dec-14 4 21615115 Wind Cold Springs Windfarm ID Elmore 20.00 Dec-11 Dec-12 5 31721100 Wind Cottonwood Wind Park ID Twin Falls 20.00 May-12 Jun-12 6 31721200 Wind Deep Creek Wind Park ID Twin Falls 20.00 May-12 Jun-12 7 41455450 Wind Delta Wind Project ID Cassia 29.90 Oct-14 Dec-14 8 21615120 Wind Desert Meadow Windfarm ID Elmore 20.00 Dec-11 Dec-12 9 31616115 Digester Double A Digester ID Lincoln 4.50 Jun-11 Jan-12 10 31616120 Digester Double B Dairy ID Cassia 2.00 Oct-11 Dec-12 11 41455500 Wind Echo Wind Project ID Cassia 29.90 Oct-14 Dec-14 12 21615150 Solar Grand View Solar ID Elmore 20.00 Dec-10 Dec-11 13 21615125 Wind Hammett Hil Windfarm ID Elmore 23.00 Dec-11 Dec-12 14 21615102 Landfill Gas Hidden Hollow Energy II Landfill Gas Project ID Ada 3.20 Feb-12 Feb-12 15 41455200 Wind Lava Beds Wind ID Bingham 18.00 Jul-11 Jul-11 16 12618200 Wind Lime Wind Energy OR Baker 3.00 Oct-11 Dec-11 17 31315500 Wind Magic Wind Park ID Twin Falls 19.50 Jul-11 Jul-11 18 21615130 Wind Mainline Windfarm ID Home 20.00 Dec-11 Dec-12 19 12616500 Wind Murphy Flat Energy ID Owyhee 20.00 Dec-11 Dec-12 20 12616550 Wind Murphy Flat Mesa ID Owyhee 20.00 Dec-11 Dec-12 21 12616600 Wind Murphy Flat Wind ID Owyhee 20.00 Dec-11 Dec-12 22 31615300 Wind Notch Butte Wind ID Jerome 18.00 Jul-11 Jul-11 23 31315075 Wind Oregon Trail Wind ID Twin Falls 13.50 Dec-10 Dec-10 24 31315045 Wind Pilgrim Stage Station Wind ID Twin Falls 10.50 Dec-10 Dec-10 25 31615500 Wind Rainbow Ranch Wind ID Cassia 20.00 Dec-11 Dec-12 26 31615550 Wind Rainbow West Wind ID Cassia 20.00 Dec-11 Dec-12 27 31616110 Digester Rock Creek Dairy ID Twin Falls 4.00 May-11 May-12 28 41455300 Wind Rockland Wind Project ID Power 80.00 Jul-11 Dec-11 29 31721300 Wind Rogerson Flats Wind Park ID Twin Falls 20.00 May-12 Jun-12 30 21615135 Wind Ryegrass Windfarm ID Elmore 20.00 Dec-11 Dec-12 31 31721400 Wind Salmon Creek Wind Farm ID Twin Falls 20.00 May-12 Jun-12 32 31618100 Wind Salmon Falls Wind ID Twin Falls 22.00 Dec-10 Dec-10 33 21615110 Wind Sawtooth Wind Project ID Elmore 21.00 Oct-12 Dec-12 34 31616130 Digester Swager Farms ID Twin Falls 2.00 Sep-11 Oct-12 35 31315055 Wind Thousand Springs Wind ID Twin Falls 12.00 Dec-10 Dec-10 Idaho Power Company Cogeneration and Small Power Production As of December 20,2010 Project Resource Number Dm Prolect Name State . County Projec Size (MW) 36 31315065 Wind Tuana Gulch Wind ID Twin Falls 10.50 Dec-10 Dec-10 37 21615140 Wind Two Ponds Windfarm ID Elmore 20.00 Dec-11 De-12 38 11866075 Biomass Yellowstone Power ID Gem 10.00 Sep-11 Dec-11 Subtotal 723.90 Proposed Projects Interconnection Que number 304 Biomass Project 1 ID Adams 10.00 360 Hydro Project 2 ID Canyon 0.90 334 Wind Project 3 ID Twin Falls 40.00 345 Solar Project 4 ID Owhee 20.00 356 Solar Project 5 ID Owyhee 20.00 331 Solar Project 6 ID Elmore 10.00 332 Wind Project 7 ID Elmore 10.00 318 Wind Project 8 ID Owyhee 5.00 Of system Wind Project 9 Reed Point, MT 27.00 Off system Wind Project 10 Lynn, UT 21.00 Off system Wind Project 11 Lynn, UT 21.00 Off system Wind Project 12 Rock Springs,19.00 Of system Wind Project 13 Rock Springs,19.00 Of system Hydro Project 14 ID Fremont 3.60 Subtotal 226.50 Total 1372.96 As these are not yet complete contracts. the project names etc is confidential